Edwards Lifesciences Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2023

There are 13 speakers on the call.

Operator

Greetings, and welcome to the Edwards Lifesciences Third Quarter 2023 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, turn the call over to Mark Wilcherding, Senior Vice President, Investor Relations and Treasurer. Thank you. You may begin.

Speaker 1

Thank you very much, Diego, and good afternoon and thank you all for joining us. We are coming to you live from San Francisco at the 35th Annual TCT Conference. With me on today's call is our CEO, Bernard Zavigian and our CFO, Scott Ullem. Also joining us for the Q and A portion of the call are Larry Wood, our Group President participants have TAVR in Surgical Structural Heart and Devine Chopra, our Global Leader of TMTT. Just after the close of regular trading, Edwards Lifesciences will be released Q3 2023 financial results.

Speaker 1

During today's call, management will discuss those results included in the press release and accompanying financial schedules and then use the remaining time for Q and A. Please note that management will be making forward looking statements that are based on estimates, assumptions and projections. These statements include, but aren't limited to, financial guidance and expectations for longer term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters and foreign currency fluctuations. These statements speak only as of the date on which statements were made and Edwards does not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially.

Speaker 1

Information concerning factors that could cause these differences and important safety information may be found in the press release, our 2022 annual report on Form 10 ks and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Unless otherwise noted, our commentary on sales growth refers to constant currency sales growth, which is defined in the quarterly results press release issued earlier today. Reconciliations between GAAP and non GAAP numbers mentioned during the call are also included in today's press release. With that, I'd like to turn the call over to Bernard for his comments.

Speaker 2

Good afternoon, everyone. As Mark said, we are hosting today's call from TCT in San Francisco. I am going to start by covering some of the exciting developments of the conference, share highlights of a significant progress our team has made advancing our strategy, review our strong third quarter results and finally, discuss our confidence in the outlook for Edwards. There are a lot of data being presented this week about technologies Edwards has developed. Included among these are results from 3 late breaking clinical trials, all of which reflects Edwards' commitment to generating high quality evidence to advance innovative therapies for patients from the PARTNER free low risk pivotal trial, we believe these data demonstrate that TAVR with the SAPIEN platform should continue to be the preferred therapy for treating patients who have severe symptomatic aortic stenosis.

Speaker 2

After more than 20 years of rigorous clinical experiences in trials, now 8 New England Journal of Medicine publication and over a 1000000 patient treated, Sapiens technology offers patient unique benefits. SAPIEN 3 has demonstrated 99% freedom from death and disabling stroke at 1 year, 90% survival at 5 years and is the only valve with a THV and THV indication. This is true lifetime management benefit, which expands option for patients. Tomorrow at TCT, we are looking forward to the presentation of a 6 month analysis of our EVOQ transcatheter trachecid valve, the first of its kind therapy for the millions of patients suffering from trachepital valve disease. In addition, tomorrow you will receive a 1 year full cohort result of a Class IId pivotal trial with PASCAL.

Speaker 2

We continue to make meaningful progress to advance our vision of offering a portfolio our innovative transcatheter therapies to treat tricuspid and mitral valve disease. In the last several weeks, we achieved 4 important milestones in support of our commitment to patients for psinnovation. 1st, all participants will be conducting a call for the EVOQ transfemoral replacement system. 2nd, CE Mark approval for the MITREZ Resilia Surgical Mitral Valve 3rd, PASCAL Precision approval in Japan finally, the completion of the enrollment in the first ever pivotal trial for any transfemoral mitral replacement therapy, the ENCERCL trial for SAPIEN3. Turning now to Q3 financial performance.

Speaker 2

3rd quarter global sales grew 11% to $1,500,000,000 led are by our differentiated portfolio of innovative therapies. We were pleased with our results, which were in line with our expectation all participants are present another quarter of double digit sales growth. For the full year, we continue to expect total company sales growth to be in the 10% to 13% range. Now, I will provide an overview of the Q3 sales performance by product group. In TAVR, we continue to see strong demand for our leading Sapiens platform with 3rd quarter sales of 9 $61,000,000 up 10% year over year.

Speaker 2

Our U. S. And OUS sales growth rates were comparable. Our U. S.

Speaker 2

And OUS competitive positions were stable and globally local selling prices were stable. In the U. S, our Q3 TAVR sales were driven by the continued successful launch of in our pivotal trial alliance designed to study SAPIEN X4, our groundbreaking next generation TAVR technology. In Europe, EDWAR's sales growth was driven by the broad based adoption of our Sapient platform. We look forward to additional data supporting the Edwards benchmark program to be presented at the PCR Lundin Valves Conference in November.

Speaker 2

Our sales in Japan grew year over year, reflecting a gradual recovery in market growth overall positive growth. Around the world, we remain focused on improving diagnosis and treatment Of the many more patients who remain under treated. In summary, the combination of our global TAVR leadership along with the data presented at TCT this week gives the company further confidence in the future of TAVR and the company's expectation of a $10,000,000,000 opportunity by 2028. Now turning to TNTT. Our commitment to the unmet needs of mitral and trachycy patients took a significant step forward with the achievements of several important milestones in this past quarter.

Speaker 2

TNTT's 3rd Q2 global sales of $52,000,000 increased 65% versus the prior year. This performance was driven by accelerating adoption of our differentiated PASCAL Precision platform, the activation of more centers across the U. S. And Europe as well as senior procedure growth. We continue to be pleased with our excellent clinical outcomes, reflecting the impressive performance pass the call to PASCAL Precision and the value brought by our comprehensive high touch model.

Speaker 2

We are continuing the expansion of PASCAL Precision globally with the expected launch in Japan before the end of the year. In our mitral clinical trials, we look forward to the 1 year Class II d randomized pivotal trial our operating scientific sessions tomorrow at TCT. This will add to the body of evidence supporting TIER as an effective therapy for patients. With the earlier expected completion of enrollment in the encircled pivotal trial for CPLN3, we believe we are 1 step closer to offering an important value replacement option beyond tier to serve even more patients are suffering from mitral valve disease. In tricuspid, earlier this month, we received CE Mark approval for REVOKE.

Speaker 2

We look forward to bringing this new therapy to Europe through disciplined launch that will focus all ensuring excellent patient outcomes. Now with this approval, physicians in Europe we'll have access to this groundbreaking option in addition to TIER. As noted, tomorrow at TCT, late breaking data from the TRICIN-two pivotal trial of the EVOQ replacement technology will be presented on the first 150 randomized patients based on Evoque's FDA breakthrough pathway designation. This landmark presentation on a novel therapy demonstrates our leadership and commitment to innovation and science our focus on helping large population of patients with unmet needs. In summary for TMTT, we are proud all the new therapy introductions, clinical trial achievements and geographic expansion, we have achieved all participants are ready to advance our vision to build a portfolio of therapies to transform the lives of mitral and selective patients.

Speaker 2

Operator In Surgical, 3rd quarter sales of $247,000,000 increased 11% are driven by a balanced combination of strong global adoption of EDWARDS Premium Technology we continue to see strong momentum of our Resilia portfolio globally, which has been widely adopted because of the excellent durability of this proven tissue technology Supported by the recent 7 year aortic data and 5 year NITRAIL data from our COMMANDS clinical trial. We are confident about the future of this technology as we expand the overall body of RESILIA evidence, including ongoing patient enrollment of our momentous clinical study. Finally, we received CE Mark approval for our MITREZWEZLEA mitral valve earlier this month. We expect to introduce this valve in the 4th quarter followed by full European launch in 2024. Operator In Critical Care, 3rd quarter sales of $221,000,000 increased 6%, Driven by our smart recovery portfolio with strong adoption of our AcumenIQ sensors are equipped with the hypertension prediction index algorithm.

Speaker 2

We remain confident in our plan of critical care innovation as we continue to shift our focus to smart recovery technologies designed to help clinicians make our better decision and get patient home to their family faster. And now, I will turn the call over to Scott.

Speaker 3

Operator? Thanks a lot, Bernard. We are pleased to report 3rd quarter sales performance in line with our expectations with strength across all product groups. We achieved total sales of $1,480,000,000 which represents 11% year over year growth. We achieved adjusted earnings per share of $0.59 Our GAAP earnings per share of $0.63 benefited from a change in U.

Speaker 3

S. Tax regulations. A full reconciliation between our GAAP and adjusted earnings per share for this and other items is included with turn the call over to today's release. I'll now cover some additional details of our Q3 sales results and full year 2023 outlook by product group. A continuation of double digit global TAVR growth reflected a more balanced hospital staffing environment as well as strong adoption of the SAPIEN family of valves.

Speaker 3

U. S. TAVR sales growth was driven by the launch of SAPIEN 3 Ultra Resilia, which remains on track represent the majority of our U. S. TAVR sales before year end.

Speaker 3

In Europe, Edwards sales growth was driven by continued demand of our SAPIEN platform and was broad based by country. In Japan, improved growth in the Q3 was driven by the ongoing launch of our $4,000,000,000 representing 10% to 13% growth. TMTT growth in Q3 was driven by our differentiated PASCAL Precision platform, activation of more centers across the U. S. And Europe and strong procedure volumes.

Speaker 3

Overall, we are pleased with our continued progress towards establishing a portfolio of TMTT therapies combined with temporary clinical data in order to achieve our vision of transforming the lives of patients with mitral and tricuspid valve disease. We continue to expect full year 2023 TMTT sales of $180,000,000 to $200,000,000 In Surgical Structural Heart, 11% sales growth in the quarter was driven by the adoption of Edwards Resilia products. Based on positive year to date performance, we continue to expect that our full year sales will be in the range of $960,000,000 to $1,020,000,000 implying low double digit growth in 2023. And in Critical Care, we continue to expect full year 2023 sales of $870,000,000 to $940,000,000 For total Edwards, based upon the performance we have delivered year to date, we continue to expect full year 2023 sales to be in the range of $5,900,000,000 to $6,100,000,000 and full year sales growth to be in the 10% to 13% range. Lastly, we continue to expect our full year adjusted earnings per share to be between $2.50 $2.60 we're projecting 4th quarter sales to be between $1,450,000,000 $1,530,000,000 we are also projecting 4th quarter adjusted earnings per share to be between $0.60 $0.66 I'll now cover additional details of our P and L.

Speaker 3

For the Q3, our adjusted gross profit margin was 76.4% as expected compared to 81% in the same period last year. This year over year reduction was driven by impacts from foreign exchange. Remember last year, Edwards gross profit margin was lifted by an unusually positive impact from foreign exchange. We continue to expect our full year 2023 adjusted gross profit margin to be between 76% 78%. Selling, general and administrative expenses in the quarter were $440,000,000 or 29.7 percent of sales, are compared to $377,000,000 in the prior year.

Speaker 3

This increase was driven by investments in transcatheter field based personnel in support of our growth strategy and performance based compensation. We continue to expect full year 2023 SG and A as a percent of sales to be 29% to 30% as we invest in field based personnel and our therapy adoption initiatives. Research and development expenses in the Q3 grew 16% over the prior year to $270,000,000 or 18.3 percent of sales. This increase was primarily the result of continued investments in our transcatheter valve innovations, including increased clinical trial activity. For the full year 2023, we continue to expect R and D to be 17% to 18% of sales as we invest in developing new technologies and generating evidence to support TAVR and TMTT.

Speaker 3

Turning to taxes, our reported tax rate this quarter was 12.7% participants were 18.8%, excluding the impact of special items. Our reported rate benefited from the suspension of certain U. S. Tax all participants

Speaker 4

are currently experiencing the

Speaker 3

impact of the current tax credits. Our slightly higher than expected non GAAP rate resulted primarily from income mix And a lower excess tax benefit from stock based compensation. We continue to expect our full year tax rate excluding special items could be between 13% and 17%. Foreign exchange rates decreased 3rd quarter reported sales growth by 140 basis our earnings points were $16,000,000 compared to the prior year. At current rates, we now expect an approximately $40,000,000 year over year negative impact turn the call back to full year 2023 sales compared to 2022.

Speaker 3

FX rates negatively impacted our 3rd quarter gross FX rates had a $0.01 negative impact on 3rd quarter earnings per share. Free cash flow for the Q3 was $356,000,000 is defined as cash flow from operating activities of $411,000,000 less capital spending of $55,000,000 we continue to expect full year 2023 adjusted free cash flow will be between $1,000,000,000 $1,400,000,000 And before turning the call back over to Bernard, I'll finish with an update on our balance sheet and share repurchase activities. We continue to maintain a solid and flexible balance sheet with approximately $1,900,000,000 in cash, cash equivalents and short term investments as of September 30. During the Q3, we repurchased 2,200,000 shares under our 10b5 plan. We continue to expect our average diluted shares outstanding for 2023 to be between $610,000,000 $615,000,000 we have approximately $500,000,000 remaining under our current share repurchase authorization.

Speaker 3

And with that, back over to you, Bernard.

Speaker 2

Thank you, Scott. In closing, after more than 20 years of vigorous clinical experience, over 1,000,000 patients treated. And this week's 5 year partner free results, Edwards TAVR In addition, we have 2 strong global businesses, Critical Care and Surgical, which are positioned we are achieving many significant milestones in TNTT that gives us the confidence our progress is progressing our vision to treat the many mitral and trichacide patients in need. Altogether, we are convinced of a tremendous opportunity to drive success in the future through our patient focus, our breakthrough technologies and leadership. With that, I'll pass it back to Mark to open up Q and A.

Speaker 1

Thank you very much, Bernard.

Speaker 5

Before we open

Speaker 1

it up for questions, I'd like to remind you about our 2023 Investor Conference, which we will host at our our speakers in Irvine, California on Thursday, December 7. This event will include updates on our latest technologies, views on longer term market potential, as well as our outlook for 2024. More information and a registration form are available on our website. With that, we're ready to take questions now. In order to allow for broad participation, participants are in the remainder of the call.

Speaker 1

Diego, please go ahead with additional details on accessing the Q and A portion of the call.

Operator

Thank our first question comes from Robbie Marcus with JPMorgan. Please state your question.

Speaker 6

Great. Thanks for taking the question. Maybe to start, you guys did 11% TAVR growth in the quarter, roughly similar U. S. OUS.

Speaker 6

Participants How do we think about what's holding it back here from being faster? Pre COVID, it was growing at much higher rates. Participants have been one of the slower to recover subsectors in medtech. Data we presented this weekend should be supportive of growth. Operator But what gives you confidence this can remain a double digit growth market for the foreseeable future?

Speaker 2

Thank you, let me start and then I will ask Larry to continue here. First, we are pleased to this quarter. Again, it is the 3rd quarter in a row of double digit sales growth, we are very pleased about it, very balanced between U. S. And the U.

Speaker 2

S. Our Ultra Resilia adoption is going very well according to plan in U. S. And in Japan. And we look at the opportunity we so many patients are undiagnosed and untreated.

Speaker 2

So we feel good about what's ahead of us. We feel that we are well positioned. All of the data presented this week give us even greater confidence. But Larry, you want to add anything?

Speaker 7

Yes. I don't have a lot to add. This is our 3rd 3 quarter of double digit growth, which coming out of COVID and all the rockiness that we saw during that period of time, it's actually been really good to see the stability that we've are seeing the continued growth even as our business gets larger. So I actually feel really good about our growth rate. I think we're continuing to work to get patients off the sidelines participants are in our patient activation.

Speaker 7

I think the data hopefully the data here is reassuring for patients. People were worried about a durability signal with TAVR and now we have really high quality data published with in the New England Journal of Medicine that shows absolutely no durability signal at 5 years using VARQ III definition. So we think all of those are positive and those continue to help us have double digit and sustainable growth over a long period of time. So I feel great about where we are.

Speaker 8

Participants are ready to go.

Speaker 6

Great. Maybe one more product question here for me. You just got Evoque approved in Europe with participants will see the data for 6 months tomorrow in tricuspid replacement. This is a market we hear from doctors a lot. May not be terribly excited about repair, but replacement could be a really exciting option.

Speaker 6

What do you think Edwards needs to do as a company to take this market and accelerate adoption and drive uptake here in an area that's been pretty slow with TriTESTA repair. Are ready.

Speaker 2

Thank you, Robbie. So we are going to do what we have done in TAVR for the last 50 days, basically focusing on number 1 of the patient outcomes. So it is why we are going to be focusing on making sure our team is well trained, well equipped to our supportive positions, we are going to have a disciplined launch in Europe and we are going to produce evidence like the TRICEN 2 cohort you are going to see tomorrow and we are going to continue to produce more evidence. But maybe Zviin, you want to add anything here?

Speaker 6

Yes. No, thanks, Bernard. I appreciate it. No, I think as Bernard has said, we really do believe that it's The comprehensive high touch model and outstanding outcomes is a key step, but it's much more than that. And us having the ability to take the TAVR playbook from long ago and help apply to this news area is really important.

Speaker 6

And for us, that includes not only technology, G, innovation, evidence, but also continuing to then over time work on helping improve diagnosis, referral and eventually treatment of patients. But For us, this is a comprehensive kind of play, long term play for us to really build a new therapy that we're really excited about to help patients with.

Speaker 2

Operator And if I may add, Robbie here. We are also at the beginning of better understanding the Strichuspid disease. We believe that with tier and a replacement option, physician will have more options to treat even more patients. So we are going to learn a lot here about what therapy for what patient, but I think 2 therapy in Europe and as leading that space, we are going to learn a lot in the past few years and I'm sure patient will benefit from that. Participants are ready to go.

Speaker 6

Thank you.

Operator

Our next question comes from Larry Biegelsen with Wells Fargo. Please state your question.

Speaker 5

Good afternoon. Thanks for taking the question. Scott, year to date the camera growth is a little over 10 percent, I believe the midpoint of the guidance is about 11.5%. So should we be thinking about the low end of the TAVR range of 10% to 13% for the year? And if not, what drives the acceleration implied in Q4 for TAVR?

Speaker 5

And I had one follow-up.

Speaker 3

Well, I'll take you back

Speaker 6

to the beginning of the

Speaker 3

year when our guidance for the full year for both TAVR and Edwards was 9% to 12%. We increased it to ultimately 10% to 13% because of the Q1 and the Q2 results. Participants So we're coming about where we thought we would for Q3 and Q4. The 10% to 13% guidance reflects the stronger than expected Q1 and Q2. All participants In the Q4, our guidance for the full company is about $10,000,000 higher at the midpoint than our results in Q3.

Speaker 3

So we haven't broken out guidance by business unit, but you can expect that overall, we expect the 4th quarter that looks pretty similar to the 3rd quarter. You're right. I think for the full year, we're probably going to end up about in the middle of the range that we said 10% to 13%, but that doesn't mean that It's 10% to 13% for Q4 because again that higher range reflects the increase from the Q1.

Speaker 5

Thank you for that. All participants And obviously, people are starting to think about 'twenty four right now. So Bernard, at our conference, you talked about targeting double digit annual revenue growth. Does that apply to 2024? And Scott, 'twenty three guidance implies margins are down year over year because of investments and currency.

Speaker 5

What are some of the puts and takes on the P and L that we should be thinking about it? Any help on FX would be appreciated. Thank you.

Speaker 2

Thank you, Larry. Let me take the first part of your question here. So for 2024 guidance, you will get all of the details here in December participants are at our investor event. And your question is about my confidence and our confidence as a company. Yes, we are confident.

Speaker 2

As I said during the script, I think like we have an amazing opportunity in front of us with so many patients. All of our businesses are in solid position, in global leadership position. So I am confident for the years to come, for 2024, more to come in December, Larry.

Speaker 8

Participants are in

Speaker 3

the line with the second part of your question about FX. We'll talk about more of the specifics at the investor conference. But if you take our exchange rate environment right now on a client to 2024, it would be a headwind to sales and also a headwind to EPS. So we'll be able to quantify that more by that more specifically, and we'll see what happens to FX rates between now and then as well.

Speaker 5

All right. Thank you, guys.

Operator

Ready. Our next question comes from Vijay Kumar with Evercore ISI. Please state your question.

Speaker 9

Participants. Hey, guys. Thanks for taking my question. Bernard, maybe first one for you on the STACK. However, 5 year data that this presented, A lot of noise in the street on the lines crossing for Edwards and your peer, participants are widening between TAVR and Control.

Speaker 9

Does that worry you at all just from Edwards' perspective when you look at the data? And I think you also mentioned VAR3 definition for durability. Is that something that your peer all the years the same definition or there are some differences here and how durability was defined in these two trials?

Speaker 2

Participants are in the line with us. Thank you, Vijay. Let me start at a high level. I believe last night investor event was very insightful we'll talk with Doctor. Leon and Doctor.

Speaker 2

Marc. They went very deep into the data. They went very deep into the meaning of the data and the trial design. Operator at the end of the day, for me, it is I like to keep it very simple. 90% survival at 5 years.

Speaker 2

Operator? That's amazing for patients. That's in my mind what we should remember, but I'm going to ask Larry to comment with greater detail here.

Speaker 7

Yes. Thanks, Bernard. Yes, this whole thing about the curves continuing to diverge just are really accurate. I think we have a little bit of a catch up. But if you'll notice from the New England Journal of Medicine manuscript, we are impacted somewhat by the patients With Drew on the surgical side disproportionately and when we did the phone sweep, the absolute difference that we're showing at 5 years is about 1%.

Speaker 7

When you go into the causes of death, you look at cardiovascular mortality, they're about the same. We had, I think, double the rate of cancer. We had 3 times as much COVID death participants in the TAVR group as we had in the surgical group and I think higher rates of sepsis, which were all adjudicated to be participants are not TAVR related and I don't think anybody is suggesting that TAVR causes cancer or COVID. So when you get into the depths of the data, I mean, we are great about the data. What's amazing about this data set is that both groups performed incredibly well.

Speaker 7

Participants And given the prominence of Edwards Surgical Valves and then obviously our TAVR cohort, we're looking at both groups that have over 90% survival at 5 years. And the other thing that people have been worried about with TAVR was durability. And you're right, we did use the BARC definition participants are ready for the Q1. Thank you. Thank you.

Speaker 7

Our next question comes from the line of And so part of what drives the New England Journal of Medicine publication is we used all the contemporary standards, all the contemporary things. So I don't want to comment on other people's data. You can ask them about their data and what methodologies they use. But I'm very comfortable we applied the highest academic standard STAR study. And again, we feel great about the data.

Speaker 7

And I think there's just a little bit of an oddity here that people are discussing that somehow TAVR has to be better than surgery. If we have 2 procedures, TAVR and surgery, and we can go to patients and say, your results participants are identical at 5 years, then that's going to automatically default people to the less invasive therapy. And Now we need to continue to follow these patients. We need to follow them all the way out to 10 years. But for a pretty significant interim look at the data at 5 years, operator I don't think we could be any happier about the data than we are.

Speaker 2

And in addition, Vijay, if you think about What we have been saying all along about the under diagnosis and under treatment of this patient. Now you look at this part of 3, 5 years, we hope, we certainly hope that very fitting network of cardiologists will send more patients, because they have options, safe options, effective options. So we feel good about all of these.

Speaker 7

Yes. I mean, I'll just add, I think this was a great day, a great our meeting for the field in general. If you have patients on the sidelines who say, I'm just I just don't want to have open heart surgery. I'm too scared of open heart surgery, participants are being told TAVR doesn't really have any data behind it and it's still early. If you look at both data sets that were presented, there's absolutely no durability signal at 5 years or 4 years depending on which study you're looking at.

Speaker 7

And I think that should just give the referral community tremendous confidence participants That they can send patients for this procedure and they're going to get a durable outcome.

Speaker 9

That's helpful guys. And Bernard, just one more for you. Participants are in the U. S.

Speaker 4

And the U.

Speaker 8

S. And the U.

Speaker 4

S. And the U. S. And the U.

Speaker 9

S. And the U. S. And the U. S.

Speaker 9

And the U. S. And the U.

Speaker 4

S. And the U. S. And the U. S.

Speaker 4

And the U. S. And the U. S. And the U.

Speaker 4

S. And the U.

Speaker 2

S. And the U. S.

Speaker 9

I know it's a silly question, but I have to ask, is there any GLP-one exposure to TAVR or TAVR patients related to Opacity in GLP-1s? Thank you.

Speaker 2

Operator? Thanks. In Europe, there is no financial exposure. We have a brief statement on that, so no expectation here. With regards to GLP-one exposure to TAVR, we don't think so.

Speaker 2

We have not seen any evidence losing weight has any impact to aortic stenosis disease. We don't know that. We don't see that. We have not seen any evidence. So we don't see any possible implication here.

Speaker 2

Larry, anything to add?

Speaker 7

No, I totally agree. I think all participants As it relates to just general things, obviously, people losing weight is a good thing, but we've never seen anything related to all participants Even coronary disease, there's a lot of these things are genetically derived and genetically driven, and I don't think your weight is going to be the determinant of those things. So operator I don't really see any impact of this.

Speaker 9

Understood. Thanks guys.

Operator

Our next question comes from Josh Jennings with TD Cowen. Please state your question.

Speaker 10

Hi, good afternoon. Thanks for taking the questions. I wanted to just ask first on the tricuspid our Repair and Replacement segment and just get your views on patient reported outcomes are driving approvals and then potentially reimbursement decision positive reimbursement decisions. Are paper reported outcomes or quality of life improvements are Enough to clear those two hurdles?

Speaker 2

So let me start and then I'm sure Devine can add his participants are ready for questions. It is a good start. We have seen tarluminate so far, correct? And we believe tarluminate great quality of life improvement for these patients who have a miserable life. We need to remember that.

Speaker 2

With Evoque, we are going to talk about it tomorrow. So if it's tough for me to talk about it today, we might talk about it more all participants are at the end of the day, quality of life improvements are important. Operator? Solid safety profile also is important. And all of that, we see that as a great start for this patient who has no other options today.

Speaker 2

Dovine, you want to add anything?

Speaker 4

Yes.

Speaker 6

I mean, I think we continue to see out of our European experience where

Speaker 5

we do have PASCAL tricuspid approved

Speaker 6

that we could use these great outcomes for the technology is really making a difference in patients' lives. It's taking patients that ultimately can't do the things they want are doing their day to day. They feel really down. They have trouble breathing and it really just helps them live the life that they want to lead. And so for us to see now in this randomized trial that's been presented with triluminate to see high quality data where that you can treat tricuspid regurgitation in a randomized trial get safe results and have significant TR reduction with meaningful quality of life.

Speaker 6

Wow, I mean that's just fantastic for patients and something we love. And ultimately down to the community and the regulators, they're going to keep looking at the benefit and risk trade off to make the decisions that they need to make, but we continue to be super excited by what these therapies are doing for tricuspid patients.

Speaker 2

What we are in addition of what David said, what we like about where we are today is in the past few years, it was only about tear. It was only about repair. So physician didn't have a lot of options. And what we are doing is now progressing with our vision To being able to offer to physician a toolbox, so they can decide what therapy for what patient for what anatomy. And so that's still a big progress to where we were in a few years ago, even in a few months ago.

Speaker 2

So a great progress here and I see more to come.

Speaker 10

Participants are Thanks for that. Just one follow-up on just the U. S. Sales our strategy and having 2 separate teams for TAVR and for the TMTT franchise. Just wanted to hear about how that's going?

Speaker 10

Participants are in the line with the TAVR our sales reps and their deep relationships with some of these interventional cardiologists. Thanks for taking the question.

Speaker 2

Thank you. So what about, I asked you, Larry, we're leaving that to you every day to comment on this.

Speaker 7

Yes. It's funny when we launched TAVR in the U. S, if you'll remember, half of our procedures were transapical and people were like, hey, you already have a selling organization that's selling to surgeons, why are you developing this whole new sales organization? You could get a lot of synergy. But it's really all about providing that high touch model and that level of expertise and we built out a completely separate sales force for THB.

Speaker 7

And I don't think there's a day we look back on that and think that that was a bad decision. I think we feel that that was the right decision for the therapy. Mitral patients are different than aortic patients. And all participants If you ask your clinical specialists and your salespeople to try to be experts in 10 therapies, they're going to be generalists in all of them and not experts. And I think one of the reasons we've had the success we've had in TAVR is, I think our average field clinical specialist supports about 1200 cases a year.

Speaker 7

And So you bring that level of expertise to every case. And we really drive differentiated outcomes for patients, Which I think what's driven the therapy and what's driven our leadership and we like that model a lot. We think it's been hugely successful. Just because our team sit in different organizations This doesn't mean they don't talk. And Dabine and I talk a lot.

Speaker 7

I have surgical structural heart now, but I talk are in the same time. We look for where there are opportunities for us to work together. But at the same time, we want to make sure we have focus on these new therapies and we bring the highest level of expertise possible, so we drive the best outcomes for patients possible because we believe that is what's going to drive long term the success of our franchises.

Speaker 6

I'll add one thing on that. This is Devine. Even here at TCT, as I talk to physicians, the one thing I consistently hear from physicians is they so appreciate our comprehensive high touch model. They love that the Edwards person who is so deep in the mitral tricuspid space and that's are ready to take their questions. They're ready to take their questions.

Speaker 6

They're ready to take

Speaker 4

their questions. They're ready to take their questions. They're ready to take their questions. They're ready

Speaker 3

to take their questions. They're ready to take their questions. They're ready to take their questions.

Speaker 6

They're ready to take their questions. They're ready to take their questions. They're ready to take their questions. They're ready to take their questions. They're ready to take their questions.

Speaker 6

They're ready to ensure the best possible patient results. And I just love seeing that this week as I talk to physicians.

Speaker 10

Participants are

Speaker 4

ready. Our

Operator

next question comes from Travis Seed with Bank of America. Please state your question.

Speaker 5

Participants. Hey, thanks for taking the question. Maybe just to clarify one clarification. When I add your Q4 guide of $0.60 to $0.66 I'm getting to a full year of $2.47 to $2.53 which is different than your full year guidance. So I don't know if there was a restatement or just participants may be on the math is off, just wanted to clarify that, if you don't mind.

Speaker 3

No, your math is spot on. At the midpoint of the range, all participants That's exactly what it implies. And so take the midpoint, it ends up at the lower end of that 2.50 dollars to $2.60 range, but still within the range.

Speaker 5

Okay, got it.

Speaker 2

And then participants

Speaker 5

are in the U. S. And OUS growth rates being comparable. Is that referring to constant currency reported? It looks like OUS is a little bit lighter in this quarter and just wanted to make sure I understood everything going on in OUS and some of the Japan comments and what's going on in Japan?

Speaker 3

All the growth rates we talked about were underlying constant currency growth rates.

Speaker 5

Okay. All participants That's fair. And then my last question was on 2024, I think you're not going to talk a lot about 2024. But curious if you think you can still I'll hold shares stable with new competition coming in or do you think it's fair to assume something less than the market growth rates in 2024? Participants are in the line with us.

Speaker 3

Yes, it's Scott. Let's hold off on that question about share and the environment, new product introductions and all kind of stuff. There's a lot that we expect to happen in 2024 and we'll look forward to getting into all of those details and forecasts when we get together at our Investor Conference in December.

Speaker 8

Participants are ready.

Operator

Our next question comes from Joanne Wuensch with Citibank. Please state your question.

Speaker 11

Participants. Good afternoon and thank you for taking the questions. Tatum, I know you don't want to talk about 2024, but last year you did a great job of helping us understand The impact of FX on gross margin and it sounds like you're going to have an FX headwind next year. Can you sort of level set us How to think about gross margins next year?

Speaker 2

I hate

Speaker 3

to do this to you, Joanne, but again, we're going to have to hold off until we get our earnings call is being recorded. Really all we can say right now is that we think we're going to see some pressure on the top line reported sales dollars, won't impact our underlying growth rates. And the reported sales dollars headwind is going to flow right down to earnings per share. Now again, that's not current foreign exchange rates, so when we get to December and we lay out our full year guidance for 2024 and we'll go through all the lines of the P and L and take you through all the detail. But at this point, we really can't tell you more.

Speaker 11

Okay. My follow-up question, which is completely unrelated, is you did another quarter of double digit surgical valve revenue. And I'm curious with helping to drive that and how much of it is maybe an upcharge from Nasilia versus underlying demand? Thank you.

Speaker 2

Yes. So let me start here. So 11% obviously, we are very pleased. I don't know if you remember, but few years ago, all participants Nobody believe in surgical and we believe in surgical because we have been a pioneer here. We have been a great innovator.

Speaker 2

Operator And our innovation is paying off. What we see in Q3 again, like in 2023, we see a balanced combination between adoption of our Resilia platform, premium pricing and also the procedural growth. So altogether, which it's very balanced between procedural growth and our premium technology.

Speaker 7

Yes. I'll just add it. It's all participants We'll try to bring this to life a little bit at the investor conference is I almost feel like when we have a good surgical quarter that you guys participants get mad at us because you think it comes at the expense of TAVR. And I'll tell you, the guy that runs both of those business units, that gets really frustrating after a while and my new GM is really mad about it. So, but what you have to understand is our surgical business isn't 100 percent aortic stenosis.

Speaker 7

Our surgical business treats aortic, we treat mitral. And even in the aortic space, we don't just treat aortic stenosis, we treat aortic regurgitation. We have products like Connect where we're treating aortic aneurysm disease. We have repair products, replacement products. So there's just a lot more that goes into that business than aortic stenosis.

Speaker 7

So are thinking that the zero sum gain between the two businesses just isn't the right way to think about it.

Speaker 8

Participants are ready.

Operator

Thank you. Our next question comes from Matt Miksic with Barclays. Please state your question.

Speaker 12

Operator. Thanks for taking the question. So one, if I could on sometimes Scott and Bernard, you're able to offer some color participants are in the U. S. Performing.

Speaker 12

You mentioned staffing stable. Any color as to which large, small or size centers were additive to growth and in what ways? And then I have one follow-up.

Speaker 8

Participants are

Speaker 2

ready to ask Larry to comment on

Speaker 7

that. Operator Yes. We look at this every quarter and I will just tell you just even internally amongst us, we sort of see the growth rates by segment and then we sort of make up the reasons for why we think they're different a little bit. I will tell you during COVID, we saw trends that said when COVID spiked, people tend to stay a little bit closer turn the home, we saw maybe some of our smaller centers grow more and larger centers would grow less. And then as COVID waned, we'd see larger centers kind of return to higher growth.

Speaker 7

I think this quarter we probably saw a little bit more growth in the higher in the bigger centers than the smaller centers. But really, I think it's getting a little bit negligible and we're kind of returning to a little bit of sense of normalcy as it relates to growth across center size.

Speaker 5

Participants are in the line with us.

Speaker 12

That's helpful. Thank you for that. And then just one follow-up on just maybe Segment of the market that's got to be getting bigger, I guess, by this point. But looking forward, being the only valve on the market with

Speaker 6

a valve in valve indication,

Speaker 12

how big is that now and how important is that? We talk a lot about expanding indications into participants are not asymptomatic and moderate AS patients over the intermediate and long term. But does valvivel become a

Speaker 8

participants are in the line

Speaker 7

with us. Yes. I think it's a good question. I think valve and valve isn't a huge part of our offering right now, it's not a big driver for us. We do TAV and SAV, so TAV and failed biopharmaceutical surgical valves.

Speaker 7

And as TAVR came online, we saw more and more biological valve usage in younger patients Because they knew they would have this TAVR option down the road. So we think that that's going to be as these patients live longer, obviously, our our surgical valves are very durable, but that was a whole basis for Inspiras was creating a valve that would be a great platform for their TAVR procedure down the road and that's the whole basis for it. And we think I'll That will pay dividends later. As we just got the lowest approval, it's still fairly new for us. It's not something that's been around forever.

Speaker 7

But the more and more patients that are younger that are getting TAVR, eventually those patients will come back and need a second procedure. And So for us having a TAB and TAB option, it just feeds directly into our lifetime management strategy, which is putting in a first valve And ensuring that you have a strategy for that next intervention. And that's true whether it's INSPIRIS is your first valve or whether it's a SAPIEN 3 is your first valve. We want to make sure we have an option for that patient when they come back. And that's what's great about both of our surgical and TAVR platforms is they're both really a great host for that future valve and we do think as you advance down the road that TAB and TAB will become a bigger contributor to our growth over time.

Speaker 12

Participants. Thanks so much.

Operator

Our next question comes from Danielle Antalffy with UBS. Please state your question.

Speaker 8

Participants are ready for questions.

Speaker 11

Hey, good afternoon, guys. Thanks so much for taking the question. I was just wondering if I could follow-up actually on the data, the 5 year data we saw yesterday. Participants are ready for questions. And Larry, if there's any read that we can make or something that could that we saw in the data that could give us more confidence in the coming asymptomatic data readout or is that just too difficult to take anything from yesterday and apply it to that trial?

Speaker 8

Participants are

Speaker 7

Yes. I appreciate everybody is trying to get an early read on early TAVR. And I I don't think there's anything that's really from this data that I and I haven't even we haven't even broke apart the early TAVR data. So I don't even know anything We show excellent durability out at 5 years with no durability signal whatsoever. FS, the asymptomatic trial is successful, which we obviously hope it is.

Speaker 7

But FS trial is successful. It just takes one more burden away from people saying, do I want to treat people earlier And I think the more durability data we can put on the Board will help make that if that trial is successful and we do get the indication participants That will be one barrier that's removed. So I think the long term data continuing to build on the durability and safety and long term results of the platform just continue to be important and it's going to be important long term for the progress trial. If you're going to treat people with moderate disease down the road, you need to make sure you have a durable platform And then it has options down the road for these patients. So I think it all is complementary, but I don't think anything about this trial informs the early TAVR results.

Speaker 8

Participants are

Speaker 11

in the line with us. Okay, got it. And then just a quick question on Bernard, you mentioned there's still a lot of these patients all participants are treated out there. I mean as far as Edwards' progress on getting those patients off the couch into their physician's office diagnosed I'll refer for TAVR. I mean, where are we in that process?

Speaker 11

You guys spent a lot of time at the Analyst Day last December. I imagine we'll get an update you in December in a few weeks here, but just curious what you can say about are you seeing any real traction in some of the direct to consumer campaigns, things like that. Thanks so much.

Speaker 2

Thanks for the question. We see this initiative is super important to us. We have the right platform. We have the right science. So how can we get more patients?

Speaker 2

And we have done in the last, I want to say years, maybe 3 to 4 years, a lot of initiative, a lot of pilots. We learn a lot. This year, we scale some of the initiatives. And so we are going to talk more about it in December. Larry and his team are going to talk about it.

Speaker 2

But we feel like we have some interesting learning and we believe that we are starting to see some impact also. So we feel are excited about the potential of that. It is why when we see it, we believe the future is even more exciting. It is because of its reason. In addition, obviously, asymptomatic and moderate indication will add to all of this.

Speaker 2

But Larry, you want to add anything?

Speaker 7

Sure. I think one thing that I think people are missing a little bit is, it's not like we just started doing patient activation stuff last year or in the last 2 years. I mean, we go all the way back to starting a website with a lot of educational information for patients, even things like how to find a TAVR center and your questionnaires and patient information kits. So we've been doing a lot of things over the last several years that I think is one of the reasons the market has grown and developed the way it has. So I think a lot of our digital and patient activation efforts are still are paying dividends right now.

Speaker 7

Now the deeper you go into the prevalence pool, the harder it gets and the more activation you have to do. So it's sort of a it's not a light switch. It's in a never ending journey that you're going to do to continue to build on the last program with additional programs to try to get people activated. And I'll tell you, we have a lot of work streams and we're looking forward to maybe getting in a little bit more detail at the investor conference and trying to show you a little bit about other things that we're working on. But we have a number of pilots we have a lot of very mature programs at the same time that we think help us a lot.

Speaker 8

Participants are in the line.

Operator

And our next question comes from Pito Chickering with Deutsche Bank. Please state your question.

Speaker 5

Hey, good afternoon, guys. Prescript, you mentioned that of our market share is stable. If you look at our competitive accounts with hospitals and doctors that use both State Beacon and CorVel, are you seeing any market changes in those accounts where Resilient is be repeating again, Seth.

Speaker 7

Yes. I think market share has been pretty stable. I don't think we've seen big shifts or big changes. We're very excited about Resilia and I think it does participants give people increased confidence in going into younger lower risk patients. So we feel good about that.

Speaker 7

But Maybe we can try to update that a little bit more at the investor conference. But again, I think overall, I think share has been generally pretty stable.

Speaker 5

Participants. Okay, great. And then a quick follow-up for TAVR. I think you said that procedure growth was the same as revenue growth. But was there any benefit from positive pricing from Resilia?

Speaker 5

I participants are ready to drive revenue growth above the following year. Thanks so much.

Speaker 7

There was a little benefit, but it wasn't the big driver of our growth.

Operator

Remarks.

Speaker 2

Thank you. So let me close this meeting by saying, I am pleased with our performance in 2023. Beyond the numbers, I am excited with the progress we have made reinforcing our TAVR leadership position with new clinical evidence As a result, we are confident in our long term strategy to add even more patients around the world. Thanks for your continued interest in Edwards. The IR team, Scott and I welcome any additional questions by phone.

Speaker 2

Thank you.

Speaker 4

In the call.

Operator

Thank you. And with that, we conclude today's conference call. All parties may disconnect. Have a good day.

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Earnings Conference Call
Edwards Lifesciences Q3 2023
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