Edwards Lifesciences Corporation

Greetings and welcome to the Edwards Life Sciences second quarter 2019 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mark Wilterding, Vice President, Investor Relations. Thank you. Please begin.

Thank you, Roya. Good afternoon, and thank you for joining us today. Just after the close of regular trading, Edwards Life Sciences released its second quarter 2019 financial results. During today's call, management will discuss the results included in the press release and accompanied financial schedules, and then use the remaining time for Q&A. Our presenters on today's call are Mike Musallam, Chairman and Chief Executive Officer, and Scott Ullam, Chief Financial Officer. Before we begin, I'd like to remind you that today's During today's call, 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 they are 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. Information concerning factors that could cause differences and important product safety information may be found in the press release. Our 2018 annual report on Form 10-K and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Finally, a quick reminder that when using terms underlying and adjusted, management is referring to non-GAAP financial measures. Otherwise, they're referring to gap results. Additional information about the use of non-gap measures is included in today's press release and available at edwards.com. With that, I'd like to turn the call over to Mike for his comments.

Thank you, Mark, and welcome to the team. We're pleased to report strong second quarter total adjusted sales of $1.1 billion. representing 14% underlying sales growth with valid strength across all four in TAVR, which reinforces our belief in our project. We continue to aggressively pursue breakthrough technologies. Return drives significant future value. Given our first half performance, we have increased confidence that we will again achieve double sales. Global sales were $678 million, up 18% on an underlying basis. We anticipated growth would accelerate after the first quarter. and our results this quarter exceeded our expectations. ...to exercise price discipline. For the first half of 2019... ...teens, consistent with our guidance from the December Investor Conference. ...high teens, and we estimate that our share of procedures was stable. We believe growth was stimulated by increased... confidence in the therapy following the strong partner three clinical results presented and published in late Q across both high and low volume centers. Nevertheless, based on our continued research, we are increasingly confident that there are many patients who would benefit from TAVR and who are not diagnosed, referred, or treated today. We remain focused on our efforts to increase awareness and diagnosis that they need based on medical guidelines. Patients are continuing to be treated with the Partner 3 low-risk continued access protocol in more than 30 high-volume clinical trials. FDA will approve Sapien 3 and Sapien 3 Ultra for patients at low surgical risk. Laid in Q2, the U.S. Centers for Medicare and Medicaid Services, which we believe better reflects today's practices and the needs of patients. While the NCD did not achieve equipoise requirements and more streamlined patient evaluation process, our meeting suffering from severe aortic stenosis. Outside the U.S., in the second quarter, we estimate total TAVR procedures. We continue to see excellent opportunities for OUS growth at low. In Europe, we estimate that TAVR procedures also grow in the mid-teens on a year-over-year basis, and Edwards growth was comparable. We are continuing our launch of Sapien 3 Ultra System in Europe, which we expect to account for a majority of our TAVR sales in Europe by year-end. ...number of centers and did not contribute meaningfully to this growth. ...adoption driven by Sapien 3 and new centers are being qualified. we remained focused on expanding the availability of TAVR therapy throughout the country, driven by our belief that aortic surgery can help a large elderly population. As we discussed earlier this year, the landmark PARTNER III trial in the low-risk patient population. A highlight was a low 1% risk of death or stroke at one year. Combined with prior aortic stenosis are ideally treated with Edwards Best in Class Sapien III platform. Given the pending approval of our balloon expandable platform, we have made the difficult decision to discontinue the Sentera program. While the Sentera valve has demonstrated excellent clinical outcomes, it is required to optimize deliverability as well as expanding the indications to match Sapien III are significant. By focusing resources on our robust pipeline of next generation balloon expandable technologies and indication expansion trials. We continue to be pleased with the Sapien 3 Ultra Valve performance, and throughout the discipline launch, our confidence has been reinforced by positive clinician feedback. Many clinicians have also expressed a preference for aspects of the Sapien 3 delivery system, and we're working to incorporate those changes to optimize the Sapien 3 Ultra system. We expect physicians to continue to transition from Sapien 3 to Sapien 3 Ultra system around the world. In summary, our year-to-date underlying sales growth in TAVR was 14% and we are raising our full year guidance to around the top end of our previous 11 to 15% range. Although the strategic decisions we made in the quarter resulted in a special charge, these decisions strengthened the execution of our long-term strategy. We are encouraged that the TAVR opportunity remains robust and continue to believe that our TAVR innovations will sustain our strong global leadership position. Turning to transcatheter mitral and tricuspid therapies, or TMTT, second quarter global revenue of $7 million was lifted by the continued rollout of Pascal in Europe. In our early commercial experience, we remained focused on physician training, procedural success, and great outcomes for patients. We're pleased with our progress as well as the positive physician feedback that we're receiving regarding Pascal as a differentiated therapy. We also treated patients commercially with our cardio band, mitral and tricuspid annular reduction therapies, and there have been improvement in supply as we continue transferring production to other Edwards manufacturing sites. As we advance our comprehensive portfolio, we remain focused on developing clinical evidence. We recently presented positive data on our mitral and tricuspid experience with Pascal and Cardioband at the URO-PCR and TBT medical meetings. We're encouraged by the data from the CLAS study of the Pascal system. At six months, patients experienced substantial MR reduction as well as clinically and statistically significant improvements in functional status, exercise capability, and quality of life. Looking ahead in mitral repair, as previously announced, we receive approval of our class 2F pivotal trial for patients with secondary or functional mitral valve disease and plan to initiate enrollment in late 2019. and we continue to enroll in our CLASP 2D pivotal trial to study Pascal in primary or degenerative mitral valve disease. In mitral valve replacement, we're pleased with the ongoing early feasibility study experience in both EVOC and SAPIEN M3 transeptal therapies, and we remain on track to initiate a US pivotal trial of SAPIEN M3 in late 2019. In transcatheter tricuspid repair, we've gained significant clinical experience through our three simultaneous US early feasibility studies for PASCAL, CARDIOBAND, and FORMA. We believe that PASCAL and CARDIOBAND can treat a significant number of patients suffering from tricuspid regurgitation, supporting further optimization of our portfolio. We plan to initiate a pivotal trial using Pascal in the tricuspid position late this year and plan to initiate a second tricuspid pivotal trial with CardioBand in the future. Further, while we have experienced positive clinical outcomes for patients who've been treated with FORMA, we've made the decision to discontinue work on FORMA to support the acceleration of other tricuspid programs. Overall, we remain enthusiastic about the opportunities to treat patients suffering from tricuspid and mitral disease with our transcatheter therapies. We remain on track to achieve our 2019 milestones, including continued enrollment in our class 2D pivotal trial, as well as planning to initiate three additional pivotal trials by late 2019. And you can expect to hear more updates regarding our one-year class study data at the upcoming TCT medical meeting. In summary, we remain confident in achieving approximately $40 million of total TMTT revenue for 2019. We continue to estimate the global TMTT opportunity to reach approximately $3 billion by 2024 and are passionate about bringing a portfolio of solutions for patients in need. In surgical structural heart, sales for the quarter were $218 million and were up 2% on an underlying basis. Growth was lifted by increased adoption of our premium high-value technologies and strength outside the U.S. This was partially offset by lower surgical aortic heart valve procedures in the U.S. as TAVR adoption expanded. Of particular note, the Inspiris Resilia aortic valve continued to grow significantly in all regions with notable usage in more active patients who might otherwise get a mechanical valve. Separately, we now anticipate that our HARPOON system, an echo-guided beating heart microvalve repair therapy, will be commercially available in Europe in late 2019 versus our previous expectation for a mid-2019 launch. The delay in timing reflects what we believe is generally a slower regulatory environment in Europe. We remain enthusiastic about this unique therapy and believe that it will offer the potential for earlier treatment of degenerative mitral valve disease while providing faster recovery and more consistent outcomes for patients. In summary, in surgical structural heart, we remain comfortable with our full-year underlying sales growth range of 1% to 3%. We remain excited about our ability to provide innovative surgical treatment options for more patients and to extend our global leadership in premium surgical structural heart technologies. In critical care, sales for the quarter were $184 million and grew 9% on an underlying basis. All product lines contributed to this performance, boosted by Hemisphere sales primarily in the US and Europe. Hemispheres, our all-in-one monitoring platform, is an important growth driver in 2019 and with the recent Fulmark Acumen Hypotension Index software. This platform is designed to provide greater clarity on a patient's hemodynamic status while introducing a predictive algorithm to improve decision-making. In April, we successfully completed our acquisition of CasMed's Foresight, a non-invasive cerebral oximetry monitoring technology. Sales of CASMED were $5 million in the quarter. Integration is underway to enable the use of Foresight on our Hemisphere platform. This combination will create a unique offering of enhanced recovery tools and predictive analytics capabilities to further strengthen our leadership in smart monitoring. In summary, given the strong first half sales performance, and the momentum from the recent Hemisphere launches, we now expect full-year 2019 underlying sales growth of 8% to 10%, an increase versus our previous 5% to 7% projection. And now I'll turn the call over to Scott.