Edwards Lifesciences Corporation

Thank you. Greetings, ladies and gentlemen, and welcome to the Edwards Life Sciences third quarter 2020 results call. At this time, all participants are in a listen-only mode. A 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. Please note that this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, President of Investor Relations. Thank you. You may begin.

Thanks, Diego. Good afternoon, everyone, and thank you for joining us. With me on today's call are Mike Musalem, Chairman and Chief Executive Officer, and Scott Allum, Chief Financial Officer. Just after the close of regular trading, Edwards Life Sciences released third quarter 2020 financial results. 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&A. Please note that management will be making forward-looking statements that are based on estimates, assumptions, and projections. These statements include, but are not limited to, financial guidance and expectations for longer-term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters, and foreign currency fluctuations. Thank you. factors that could cause these differences and important product safety information may be found in the press release, our 2019 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 the terms underlying and adjusted, management is referring to non-GAAP financial measures. Otherwise, they are referring to GAAP results. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today's press release. With that, I'd like to turn the call over to Mike for his comments. Mike? Thank you, Mark.

Let me begin by saying I am very proud of our passionate team and the way that they continue to serve patients during this difficult period. Our supply chain is delivered and our field team has continued to support the dedicated clinicians that count on Edwards. We're pleased to report better than expected third quarter results despite the challenges of the ongoing COVID pandemic. Sales of $1.1 billion increased 4%, reflecting growth around the world. Global TAVR sales headlined our growth with continued adoption of our Sapien valve platform and a step up in procedure volumes as newly diagnosed patients entered the system and were treated. In the third quarter, we are also pleased to report growing investments in new therapies and compelling clinical data announced at the recent TCT Connect Conference that we will be having a meaningful impact on future patient care. In TAVR, Third quarter global sales were $745 million, up 6%. Growth was led by therapy adoption across all geographies, with notable strength in Europe. Globally, our average selling price remains stable. Although third quarter treatment rates were lifted somewhat by the postponement of treatment in the second quarter, particularly in Europe, we believe that going forward there is no significant backlog of patients in the system. Taking a step back, we know that a sad consequence of the intense focus on the pandemic has been that many patients, like those with structural heart disease, are delaying screening and treatment or not being treated at all. Evidence continues to suggest that delaying valve replacement for patients with aortic stenosis inevitably results in adverse events and increased mortality. A recent Swiss study, AS Defer, demonstrated that nearly 20% of patients who delayed a previous scheduled aortic valve replacement reported to the hospital with valve-related symptoms or worsening heart failure. And closer to home, a study conducted last month by the Structural Heart Program of Mount Sinai Hospital reported that 10% of patients waiting for aortic valve replacement required urgent TAVR or passed away during the first month after elective procedures were halted due to COVID. After three months, 35% of patients affected by the ban on elective procedures required an urgent intervention or passed away. There's growing recognition that postponing treatment of AS has significant consequences. At the same time, however, we know that this remains a very difficult time for the patients we serve as they continue to weigh the risk of COVID against the severe effects of progressive heart valve disease. Our observations indicate that most hospitals globally have determined that they can safely treat their AS patients in need and at the same time care for COVID patients. In conclusion, strong evidence indicates that TAVR is a proven therapy with excellent outcomes. It offers efficient use of hospital resources and can benefit many more patients whose structural heart disease is deadly and undertreated today. Now, turning back to the third quarter TAVR results by region, in the U.S., our TAVR sales increased in the mid-single-digit range versus last year, despite approximately 30% growth in the year-ago period. We were very encouraged by the improvement in procedure volumes in Q3, with 100% of our active sites across all 50 states performing TAVR cases, up from approximately 90% in Q2. Third quarter growth across the more than 750 centers in the U.S. was highest in smaller centers, which are providing access to a broader population of aortic stenosis patients. Two-thirds of our U.S. TAVR centers have completed training and proctoring with Sapien 3 Ultra, and physician feedback on ease of use and improved paravalvular leak performance remains outstanding. Outside of the U.S. in the third quarter, our underlying TAVR sales increased in the high single-digit range year over year. We continue to be encouraged by the strong international adoption of TAVR, particularly in Europe, where growth continues to be faster than expected. Edward's underlying TAVR growth in Europe versus the prior year was in the high single-digit range. We saw unit increases in nearly every country across Europe. Growth was driven by continued strong adoption of our Sapien 3 Ultra platform. And although transcatheter valves have been commercially available for over a decade in Europe, AS continues to be significantly undertreated. Outside of the U.S. and Europe, we're continuing to see strong TAVR adoption driven by Sapien 3. Sales growth in Japan and other regions was strong as aortic stenosis remains an immensely undertreated disease, and we remain focused on increasing the availability of TAVR therapy. In China, where Edwards recently received regulatory approval to begin treating high-risk patients suffering from severe aortic stenosis, we successfully completed our first cases in the third quarter. And although it will likely take significant time to expand our TAVR presence in China, we look forward to partnering with hospitals across the country to introduce this therapy through our comprehensive proven training program. In summary, we anticipate regional variability due to the pandemic. Yet based on our year-to-date performance, we continue to anticipate global TAVR sales growth for 2020 will be at the high end of our previous range of minus 5 to plus 5%. We anticipate a return to double-digit growth in 2021, and we expect quarterly growth rates will be lower year-over-year in Q1 and Q4 with more normal market dynamics versus higher growth in Q2 and Q3 when the COVID impact was most severe. Global TAVR growth reinforces our belief in our projection of a $7 billion-plus opportunity by 2024. Turning to transcatheter mitral and tricuspid therapies, or TMTT, we continue to view this opportunity as one with substantial unmet patient needs and the potential to drive significant growth. Our focus will be on the advancement of three key value drivers, which we believe are the leading indicators of our success. A portfolio of differentiated therapies, favorable real-world clinical outcomes, and favorable results from rigorous pivotal trials, which will ultimately support approvals and adoption. As an example of our differentiated therapies, we recently received the CE mark and began introducing Pascal ACE implant system for mitral and tricuspid repair. Pascal ACE has the differentiated features of Pascal with a narrower profile. It is designed to complement Pascal and provide further options to optimize treatment for patients with mitral and tricuspid regurgitation. In mitral valve replacement, we continue to advance both transfemoral evoke and sapien M3 platforms, and we remain on track to initiate the U.S. pivotal trial for sapien M3 before the end of the year. In addition, with evoke tricuspid, we are encouraged by the experience gained in our early feasibility study and are on track to initiate our pivotal trial by year end. We are pleased to demonstrate clinical success in these programs as reported at the recent TCT Connect Conference. We presented roll-in data from our CLASP 2D pivotal study. In U.S. centers with no prior experience, the PASCAL system showed favorable 30-day outcomes in patients with degenerative mitral valves, including low complication rates, significant regurgitation reduction, and improvements in quality of life. Our one-year CE-MARC class data for PASCAL mitral repair demonstrated robust and sustained MR reduction. In addition, Pascal tricuspid repair demonstrated positive 30-day results, and cardioband tricuspid follow-up demonstrated favorable two-year results. And importantly, we're making progress on five TMTT pivotal studies. While initial pivotal clinical trial results could be delayed by a couple quarters, We're now enrolling patients at pre-COVID rates and looking forward to generating a body of clinical evidence across our portfolio, demonstrating excellent outcomes for each one of our therapies. Third quarter global sales were $12 million. Although the situation remained fluid, we were able to resume activation of new centers in Europe and increase commercial procedures. We continue to advance our commercialization of Pascal in Europe and remain focused on physician training, procedural success, and patient outcomes. In summary, we expect procedures and activation of centers to continue to be subject to COVID interruptions in Europe. We anticipate TMTT sales of around $40 million in 2020 versus our previous estimate of $30 to $45 million. In addition, while still early in the 2021 forecasting process, our aspiration is to double 2020 TMTT sales in 2021. We continue to believe the TMTT opportunity remains significant and now expect a $3 billion global market by 2025. We reiterate our confidence in this long-term opportunity and are passionate about bringing a portfolio of solutions to the many patients in need. In surgical structural heart, sales for the third quarter of $203 million were similar to the 2019 levels, decreasing 1% on an underlying basis. During the third quarter, we observed that patients were more willing to seek heart valve surgery and hospitals more able to manage surgical patient flow. Ongoing prioritization of heart surgery in many hospitals also contributed to rebounding case volumes. We remain very encouraged by the steady adoption of Edwards Premium Resilient Tissue Valves including the Inspiris aortic surgical valve and the recently launched Connect aortic valve conduit in the U.S. In the third quarter, Inspiris valve utilization grew in all regions, driven by increased demand among younger and more active patients. Inspiris is becoming the surgical valve standard of care in many geographies around the world. We continue to add new Inspiris centers in both the U.S. and Europe, and adoption is growing in our existing centers. Following the first commercial cases of Harpoon in Q2 in Europe, we continue to focus on intensive physician training and robust data collection for this new beating heart mitral valve repair system. We're seeing positive initial patient results with faster surgery and recovery times with this minimally invasive therapy. In summary, we continue to expect surgical structural heart sales for full year 2020 will decline in the 5% to 15% range from 2019. Localized COVID-19 hotspots may continue to be headwinds to procedure growth. However, our expectation remains that in Q4, our sales will return to positive growth driven by the market adoption of our newest technologies. We're excited about our ability to provide innovative surgical treatment options for more patients and extend our global leadership in premium surgical structural heart technologies. In critical care, sales for the quarter were $181 million in line with the year-ago period. Demand for our products used in cardiac surgeries was solid but was offset by the COVID-driven impact of delayed elective procedures. sales of our TruWave disposable pressure monitoring devices used in the ICU were lifted by a large one-time order in Europe associated with ICU capacity expansion. However, we continue to experience a decline in hemisphere orders in the US as hospitals continue to limit their capital spending as a result of COVID. In summary, We continue to anticipate that critical care sales will be negative for 2020, largely due to anticipated reduced capital spending in the U.S., which is still within our original guidance range of minus 5 to plus 5%. And now I'll turn the call over to Scott.