Edwards Lifesciences Corporation

Greetings and welcome to the Edwards Life Science Corporation fourth quarter 2020 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during this 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, Vice President of Investor Relations. Thank you. You may begin.

Thanks, Diego. Good afternoon, and thank you for joining us, everyone. With me on today's call are Mike Musalem, Chairman and Chief Executive Officer, and Scott Ullum, Chief Financial Officer. Just after the close of regular trading, Edwards Life Sciences released fourth 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 aren't limited to, financial guidance and expectation 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 when they were made, and Edwards does not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties, including, but not limited to, those associated with the pandemic that could cause actual results to differ materially. Information concerning factors that could cause these differences and important 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're 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. Before we discuss fourth quarter's results and our expectations for 2021 and beyond, I want to spend a minute reflecting on 2020. Structural heart patients were severely impacted beginning in March, experiencing significant difficulties entering the system, which also had a profound impact on second quarter procedures. And even though healthcare systems adapted to the challenge, the resurgence of COVID that began late in the year continues to impact structural heart patients who need care. Despite unprecedented challenges throughout the year, I'm proud of our team's steadfast dedication to our patient-focused strategy. We continued to invest in developing solutions that extend lives, improve the quality of life, and offer greater value for the healthcare system. Along those lines, we celebrated some exciting milestones in 2020 that directly impacted patients. In TAVR, despite headwinds, more than 100,000 patients benefited from treatment with sapien valves worldwide. In surgical structural heart, we launched our Connect aortic valve conduit, and Inspiris became the leading aortic surgical valve worldwide. We've seen early positive clinical evidence across the TMTT platform. Physician feedback is encouraging, and patient outcomes have been distinguished. And in critical care, we met the increased demand for core pressure monitoring products due to the pandemic, and we're proud that we're able to help over 1 million COVID patients globally with our monitoring technology. To support our innovation and growth, we continued to invest in our people and our infrastructure. During a year when job losses impacted many families across the globe, Edwards prioritized protecting our employees, and we grew our team to 15,000 worldwide. We continued to make strategic R&D investments that enabled us to fuel progress. And despite this unique environment and extraordinary prior year growth, underlying sales grew 1% in 2020 to $4.4 billion, which is a reflection of the life-threatening needs of the patients that Edwards serves. Looking into 2021, while we expect the pandemic to continue to impact the global healthcare system, we remain optimistic about the year ahead. As we indicated at our investor conference, we expect full year sales between 4.9 and $5.3 billion representing mid teens underlying growth on a year over year basis. Based on our year to date experience, we expect q1 sales to be slightly down sequentially, although in line with the first quarter of last year, which was largely unaffected by COVID. Our 2021 guidance continues to assume COVID will stress the global health care system at least through the winter months, with procedures ramping later in the year. This expectation assumes that vaccines are effective and widely administered by mid-year 2021, and hospitals continue to improve their ability to treat non-COVID patients who need care for conditions such as aortic stenosis. And even though we expect the COVID impact on sales at the start of the year, we're continuing to invest now in our innovations that have the tremendous opportunity to enhance patients' lives and bring significant value to the healthcare system. We recognize the uncertain impact and timeframe for recovery from this unique global challenge, but we remain confident that our patient-focused strategy of continued investment positions us well and even stronger when the world emerges. from the pandemic. Now turning to our quarterly results. Consistent with our guidance at our investor conference last month, fourth quarter sales of $1.2 billion were in line with the year ago period when Edwards grew nearly 20% on an underlying basis, reflecting the strength even during the ongoing pandemic. Full year 2020 global sales global TAVR sales of 2.9 billion increased 4% on an underlying basis over the prior year. 2020 growth reflected increased sales in every region, lifted by greater awareness of the benefits of TAVR therapy and increased adoption of our leading technologies. Based on the strength of the Sapien platform, we retained our strong leadership position while also maintaining our disciplined price strategy. In the fourth quarter, global TAVR sales were $776 million, up slightly from the year-ago period. We estimate global TAVR procedure growth was comparable with our growth, and globally, average selling prices were stable. Although the rollout was somewhat impacted, Sapien III Ultra now represents more than two-thirds of our global TAVR sales and physician feedback on ease of use and improved paravalvular leak performance remains outstanding. In the U.S., our Q4 TAVR sales were approximately level with the third quarter and declined in the mid single digit range versus last year. We estimate overall Q4 U.S. procedures declined at a comparable rate. Recall that our U.S. TAVR sales in the year-ago period increased nearly 40% driven by the strong Partner III evidence that led to a third quarter 2019 indication expansion and improved patient access under an updated TABR NCD. We expect these factors to resume lifting treatment rates as the pandemic subsides. Growth at smaller TABR centers, which are providing local access to aortic stenosis patients, was more than offset by declines in larger accounts, where referrals have been disrupted by the resurgence of COVID. Outside the U.S., in the fourth quarter, we estimated total TAVR procedures grew in the high single digits on a year-over-year basis, and Edwards' growth was comparable. Edwards' underlying TAVR growth in Europe versus the prior year was in the mid-single-digit range. Growth was driven by continued strong adoption of our Sapien platform and was more pronounced in countries that were more severely impacted by the first wave of COVID in 2020. Outside of the US and Europe, we continued to see very good TAVR adoption in the fourth quarter. Sales growth in Japan, Australia, and Korea were strong, where therapy adoption is still low. In Japan, we continue to anticipate providing Sapien 3 for low-risk patients prior to the end of this year. In China, which was a minor contributor to Q4 sales, we remain focused on growing our dedicated clinical support team to assist leading hospitals as they build their TAVR programs. In addition to geographic expansion of our TAVR therapies, we remain focused on indication expansion. We talked at our recent investor conference about our early TAVR trial, which is focused on the treatment of asymptomatic patients. Enrollment is now two thirds complete, and we remain optimistic that the trial will be fully enrolled in 2021. Separately, we continue to plan to initiate an important pivotal trial for moderate aortic stenosis to determine the optimal time to treat patients who have this progressive disease. We believe that some patients may benefit from earlier treatment when they have moderate AS rather than risking irreversible damage as the disease progresses. We're optimistic about the potential of this trial and we anticipate FDA approval to begin enrollment this year. In November 2020, we were pleased that the American Heart Association announced the launch of an initiative called Target Aortic Stenosis. a quality improvement program aimed to develop optimal standards of care. The program features a learning collaborative comprised of experts and volunteers from pilot hospital locations around the nation. AHA noticed that if left untreated, the condition worsens and patients with severe aortic stenosis have a survival rate as low as 50% at two years. Aortic stenosis is also a risk factor for heart failure. a costly disease projected to cost the U.S. healthcare system $70 billion in 2030. In summary, we continue to anticipate 2021 underlying TAVR sales growth in the 15% to 20% range as we shared at our investor conference. We expect continuing COVID-related challenges early in 2021, turning to a more normalized growth environment in the second half of the year. We remain confident in this large global opportunity will exceed $7 billion by 2024, which implies a compounded annual growth rate in the low double-digit range. Turning to transcatheter mitral and tricuspid therapies or TMTT, we've made meaningful progress moving from early stage development to clinical use across all of our platforms with over 3,000 patients treated to date. To transform treatment and unlock this significant long-term growth opportunity, we remain focused on three key value drivers, a portfolio of differentiated therapies, positive pivotal trial results to support approvals and adoption, and favorable real-world clinical outcomes. In Europe, Pascal Leaflet Repair continues to deliver excellent results. In Q4, we continued the introduction of Pascal ACE for mitral and tricuspid patients, and we're pleased with the early real-world results and positive physician feedback regarding its differentiated features and narrower profile. We plan to make both Pascal ACE and Pascal available on a single next-generation platform called the Pascal Precision System. This new system is designed to elevate the user experience with enhanced maneuverability, navigation, and stability, enabling improved procedural precision. From a clinical perspective, in this challenging near-term environment, we're experiencing a negative impact to clinical trial enrollment. However, our team and research partners are highly motivated to build on the differentiated data presented in 2020 and expand our body of clinical evidence in this exciting field. We look forward to presenting meaningful follow-up data across our portfolio at medical meetings later this year. We progressed in the enrollment of our three CLASP pivotal studies. We also received approval for use of the Edwards Pascal precision system in these pivotal studies. The company still expects U.S. approval of Pascal for patients with DMR late next year. We continue to enrolling SAPIEN M3 Pivotal Study and CIRCLE designed to demonstrate strong safety and efficacy for transcatheter mitral replacement. And we're on track to initiate our first clinical experience with our next generation EVOKE mitral replacement system. The EVOKE tricuspid replacement study, TRISEND, continued to enroll in Q4 and we're on track to initiate the TRICEN2 randomized pivotal study based on FDA's breakthrough pathway designation. We look forward to bringing this important treatment option to more patients that are in significant need. Turning to recent news, we commend CMS for ensuring mitral valve disease patients have improved access to therapy options through the updated NCD. This update, which includes coverage with evidence development achieves the balance of patient access with high quality outcomes. Fourth quarter global sales were $13 million representing sequential improvement versus Q3. Full year 2020 sales were $42 million. We expect continuing COVID related challenges early in 2021, but we anticipate a ramp up through the rest of the year. We maintain our belief that the total TMTT sales will approximately double in 2021. We continue to estimate the global TMTT opportunity to reach $3 billion by 2025 with significant growth beyond. We remain committed to transforming the treatment of these patients and believe our portfolio strategy positions us well for ultimate leadership. In Surgical Structural Heart, Full year 2020 global sales of $762 million decreased 10% on an underlying basis over the prior year in line with our guidance of 5% to 15% decline. Fourth quarter sales of $204 million held steady with Q3 and declined 2% year over year on an underlying basis, which was below our previous expectation for positive growth. Over the course of the quarter, hospitals experienced an influx of COVID patients limiting surgical procedures. Despite this impact, we are encouraged that the U.S. achieved positive growth in Q4 driven by adoption of our newest premium technologies. We remain very encouraged by the steady global adoption of Edwards Premium Resilia tissue valves, including the Inspiris aortic surgical valve, and the recently launched CONNECT aortic valve conduit. In the fourth quarter, inspirous valve utilization grew in all regions, and we continued to add new centers. Sales in the U.S. are ramping for CONNECT, the first preassembled, ready-to-implant aortic tissue valve conduit for patients who require a replacement of the aortic valve, root, and ascending aorta, which is a critical unmet patient need. We continue to focus on comprehensive physician training and robust data collection for the harpoon beating heart mitral valve repair system. We're seeing favorable patient outcomes with faster surgery and recovery times with this minimally invasive therapy. The US pivotal trial is now underway and the first patient was treated in December. In summary, we expect full year 2021 underlying sales growth in the high single digit range for surgical structural heart driven by market adoption of our newest technologies. After a challenging start, we expect improving year-over-year comparisons as we progress through the year. We are excited by our ability to provide innovative surgical treatment options for more patients and to extend our global leadership in premium surgical structural heart technologies. We believe the current $1.8 billion surgical structural heart opportunity will grow mid single digits through 2026. In critical care, full year 2020 global sales of $725 million decreased 3% on an underlying basis versus the prior year in line with our guidance of flat to down 5%. Fourth quarter critical care sales of $198 million decreased 2% on an underlying basis, driven by the decline in hemisphere orders in the US as hospitals limited their capital spending. Sales of our TruWave disposable pressure monitoring devices used in the ICU were lifted by the increased COVID hospitalizations late in the fourth quarter in both the US and Europe. Demand for our products used in more intense surgeries remains strong, but we're more than offset by the impact of delayed elective procedures. In summary, we expect full year 2021 underlying sales growth in the high single digit range for critical care. We remain excited about our pipeline of critical care innovations as we continue to shift our focus to smart recovery technologies designed to help clinicians make better decisions for their patients. Now I'll ask Scott to provide some more detail on the company's financial results.