Edwards Lifesciences Corporation

Greetings and welcome to the Edwards Life Sciences First Quarter 2021 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 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, Vice President of of investor relations.

Thank you. You may begin. Thank you, Diego. Good afternoon, and thank you for joining us. With me on today's call are Mike Musallam, Chairman and Chief Executive Officer, and Scott Allum, Chief Financial Officer. Just after the close of regular trading, Edwards Life Sciences released first quarter 2021 financial results. During today's call, management will discuss those results included in the press release and accompanying financial statements, 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 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 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 product safety information may be found in the press release, our 2020 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 GAAP results. Reconciliations between GAAP and non-GAAP numbers mentioned during this 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. As we anniversary our one-year impact of the pandemic and our financial results, I'd like to briefly reflect on the current environment and to discuss our 2021 and longer-term priorities as a company. I'd also like to touch on Edward's response to the pandemic and our efforts to better support our patients, employees, and the community. Recall that our sales were dramatically impacted in the last few weeks of Q1 2020 as procedures fell due to COVID disruptions. One year later, after an extraordinarily difficult global crisis, I'm encouraged by the signs of recovery And although we recognize that many people are still struggling around the world, our sales growth this quarter was better than expected across all product lines. Although we expect the pandemic will impact the global healthcare system, based on the environment as we exited the quarter, we have continued confidence in our positive 2021 outlook. We continue to believe that 2021 will be an important growth year for Edwards with mid-teen sales growth, highlighting the importance of treating structural heart patients even during this pandemic. We also anticipate meaningful progress on expanding large, underappreciated, and underserved transcatheter opportunities in 2021. Recently, we achieved several important milestones. Let me mention four. Just last week, in transcatheter aortic valve replacement, or TAVR, we received approval to initiate a pivotal trial for patients suffering from moderate aortic stenosis. Also earlier this month, we received approval to begin treating patients at low surgical risk in Japan with SAPIEN3. And in transcatheter mitral and tricuspid therapies, or TMTT, I'm pleased to announce that the first patients were recently treated with EVOKE-EOS, our next-generation transcatheter mitral replacement system. Also in TMTT, we initiated the TRICEN2 US Pivotal Trial for transcatheter tricuspid replacement. Looking beyond 2021, we remain competent in our long-term strategy and our pipeline of innovative therapies. Our patient-focused culture drives us and motivates our employees around the world every day. Our R&D targets breakthrough therapies that can create significant value for patients and health systems enabling strong organic sales growth and exceptional shareholder returns. Despite COVID disruptions, we've continued to invest aggressively for future growth. As a reminder, about a third of our research and development investments today are focused on generating a robust body of guideline-changing clinical evidence. And although clinical studies slowed during the pandemic, our dedicated clinician partners are eager to accelerate enrollment in this important research. Regulators have also been supported in addressing the impact of the pandemic and its impact on clinical studies. Finally, I want to provide some perspective on how we've maintained our focus on creating long-term value as we navigated the pandemic over the last year. We continue to invest in our people and our infrastructure. During a time when widespread uncertainty impacted many families across the globe, we have prioritized protecting our employees and have grown our team. We enhanced employee benefits, rewarded performance, and protected incentives. We also moved ahead on expanding Edwards research and production facilities around the world. We adjusted our agreements to support hospitals as they navigated COVID. And additionally, we provided extra support to the communities where our employees live and work. In fact, we recently converted one of our facilities into a mass COVID vaccination site to support the community of 3 million people where our company is headquartered. As a company, we expect that Edwards will be positioned even stronger and be able to help more patients than ever before as the world emerges from the pandemic. Now, turning to our first quarter results, we reported $1.2 billion in sales this quarter, up 5% on a constant currency basis from a year ago. Recall that our guidance assumed Q1 sales would be in line with the first quarter of last year, which was largely unaffected by COVID. We were pleased with how sales improved as the quarter progressed. In TAVR, first quarter global sales were $792 million, up 4% on an underlying basis. The Sapien 3 Ultra platform remains differentiated with low complication rates, ease of use and significant potential for length of stay efficiency. Our average selling prices were stable and we estimated that global TAVR procedure growth was comparable with our growth. In the US, our Q1 TAVR sales were flat with fourth quarter and year ago results and we estimate that overall US procedure growth was comparable. Consistent with our guidance on the Q4 earnings call in late January, COVID stressed the global healthcare system during the winter months. We are encouraged, however, that U.S. TAVR procedures grew as COVID hospitalizations decreased and vaccinations increased during the quarter. Small and medium-sized centers played a valuable role in serving patients during the quarter. We continued to activate new centers this quarter as we have been throughout the pandemic. This demonstrates the clear interest of many smaller centers to provide state-of-the-art care for structural heart patients. Outside the U.S., in the first quarter, we estimated TAVR procedures grew in the low double digits on a year-over-year basis, and Edwards' growth was comparable. Although we are off to a strong start, the slow vaccination progress outside the U.S. provides uncertainty for the remainder of the year. Edwards underlying TAVR growth in Europe versus the prior year was in the mid single-digit range. Edwards growth in countries with lower TAVR adoption rates outpaced countries where the therapy is more established. Although TAVR centers were more prepared to treat patients, patient flow was disrupted due to regional lockdowns and uncertainty among patients about the urgency of their disease. Sales growth in Japan and other countries was strong, as aortic stenosis remains an immensely undertreated disease, and we remain focused on increasing the availability of TAVR therapy. As previously noted, we received approval earlier this month in Japan for Sapien 3 in patients at low surgical risk. We anticipate increased treatment rates when reimbursement is approved later this year. In addition to geographic expansion of our TAVR therapies, we remain dedicated to pursuing indication expansions. Our groundbreaking early TAVR trial is focused on patients who have severe aortic stenosis but without recognized symptoms and who do not meet the current guidelines for valve replacement. We expect enrollment to increase as we and participating sites are motivated to complete enrollment of the trial this year. I'm also pleased to report that we received FDA approval for a pivotal trial for TAVR in moderate AF patients, as we expect enrollment to begin later this year. Based on recent trials, we're learning on what was once thought of as a benign precursor to severe aortic stenosis may actually be associated with higher rates of morbidity and mortality than previously recognized. Thus, we believe TAVR may be a future treatment option for these patients. Separately, last week we received Sapien 3 CE mark approval to begin treating patients with a previously repaired or replaced valve in the pulmonic position. Looking ahead to the upcoming virtual URO-PCR meeting next month, we expect long-term follow-up data from our European registry on Sapien 3, as well as the late-breaking clinical trial results on low-risk bicuspid patients. In summary, based on the strength we saw at the end of the first quarter, we have confidence that the underlying TAVR sales will grow in the 15 to 20% range in 2021. We expect continued near-term COVID-related regional disruptions and a more normalized second half of the year. We remain confident that this large global opportunity will exceed $7 billion by 2024, which implies a compounded annual growth rate in the low double digits. Turning to TMTT, we're enrolling five pivotal trials across our differentiated portfolio of technologies to support patients suffering from tricuspid and mitral valve disorders. This quarter, we progress with the enrollment of our three CLASP pivotal trials for Pascal. We continue to expect approval for patients with DMR late next year. This is expected to be the first commercial approval of the Pascal system in the U.S. We've also begun treating patients with EVOC-TR in the TRISEN-2 randomized pivotal trial in accordance with the FDA's breakthrough pathway designation. This trial will evaluate the safety and effectiveness of the EVOC tricuspid valve replacement system for patients with severe tricuspid regurgitations. In addition, the first patients were recently treated with our next-generation transcatheter mitral replacement system called EVOX EOS through the MISEN study. This study will evaluate the safety and performance of EVOX EOS, which is designed to advance the treatment of patients with mitral regurgitation with a low-profile valve delivered through a sub-30 French transfemoral delivery system. We believe our two-platform replacement strategy with Sapien M3 and Evoke EOS strongly positions us to be the leader in treating these underserved patients. As we expand our body of clinical evidence, we look forward to presenting meaningful data across our portfolio at the upcoming virtual ACC and EuroPCR medical meetings, including multiple late-breaking presentations. These include longer-term outcomes, for transcatheter mitral repair from our CLAS trial and the first report of 30-day outcomes with evoke tricuspid replacement from our TRISEN study. Turning to our results, first quarter global sales were $16 million driven by continued adoption of our PASCAL system and activation of more centers across Europe. Assuming diminishing COVID-related impact, we expect a ramp of sales throughout the year. We remain confident in our 2021 sales guidance of $80 million as we advance commercialization, stay focused on physician training, procedural success, and patient outcomes. Adoption and favorable real-world clinical outcomes remain key drivers to transforming treatment. In summary, we are making meaningful progress toward our 2021 milestones, and we continue to estimate the global TMTT opportunity to reach approximately $3 billion by 2025. We remain committed to transforming the treatment of patients with mitral and tricuspid valve disease around the world. In surgical structural heart, first quarter 2021 global sales was $213 million, increased 7% on an underlying basis over the prior year. Despite a soft start associated with COVID, we were encouraged by improvement across all regions over the course of the quarter. Notably, growth was lifted by premium products and improved as declining COVID cases enabled more hospitals to resume treating surgical structural heart patients. We remain very encouraged by the steady global adoption of Edwards Resilia tissue valves, including continued adoption of the Inspiris Resilia aortic surgical valve. We anticipate that adoption will be bolstered by the five-year data from our commenced clinical trial presented at the recent meeting of the Society of Thoracic Surgeons, which demonstrates the excellent durability of this tissue technology. And we're pleased that in the first quarter, we initiated sales of Inspiris in China. Sales in the U.S. also continue to gain traction with Connect Resilia, the first pre-assembled aortic tissue valve conduit for patients who require replacement of the valve, root, and ascending aorta, a critical unmet patient need. Finally, we're pleased to announce that we received regulatory approval with reimbursement in Japan for our Mitras Resilia Valve, a new mitral valve incorporating our newest tissue technology. Yesterday in Japan, we performed our first commercial cases with this differentiated innovation. In summary, we have confidence in our full year 2021 underlying sales growth in the high single digit range for surgical structural heart driven by market adoption of our premium technologies. We continue to believe the current $1.8 billion surgical structural heart market will grow in the mid single digits through 2026. In critical care, first quarter sales of $196 million increased 4% on an underlying basis, driven by increased sales of technologies for both the operating room and intensive care units. Hemisphere orders increased as hospital capital spending began to show signs of recovery. Demand for our products used in high-risk surgeries remained strong, and our ClearSight non-invasive finger cuffs used in elective procedures also recovered to near pre-COVID levels. Our TrueWave disposable pressure monitoring devices used in the ICU remained in demand due to elevated hospitalizations in both the US and Europe at the beginning of Q1. We continue to 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. And now I'll turn the call over to Scott.