Edwards Lifesciences Corporation

Greetings and welcome to the Edwards Life Sciences fourth quarter 2021 results conference 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, Vice President investor relations, and treasurer. Thank you. You may begin.

Thanks, Diego, and thank you all for joining us this afternoon. With me on today's call are Mike Nussallem, Chairman and Chief Executive Officer, and Scott Ullum, our Chief Financial Officer. Just after the close of regular trading, Edwards released fourth quarter 2021 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 expectations for longer-term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters, and foreign currency fluctuations. These speak only as of the date on which they were made, and Edwards does not undertake any obligation to update these statements after today. Additionally, the statements involve risks and uncertainties 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 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 the terms underlying and adjusted, management is referring to non-GAAP financial measures. Otherwise, they're referring to GAAP results. Reconciliations between gap and non-gap numbers mentioned during the call are included in today's press release. With that, I'd like to turn the call over to Mike Mussolini for his comments. Mike.

Thank you, Mark. We're proud of our performance in 2021. Although hospitals continued to be impacted by COVID, it was a year of significant milestones and investment for Edwards, and our teams were relentless. In TAVR, we made important strides in executing our long-term strategy. In particular, we invested in increasing awareness, pursued further therapy expansion, and advanced new technologies. We completed enrollment of the early TAVR trial, an important pivotal study studying the treatment of severe aortic stenosis patients before their symptoms develop. Separately, we initiated enrollment in our PROGRESS trial for moderate AS patients And we received FDA approval for our Alliance Pivotal Trial to start our next generation TAVR technology, Sapien X4. In TMTT, we achieved our significant 2021 milestones as we continue to make meaningful progress on advancing our three key value drivers, a portfolio of pioneering therapies for patients, positive pivotal trial results to support approvals and adoption, and favorable real-world clinical outcomes. We're pleased to have treated over 3,000 patients in 2021 with our differentiated portfolio of TMTT therapies, gaining valuable learnings through both our clinical and commercial experiences. Each of our platforms demonstrated promising outcomes and clinical performance. I'm also pleased to announce that we completed enrollment of our CLASP2D pivotal trial in 2021 an important milestone that keeps us on track for U.S. approval late this year. In surgical structural heart, we extended our leadership position through the adoption of our premium technologies. We also implemented valuable additions to our smart monitoring advancements in critical care. Most importantly, in 2021, even more patients benefited from Edwards' lifesaving technologies than ever before. I'm also proud to say that throughout the year, our employees remain dedicated to keeping our commitments to patients and to one another. Despite the ongoing pandemic that fueled global challenges, our employees found innovative ways to support hospital procedures and to ensure our ability to supply our life-saving therapies was not impacted. And through their efforts, we're able to get our technologies into the hands of our trusted partners around the world so they could serve their patients. Now, I'd like to cover several 2021 financial highlights before I get into the quarterly details. In 2021, we're pleased to achieve all of our key financial expectations. Underlying sales increased 18% to $5.2 billion, driven by balanced organic sales growth in each region. We achieved 19% growth in adjusted earnings per share while also increasing R&D 19%. The significant increase in R&D and infrastructure investments this year helped strengthen our long-term outlook. And as you heard at our investor conference last month, we are as convinced as ever about the tremendous opportunity we have to enhance patients' lives and bring significant value to the healthcare system. Turning to our financial results, fourth quarter sales of $1.3 billion increased 13% on a constant currency basis versus the year ago period. Growth was driven by our portfolio of innovative technologies, although at the lower end of our October expectations due to the pronounced impact of Omicron on hospital resources in December, especially in the U.S., Full year 2021 global TAVR sales of $3.4 billion increased 18% on an underlying basis versus the prior year. Despite intermittent challenges associated with the pandemic throughout the year, sales were in line with our original guidance of $3.2 to $3.6 billion and were driven by increased awareness of the benefits of TAVR therapy with our Sapien platform. In the fourth quarter, our global TAVR sales were $872 million, an increase of 13% on an underlying basis with impressive strength outside the U.S. We estimated global TAVR procedure growth was comparable with our growth. And globally, average selling prices were stable as we maintained our disciplined pricing strategy. In the U.S., our TAVR sales grew 10% year over year in the fourth quarter, and we estimate that our share of procedures was stable. As previously mentioned, the Omicron variant had a noticeable impact on hospital resources in December as cases were postponed or limited in a number of hospitals. Growth in the U.S. was highest in small to mid-volume centers, which are helping provide access to a broader population of aortic stenosis patients. Outside the U.S., in the fourth quarter, our sales grew approximately 20% year over year on an underlying basis, and we estimate total TAVR procedure growth was comparable. We continue to be encouraged by the strong international adoption of TAVR broadly in all regions. In Europe, Edwards' growth was in the mid-teens, and we estimate that our competitive position was stable. Growth was broad-based across the regions. It's worth noting that a recent cost-effectiveness study demonstrated that TAVR with SAPIEN3 was economically dominant when compared to surgical aortic valve replacement in treating French patients with severe symptomatic aortic stenosis who are at low surgical mortality, who are at low risk of surgical mortality. We're also encouraged by the recently published guidelines from the European Association of Cardiothoracic Surgery which now definitively recommend TAVR for patients over 75. We believe both of these developments represents an important long-term opportunity to bring TAVR therapy to even more patients in need. Sales growth in Japan was also strong, where therapy adoption is still relatively low. Several important milestones were achieved in Q4. For the first time, the number of TAVR procedures performed in Japan was comparable with the surgical aortic valve replacements. Furthermore, in each prefecture in Japan, there is now at least one hospital offering sapien. Following the recent reimbursement approval for the treatment of patients at low surgical risk, we remain focused on expanding the availability of TAVR therapy throughout the country. Longer term, we see excellent opportunities for continued OUS growth as we believe global adoption of TAVR therapy remains quite low. In addition to our geographic expansion of our TAVR therapies, we remain focused on indication expansion. In Q4, we completed enrollment of our early TAVR pivotal trial, which is focused on the treatment of asymptomatic AS patients. Separately, We initiated enrollment in progress, 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 before they have symptoms or before their AS becomes severe rather than risking irreversible damage to their heart as the disease progresses. We also took steps to advance our innovative product portfolio. In Q4, we received FDA approval for our Alliance Pivotal Trial to study our next generation TAVR device, Sapien X4. Additionally, in Q4, we received FDA approval to use Sapien 3 with our Altera Adaptive PreStent for congenital heart patients. This should result in a quality of life improvement and a reduction in the number of procedures that these younger patients will require over their lifetime. In summary, despite a slower than expected start to the year, we continue to anticipate 2022 underlying TAVR sales growth of 12 to 15%, consistent with the range we shared at our December investor conference. Our outlook assumes COVID related challenges early in 2022, turning to more normalized growth environment as headwinds from Omicron subside and hospital resource constraints stabilize. We remain confident in this large global opportunity will double to $10 billion by 2028, which implies a compounded annual growth rate in the low double digit range. Turning to TMTT, as I mentioned, in the fourth quarter we completed enrollment of our class 2D pivotal trial, and we remain on track to present data in the second half of 2022. This important milestone keeps us on track for US approval late this year of Pascal for patients with degenerative mitral regurgitation. We also continue to expect European approval of our next generation Pascal precision system later this year. At the PCR London Valves Conference in Q4, Pascal 30-day outcomes from our MyClass post-market approval study of more than 250 patients in Europe were presented. The data highlighted safe and effective MR reduction in a post-market setting. We also progressed on the enrollment of our Class 2F pivotal trial for patients with functional mitral disease. In mitral replacement, We continue to expand our experience with both our transcatheter mitral replacement therapies through the ENCIRCLE pivotal trial for sapien M3 and the MISEN study for evoke EOS. Early experience with these subfrench transfemoral therapies increase our competence in both platforms. Turning to transcatheter tricuspid therapies, Results from the TRISEN study were presented at the annual TCT conference in November and demonstrated that early patient outcomes with the EVOKE tricuspid were favorable and sustained at six months. We're encouraged by the procedural success rates and also the significant TR reduction and sustained improvements in quality of life measures experienced by these patients. We continue to make meaningful progress in enrolling our two tricuspid pivotal trials, the TRISEN2 pivotal trial for the EVOKE system and the CLASP2-TR pivotal trial with Pascal in patients with symptomatic severe tricuspid regurgitation. We anticipate a late 2022 approval of EVOKE tricuspid in Europe and remain committed to providing solutions for these patients that have very poor prognosis and few treatment options today. Turning to the sales performance of TMTT, fourth quarter revenue of $25 million grew sequentially from the third quarter as we saw increased adoption of the Pascal system despite the negative COVID impact in December. Full year 2021 global sales more than doubled to $86 million As we continue to expand the availability of Pascal to more centers in Europe, we are pleased with the excellent outcomes for patients supported by our high touch model. We look forward to continuing our progress toward advancing our vision to transform the lives of patients with mitral and tricuspid valve disease in 2022 with the milestones that we outlined in our recent investor conference. Despite the COVID impact so far this year, we continue to expect TMTT sales of $140 to $170 million for 2022. We estimate the global TMTT opportunity will grow to approximately $5 billion by 2028, and we remain committed to bringing our groundbreaking portfolio of therapies to patients with these life-threatening diseases. We are confident our portfolio strategy positions us well for leadership. In surgical structural heart, full-year global sales were $889 million, up 15% on an underlying basis versus the prior year. Fourth quarter 2021 global sales of $221 million increased 9% on an underlying basis over the prior year. Although we saw that Hospital staffing shortages continued to worsen throughout the quarter, especially in the U.S. Life-saving surgical therapies continued to be prioritized over elective procedures. We're excited about the continued global adoption of Inspiris Resilia Aortic Surgical Valve, the Connect Resilia Aortic Tissue Valve Conduit, and our Mitras Resilient Valve. We remain encouraged by the growing evidence that supports Edwards Resilia Tissue Valves including two studies being presented at the Society of Thoracic Surgeons conference this weekend. The commenced study demonstrates excellent hemodynamics of this tissue technology across all aortic valve sizes at five years, while a European economic value study shows a cost reduction with the use of inspirous versus mechanical valves. In summary, we continue to expect that our full-year 2022 underlying sales growth will be in the mid single digit range for surgical structural heart driven by adoption of our premium technologies and procedure growth. Even as TAVR adoption expands, we're excited about our ability to provide innovative surgical treatment options for patients, extend our global leadership and be the partner of choice for cardiac surgeons. Turning to critical care. Full-year global sales of $835 million increased 14% on an underlying basis versus the prior year. 2021 growth was driven by balanced contributions from all product lines, led by hemisphere sales as capital spending resumed. Our TrueWave disposable pressure monitoring devices used in the ICU also remained in high demand due to the elevated COVID hospitalizations in both the U.S. and Europe. Fourth quarter critical care sales of $212 million increased 8% on an underlying basis, driven by strong demand for Hemisphere. Demand for our broad portfolio of smart recovery sensors also remained robust in the fourth quarter, including Clairsight, our non-invasive finger cuff, which achieves sustained performance at or above pre-COVID levels. As discussed at our recent investor conference, the integration of a full range of technologies creates a unique offering of enhanced recovery tools and predictive analytics capabilities to further strengthen our leadership in hemodynamic monitoring. In summary, we continue to expect mid single digit underlying sales growth for 2022. And we remain excited about our pipeline of innovative critical care products. And now I'll turn the call over to Scott.