Edwards Lifesciences Corporation

Greetings, and welcome to the Edwards Life Sciences second quarter 2024 results. At this time, all participants are in 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. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Mark Wilterding, Senior Vice President, Investor Relations. Thank you.

You may begin. Thank you very much, Kevin. Good afternoon, and thank you all for joining us. With me on today's call is our CEO, Bernard Zavigian, and our CFO, Scott Ullum. Also joining us for the Q&A portion of the call will be Larry Wood, our Global President of TAVR and Surgical Structural Heart, Devine Chopra, our Global Leader of TMTT, Wayne Markowitz, our global leader of surgical structural heart, and Katie Zyman, our global leader of critical care. Just after the close of regular trading, Edwards Life Sciences released second quarter 2024 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 growth opportunities, strategy, leverage and integration of acquisitions, 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 these differences and important safety information can be found in the press release, our 2023 annual report on Form 10-K, and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Unless otherwise noted, our commentary on sales growth refers to constant currency sales growth, which is defined in the quarterly press release issued earlier today. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are also included in the company's press release. With that, I'd like to turn the call over to Bernard for his comments.

Thank you, Marc, and thank you all for joining us. This afternoon, we issued two press releases, which the team and I will review in more detail with you now. The first, outlining our Q2 results, and the second, highlighting our acquisition of Yenavalve, a pioneer in the transcatheter treatment of aortic regurgitation or AR, and Endotronics, a leader in heart failure management solutions. I will start with our second quarter performance. Total company sales of $1.6 billion increased 8% on a constant currency basis versus the year-ago period. In addition, we made important advancements in our clinical research, new product interactions, and efforts by Edwards employees to address the unmet needs of many more patients around the world. TAVR growth in the second quarter was lower than expected. Yet, we are pleased with the increasingly significant contribution from TMTT. Our vision for TMTT is becoming a reality, and our strategic commitment has developed into a growth portfolio of differentiated technologies. Overall, Edwards remains well-positioned to deliver strong, sustainable growth. We also announced this afternoon two acquisitions, Yena Valve and Endotronics. We have known this company for many years. Discussions with the companies have been ongoing for some time, and the timing of these acquisitions coincided with earnings. We are pleased to expand into two new structural heart therapeutic areas, AR, and heart failure. And we will leverage our innovation capabilities with world-class science and clinical evidence to ensure accelerated access to life-saving technologies for patients around the world. Now, I will provide some additional detail on Q2 results by product group. In TAVR, second-quarter global sales of $104 billion increased 6% year-over-year. lower than we planned. Edward's competitive position did not meaningfully change globally, although we experienced some regional pressure and we maintained pricing. We are confident in our differentiated technology, high-quality evidence, and the value we continue to demonstrate to patients, clinicians, and the healthcare system. We remain focused on continuing our deep commitment to advancing evidence for AS patients. At the New York Valve meeting in June, we presented additional analyses from the partner trials, which demonstrated excellent clinical outcome up to five years in women and patients with small analyzes. Adding to the global body of evidence on the platform, we also anticipate additional data from the REIA study to be presented at the upcoming ESC meeting in London. RIA is a prospective randomized study in more than 400 patients across 35 sites in Europe, comparing the safety and efficacy of TAVR versus surgery in women with severe symptomatic aortic stenosis. We are actively pursuing significant opportunities to grow TAVR globally over the long term and are proud to continue our deep commitment to advancing science for aortic stenosis patients through the progress and early TAVR trials, which could fundamentally change how AS patients are treated. Early TAVR trial results will be presented at TCT this year, and we believe if the data are compelling, it could have a meaningful impact on the timing for patient treatment, while also streamlining referral and patient care for all severe AS patients. In the U.S., our year-over-year second quarter TAVR cells growth was slightly below our global constant currency growth rate. We believe our U.S. competitive position was largely unchanged. Second quarter U.S. TAVR cells grew slower than expected. The continued growth and expansion of structural heart therapies, including newly approved tricuspid therapies and other Fast-growing structural heart therapies put pressure on hospital workflows, which impacted TAVR. These pressures were also observed in the recent spike in emergent TAVR cases as reflected in claims data. As centers adopt these new therapies and they become part of their standard processes, we expect this will stabilize. We know from experience that hospitals have historically demonstrated the ability to scale to support transcatheter procedure growth over time. We believe significant undertreatment of severe AS persists. Evidence demonstrates that a large number of in-system patients currently go untreated. We are accelerating our efforts to improve referrals and treatment rates for patients already in the hospital system who are suffering from severe symptomatic aortic stenosis. We recently launched the Edwards ENACT patient activation program, which leverage a comprehensive cardiovascular AI platform and world-class support to bring real-time insight to TAVR program and improve the quality of care for patients. This first of its kind program is focused on streamlining the identification, evaluation, and treatment of severe aortic stenosis patients within the hospital system. Outside of the U.S., in the second quarter, our constant currency TAVR sales growth was slightly above our global TAVR growth. In Japan, we generated double-digit sales growth driven by sapien-free ultraresilia. We continue to focus on expanding the ability of this therapy and believe AS remains a significant under-treated disease among the substantial elderly population in Japan. In Europe, while share is down slightly on an annualized basis, we were pleased with the momentum driven by the launch of sapien-free ultraresilia. We are pleased with high procedure success rate and exceptional patient outcome. We expect the momentum to continue to build as more centers have experienced with the first-choice valve for lifetime management. In closing, we now anticipate second-half TAVR cells growth similar to the first-half year-over-year growth rate, a 5% to 7% full-year growth rate versus previously guidance of 8% to 10%. This equates to full-year global TAVR cells of 4 billion to 4.2 billion. We believe hospitals are motivated to continue scaling to accommodate increasing volume of trans-catheter procedures, which will bring tremendous value to patients and the healthcare system. We remain confident that EDWARDS is positioned for healthy and sustainable TAVR growth, driven by our differentiated TAVR portfolio, our deep commitment to advancing patient care for high-quality clinical evidence and new indications, and our investment in patient activation initiative. Turning to TMTT, our deep structural heart expertise has enabled us to significantly advance our portfolio of differentiated technology, including the PASCAL repair system, the Evoque trachea speed replacement system, and the Sapien M3 mitral replacement system. Our exciting pipeline of innovations is addressing the large and many needs for patients with mitral and tracheal speed disease. In Q2, we achieved positive results, with cells of 83 million, representing a 75% increase versus the prior year. Q2 cells were led by Pascal Globally, an early commercial introduction of EVOC in the U.S. and Europe. Pascal adoption is growing, reflecting its premium differentiation and the value it brings to physicians and patients. We believe the mitral tear market continues to grow double-digit in both the U.S. and Europe. We are excited to bring this therapy to more geographies, more physicians, and more patients. The EVOC commercial launch continues to progress well. Our discipline strategy is focused on outstanding patient outcomes in centers investing resources required to grow a successful tricuspid program. We are now opening new centers, both in Europe and the U.S., after having started with our clinical trial sites. We continue to see strong interest in the therapy, which reflects the significant unmet need in this population of patients who have few options for treatment. Our early real-world commercial experience has demonstrated excellent clinical results, consistent with those from the Tricin-2 trials. We look forward to presenting the full cohort of trace-into data at the TCT conference in October. Last month, CMS announced the opening of a national coverage analysis for trans-catheter tricuspid valve replacement. Since EVOC was granted FDA breakthrough status and is utilizing the CMS parallel review process, we believe CMS can move quickly to finalize national coverage. remains on track to be our first trans-catheter mitral valve replacement therapy to get a regulatory approval and launch around the world. We are also pleased to have received a breakthrough designation from the FDA, and we completed enrollment in the mitral annulus calcification, or MAC-ARM, of our in-circle study. We now expect sapien M3 to receive C-mark earlier than previously expected, by mid-2025, with FDA approval in the U.S. to follow in 2026. Earlier this month, we announced the acquisition of InnoValve. InnoValve early-stage technology will add to our growing pipeline of innovative therapy in TMTT, and we expect to close the acquisition later this year. We further expect that InnoValve technology, combined with Edwards' expertise in mitral disease will enhance the company TMVR technologies to address large unmet structural health patient needs and support sustainable long-term growth. Based on the first half 2024 momentum and the ongoing global adoption of our differentiated technology, Pascal and Evoke, we are increasing full-year sales guidance for TMTT to the higher end of our previous 320 to 340 million range. We remain confident that our unique portfolio strategy with repair and replacement therapies for both mitral and tracheal disease will offer clinicians the broader set of options needed to treat this complex underserved patient. The advancement of our long-term TMTT strategy has positioned us for strong, sustainable growth over many years driven by a growing portfolio of innovative therapies. In surgical structural hearts, second quarter sales of $264 million increased 5% over the prior year. Growth was driven by strong global adoption of Edwards premium surgical technologies, Inspiris, Mitris, and Connect. We continue to see positive procedure growth globally for the many patients best treated surgically, including those undergoing complex procedures. We continue to expand the overall body of Resilia evidence and have completed enrollment in the U.S. and Canada for a momentous critical trial studying Resilia performance in the mitral position. Mitral risk adoption in Europe is ramping up, and we are pleased to have been granted reimbursement for the device in France earlier than expected. In summary, we remain confident that our full year 2024 surgical sales will be 6% to 8% driven by continued adoption of our Resilia portfolio and growth in overall heart valve surgeries. In critical care, second quarter sales were $246 million, which increased 7% versus the prior year. Growth was led by our pressure monitoring devices used in the ICU, with strong contribution from our smart recovery technologies, including the Acumen IQ sensor. Demand was also strong for Swansgan's catheter. Critical care remains focused on driving growth through smart recovery and smart expansion, which are designed to help clinicians make more informed decisions and get patients home to their family faster. Since announcing the sales of critical care to Becton Dickinson in June, our team has made significant progress, and we plan to close by late Q3. I want to thank all of them for their hard work and dedication. Turning down to the strategic acquisition of Yenavalve and Endotronics, these acquisitions provide an expanded opportunity in new therapeutic areas to address the unmet needs of AR and heart failure patients around the world. Furthermore, the acquisitions reflect our deep commitment to advancing patient care through our unique strategy and reinforce our confidence in Edward's sustainable long-term growth. Starting with Yanavalve, a pioneer in the trans-catheter treatment of AR, a deadly disease that impacts more than 100,000 patients in the U.S. alone, and is largely untreated today. Edwards anticipates U.S. FDA approval of the Yenna Valve Trilogy Heart Valve System in late 2025, which will represent the first approved therapy for patients suffering from AR. Edwards will invest to accelerate development of this novel technology to enable earlier patient access. As the pioneers in valve innovation, we believe we are best positioned to lead this next frontier of aortic valve disease treatment. We expect this to be the beginning of a long-term, iterative strategy similar to TAVR. Turning to endotronics, Edouard's made its first investment in the company in 2016, so we are very familiar with the technology, the opportunity, and the employees. Many structural heart patients, Edward's sales today, also suffer from heart failure with limited options. This acquisition will expand Edward's structural heart portfolio into a new therapeutic area to address the large unmet needs of patients suffering from heart failure, which we believe has a significant long-term growth opportunity. Last month, endotronics, received FDA approval for Cordella, an implantable pulmonary artery pressure sensor that directly measures the leading indicator of congestion following the publication of a successful US pivotal trial. We are pleased to enter this structural heart therapeutic area with innovation, world-class science, and clinical evidence to provide access to life-saving technologies for patients around the world. We anticipate this investment will strengthen its leadership in structural heart innovation and represent long-term growth opportunity. Minimal revenue contribution from Yanavalven Electronics is expected to begin late in 2025. As you can tell, we have a lot of positive momentum and many catalysts across our core businesses, TAVR, CMTT, and surgical, combined with opportunities to reach new patient population. And now, I will turn the call over to Scott. Thanks a lot, Bernhard.