Edwards Lifesciences Corporation

Greetings and welcome to the Edwards Life Sciences third quarter 2025 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 this conference is being recorded. I will now turn the conference over to your host, Mark Wilterding. Senior Vice President, Global Finance. Thank you. You may begin.

Thank you, Diego, and thank you, everyone, for joining us this afternoon. 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 Dan Lippis, our Global Leader of TAVR, and Devine Chopra, who has global responsibility for TMTT and Surgical. Just after the close of regular trading, Edwards Life Sciences released third quarter 2025 financial results. During this call, management will discuss the 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 speak only as of the date of which they were 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 can be found in today's press release 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 today's press release. Quarterly and full-year growth rates refer to continuing operations. With that, I'd like to turn the call over to Bernard for his comments.

Welcome everyone for joining us today. We are pleased with the year-to-date performance of the company, including the most recent third quarter. Our focus on structural heart has positioned us to execute our growth strategy with agility this year and also give us confidence in 2026 and beyond. These strong Q3 results represent another quarter of double-digit sales growth. Sales in the quarter grew 12.6% to $1.55 billion, driven by our comprehensive portfolio across multiple therapeutic areas, aortic, pulmonic, mitral, and tricuspid, as well as an established presence in countries around the world. We were pleased with the better than expected results, reflecting the performance of our talented employees. Based on our strong performance in Q3, we are raising full-year sales growth guidance to the high end of the previous 9% to 10% range and are also raising our EPS guidance range to between $2.56 and $2.62. As we look ahead to 2026 and beyond, the company is in a good position with multiple growth drivers to deliver sustainable top-line growth. While the composition and contribution from product lines and regions could vary, you could expect Edwards to grow sales and profitability in line with our commitment from last year. We look forward to talking more about this at the upcoming investor conference in December. This week was an important week for Edwards. And this quarterly call comes on the heels of TCT, where I was pleased to see many of you. At the conference, physicians featured a significant amount of compelling data on Edwards' groundbreaking trans-catheter therapies, including Sapien, Evoke, and Sapien M3. Our unique leadership commitment to high-quality evidence was once again showcased by the multiple late-breaking clinical trials, as well as concurrent publications in the New England Journal of Medicine and Lancet. On Monday at TCT, physicians presented seven-year data for the PARTNER III pivotal trial, which represents the most extensive clinical follow-up to date for low-risk TAVR and surgical patients. The results confirmed that rate of all-cause mortality for TAVR remained low and comparable to the surgical control arm. Additionally, sapient performance and durability indicators were excellent and comparable to SAVR. Also, during the TCT conference, 10 years, of follow-up on multiple generations of Sapien was featured. Long-term data from the Paraner 2A and the Paraner 2S3I studies demonstrated sustainable performance, excellent durability, and consistent clinical outcomes of Edwards TAVR matching the performance of SAVR. So overall, when taken together, the Sapien platform has been the most studied valve with more than 15 years of world-class clinical trials involving over 10,000 patients, 10 New England Journal of Medicine publications, and 1.2 million patients treated around the world. It is clear that in addition to offering an early clinical benefit with superiority at one year for low-risk patients, The excellent performance of TAVR Recipient 3 is now proven at 7 years. This impressive durability is further supported by the 10-year result of the Parler 2 trials. At the end of the day, this groundbreaking evidence sets a new global benchmark, one that is exceptionally reassuring for both patients and physicians. and set the stage for continued long-term adoption of sapien to treat patients suffering from aortic stenosis. TCT also featured multiple important studies focused on Edwards' portfolio of mitral and tricuspid replacement therapies, including the largest real-world registry data on EVOC and the one-year result of a first-ever pivotal trial for any transfemoral mitral replacement therapy, the ENCIRCLE trial for CPNM3. Just over two years ago, Tricin-2 six-month data was presented at TCT 2023. To date, more than 5,000 patients have benefited from this novel therapy, solving the large unmet patient needs. and the 1,000-plus patients. The real-world data presented at this year's TCT demonstrates that the clinical community is embracing this technology broadly across many centers and is excelling at caring for these patients with consistent procedure times and high-quality results for both safety and efficacy. The TBT data of 30 days shows consistent TR elimination in 98% of patients, a very low major or life-threatening bleeding rate of 1.3%, a new pacemaker rate of 15%. To put this evoked pacemaker rate into perspective, it is now competitive to the pacemaker rate seen today in self-expanding TAVR valves available in major regions. It is inspiring to see the practice of medicine progressing for improved patient care. Turning to mitral replacement, we know that there are many patients who cannot be treated with by today's existing technology, including TEAR. And at TCT, the in-circle study demonstrated meaningful early benefits for these patients on all important measures like mortality, quality of life, and reinforced the growth potential of this therapy in the years ahead. The introduction of sapienin-3 marks the beginning of increased physician awareness and referrals to the heart team to support treatment for these many patients in need. Over the past decade, we built a comprehensive portfolio of TMTT technologies. These ensure physicians have an opportunity to select the optimal treatment for their mitral and tracheal spill patients, whether replacement or tear. This is creating compounding value across the care continuum for all stakeholders, especially patients. And in terms of the impact to Edwards, while the contribution to growth from our portfolio of repair and replacement therapy could vary by quarter or year, we know Pascal, EVOC, and M3 will be key contributors as TMTT grows to an estimated $2 billion by 2030. I am proud of the Edwards team and our physician partners for advancing each of these important clinical trials. Edwards is the world-only company to provide physicians with a complete portfolio of therapies addressing aortic, mitral, pulmonic, and tricuspid-like diseases, built on the foundation of our unique strategy and an unprecedented body of evidence. Leveraging our 65 years of deep expertise, we are also extending into heart failure and aortic regurgitation, which are next-generation contributors to patient impact and growth. We have aligned our internal resources to support growth across these multiple therapeutic areas. This focus on structural heart has positioned the company for agile execution of our strategy and provide a foundation for sustainable multi-year growth. When I reflect on all of this, I am proud of our impact. When Edwards leads, everyone benefits, physician, provider, payers, and most importantly, patients, who can enjoy a restored quality of life and live longer. Now I'd like to provide an overview on the third quarter sales performance by product group. In TAVR, our third quarter global sales of $1.15 billion increased 10.6% over the prior year. TAVR growth in the quarter was better than expected, as clinicians demonstrated a renewed focus on prioritizing treatment for patients suffering from aortic stenosis. During the quarter, sales growth increased in multiple regions, supported by new evidence, guideline updates, and expanded education. Growth was comparable in the U.S. and all U.S. On a global basis, Edward's pricing and competitive position remain largely stable. We are pleased that aortic stenosis management is experiencing significant transformation, supported by the combination of evidence of superiority in low-risk patients in one year, unprecedented data on long-term valve performance and durability, expanded asymptomatic indication, and updated ESC, ESCTS guidelines, combined with the Global Expert Consensus publication. These guidelines for valvular heart disease establish a simplified care pathway for severe AS patients and enable a proactive approach to disease management. They underscore that timely intervention should be considered for all severe aortic stenosis patients, regardless of symptom and heart function, which is a meaningful step forward from the prior practice of watchful waiting. In the US, strong third-quarter procedure growth was driven by a continued focus within the clinical community on the importance of timely intervention and streamlining the management of patients with severe AS. We were encouraged by the release of the updated American Society of Echocardiography Guidelines, which categorized severe AS as a critical finding that should be communicated with urgency and encourage echocardiologists to actively participate in patient management. The evolution of policy and guideline changes together with the potential of a new US NCD will provide important catalysts, resulting in a multi-year growth opportunity for US data. Outside of the US, we continue to focus on increasing therapy adoption, especially in areas where many patients go without care. In Europe, Edward's sales growth was driven by the broad-based adoption of our sapient platform in addition to the exit of a competitor, which resulted in a rebalancing of the market and a modest contribution to our sales. In Japan, TAVR sales growth continued to improve, reflecting a gradual recovery in market growth. Rest of the world, growth remained strong. In summary, Due to our strong Q3 results, we are raising our full-year TAVR guidance to 7 to 8% from our previous 6 to 7% range. Longer term, we continue to expect mid to high single digit growth in TAVR, supported by proven long-term evidence, new indication, further guidelines and policy changes, and finally, the potential to serve patients with moderate AS. Now let's turn to our TMTT product group. Our differentiated Pascal mitral and tracheal speed repair system and our unique replacement portfolio of Evoque and Sapien M3 delivered another strong quarter of growth. Third quarter sales of $144 million increased 53% year over year. Fueled by the strong performance of both Pascal and EVOC. Globally, we observe a continued trajectory of double-digit global procedure growth for Mitral and significantly higher growth for TrackerSpeed. The new ESC-ESETS guidelines released in the third quarter also including updates related to the management of patients with mitral and tracheal speed diseases, which further supports increased global use of trans-catheter therapies for these patients. Continued global adoption of PASCAL and EVOC in new and existing centers fueled additional substantial growth. We've observed physician excitement and support of the differentiation of PASCAL and the strong predictable outcome of EVOC, including consistent tricuspid regurgitation elimination. Over the last quarter, we released several new groundbreaking clinical evidence updates. Presented at the ESC Congress, Trisyn 2 outcomes now show a hard endpoint benefit of EVOC versus optimal medical therapy. The data show that the most severe TR patient experienced a combined reduction in mortality and heart failure hospitalization, which is a meaningful advancement. In addition, as previously mentioned, at TCT, we were pleased to share the largest real-world data set of the EVOC early commercial experience from the STS-ACC-TVT registry. The data showed excellent outcome with consistent elimination of TR, and a positive safety profile. We also presented additional TRICEN1 and TRICEN2 sub-analyses at ECT. And the totality of this new evidence strengthens confidence in tricuspid replacement therapy with EVOC and the impact it can have on this greatly underserved patient population. Moving to SAPIEN3 and 3, Our early introduction in Europe is off to a great start, providing exceptional clinical outcome to patients in need and supported by our dedicated field team. The one-year result from the in-circle pivotal trial studying CPNM3 showed excellent outcome for this first approved transeptal mitral valve. The data show that in critically sick group of patients, who were unsuitable for tear and surgery now had an option to eliminate their MR while drastically improving their quality of life with a high survival rate. We now expect U.S. approval by early 2026. In closing, with PASCAL, Evoque, and now CPNM3, We are advancing our vision to meet the complex needs of underserved patients with mitral and tricuspid disease with a differentiated portfolio comprised of repair and replacement technology. We are pleased with our year-to-date performance in TMTT and remain on track to achieve our full year sales guidance of 530 to 550 million. In our surgical product group, Third-quarter global sales of $258 million increased 5.6% over the prior year. Growth was driven by continued adoption of our Resilia therapies. In addition to positive procedure growth for the many patients best treated surgically, Our Resilia portfolio achieved double-digit growth with contribution from Inspiris, Connect, and Mitrease therapies. We continue to generate evidence on the Resilia portfolio and expand access globally. With CMARC approval for Connect in Europe at the end of the second quarter, we have been able to expand this therapy to patients across European countries during the third quarter. I think it is also important to highlight the strong Edwards surgical valve performance in the recent partner-free seven-year data. The majority of patients in the control arm were treated with Edwards surgical valves, and the results were comparable to TAVR at seven years. This performance reflects over 65 years of valve leadership and innovation. In summary, we continue to expect that our full year 2025 surgical global sales will be in the mid-single digit, driven by resilient portfolio adoption across our key markets and growth in heart valve procedures for patients best treated surgically. And now Scott will cover the detail of a company financial performance.

Hey, thanks a lot, Bernard. As Bernard mentioned, we are encouraged with our stronger than expected third quarter performance and the progress we made during the quarter advancing our strategic initiatives. Our double-digit sales growth drove adjusted earnings per share of 67 cents, well above our expectations, driven by both stronger than expected top-line performance and certain spending delayed to Q4. Our gap earnings per share for the quarter was 50 cents. A full reconciliation between our GAAP and adjusted EPS for this and other items is included with today's release. I'll now cover additional details of our P&L. For the third quarter, our adjusted gross profit margin was 77.9%, in line with our expectations, compared to 80.7% in the same period last year. This year-over-year change was primarily driven by foreign exchange and operational expenses. We continue to expect our full year 2025 adjusted gross profit margin to be within our original guidance range of 78 and 79%. Our guidance continues to assume some pressure from the weakening dollar. Selling, general, and administrative expense in the third quarter was $515 million, or 33.1% of sales, compared to $420 million, $421 million in the prior year. We continue to expect increased SG&A spending this period due to deferral of certain first half spending and investments expected in the fourth quarter to advance our strategy. R&D expense was $281 million in the third quarter or 18.1% of sales compared to $253 million or 18.7% of sales in the same period last year. This increase in spending and decrease in R&D as a percentage of sales reflects our intentional strategic prioritization of investments in our expanding structural HART portfolio. Third quarter adjusted operating profit margin of 27.5% benefited from our better than expected sales performance and the deferral of certain spending to the fourth quarter. As mentioned on our Q1 and Q2 earnings calls, We continue to expect lower second half operating margin levels compared to the first half driven by the timing of key investments. We continue to anticipate full year 2025 operating margin of 27 to 28%, implying a Q4 operating margin in the mid-20s consistent with prior guidance. We remain committed to annual constant currency operating profit margin expansion over the full-year 2025 level in 2026 and beyond, consistent with our guidance at last year's investor conference. Turning to taxes, our reported tax rate this quarter was 16.1%, or 16.9%, excluding the impact of special items, in line with our expectations for the quarter. We continue to expect our 2025 tax rate, excluding special items, to be between 15% and 18%. Turning to the balance sheet, we continue to maintain a strong and flexible balance sheet with approximately $3 billion in cash and cash equivalents as of the end of the quarter. The Board of Directors has increased the company's repurchase authorization, resulting in approximately $2 billion remaining under the current authorization. Average diluted shares outstanding during the quarter were $586 million. Based on year-to-date share repurchases of over $800 million, including the previously announced accelerated share repurchase of $500 million, we now expect lower full-year shares outstanding to be between $585 to $590 million versus original guidance of $585 to $595 million. Foreign exchange rates increased third quarter reported sales growth by 210 basis points for $24 million compared to the prior year. FX rates negatively impacted our third quarter gross profit margin by 110 basis points compared to the prior year. As a reminder, our program is designed to mitigate the foreign exchange impact on earnings per share compared to our initial guidance for the year. At current rates, we continue to expect FX to have an approximately $30 million upside to full year 2025 sales compared to the prior year. I'll finish with comments related to sales and earnings per share guidance. As Bernard mentioned, we are increasing our underlying growth rate guidance for TAVR to 7 to 8%, with sales of $4.4 billion to $4.5 billion, and our total company sales growth guidance to now be at the high end of 9 to 10%. For the fourth quarter, we're projecting total company sales of $1.51 to $1.59 billion, and adjusted earnings per share of 58 to 64 cents, bridging to our full-year earnings per share range of $2.56 to $2.62. We're looking forward to providing more forward-looking commentary at our investor conference on December 4th. We remain confident in delivering the long-term financial goals for the company and each business unit that we provided at last year's investor conference. And I do have one additional piece of personal news. After 12 years at Edwards, I'm going to be transitioning out of the CFO role by mid-2026. The company has initiated a process to select a successor. We have considered this transition and a CFO succession plan carefully, and I'm confident we'll have a smooth transition. I look forward to serving as a strategic advisor to Edwards after a new CFO is in place. And now is a good time to pass the baton. The company is in a strong strategic and financial position, and I have confidence that Edwards will continue to perform at a high level in the years ahead. I care deeply about Edwards and know what a special company it is, and it has been an honor and a privilege to serve as CFO for almost half of the company's history as a publicly traded company. And I am committed to a smooth transition next year. So with that, back to you, Bernard.

Thank you, Scott. You have been a valued and key partner to me for over 10 years. First, as colleagues on the executive leadership team, through the CEO transition a few years ago, and now in the last two and a half years since I became CEO. We have worked closely to find the right time for you personally, and also for Edward for the CFO transition. And while we will miss having you in your current role, I am pleased that you will continue in the CFO role until the transition occurs by mid-2026 and remain at Edwards as a strategic advisor beyond the transition period. So I am confident that we will have a smooth handoff during this transition, and we are initiating a process to identify the successor. In closing, after more than 20 years of innovation that has benefited more than a million patient lives and this week's seven-year partner-free result, Edward Staver is positioned for strong sustainable growth as many patients remain undiagnosed and untreated. Moreover, We are achieving many significant milestones in TMTT that give us confidence about treating the many mitral and tracheal patients in need. And surgical is positioned for durable long-term growth driven by a portfolio of differentiated technology. In addition, we are leveraging our structural heart expertise and extending into heart failure and AR, which are next generation contributors to patient impact. Altogether, we are convinced of a tremendous opportunity to drive success in the future through our patient focus, breakthrough technologies, and leadership. With that, back to you, Marc.

Thank you very much, Bernard. Before we open it up for questions, I'd like to remind you about our 2025 Investor Conference on Thursday, December 4th at our headquarters here in Irvine. This event will include updates on our latest technologies, views on the longer-term market potential, as well as our outlook for 2026. More information and a registration form are available on our website. With that, we're ready to take your questions. As a reminder, please limit the number of questions to one plus one follow-up to allow for broad participation. If you have additional questions, please re-enter the queue, and management will answer as many participants as possible during the remainder of the call. Diego, over to you.

Thank you. And to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You can press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And once again, please limit yourself to one question and one follow-up. Our first question comes from Travis Steed with Bank of America. Please state your question.

Hey, congrats on a good quarter. Maybe to start with the TAVR growth in this quarter, the 10.6%, it sounded like just a modest contribution from the Boston exit. So if you can just maybe talk about some of your underlying trends and what drove the strength this quarter. And is this kind of full-year TAVR 7% to 8%? If you exclude the Boston exit, is that kind of the right way to think about sustainable TAVR growth kind of longer term?

No, thanks, Travis. Yes, we are very pleased about the quarter. We had a strong quarter, better than expected. There are a number of things who contributed to this great performance in Q3. The first one is we didn't have so much evidence, so much news on Taver and Sapien for a long time. Remember the early Taver. then the ESC guidelines on asymptomatic patients, the global consensus document, and then all of them at each congresses, physicians, we are talking about it, presenting a sub-analysis. So this created a halo where TAVR now is at the center of a conversation for most of the heart team in the US, but also outside of the US. So that's clearly a big catalyst. Also, what we didn't experience, that usually we experience during Q3, is the summer usually, the summer seasonality usually is very pronounced. And this year, we didn't experience it. So we had a higher Q3, and we have a lower impact from the summer seasonality. So all of that together, basically contributed to the great quarter. Are we, now if you ask us about Q4 and the rest. We will talk about next year or maybe later, but for Q4, we expect a good Q4, better than we originally thought, but I will not take the Q3 result as the new normal for TAVR.

That's helpful. Since we were just at DCT a couple days ago and you had 7-year and 10-year data there, Maybe just talk about now that you've had a few days to talk to doctors, kind of what you're hearing from customers and the physician community and kind of the importance of that data and how it could or might not change practice.

Yeah, so maybe I ask Dan, you know, our new leader of the TAVR franchise. He was at TCT. He talked to so many customers. He was, you know, the architect, you know, behind, you know, all of the symposium that you attended. So maybe I ask Dan to comment on that.

Yeah, thanks, Travis. Thanks for the question. obviously important meeting for us and more importantly very very important data that was presented there answering probably the last of the unanswered questions on TAVR which is what are these TAVR valves look like at the critical window of vulnerability which is this five to seven year period and it's nice it's reassuring to be able to now answer that definitively at least with the Sapien 3 platform and as you can imagine Physicians were very, very positive. Obviously, the conversations kind of sort of stem with like, oh, it's a shame that a lot of people were maybe betting against. It was no surprise to me. Congratulations. And I think overall, everyone's super positive. I think it gives physicians and patients just, again, reassurance to treat earlier in the disease progression pathway and maybe younger. And that's the direction of travel. that we see. Also, with the guideline evolution, etc., that's the way that it's going. We now see clinical benefit for treating earlier in the disease pathway, but also new evidence that's come out. Bernard mentioned so much new data coming out just consistently over the last 12 months, but a lot of new evidence to suggest that there's economic consequence if you treat later in the process. And all this is driving just a renewed focus both domestically and internationally on TAVA programs. And that's probably the best way to sum up PCT.

That's really helpful.

Thanks a lot, and congrats on a good quarter. Thank you. Your next question comes from Larry Beagleson with Wells Fargo.

Please state your question.

Good afternoon. Thanks for taking the question. Congrats on a nice quarter here. And, Scott, congratulations on all the success at Edwards. I know you'll be around for a couple more quarters, but I enjoyed working with you and will miss working with you when you leave. So for my question, Bernard, it sounds like you're comfortable with the 10% plus organic growth and 50 to 100 basis point margin expansion next year. What's giving you the confidence this early? And Scott, as of today, would FX positively or negatively impact margins next year? And I had one follow-up.

Yeah, no, thanks, Larry. To be fair, when I look back, I always had confidence. Let me give you the context on why I am saying that. We have been studying this platform, SAPIEN, for 20 years. We have been iterating this platform for 20 years. We know what this platform is. is delivering for patients. More than a million patients receive this platform. So when we gave you the guidance last year about TAVR for the foreseeable future, basically mid- to high-single-digit, and the company, on average, 10% with levered GPS, we knew that. And when I say that, You know, we knew that because all what we do is rational, is science-based. You know, you don't have, you know, you don't have, you know, surprises. So it's like the seven years, you know, maybe was a surprise to some, but for us it was a confirmation about what we knew here. And so no change to the guidance we gave you last year in December, Larry.

Yeah, Larry, I'll just add to that. First of all, thanks for your nice comments. Appreciate it. You know, just to reiterate what Bernard said, last year we said on average 10% over the year's constant currency. And we think that 10% growth on the top line for Edwards in 2026 will be within the range that we provide at the investor conference. But remember, now with the third quarter results and the momentum that we see in the business going into the end of the year, we now have a higher bar that we'd need to clear when we're calculating that year over year growth rate. As it relates to your question on FX, I thought you might ask the question, we're just going to have to hold off for five weeks until we get to December 4th. We're still running all the numbers and we'll take you through, when we take you through our guidance, we'll take you through the impact of FX on guidance.

Fair enough. And just for my follow-up, Bernard, as you approach the scheduled trial for the Genoval deal, what's your level of confidence you could overturn the FTC block? And Just remind us of where Sapien X4 stands and when we'll see the pivotal data. Thank you.

Thanks, Larry. These are important questions. So let me take the first one and maybe Dan will take the second one. We continue to pursue this regulatory approval for Yenavalve for a very simple reason. You know us. We have identified these large and med needs. These patients have no solutions. And we know that when We come into a space. We bring our leadership, our innovation power, our commitment. We make a big difference. Patient benefits. So we believe here that we have great facts. At the same time, we will know in Q1. So before Q1, I can't tell you how it is. But I really hope that we will have a favorable ruling at the end, because again, these patients are waiting.

Thank you.

Larry, just regarding X4, first of all, very excited about our pipeline. X4 has the real potential to be a game changer in TAVR. And that trial, the Alliance trial, completed at the end of 2024, Right now, the patients are in follow-up phase, right? And so until the patients have gone through that period and the trial is complete and the data is analyzed, we don't have a whole lot more to say about X4.

Thank you. Your next question comes from David Roman with Goldman Sachs.

Please state your question.

Thank you. Good afternoon, everyone. And Scott, I'll add my congratulations on moving on. I finally remember your first Analyst meeting in 2013, I think Edward was a small cap growth stock at $4 billion. So I think you're certainly leaving the company in a good position, although they'll miss working with you. Two questions for me. One, just starting on the TAVR side. When you look at the preview valve study that was presented at TCT and think about the early TAVR study in context, can you maybe just help us look forward? And I know we're all focused on indication expansion and asymptomatic patients, but To what extent is there an opportunity here to see broader diagnostic rates for AS increase that would not only trickle through to your TAVR business, but also be a tail end to the surgical valve business as well?

Yeah, that's a good question, you know, and we have not talked about it, you know, when we were at TCT together. So this study was an investigator-initiated study, and if you look at it in a big picture, it validates our assumptions. on the size of the AS market potential, the number of patients, but also it's validating basically the incidence and prevalence of all valvular heart disease. So at the high level, it's positive. There is more to learn from, but we look at this one as a positive one for the next year to look at. Dan, you want to add anything to that?

Yeah.

David, I think Very, very important study and one that I anticipate is going to be referenced a lot, right? And it looks at the prevalence from a unique lens, right? Typically, when we try to establish incidence prevalence and market opportunity, it's coming starting from the basis point of who's actually got an echo. And what this study was trying to do is to take a look at the prevalence, if you like, of the disease from an out-of-system population or non-diagnosed population. And so it kind of brings a completely different lens and a very novel way of doing it to help our understanding of the disease. As Bernard said, when you look at the data that we've had available from an aortic stenosis perspective, it kind of validates kind of some of the assumptions that we had maybe maybe even suggesting that the disease is larger than what we thought, but it's pretty much in that ballpark. What I would say about what is the opportunity here, as you see, whether it's this evidence, whether it's early TAVR, whether it's the sub-analyses of early TAVR, whether it's the Partner 3 and the new standard now we have for TAVR with long-term durability, all of this is going to get disseminated It's going to be part of an education process. It's going to be democratized in the community. And it's going to lead to greater awareness and greater referral and greater adoption. And I think that that's part of our strategy, part of the plan, why we are investing so heavily and so confident about the impact. But it all helps. So thanks for the question.

And maybe on the TMGT side, I think you said M3 approval coming – in early 2026. Can you maybe help us think through how to compare and contrast the M3 launch with Evoke? And I think Dr. Sharma, at your analyst meeting on Monday, kind of described tricuspid valves as a once-forgotten valve that's starting to gain attention from the clinical community with the now treatment solutions that are out there. But I think Mitral, while procedure volumes are low, is a much more mainstream and well-understood disease states. So help us think about what are the factors influencing the M3 launch and whether using the Evoque launch is a good template or not.

No, thanks so much for the question, Dave. It's Devine here. Yes, we did say that we expect U.S. approval in early 2026. And if you look at the SAPI and M3 launch, we now have a couple months of the launch in Europe. And in Europe, what we're seeing is that we have a kind of continuing limited control launch, and we're really focusing on the high-value model. We've got really important physician training, Edwards people really working very closely with physicians to make sure we get great outcomes in every case. And what we're seeing from physicians is that they're actually pretty excited about this technology. As you said, they treat mitral patients today. And the Sapien M3 product is specifically focused on patients who are unsuitable for both tear as well as surgery. So for them, I think that we do see patients in the system who are unsuitable, and so their excitement is getting to see great results for these patients with M3. However, to your point about comparison to the Evoke thing, I think I wouldn't get ahead of ourselves in saying that with us, it's kind of this control launch, high training, and making sure that we go one center at a time.

to kind of ensure that we get the best possible outcomes and results.

Thank you. And your next question comes from Vijay Kumar with Evercore ISI.

Please state your question.

Hi, guys. Thanks for taking my question, and congrats on the nice sprint here, Scott. Congratulations to you as well, and wishing you the best as you transition. Maybe my first question on the STAVR performance in 3Q. Why isn't this performance a reflection of asymptomatic approval? I'm curious why you think the strength wouldn't sustain.

Yeah, maybe, you know, Dan, you want to take?

Yeah. Hi, Vijay. I think your question is as is the Q3 performance a reflection of asymptomatic approval? And I'm not sure if you specifically mean adoption or treatment of asymptomatic patients, but certainly it is the asymptomatic approval, the indication, the evidence is reflected in what we're seeing here. As along with, I mean, I really can't recall over my 15 years a period of 12 months where the scientific and academic podiums have just been so focused on TAVR with so much new evidence, so much new discussion, sub-analyses, et cetera. So for sure, the asymptomatic evidence and indication is playing a part here. But as we've also seen in other indication approvals where a new indication shines the light on a previous indication and you see a renewed focus on that, And we're seeing that here for sure because there's also new data. There's also new data to say that timely and urgent intervention brings both clinical and economic benefit for symptomatic severe aortic stenosis, which is part of the analysis of that data. Regarding is asymptomatic patients entering into the treatment pathway in Q3 and is that driving the current performance, we don't see any evidence of that it has to be caveated by the fact that there isn't coverage for the asymptomatic indication right at the moment so it's hard to see that encoded CMS data but we do have ways at looking at upstream patient populations to see what's coming through the funnel and right now we don't see any significant evidence that the growth is being driven by referral and treatment of asymptomatic patients so I think that that's an opportunity to come.

And this is probably what is most exciting, Vijay, that we have seen this momentum in Q4 just by having a renewed focus, given all of this data, all of this positive data. Also, we benefited from the seasonality of the summer. But the big catalysts are still in front of us. And this is what we have been saying, you know, we are very confident about, you know, this multi-year opportunity for TAVR. This is what made us, you know, confident again that, you know, this is just, you know, in my mind, what I say always, you know, to the team, it is just the beginning.

Understood. That's helpful. And Scott, maybe one quick one for you. There was a litigation charge. I know that was non-GAAP. Could you just remind us on what the charge was?

Yeah, thanks for the question, Vijay. You know, there's a lot that happens behind the scenes with just the ins and outs of running our business. As you know, in medical technology, it's not uncommon to have litigation activities underway. And so we take reserves periodically based upon what we think that exposure looks like. And you'll see that reflected in today's GAAP P&L.

Understood. Thanks, guys.

Thank you. Your next question comes from Matt Taylor with Jefferies.

Please state your question.

Hi, thanks for taking the question. I wanted to circle back on TCT. It had a really nice showing kind of across the board, and I think what maybe stood out the most to us was how positive the real-world tricuspid data was, and you talked about having a toolbox there, and you'll have that in Mitral next year. So my question is really, after this tricuspid data and having the toolbox, there. Do you expect some acceleration in the tricuspid adoption, and could we also see that in mitral next year? Maybe you could just talk about that in general and the pace of acceleration we might see.

No, yeah, thanks, Matt, for the question. Now, obviously, we were very excited to see the Evoque data coming from TCT, and I think what we saw from Evoque is that we see this continued trend of great real-world outcome, first starting at ESC a couple months ago, where we saw these hard endpoints for the most severe TR patients. And now we see with the TCT data the improved safety, both in bleeding and conduction, versus what we saw in the randomized trial. And I think what we're seeing is that we're seeing how the elimination of TR is leading to just change in patients' life. And I think what we're also seeing from Europe, where we have both repair and replacement for tricuspid is that you really need both technologies to really get, treat the maximum number of patients with the best possible outcomes. And so I think with that, as we get to your point is having the full portfolio, even on tricuspid and now then coming with mitral, you start seeing this compounding effect where when you have multiple treatment options, each patient is getting the best possible outcome. You can treat the maximum possible number of patients. And with that, you see this continued strength and growth. And so, you know, in the words of seeing you're asking about the acceleration of TR, I think what we're seeing is very, very strong growth in TR. I mean, this year you see overall that our overall business is growing at over 50%. And so I think we're going to see this continued growth in TR. And these provide, I think, nice tailwinds, nice real-time examples to help continuously support this strong growth in TR to really treat

an awesome number of patients in the years to come.

Great.

Thank you very much.

Your next question comes from Robbie Marcus with JP Morgan. Please state your question.

Oh, great. Congrats on a good quarter, and Scott, wish you all the best. We'll miss working with you. Two quick ones for me. First one, I know you've been working a lot the past couple years. to try and improve efficiency in the cath lab. And you have some AI initiatives and educational initiatives. And just wondering how that's going, what you're doing exactly, and how much efficiency and extra capacity you've been able to help drive such good TAVR volumes.

Yeah, thanks, Robbie. Maybe I'll take that question for you. We've got a number of programs in flight, if you like, whether it be at an early pilot stage or various stages of ramp. Specifically as it relates to capacity building or efficiencies, one of the big programs that we have is Benchmark. And that has been in development and all about improving efficiencies for better patient outcomes in the hospitals couldn't be a better time to be applying that right now with the renewed focus you know on TAVR as the timely treatment and more urgent treatment of these patients is in the spotlight but at a high level we've got programs that we execute on the ground right with our field team we are in just about every single case and These are either targeted towards improving the efficiencies in the cath labs or in the program itself, or with referral activity and education of evidence and guidelines and new data, et cetera. We have also partnerships with tech companies and AI-based companies that look at echo screening and upstream identification of patients and workflow solutions so that that can be done economically. And so we're working on that. We have very sophisticated marketing programs looking at targeting direct-to-patient activity through social media, et cetera. And then just the partnerships that we have with societies and others, with GCs, with patients, et cetera, around dissemination and education of clinical evidence. So all of this comes together and kind of helps us sort of run the process of moving the needle of patient activation. And I hope that gives you some idea of what we're doing on the ground with our physician and hospital partners.

And so, you know, Dan, you gave here a full picture on all of what we do on the TAVR side. Maybe, Devine, a couple of things on TMTT?

A couple of quick things. If you think about it, right, Dan, for a more established procedure like TAVR, went through a lot of great examples there. On TMTT, when you're creating a brand-new therapy, You can imagine there's so many things to quickly help improve their time in the cath lab, their time to go home, their time for pre-habbing a patient before you even have a procedure. So what we see is actually with things like replacement technology, both mitral tricuspid and even to some extent with tear, as we establish and grow these new therapies, we are constantly improving efficiencies across the board in almost all aspects. So I think for us that just comes with the therapy development that happens and helps really line you up for long-term success.

Thanks. We do a lot here and I'm glad we were able to share some of what we do, but we do much more than that.

Maybe if I could just ask a quick follow-up for Scott. We had really good margin expansion. I think you've committed to 50 to 100 basis points and I don't want to steal any thunder from the analyst day, but You're one of the biggest spenders in R&D at $1.1 billion, and it's clearly given you a great product pipeline and portfolio. With a lot of big trials wrapping up, how do you think about R&D and what's the right level of spend over the forward horizon? How are you thinking about that?

Thanks for the question. Look, we think about R&D as an investment in the top line. And the most important thing that we do here is innovate to drive sustainable, organic, top-line sales growth. We've also said, though, at last year's investor conference, and you'll hear it again at this year's investor conference, that top-line growth will outpace R&D spending growth. And you saw it in the third quarter, where we went from nearly 19% R&D as a percentage of sales last third quarter to 18.1% of sales this quarter. And so that gives you a sense of how R&D as a percentage of sales is going to trend. Again, it's still the most important driver of our strategy, of our innovation strategy, and of our sustainable top-line growth expectations. But it's also something we're going to be pretty disciplined about prioritizing where we're investing those R&D dollars.

Great. Thanks a lot. Thank you.

And ladies and gentlemen, that's all the time we have for questions today. So I'll now turn it back to Bernard Sovigian for closing remarks. Thank you.

Okay, everyone. Thanks for your continued interest in Edwards. Scott, Mike, and I are welcome any additional questions by telephone. And I wish you a great day. Thank you, everyone.

Thank you. And with that, we conclude today's call. All parties may disconnect. Have a good day.