Edwards Lifesciences Q1 2024 Earnings Call Transcript

Thanks, Robbie. This is a good question. So we are obviously very pleased about the early physician feedback, which has been very, very strong on EVOQUE. We were able to achieve an excellent procedural outcome. Now, back to your question about our performance in Q1, very little about EVOQUE. We have seen a very clear momentum on PASCAL, PASCAL in Europe, PASCAL in the U.S. And we are very pleased about our expansion and adoption of PASCAL globally basically. But I'm going to ask Daveen to add some details here.

Yeah. Thanks so much, Bernard. Thanks for the question, Robbie. Yeah, and to follow up with Bernard's comments, obviously, the vast majority of our growth came from PASCAL, just because EVOQUE is so new. And overall, though, we continue to be really pleased with the initial launch of EVOQUE both in Europe and the U.S. Right now, we're just starting to steadily kind of activate sites.

We've had really good clinical outcomes, very consistent with what we saw in the clinical trial. And we see really predictable times and predictable procedure times is something that, obviously, physicians really love to see and we see that both at old sites that were enter TRISCEND II, as well as new sites that we've opened up kind of in Europe.

The only other comment I'll make is, it's really early in our journey, but our experience in Europe, especially, where we've had PASCAL approved for tricuspid since 2020 really reinforces the fact or the need that we want to have a portfolio of both repair and replacement technologies because tricuspid patients are so complex and so diverse. So, I'll stop there.

Thanks, Robbie. Let me start, and again, I will ask Larry to add some insights here. So we knew, when we put together a guidance for the year, the TAVR guidance 8% to 10%, we knew that the growth will ramp throughout the year and that Q1 will be our lowest growth quarter. So we feel you're confident about our 8% to 10%. We feel confident about what's happening in the U.S., share and price are stable. So we feel good about all of that.

Larry, you want to add anything?

Yeah. I don't have a lot to add. We saw good progression throughout the quarter. It's always a little slow in January as we come out of the break, but we are pleased with how the quarter went overall and we remain excited about the year. We have a lot of activities on patient activation. We have a huge data set coming out of TCT that I think all of us are going to be excited to see what that say -- what those data say and how they inform the field. And so I continue to believe we have a long runway long term with TAVR and it is good to see the U.S. kind of put COVID, I think, finally in the rearview mirror, and we can just focus on accelerating patient care.

Yeah. Thanks. Yeah. Overall, we felt good about the quarter, and we just talked about the U.S. We saw a lot of strength in Japan, but Europe was -- it grew year-over-year and it grew sequentially, and we lost a couple of billing days. But even with that, we were a little bit disappointed with our overall growth in Europe. We saw some pretty aggressive pricing from competitors that I think led to some trialing. But we're really excited that we're launching S3UR, that actually starts this month, and we're excited to bring that technology to Europe, and we expect these to normalize through the course of the year.

I can give a little bit more commentary on the billing days. So, outside of the U.S. is where we really felt it. We saw two billing days difference in Europe and Japan. Overall, globally, we saw one billing day difference and so it had an impact. To your question about do we see any more impact in later in the year? Yeah. In Q3, we've got a billing days impact that goes the other direction as well.

Yeah. We have a lot of patient activation activities where there's a lot of work that we do. We have multiple fronts and Egnite is just one part of our strategy there. But we're excited about what these technologies can do. And there are so many patients, if you look at the [indecipherable] publication, and I know he's spoken to you guys before, there's just a lot of patients upstream that aren't moving through the system at the speed in which they should. And I think there's a patient identification aspect, there's a referral aspect.

So we have multiple work streams working on this. But I think the appreciation and understanding for the undertreatment of aortic stenosis is growing. And I think as that grows and people start to understand the magnitude of the problem, I think it gives more opportunity for our patient activation strategy to take hold.

And maybe in addition, Larry, I'm very proud about what we are doing. We are the only one basically having a deep commitment to advancing science for AS patients through the PROGRESS and early TAVR trial. So this is truly our commitment, but we feel that there is a ton of potential. These patients are underdiagnosed undertreated, and we are committed to offer treatment for these patients. So as a company, very proud about how we do all of this.

Yeah. We do expect to have procedures to ramp. That's always been a part of our plan, and so we continue to expect that to happen. And I think it's a lot of things, Larry, I think it's a lot of our patient activation work. But it's also just the market continues to improve, and we're very pleased with where we finished Q4 last year. We were happy with the ramp in Q1. So I think we do expect to see an increase in Q2 over Q1. But even with that, we expect the second half to have a higher growth rate than the first half. So I think that that's good.

And as it relates to the SMART trial, I mean, we talked a lot about it at ACC. I think it's just a reminder, and we've talked about this before, but the decision on what valve to use is multifactorial. It's never been about one criteria. It's never been about one data point. And so we continue to have confidence in our platform and the value proposition and with our Ultra RESILIA technology and all the other things that we're doing that we always model in competition, but we feel very good about our platform and our leadership.

So let me -- Larry, let me add something about it. I know that there were plenty of questions about that trial at ACC. I was not at ACC. But our strategy to bring basically groundbreaking science, the highest quality of evidence to help over millions of patients who are not being treated today and being able to unlock this large TAVR market potential, this is what we are doing. This is our strategy.

So you know us very well. In the last 10 years, we signed 12,000 symptomatic severe aortic patients across mainly FDA-approved studies. And today, again, we are the only company conducting a groundbreaking research into the treatment of AS through early TAVR and PROGRESS. So again, I can tell you I'm very proud about who we are as a leader in circular heart disease. I think what happened at ACC with the SMART in my mind is, no, it was an interesting study, but more than anything else.

Yeah. That's right. We brought revenue guidance up nearly $150 million, and you're right, we kept our $2.70 to $2.80 range the same. There are a couple of reasons. One was, we ended up with a lower tax rate in the first quarter than we expected. Not sure that we're going to be able to maintain that low of a tax rate the rest of this year. The other one is, it's just early in the year. And so we'll talk more about how EPS is trending three months from now. But we decided at this point early in the year, we just keep it the same. We think the top end of the range can accommodate multiple different scenarios that could play out in the rest of 2024.

I'll answer that. Yeah. This is Daveen. I'll answer that. No, honestly, if you look at Quarter 1, no, I don't really think there was any significant kind of direct pull-through from EVOQUE versus PASCAL. But if you pull back up, I think us having our portfolio product to treat the maximum number of patients by having repair and replacement technologies for both mitral and tricuspid help show our leadership and that physicians would then want to continue to work with us as leaders in the space.

I think so there's always going to be a continued kind of link in that way. But when we look at kind of growth opportunities and what's happening for growth overall, if I look at PASCAL in Q1, we continue to open up new centers. We continue to grow in the centers that we work with and that we continue to gain -- work with physicians more deeply in that way, which I think was fantastic. Additionally, and we think that will continue for quarters going into the future.

Additionally, we continue to grow geographically, right? There are also countries in the world where we're just kind of bringing PASCAL for the first time. We're in the new kind of the initial stages of where we'll be at PASCAL. So we think that's going to be an important opportunity. And then clearly, that's PASCAL and number two EVOQUE, EVOQUE is just starting, right? We see EVOQUE being a long runway for us of growth across the board.

And then we've talked about in the future, we will also then bring our M3 -- SAPIEN M3 transcatheter mitral valve to the market, which will add another layer of kind of growth for the future. And I think having all these technologies together really provides a leadership role that we can have.

Katie, do you want to take another question?

Yeah. Thanks, Joanne for the question. So for Critical Care, as you know, we have capital sales as part of the mix. And so we just see high variability of demand really every quarter across all our product lines. We also have distributor sales that kind of will come up and down. So it was a great quarter for us overall. It's still early in the year. So you saw us raise guidance to 8% to 10%, and we're very confident in that 8% to 10% range. But we don't want to bring it up too much more at this point just because of that variability in demand.

Profitability for the company, Joanne?

Yeah. Well, let's hold off on product line profitability. Suffice it to say, it was a good top line quarter, and that's helping our bottom line as well.

Yeah. So I'll start, Matt, and then I'll hand it over to Daveen. This is kind of like what Daveen and I do every day. We partner very closely on these sorts of things. And clearly, as we roll out these new therapies, we want to make sure that people do it with the right volume. And so it's a key part of when we start centers, making sure that they have a whole program that encompasses their entire structural heart patient population.

And so our teams work closely together. We have this unique environment where we have very dedicated teams because we want to bring that detailed procedural knowledge and the knowledge of all things related to it. But it still requires a lot of coordination between Daveen and I, and we've been doing this for a while. This is true with PASCAL and the launch is there, and it remains true of both. Daveen?

Yeah. I mean, I'll just add maybe some comments about the -- maybe the capacity question that you kind of asked, right? The rally is in mitral repair, right, in cure technology that's been around for several years and continues to grow with more and more patients being treated. The number of patients being treated and kind of minds me EVOQUE is relatively small in Quarter 1 and for the future just based on these very large, more established numbers of procedures.

So for us, overall, I don't necessarily believe that the EVOQUE procedures for any time in the near future are going to affect overall capacity. But I do also -- and to put -- carry on to Larry's point, we collaborate very well together to ensure that when we're opening up a center or working with center for the first time, we're working with that center to ensure that they do have the capacity to then add in these incremental procedures.

What it is fair to say is that so far, we have not faced a big challenge in terms of center having a lack of capacity to be able to treat the patients, whether TAVR patients or EVOQUE patients.

EVOQUE patients.

EVOQUE patients, yes.

And Matt, it's Scott, your question about SG&A. You heard us say in the opening remarks that we're expecting SG&A as a percentage of sales to be around the top end of our original range of 29% to 30%. And that move up a little bit was largely based upon the increased investments that we're making in field resources and patient access initiatives.

And it also kind of gets to Larry Biegelsen's earlier question about why we didn't move EPS guidance range up yet. We've been waiting to see how sales trended here at the beginning of the year before deciding how aggressively we wanted to go after some of these investment initiatives. And based upon first quarter sales, we're going to move forward with some of those, and that's the reason we're moving up our spending outlook.

Yeah. I'll take the first part of that about U.S. TAVR growth. We try not to be too specific about breaking down every region. But what we can say is that TAVR in the U.S. grew faster than our global underlying growth rate for TAVR in the first quarter.

Larry, do you want to talk about the other pieces?

Sure. So the AHA program, we're very excited to partner with the AHA on this. And you're looking for an analog, years and years ago, the whole door-to-balloon drive where they created a quality metric that was based on time. And because we know the faster when a patient is having an MI, they get a balloon across that lesion, the survival rate rises dramatically, and it's critical that they do that.

But for AS, we really don't have any quality initiatives around the time from diagnosis to treatment. And I will say most centers sort of start the clock when the patient ends up with the heart team, and they think they do it pretty quickly. But the part of the story that they miss is the upstream component. From the time that patients got that first echo that they have severe disease, sometimes there's a long journey before the patient actually gets referred to the heart team. And we're trying to do is work on a time metric like door-to-balloon where every patient has to get treated within 90 days of diagnosis.

And one of the first things that it does is centers have to go back and look at what their own data say. And most centers think they're doing a good job and when they actually dig deep and find their own data, they find out they're not gearing near as well as they thought they were. But if we can get this quality metric implemented, then it would completely change the urgency around patients move through the system. It would be a quality metric they would have to report on. So we continue to expand this initiative but the real goal is to make a guideline or quality metric be part of the system where centers would have to report on it.

And we think we do that, it could dramatically improve patient care because we know these AS patients do not wait well. They have very high mortality rates. If you go all the way back to Part 1, which was the higher risk patients, they had a 50% mortality rate a year when left untreated, and that mortality rate starts very quickly in the process. So we're very excited to partner with AHA, and they're a great partner for us because they have demonstrated expertise in getting these sorts of things put in place.

Yeah. Thanks for the question, Chris. Appreciate it. Yeah. So first, just a couple of comments. We really believe that EVOQUE offers exceptional clinical and economic benefit to both patients and health care systems. We think that's a key factor. And we've seen a great increasing interest and demand from physicians to help have this technology treat their patients. So the results, I think we're going to see continued centers opening up and continued kind of patient growth each quarter.

If you think about the NTAP, what you mentioned with NTAP, that were psyched that CMS is actually proposing to move forward with NTAP. And then we hope that expects, as you said, to start October 1. And that helps make up any incremental cost between the cost of EVOQUE procedure versus the existing DRG, which is that DRG for TAVR and TEER. So we think that will continue to add to it. But between now and that we continue to see a lot of interest from physicians as well transcatheter system because we think this technology does so much for patients.

Probably fair to say that NTAP will have a big impact next year and the year after, but not necessarily this year. Thank you.

Yeah. This is Daveen again on a couple of comments on this one. Generally, yes, we are believers that both repair and replacement technology for each valve really helps treat the maximum number of patients. These patients and these disease states are heterogeneous. There's no one magic bullet. There are a lot of patients that continue to need different types of technologies. I think all of us, the physician community, the medical committee ourselves, we're all continuing to work and figure out which product repair replacement is right for what patient. Do we have a clean answer today? No, but we continue to work on it and have some ideas, definitely so.

With technologies like EVOQUE, we see like this unique elimination of TR, big quality of life improvement. And we see these favorable trends that all-cause mortality and heart failure hospitalizations, along with a very predictable procedure, very clean kind of times. In Europe now, we're starting to have a little -- we already have PASCAL for now a couple of years in Europe PASCAL tricuspid, where people really love PASCAL where it has some really great features for the tricuspid valve, really a atraumatic clasping, etc. But physicians there are starting to see how EVOQUE makes a lot of sense for certain segments of their patients. So no, we haven't quite figured out the exact mix of these patients, but we know both are really important for treating the most patients.

That's great, Daveen. Maybe I will add something about six, seven years ago, we believed that having repair and replacement for both mitral and tricuspid was going to be important. Today, we are confident that indeed it is the case. And this will provide a physician options to treat many patients and to best select what therapy for what patient.

So if you're asking what exactly technology for what patient, I think it is still early. We still -- we need probably more times, more research to do that. But for sure, I think this portfolio put basically a physician in a driver seat to make the best decision for their patient, which is what we wanted initially. And as a result, this is going to unlock this very large opportunity and we are going to see a sustainable growth from TMTT in the years to come.

And I'll leave it up on your comment about kind of the clinical data, right? And that's why it's so important that we continue to enroll in trials like Class II TR. So that's our tricuspid trial, right? It's a randomized study where getting more data in understanding how these different technologies can really help patients. It's super important for ourselves. So not only post-market studies for EVOQUE, but also these other randomized studies, pre-market that are so important to collect this data to continue to understand where these technologies can work best for patients.

So, this is Daveen. On the NTAP comment, we believe right now, each quarter, we continue to open up new centers. We continue to train physicians on it, and it's a steady state, nice growth in providing the technology to more patients. And we've seen a lot of demand from physicians for this technology for these patients.

I think to Bernard's point, NTAP adds a continued allowance of growth as it gets to more scale, that will really help support 2025 and 2026 growth.

And then the second question was -- I missed the second part of your question.

I mean, I think the question was how many centers do you think we'll be ready to do procedures once the NTAP is active. And I think what we can say is, certainly, the sites that have been involved in clinical trialing are going to be ready to activate. Beyond that, we're just going to be strategic and deliberate about where we activate.

And we're going to focus on centers that are already the higher volume tricuspid centers that have their infrastructure set up, have their right side imaging set up. So it's going to be just a steady kind of both of TRISCEND II centers and moving to other high-volume tricuspid centers.

Yeah. Thanks. Well, none of us know the trial results as yet, that won't happen until later this year. So if the trial is positive. And obviously, the more positive trial is, the more benefit that you get from it. But I think it's really about how patients get referred for therapy. And I think that that's going to be the key thing. So I think it speaks to the treatment in referral for aortic stenosis and the timeframe we should do that more than a specific therapy.

Now that being said, it is a randomized trial against the SAPIEN platform. And so if you're going to think about treating patients earlier, you're going to have a platform delivers outstanding clinical outcomes, right?

You're going to have to have those low mortality rates. And this is where we think our platform really shines because if you look at, again, our PARTNER 3 low risk data, we had 99% survival at a year. We had 90% survival rate at five years and very low complication rates. And that's probably more in line with the patient population that would be asymptomatic, is really more towards a lower-risk patient population. And we're the only one to make the investments in that trial at this point. So -- but I do think it speaks to the deadliness of the disease broadly.

Yeah. We had a good Q4 in Europe. And so this does feel like it's probably more temporary, and it's something that we're going to put a little bit more focus on. We do sell at a premium in Europe and some people were pretty aggressive with discounting. And I think we have to beat that with our value proposition and with new technology. And we're super excited. While S3UR feels old to the U.S. at this point in Japan, it's a brand-new product for Europe. They have no experience with it.

So we're excited because it's the only platform in anywhere that has the dry RESILIA technology. And again, this is something that's been on our market-leading surgical valves for -- we're probably approaching a decade now. So it's a huge milestone for us to be able to get this technology into Europe. And we do think that physicians still are going to make their long-term product decision based on what's best for their patients.

Sure. In the third quarter, order of magnitude, same thing. It's about a day globally. And geographically, very similar. Europe or Eastern Europe a day or two days, everybody else is a day. So it's really a day across the board in the third quarter.

Yes, more -- it's -- most of the regions are one day in the third quarter, whereas in the first quarter, we had Europe and Japan at two days, but I'm not sure that level of precision is that important. Suffice it to say, in aggregate, in total, it's a day in the first quarter, and the day in the third quarter.

Yeah. I appreciate the question, Danielle. It's a little hard to quantify. We're still putting some of these systems in place. And remember, it's not just identifying the patients. People have to start rewiring the way patients get referred and the way they come in. And so I think we're really, really pleased with the pilots that we've run in the places that we've gone. We barely clearly identify that there's an upstream population that many of the centers didn't even know existed. And now how we tap into those, how we move those patients through the system, how they add capacity to address these patients, that's where the pilot centers are kind of in that phase now.

But we -- when I spoke of this in the investor conference, we have, in our minds, 100% validated the undertreatment of aortic stenosis. We've done it in enough centers with a not different people. It's been backed by enough publications, really even leading academic programs. Now, it's a matter of going through all of the steps to get these patients off the sidelines and get the proper therapy.

And -- but this is going to be something -- it's not a day - one day, there's going to be this massive step function. It's going to be this continued effort over time. But again, it's going to be the thing that drives our growth over, I think, a very extended period of time.

Yeah. I'm not going to get into guidance, and I really want to be cautious not to speculate on trials that are in flight. We'll see the data at TCT. And after we see that data, then I'll be happy to talk about what I think the repercussions are and how I think it plays out. What I can tell you is the patient journey right now is a complicated one. Patients get diagnosed with severe aortic stenosis.

And then they had this holder layer on top of it, which is, do you have symptoms, are the symptoms attributable to our aortic stenosis, are the symptoms enough to refer you for care. And there's a number of patients even though the guidelines say any symptoms are cause for referral, there's a large number of patients that are being held upstream because somebody has decided the symptoms aren't significant enough. So instead of this being a mathematical equation, it sort of turns into almost Olympic figure skating with all this judgment.

And when you end up with older people that have more comorbidities, that gets even more confusing and more challenging. If asymptomatic is successful and we have a powerful trial there then it should simply move to track and field. It should just be a matter of if your aortic stenosis goes below 1.0, you should immediately be referred to a heart team for care. And I think that streamlining of care is going to be what makes the difference and takes a lot of the noise out of the system.

Yeah. That's a great question, Josh. And clearly, you're deep on our platform and the details. I think the concept of this variable sizing is really being able to tailor our valve to the patient rather than driving the patient to a nominal, we can adjust our valve and make it different.

As it relates to hemodynamics, we presented data at CRT that showed the improvements that we made with S3UR with the RESILIA tissue, we saw a pretty significant reduction in gradient. And so if you need a copy of that presentation, I'm sure Mark can get it to you.

So we've already made a lot of those enhancements to our UR platform and X4 is a RESILIA platform as well. So we would expect those benefits to be there as well.

Sure. I think you are right on this, Josh. Our platform with its frame design and this coronary access really the ideal platform for that second procedure, but it's also the ideal platform to use in that second procedure. I think valve needs to be a good host on but it needs to be a good guest and I think going to be critically important.

We -- if you go all the way back to the PARTNER 1 trials that are older now, those patients were 83-years-old time of implantation, we're just sort of probably getting into that range now where TAVR and SAVR is just kind of probably starting hitting a little bit of an inflection point in the next couple of years.

And I think as time goes by, that is going to be a bigger part of the story. But again, we think our platform is very well suited for that and it's good for patients. The idea that if you have a bit had, make up a number, 10 years of durability, but they can get a second procedure and get another 10 or 15 years of durability out of it, you have equivalent of 25-year durability without a patient having to have an open or procedure. And I think that will be powerful for patients.

For sure. I think our surgical platform plays well into that as well.

Thank you so much. Thanks, everyone. I want to close with offering some big picture comment about the quarter. Obviously, we are very pleased about the strong performance for the company growing 10%. And when you think about it, this is the result of the strategy we put in place years ago. What we have today is a diversified portfolio with TAVR, mitral, tricuspid and surgical, all of them contributing to the performance of the company.

TAVR for sure, it is the largest business for us. It's still our number one focus. TAVR has a lot of growth potential. But mitral and tricuspid are now contributing in a very meaningful manner to the performance of the company. So it is why we are so confident longer term that we are going to deliver a sustainable growth quarter after quarter, year after year with all of the catalysts we are having.

Again, thanks for your interest. If you have any additional questions, please do not hesitate to reach out to Scott and Mark or myself, and have a great day.

Thank you.