Good morning. I'm Josh Jennings from the TD Cowen Medical Devices team, and we are moving down the medical devices track here at the 44th annual TD Cowen Health Care Conference. We are very excited to have two distinguished members of the executive team from Edwards Lifesciences joining us here in Boston today. We have Chief Executive Officer Bernard Zovighian and Chief Financial Officer Scott Ullem. Gentlemen, thanks so much for joining today. Great to see you in person.
Thank you.
Thanks-
Thanks for having us.
Looking forward to this discussion. Also, Bernard, you've been in the CEO seat for not quite a year yet, but you've been on the Edwards team and working with the distinguished members of your executive teammates for years. And so I guess the question is, as you're moving forward, you know, Edwards has been running a highly successful playbook, executing on the strategy of trying to own leadership in the structural heart space. You made one major move so far with the announcement of the spin of Critical Care. But how are you thinking about the overall corporate strategy?
Is it more of the same of what Edwards been doing and so successful over the last decade, or are you any tweaks or redirection that you may implement?
You know, thanks, you know, for the question, you know. Good morning, everyone. So I would say a little bit of both. So obviously, you know, I know well, you know, the company. I joined, you know, the company almost, you know, 10 years ago now. I run, you know, two divisions of a company, you know, the Surgical division initially, and then, you know, the mitral and tricuspid division. So I took the time, you know, to think a lot about, you know, where we are going, who we are as a company, and where we are going. And, you know, for me, you know, there are a few things, you know, to keep. There are few things, you know, to make us, you know, very special.
You know, our culture, the patient-focused culture, and our very unique innovation strategy, where, you know, we like to go first, you know, we like, you know, to be the leader, we want to shape, you know, the markets, to bring in a breakthrough technologies, not just, you know, incremental technologies. So these are the things I want to keep because these are fundamental to who we are as a company. Now, I was thinking about, you know, hey, how to make sure, you know, this company remains special, growing like we have grown in the past, you know, 10 years plus, being highly profitable, impacting, you know, so many patients. And so, you know, the decision I made is to be able to focus more on structural heart disease. Because I believe that, you know, there is such an opportunity, so many patients.
Within structural, you know, valvular and non-valvular, you know, there is about 20 million patients in the U.S., Europe, and, and in Japan altogether. So we believe, you know, we are, you know, the only company who can have, you know, such an impact, who can expand, diversify ourself into this large, you know, space. It is a growing space; it is a very large space. Therefore, you know, we made the decision to spin off, you know, critical care, and we said, you know, the priority for us is for sure, you know, TAVR, for sure, TMTT, for sure, surgical, but we are also looking at heart failure. Heart failure is an interesting segment for us, you know, to get in.
So that's, you know, the way to think about, you know, the next, you know, few years, you know, how we are going to operate as a company. Scott, you want to add anything to that?
Excellent. And just maybe to ask a follow-up just on these, the other structural heart segments where Edwards does not participate, heart failure, transcatheter heart failure therapies is-
Yes
Is one area. Are there any other segments that are attractive? I know left atrial appendage occlusion is predominantly performed by electrophysiologists, but they're also performed by interventional cardiologists. But how do you look at those dynamics of structural heart, like in terms of who is performing it? Is interventional cardiology your channel, or could you branch out? I know you have a cardiothoracic surgeon channel as well for the surgical valve business.
No, you know, for sure, we are looking at all of the segments within Structural Heart Disease. You know, we are a company for Structural Heart Disease.
Sure.
Like, you know, when you see the many medtech companies having an extremely diversification, you know, for us, it is going to be within structural heart disease, but we want to own it, A to Z. So we are looking at everything. We are looking to strengthen, you know, TAVR even further, you know, strengthening TMTT even further, how to grow and expand, you know, surgical. Heart failure is a clear, you know, area of focus, but not only.
Understood. And then, Scott, just a question for you. I mean, in this prioritization of, of maintaining leadership in, in the structural heart segments you participate in and, and potentially others, you know, investing heavily in, in R&D, you, you've some of these new product launches, you've added some, sales and marketing expenses, and, and I guess is that, that drive to maintain potentially double-digit organic revenue growth, maintain that leadership position, you're not really sacrificing on margin. You have, you have very attractive margin profile for the business, but is there anything that could kind of pivot that strategy where you're, you're more focused on, on margin expansion and, and letting more of that upside on the top line flow, flow through to the bottom?
The short answer is probably not. Our number one objective is to invest in the business, whether it's research and development or adding people to the field who can support our clinicians to drive organic top-line growth. That's number one priority. We're gonna see natural margin expansion, profit margin expansion over time.
Mm-hmm.
But we're not. That's not the number one focus area right now, not because profitability is not important, because it is, and we're highly profitable, as you know, at the gross margin line and the operating profit line. But we're really trying to put in place the drivers to support long-term profitable growth, and that's why I think we've prioritized properly.
Great. And just wanted to ask about the impact of the TMTT launch. I know you had a US launch of PASCAL, mitral repair platform, and now EVOQUE, transcatheter tricuspid replacement valve, just recent approval. Congratulations again, and you're launching that platform in the U.S. And just how should we be thinking about these early launch days impacting gross margins and operating margins and at scale, as you said, you know, that those will turn, we assume, bigger contributors-
Right.
To overall at scale, maybe even be accretive to gross margin and operating margin lines.
Well, why don't I answer that question, which is very straightforward, but then ask Bernard to talk more strategically about our launch plans and how we see that playing out?
Sure.
From a gross margin perspective, just on a product line basis, early-stage product launches are dilutive to gross margin, but it's a rounding error from an external perspective. Pretty quickly, we'll put in place plans where at higher volumes, we get more overhead absorption and gross profits look attractive and more in line with the company gross profit margin. Short term, though, it's not quite there, but that's okay.
So what we like to do is, you know, as a company, and you know us, you know well. So let me give you an example, you know, first, you know, before getting into TMTT. Look at, you know, what we are doing with TAVR. 20 years later, we are still investing, you know, to expand indication. You know, we, we are not, you know, focusing, you know, every day, you know, every investment to compete on share. That's not who we are as a company. Yes, we defend our, you know, global leadership position, but we are trying, you know, to expand, you know, the market, the market potential. So at TCT this year, you know, we are bringing, you know, this study, you know, asymptomatic.
You know, you know, we just, you know, completed, you know, the moderate, you know, study, you know, with TAVR. So all of that, you know, to make, you know, TAVR, which is an amazing, you know, success story today, even more a success story in the next, you know, 10 years.
Mm-hmm.
So this is who we are as a company, thinking about the patient, shaping the market, to make sure that when we look it back, you know, we are very proud. In TMTT, we have the same vision. You know, from the beginning, you know, six, seven years ago, we said, "Look, you know, we have so many patients." They have, you know, basically, you know, almost, you know, no options. One technology was only available, was only, you know, capable of treating a very narrow, you know, patient population. And we said, "Let's bring a portfolio. Let's commit long term. Let's take some risk." And we reached, you know, that point already, you know, this year with EVOQUE, you know, being approved in addition of PASCAL in the U.S. and in Europe.
You know, soon after, you know, we are going to have, you know, a mitral replacement, you know, the first ever, you know, also, you know, sub-30 French transcatheter approved in U.S. and Europe in a couple of years, you know, from now. So having this portfolio will give us the opportunity, you know, to, you know, grow, shape, you know, the market. But it is not just, you know, with technology. Technology is the beginning. You need to have evidence. You need to work also on the proper, you know, payment coverage, reimbursement, so that, you know, everybody is, you know, seeing, you know, us, you know, as a company as having a positive impact: patient, payers, providers, and physicians. And this is, you know, truly, you know, how we do things. I like it. I love it.
This is our DNA, and I think, you know, we are going to do the same in TMTT.
Excellent. I'd love to follow up on the EVOQUE launch. As you gave some details and just some of the deliberate early days, making sure you have successful outcomes and probably kind of attacking those investigator sites that have some experience with the platform. But how should we think about the kind of move into full launch mode? And maybe if you can draw any parallels to the U.S. PASCAL mitral, TEER launch, and maybe in conjunction. Sorry to ask a multilayer question, but just the progress of the U.S. PASCAL launch and should EVOQUE carry the same path? Is that—it's basically that, just to my question.
No, no, thanks. They are both, you know, good questions. So let me start maybe with PASCAL. You know, we got an approval a little bit more than a year ago, and, you know, the, the launch is going well, you know, as planned. You know, we are, as always, you know, targeting, you know, patient outcome. We are training our, our team, hiring, training our team, training physicians, opening more sites, and, you know, we, we see a great activation in the U.S. You have seen, you know, our result in the last, you know, few quarters. You know, we are growing, you know, 60%-70% in TMTT, you know, way faster than the market. So it is a good testament about the success of our platform, you know, for patients.
For EVOQUE, you know, the goal is the same, except that it is exactly, you know, what we like to do: being first, shaping the market. So we were able to get, you know, NUB 1 in Germany. We are working with CMS, you know, to get an NCD, you know, for tricuspid, you know, hopefully, you know, before the end of the year. Training physicians to make sure, you know, we are going to build, you know, their practice. We are going to help them build their practice the same way we did it with TAVR. And that's, you know, in my mind, you know, a very inspiring, you know, mission. It is not just about selling a device.
It is building a practice, helping them to treat more patients, helping them, you know, to be very, you know, experienced with the technology. So that's, you know... So we, we feel good about that. You know, what, what you are going to see is the next many years, a progression. You know, more sites being opened, being trained, more patients being treated, us bringing, you know, the next gen, you know, Gen 2, Gen 3 EVOQUE, and more evidence. Do you want to add anything, Scott?
Good. Good description.
Excellent. And maybe to focus back on the US PASCAL launch, just any way you can quantify the stage of that effort? Any number of centers that are up and running relative to the number of centers that are doing mitral TEER procedures. And yeah, maybe just what inning we are in. Are you now in full launch mode in the US, and or do you need to have the CLASP IIF data and get that functional indication before you can really gain a share that you anticipate over the longer term?
It depends, you know, how, you know, you know, what you mean by, you know, full launch. We are in full launch-
Yeah
In our mind, and the full launch is going to last, you know, more quarters, you know, more years.
Sure.
You know, we are, you know, opening sites every week, every month. We are hiring more people, training more people on a regular basis. To be fair, if you look back at TAVR, we are still hiring people today. We are still training, you know, people on TAVR today. So it is never ending. You know, you know, we believe that with disease state like aortic stenosis, mitral, and tricuspid, there are so many patients that, it is a, it is a never-ending, you know, story. But we are going to be expanding for the many years to come. So the full launch mode is here, you know, to stay...
It's here
For a long time.
And then now, how about just on CLASP IIF and just that functional indication, is that, how important is that for, for PASCAL to, to capture the level share that your team thinks it deserves in, in the U.S.?
Oh, I think it is important. You know, the study is enrolling. You know, we have not yet, you know, gave a clear guidance about, you know, timing of approval, you know, all of that. You know, but the study is enrolling well, with good outcome, and more to come on this one.
Excellent. You know, you guys did put a $5 billion TAM target on the TMTT sectors combined, and you haven't broken out kind of individual contributions from tricuspid therapies versus mitral-
Mm.
Tric therapies. I don't expect you to do that here today, but feel free, free if you want to. But, but I think, I think you guys are still highly confident that that $5 billion TAM can be achieved, maybe just in a, maybe not in the same time frame, just because there has been some sluggishness in the mitral side, primarily due to COVID, and that, but that's recovering, and tricuspid therapies may not have come to market as soon as maybe we thought three or four years ago, and COVID may have had an impact on the enrollment of those, those studies as well. But any updates just on that $5 billion TAM target and, and maybe any breakdown between your expectations for-
Mm
For mitral and tricuspid therapies to what percentage they could account for that $5 billion?
So let me start with a couple of things, and then, Scott, you know, if you want to add anything. You know, one is we believe that the TMTT opportunity is way bigger than $5 billion. We are getting, you know, more and more confident that, you know, this, this, this one is going to be a multi-billion opportunity. Now, when you, when you look at, you know, the current, you know, opportunity today, about $1 billion, it, it, it is not going to be linear, correct? So it is tough, you know, to give you an exact, you know, date about, you know, when to what number. From $1 billion to, let's say, $10 billion or $8 billion, who knows, correct?
So, so it is why, you know, we wanted to be cautious here, and it is why, you know, last year, we didn't give you an exact, you know, a number with an exact year. But we are very confident, probably even more than before, given all of the positive catalysts we are having. PASCAL is doing very well. EVOQUE earlier than expected.
Mm-hmm
Going very well with great, you know, clinical outcome. We got an approval, you know, with our partner in the US. You know, this is, for sure, you know, a great sign. You know, we are having, you know, not only, you know, quality of life benefit, but also a trend to mortality and less hospitalization, which is, you know, very important. So having said that, you know, the mix, you know, between mitral and tricuspid also is an interesting one, you know, for us to give you an exact, you know, number. But we believe that both are going to be very large. They are probably going to grow at different pace. One is already established, and one is just at the beginning.
But, you know, that's, you know, the way to think about it. You know, large, and both are going to be large. You want to add anything?
Well, I'd just add that one of the reasons why we're confident about the size of this opportunity for transcatheter, mitral, and tricuspid patients is because the population of those patients is much bigger than the population of patients with aortic stenosis.
Mm-hmm.
So you talk about what's the value of those opportunities? It's significant. And you think about our $10 billion TAM forecast for TAVR by the end of this decade and put a multiple on that, that's the TMTT opportunity that we're excited about.
Thanks for that. One last question on TMTT. Just on the tricuspid therapy segment, just the breakdown between replacement and repair. I mean, do you expect that? Do you guys put your-moved your eggs kind of into the replacement basket, but you also have a shot on goal on the repair side as well with the PASCAL CLASP TR study enrolling. But I mean, how would you have investors think about the replacement versus repair opportunity in tricuspid?
Are there two different anatomical characteristic groups within the tricuspid repair-replacement market, where some will be candidates for repair, some replacement, is that 50/50, or do you think that most patients will be candidates for either one, and replacement or repair will be chosen by the operator and based on clinical evidence?
So this is a question that, you know, we will, we would love to know. You know, obviously, you know, for us, you know, we have both, so we believe in both. Both, you know, TR and a replacement will be important. They will treat different type of anatomy, different type of patients. What we have seen is, so PASCAL is used and, in Europe, you know, for now, you know, a few years. It is going very well. And it is, you know, you know, I, I believe, you know, one of the leading, you know, repair therapy here for tricuspid repair. And, what we see is that, you know, for EVOQUE, it is more, you know, reproducible. The, the procedure time is about 1 hour from case number 2 to case number 10 to case number 20.
So easier to use, reproducible, the procedure is more, you know, calm, you know, all of that. Compared to a TEER, you know, you can have, you know, a very easy procedures or plan for an easy one and have a very complex one and one that can last, you know, a couple of hours. So, you know, we see that, you know, it is tough to know. We believe that replacement is going to be probably, you know, slightly bigger, maybe bigger than TEER, but we will have to see.
Thank you. It seems you guys have confidence in that $10 billion TAVR TAM target as well by 2028. Really strong year in 2023 relative to expectations. I think end of the year, super strong. So it seems like TAVR volume trends are continuing. But maybe just talk about expectations for TAVR market growth relative to that 8%-10% TAVR guide. Should we be assuming that the 8%-10% guide for Edwards TAVR franchise is kind of on top of the market growth as assumption internally, or is there-
Roughly.
Roughly.
Yeah.
Okay.
And, look, there are going to be some market shifts, you know, point or two here and there, depending upon the geography. But roughly, we think the market's gonna continue to grow, and we're gonna continue to be the leader in it.
You guys have the EARLY TAVR data coming out of TCT. I think that trial completed last patient follow-up two-year follow-up at the end of 2023. But if we think about just the timing of submission, timing of the presentation, I mean, could we theoretically see an approval for the EARLY TAVR indication in 2024, or should we be thinking sometime in 2025?
Yeah, usually, we don't give, you know, an exact, you know, timing for approval, because obviously, you know, there are so many things, you know, at play here. But no, we don't expect an approval in 2024. You know, we, what we said is, you know, you are going to see the data at TCT, which is going to be, you know, very inspiring, you know, to be able to know that if treating patients before they get symptomatic is good or not. And I think that's, you know, that's it is going to be a very important, you know, study. You know, we are very excited about it. This is going to give plenty of learning, you know, to the community. Usually, what we have seen in the past is we see two inflection points.
The first one is when you release the data, and the second one is when you get, you know, the indication. So we don't know if it is going to happen or not, but, you know, the approval timing, we have not, you know, talked about it yet.
And just think about that asymptomatic opportunity. Excuse me. If you look at the paper published just on the rationale, the clinical trial design, the authors cite that, you know, one in every two severe aortic stenosis patients, when they're diagnosed, they're asymptomatic. And I think that's based on some epidemiologic work historically. I think with some of the surgical data, there's been some. I think the clinical team has been more diligent in potentially stressing some patients who are really trying to elicit any symptoms from their history.
I guess what I'm trying to get at is: Is there an assumption internally about kind of the percentage of severe aortic stenosis patients that are out there and that present asymptomatic, and how big of a patient opportunity increase should we be thinking about this asymptomatic indication adding to the TAVR patient opportunity as a whole?
I would say, we have, you know, plenty of assumptions, you know, internally, for sure, more than today, correct?
Sure.
I know you are looking for a number-
No-
And it is tough, you know, to give you a number. But, you know, let me step back on this, you know, eligible patient population for TAVR. I think, you know, I like, you know, to give you a big picture, you know, first here. First is today, you know, if you think about, you know, who are the patients who are eligible? Severe symptomatic. So it is already, you know, very narrow, and we know that many of these patients are undiagnosed and untreated. So for us and for TAVR, this is a huge opportunity for growth in the next, you know, many years. Then you are adding asymptomatic, could be as big, maybe a little bit, you know, smaller, but still, you know, a lot of additional, you know, patients. And then you have moderate, could be for sure, you know, bigger.
So when I look at all of the catalysts, you know, short term, midterm, and long-term in TAVR, we are very excited, and we are going to bring a ton of evidence, you know, to help, you know, physicians, you know, make decisions.
Do you think just from your sales force checks and just your team's discussions with some of your high-volume customers, that there is a bolus of asymptomatic patients that are waiting for this indication or just some pent-up demand? I know asymptomatic patients can convert to symptomatic over the course of a year, but we've heard just from some of our interventional cardiology consultants that there are, you know, a number of asymptomatic cases that not in the queue, that could move into the queue pretty quickly once an indication opens up. But I don't know if that's just anecdotal and or if you guys are sensing that through your channels.
It is tough to say. It is tough, you know, to draw a conclusion from one or two conversation because you meet with customers, you know, everybody has a different, you know, of opinion here. What we know for sure, like I said, is in the past, each time we presented a positive clinical study, we have seen an acceleration because it is bringing confidence. People have, you know, new data, there is new confidence, it is refreshing, you know, everybody, you know, mindset, you know, all of that. So we expect, you know, to see some of that, you know, after we present the data, you know, this one and the next one.
There's another angle on this as well, Josh, which is imagine if the EARLY TAVR trial reads out and suggests that it is favorable for the patients with asymptomatic severe aortic stenosis should be treated. Imagine what the implications are for the symptomatic severe patients-
Mm.
Who have not been treated. So the physicians who say, "It's not an- it's not urgent, you shouldn't get treated," imagine what happens if all of a sudden the asymptomatic data is positive. Similarly, for moderate, imagine if there's evidence that suggests that there should be earlier intervention, and that some patients with a moderate form of aortic stenosis should get their valve replaced. Boy, that tells you something about all this- all the severe symptomatic patients who are not getting treated. So there's another benefit. It's not just the pent-up potential bolus or backlog, it's everybody else who should be- is on indication and should be treated today who is not.
In that sense, I haven't thought about it that way, but that's, that's an interesting way to, to approach it. I agree. If, if we wanted to just think about the PROGRESS trial, the rapid enrollment signal, that's always a good signal in terms of the patient opportunity and interventional cardiologist interest in that indication. But there's two-year follow-up to the study, and there have been in structural heart studies, we've learned kind of, as we move through the process, that there's either been redesigns allowed by the FDA or just the initial inclusion of an interim analysis or an adaptive design or Bayesian statistical analysis.
Is anything to report on PROGRESS, or should investors think trial enrolled, wait for two-year follow-up, analyze the data, and then that typical course, or could we see an interim analysis that could come earlier?
Yeah, thanks for the question. Now, you should think about a traditional, you know, path here. So two years will bring us to early 2026. So most likely, you know, some kind of presentation, you know, late 2026.
Gotcha.
That's probably, you know, the way to think about it.
Appreciate it. Just wanna stick last couple minutes, sticking on this clinical data piece of the discussion, but one of your competitors is presenting data at ACC in a couple of weeks on the SMART trial-
Mm-hmm.
And, you know, focused on this thesis of small annulus patients benefiting from better hemodynamic outcomes acutely. So one, I guess... I mean, do you guys have a breakdown of just the small annulus segment within the TAVR market and whether or not, yeah, Edwards's share is different than some of the other size annulus? That may be hard, challenging data to capture, but that's one, just where Edwards sits, and then just what percentage of cases overall in the, maybe even in the STS literature, STS database, is in the small annulus segment?
No, it is an important segment, you know, for sure. You know, we believe our technology does well in any size, any patients. You know, we are by far, you know, the global leader. When we think about... Again, it is very interesting. You know, so we are thinking about this opportunity as how can we treat all the patients in need? And I know that some people are very much, you know, targeting share and look at valve size, you know, all of these kind of things. It is a good way to think about it, but it is not the way we think about it. We think about, you know, the market potential. How can we bring, you know, our technology, you know, to all of these patients?
So when we think about, you know, what's important to patients, mortality is important to patient, stroke is important to patient, PPM is important to patient, hemodynamic is important to patient. All of that together and all of this aspect, we, we like, you know, our clinical, our clinical results. You know, we are, you know, a leader, you know, not for a reason. And, and, and so we feel good about all of this. We feel good about our technology and our evidence.
Great. And maybe just a last question here on X4. The ALLIANCE trial has got back up and enrolling again. It seems like that pace has accelerated since the brief stoppage of that trial for the delivery system.
Yeah
Enhancement. But does X4 provide an enhancement to SAPIEN's potentially SAPIEN outcomes or hemodynamics in the small annulus segment? I mean, just thinking about patient-prosthesis mismatch and some of the findings that Dr. Herrmann has presented over the last- couple of years. But my understanding is X4 kinda helps the SAPIEN platform do better on the patient-prosthesis mismatch front, at least potentially.
I would say, you know, potentially.
Potentially.
We will have to wait, you know, and see, you know, the clinical results, you know, of this study.
Sure.
But what, what I have to say is, you know, before this one, we have our latest technology, Ultra RESILIA. All of the study that we presented so far were done with our previous technology, you know, SAPIEN 3, SAPIEN 3 Ultra. We just launched the Ultra RESILIA, which is, you know, if you think about it, what it is? It is the best valve design, the best, you know, TAVR valve design with the best tissue technology. And we are going to start, you know, showing some result with this latest technology. X4 is the one after. So we are going to continue innovating, but, you know, Ultra RESILIA is already our, the latest technology that nobody has seen yet in term of, you know, clinical outcome, and we are going to start reporting, you know, this year.
Excellent. I think we've gotta stop there. I know my question list was a little bit longer, but we'll have to catch up soon to fire some more at you. But thank you guys so much-
Josh, thank you so much for having us.
Really appreciate it.
Thank you.
Thank you.
Thank you, everyone.