Good morning, everyone. I'm David Erickson, Vice President of Investor Relations here at Edwards Lifesciences, and I'd like to welcome you to our 2018 Investor Conference. Before I get started, a few housekeeping items to go over. This morning, we issued a press release that summarizes the information that we'll be discussing today. A copy of this release is included with your handouts and it's also available on our website.
Today's conference is being webcast live and a replay of this event and copies of management slides will be available on our website as soon as possible after the conclusion. During the question and answer times, so that everyone in the room can hear as well as for the benefit of those persons on the webcast, if you have a question, please raise your hand to be acknowledged and then use the microphones that are built into the tables in front of you by pressing the button. If you're sitting on the sides of the room and so that we can get to as many people as possible during the Q and A times. During the conference today, Edwards' manager will be making a number of forward looking statements. These statements speak only as of today, and we do not undertake any obligation to update them after today.
More information about the risks associated with these forward looking statements can be found in the forward looking statement included in the bottom of today's press release and in documents filed with the SEC that are available on our website. Today's presentations include some figures identified as underlying and adjusted. When we use these items, we're referring to non GAAP measures. Otherwise, we're referring to GAAP figures and a reconciliation of non GAAP measures is included in your handouts and is also available on our website. Finally, in the interest of full disclosure, these are the relationships and financial arrangements pertaining to the clinicians that you will hear from today.
And with that, I will turn it over to Mike Mussullam, our Chairman and CEO. Mike?
Thank you, David. Thanks all for joining us today. It's our pleasure to get a chance to talk to you about Edwards Lifesciences and we appreciate your interest. So let me jump right into it. Globally, cardiovascular disease is the number one cause of death.
It's projected to remain that way. There are around overall, there's over 18,000,000 people around the world that die of cardiovascular disease last year. That's about 30% of the global population. What you may not know is that approximately 3 quarters of those are in low to mid income countries. In the U.
S, in fact, we've had cardiovascular disease on the run. It's been reducing year after year. That event that trend reversed a couple of years ago as a result of obesity, diabetes, etcetera. And now it's on the rise again. And let's talk about why this is important.
As we look ahead, our world is getting wealthier, healthier and they are living longer. There is an article in The Lancet that predicted 59 countries including China will have a life expectancy that's over 80 by 2,040. Why does that matter? As you know, cardiovascular disease is a progressive disease. It gets worse as you get older.
If you're 24 years old, your chance of cardiovascular disease, the odds are something like 20%. They go up to nearly twice that or about 40% by the time you're 45. Once you're over 80, the estimate is that about 90% of people over 80 have some form of cardiovascular disease. So, you can see why this is particularly relevant and it's very costly. This disease means that those folks that are over 80 are much more expensive to the system.
They are 3 times the cost of the average population. So, from our perspective, imagine a world where we could do something about structural heart patients to give them lives where they live longer, live better and at a higher quality of life based on these cost effective therapies, these procedures where you could go in and potentially have a procedure in an hour or 2 and recover very quickly and turn that on. We think it's a huge opportunity and it's the foundation in which we built much of our strategy. If you take a look at Edwards Life Sciences, we're we talk about our credo. We ask our employees to live this every day.
And it's at the center of what we do, innovating for people that are suffering from cardiovascular disease. It turns our team on. They get excited about that. It's very motivating for us because we are doing something that's really important in the world. It's not just the business.
It's almost the cause. We run this company with some aspirations in mind. Pretty straightforward, easy things to say, it's a little harder to do, Transform patient lives with breakthrough medical technologies. Accel is a trusted partner through distinguished quality and integrity an inclusive culture where all employees grow and thrive, a place where we give back to the community and want to give back more than we take, And finally, if we get that all right, deliver exceptional shareholder value. And these are the elevated goals that we organize ourselves and think about this a lot.
We're fortunate to be celebrating our 60th anniversary this year. So Edwards was founded right back here in 1958 with this idea when Albert Starr convinced Lowell Edwards to forget about an artificial heart, but to create a heart valve. And it was the 1st commercially available heart valve. And we've had a rich history ever since. We've gone through some ownership changes.
We've been at Ruth Life Sciences longer than any other stage of our past. And the thing that's most important is what we're doing today is much like the way the company was founded. This idea of partnerships between bright technical people, scientists and engineers working with physicians who have real problems, This has always been the magic. This is where the innovation has come. This is where our successes come and where we've been able to add value to the system.
So we're proud to be celebrating this at this time. The thing that I want to start talking to you about that's most important is our strategy. Our strategy is unchanged. We've been consistent about this. We call it our patient focused innovation strategy.
It's built on 3 pillars. One, focus, singular focus on structural heart disease and the critically ill, right? We block out the rest. Innovation, not little innovations, pioneer breakthrough innovations and back it up with evidence and then leadership, really willingness to go out front, be first, break the ground, yes, potentially make mistakes, but go first. I am going to go a little bit deeper into each of those.
Why does focus matter? We see many of our competitors go in a different direction. For us, it means that we can have a much deeper understanding of the disease itself, these patients and what the burden of this disease is. And because we understand it better, we feel like we can have unmatched expertise in terms of addressing it. And it allows us to be more agile and thoughtful and stay ahead of this really intimidating goal to go after it.
It also allows us as investors in the future to be very disciplined and prioritize our own investment, because we are focused in a single area and we don't have to spread it across a broad portfolio. Why does innovation matter? Well, we do innovation in a way that we really plan to be successful. Sometimes we act like a small company. We have dedicated teams who have nothing else to do but to drive for a particular innovation.
And we attract talent to that team that really have this elevating drive to want to innovate, to want to make a difference in the world. And we're able to attract incredible talent to be able to do exactly that and because these people want to drive fundamentally new approaches. And finally, we know that talking about innovating and just having a great idea is quite insufficient for really delivering value. It's about the commitment to deliver the evidence that would really change the system. If you want you really want to have an innovation that matters, guidelines need to change.
And you think about the commitment that's necessary, we're willing to do the hard work, be open about it and to drive the evidence. Finally, this idea of leadership is important to us. It's easier to go second, let somebody else make the mistakes, learn from that and come in as far more cost effective. But when you go first, you get a chance to build partnerships that are unparalleled, partnerships with really leading clinicians around the world that are driven to drive change in practice. It also puts you in the room with the regulators and the people that are responsible for payment to say, okay, what is the proper way to approach this?
What is the way to generate evidence that would support your premise? And so, allows you to build some trust. It also puts us in a position to go early on these trailblazing ideas. There is an investing thought that says, let's just wait, wait, who the winner is, see if their data shows up, see if they really change practice because we are so focused, we can go early. We feel like we have the ability to take more risk than others might take because we're very close to these innovations and have an opportunity to do that and again, one of the attributes of leadership.
So hopefully that makes sense to you. We don't spend a lot of time looking backwards. I'm going to do this on exactly one slide. We're very proud that this strategy has generated some results. So over 10 years now, the company has grown more than 10% on an underlying growth rate.
And this strategy doesn't just work in one region, but it works across the globe. Our compound annual growth rate in each of these regions is impressive and I expect to flip over to double digits in Japan in another year or 2. So, we are proud of that and we think that it gives us a good foundation for us to continue to do our work. Innovating in structural heart disease is really demanding. This is really hard.
Okay. We did not pick out something easy to do. It's fraught with risk. It's fraught with challenges. But we believe it's an ideal focus for our company.
Why? 1st, this disease burden is heavy and it's growing. You heard some of the statistics that I talked about, but deadly consequences, right? These diseases will kill you. They are prevalent globally and they are very expensive to ignore.
You say, well, why don't I just forget it? It's costly for any society to just ignore these. We think the time is now. It's interesting. There are sort of 2 questions on the structural heart disease.
One is, could you solve the technical challenges and the engineering challenges? We think that the technology is available today for us to do things that we never could have done 10 years ago, let alone even 5 years ago. The imaging technology, the what we're able to do on the tip of a catheter, we think it's remarkable. And we think the time is now from a technology perspective. But the other thing that's come along is that there's some groundbreaking studies that say, if you do it, will it make a difference in these patients' lives?
And there's more evidence than ever before, but yes, we can influence the lives of these patients. And it gives us the opportunity to drive the triple win and this is always our goal. If we can get improved outcomes, get patients to live longer with a higher quality of life and do it cost effectively, then what a great win for society and a great win for our company. And that's why we think it's an ideal place. We're unique and being a company that's solely focused on this.
Other companies might have 5% of their sales in this space. We're in it. This is 80% of what Edwards does and we're committed to stay with this over the long term because none of this changes with a short term effort. This takes years and even decades of energy to make this happen.
So, let me get a
little bit more granular for you on what you're going to hear. 2018, we think is going to be a year of delivering results. If I were to talk about some remarkable things, the fact that TAVR as a marketer, number of procedures that are growing in mid teens this far, It was introduced in Europe in 2007 and the U. S. At 2011 is pretty remarkable.
And we also got surprised by our critical care business who had quite an impressive growth year based on their innovations. It's been an important year for us in terms of clinical progress. Although we are proud of our financial results and glad we're able to grow so far this year, it's been 10% year to date and more than twice that on the bottom line. We've been aggressive investors in the future. A lot of clinical work, a lot of promise and we like what we've done to set ourselves up for the future.
And then one thing that's a little bit probably behind the curtain that we don't talk about very much is just what we've been able to do for our global supply chain, our capacity, building in redundancy. We've strengthened our global teams and brought in much more talent we've had in the past. So it's been a year in which we're going to exit stronger than when we entered the year. From a macro environment point of view, and I'm just looking at this from an Edwards perspective and trying to boil the ocean, the growing and aging population should never be minimized. It is the wind beneath our wings to a great extent and that's true globally.
The environment broadly is very focused on value. If you were there's not enough money to do everything that we need to do in healthcare, show us that it's really valuable, right? And that's true across the U. S. And across countries around the world.
Structural heart disease, which you never heard discussed even 10 years ago, but we probably just started discussing it the first time 5 years ago is a growth area now. You see many institutions that are focusing on we need to build a structural heart team largely because there's tools to actually do something about it. The innovation climate, I would say broadly is pretty good. I'd say reasonably receptive in the U. S, probably getting worse in Europe, emerging in Asia to some extent.
But if there's one thing we know is, it doesn't come easy. It takes commitment if you really want to be an innovator. And so that continues to be part of the climate. And finally, digital technology is everywhere. And it becomes important in terms of improving the operations of your company, but also just improving patient care.
And we're just at the front end of that and there's much more of that that's in our future. So that would be a high level summary, my view of the environment. We expect 2019 to be another really strong year of continued growth and investment. So we think it's going to be a strong year for the continued advancement of TAVR. We think that you're going to see a lot of continued progress on the clinical front in the trans catheter, mitral and tricuspid area.
It's going to be an exciting year. Our core businesses, we think are going to continue to extend their leadership and we're going to make focused investments. We're going to see more spending than ever before on clinical trials, on disease awareness. We're building a dedicated team to introduce transcatheter mitral and tricuspid therapies in Europe. And we're once again continuing our investments on capacity and on talent in the company.
So it will be a double digit year of growth. We're hopeful and we're going to be aggressive investors in R and D more than we ever have in our past and still deliver respectable earnings. You're going to hear from each of our businesses and I'll just stay at a very high level here. We expect TAVR to continue to grow for a long time. If you did a compound annual growth rate all the way out to 2024, we would say that that would be a double digit CAGR, right?
Pretty impressive for any technology, especially this one. If we look at Transcatheter Mitral, we are very pleased with our portfolio. We are on a steep learning curve, but we are quickly moving from first in being in the clinic to actually having some commercial sales. It's going to be another year of learning. We're so much smarter than we were a year ago.
We're going to be a lot smarter at the end of the year as well. And I'm very proud of our core businesses, both surgical, structural heart and critical care. These businesses that we're investing in, they're growing, they're prosperous and we expect them to extend their leadership during the course of the year. And it's going to be a year of pursuing big unmet needs. We expect a lot of progress, new platforms, clinical trials, early feasibility studies.
So yes, you can measure us based on what our sales grow or what our earnings grow, but some of the greatest value creation is actually going to occur within this area of innovations that we
are focused on.
So with that, think you all have the conference agenda in front of you. We've got a great lineup of speakers, including some outside speakers that we're really pleased to have join us today and I know you enjoy that. And I'll just close by saying that I'm really proud of our executive leadership team. We have a level of expertise, experience and talent and they're really dedicated and work well together and it makes Edwards able to do the things that we aspire to do. So with that, I am going to turn it over to Larry Wood to start us off to talk about transcatheter aortic valve replacement.
Larry?
Thanks, Mike.
Well, it's
always a pleasure to be able to talk about our transcatheter heart valve business, something I think we're all very proud of at Edwards and it's exciting to be able to give you guys an update. So Mike talked a little bit about this. We continue to see this business grow and it's continued to do extremely well. We still believe the fundamentals are there to continue to grow at a very robust rate. We are going to continue to work on expanding indication and I'll talk about a lot of this stuff later.
One of the biggest things though is the diagnosis rate and the under treatment of aortic stenosis is still a major, major problem. And I know you guys got a little bit of a flavor of that last night. I think you're going to hear more from Randy Martin after my talk, but it's a really big deal and we continue to invest heavily, not just in technology, but also in the trials and generating that evidence to continue to expand options for patients and to continue to improve those under treatment rates. So some of the highlights from 2018, if you look at our underlying sales growth, we expect it to be right about 12.5%. One of the things that I'm probably most proud of, and this goes through a lot of the history that we've had in THP is a lot of times you run these big clinical trials, but you do it in these elite centers with these elite physicians and then you roll it out to the masses and you can't duplicate those results.
You see a degradation in outcomes and that's something I think has been common across a lot of technologies, but especially the ones that are more revolutionary. And we haven't seen that in THB and I think it's really credit to our physicians, partners, but to the level of training that we've done and the evolution of the technology. We continue to see those outcomes being duplicated in all the real world registries, whether it's the TVT registry or whether it's the national registries that exist, we continue to see that. We have new technology coming. We have CENTERA, which is now CE marked and is rolling out in Europe.
We also have a U. S. Clinical trial, which we started. So we're excited about that. SAPIEN 3 Ultra is CE marked and the FDA review process is underway.
And then we have our early TAVR trial, which we're approaching 30% enrollment in that. And we're very excited about that as well because this could really help a lot of patients we believe who have the disease, but don't yet have symptoms and we think that the current guidelines may not be doing those patients a good service.
So, we
look at the global opportunity by 2024, we expect it to double in size from where we are today And we expect that to be driven by expanding the indications, increasing awareness and technology. So those are kind of our 3 pillars that we talk about that we think about and how we think how this market changes and grows over time. And that growth isn't going to be driven just by the U. S. The U.
S. Remains a big component of it. But as we start getting out into these later timeframes, we haven't even begun to scratch the surface in China yet. We have Japan, which has a large population that is elderly and undertreated. Europe, we have a lot of countries that the penetration rates are still pretty low and we have to believe that improves over time.
So it's really is a global story and that's one of the things that I think is provides a lot of opportunity for us. So just going a little bit deeper on indication expansion, this is where we run the trials, where we really try to create the evidence. The next big thing that we have is low risk, our low risk study. This is PARTNER 3. This data we expect to be presented at ACC in 2019.
We're very, very excited about it. And it's not just the core trial, it's also the all the registries that we have where obviously the aortic valve and the mitral valve and valve, but we're also running a bicuspid registry, which I think as we go into low risk patients becomes more important. But this is probably going to be the last big trial that's TAVR randomized against surgery. And if you look at the history from inoperable patients to high risk patients to intermediate risk patients and now low risk patients, there's never been the amount of evidence created around a technology that's been created around TAVR for all these different patient populations. So we expect the FDA approval to come late in 2019, but this is really going to be a game changer for patients.
Now, one
of the questions we always get asked is what's going to be the impact of that. And you can see here that if you look at the dotted line, our growth has been consistent and robust over time. But if you look at that on a quarter by quarter basis, we do see some peaks and valleys and that's pretty typical. Like if you look right now in 2018, we have the line going down and that's our Q3 seasonality that we typically see. If you go back and look at the chart, you'll kind of see every Q3 kind of dips, and that happens.
But if you look over the long haul, quarter over quarter, year over year, we continue to see this growth and we expect that to continue to happen, both with the release of the data and also with the expansion approval. What we saw with intermediate risk patients was when the data came out, it's not that patients that were being treated off label, it's just a lot patients fall in that gray area where people are trying to decide, they could probably go either way, but should I keep them with surgery, which is sort of more tried and true or should we try the newer therapy. And I think when the data came out in intermediate risk patients, those borderline patients started flowing into intermediate risk. And I think we could see a little bit of that with low risk, with the low risk approval as well. But I think the real change starts to happen once you get the label change because it ties to reimbursement.
I think people work really hard in the United States to stay on indication for that reason. The next big trial that we have and again we're approaching 30% enrollment on this is our early TAVR study. And this is where we're looking at patients who are asymptomatic. And so they haven't developed the symptoms, but don't misunderstand that. They have the disease.
They have severe aortic stenosis. And this is one of the things that drives us crazy and you probably heard me say it before, but we don't treat any other disease this way. We don't treat cancer this way. If a patient comes in and they have a mask on their lung, we don't say, well, you don't feel any pain yet, so why don't you come back when you feel some pain and then we'll talk about therapy options for you. And aortic stenosis is more deadly than most cancers.
So this idea of watchful waiting and waiting for symptoms to develop and waiting for people to suffer from fatigue or even fainting in some cases, we just don't fundamentally believe is a good thing for patients. So we're going to run this trial, it's a big trial, it's a landmark trial. It's one of the first things we've done that's not on guidelines. So it's been a little bit of a slow start getting it running, but I think we're in a pretty good place on it now. We expect to complete enrollment in 2020 and we think this could have real benefits for patients.
Now in the past, we've talked a lot about how we look at the aortic stenosis opportunity and how we look at the patients. And one of the things or 2 of the things that we focused on a lot were these risk scores, whether somebody is high risk, medium risk or low risk, and we've also looked at the split between symptomatic and asymptomatic. And so that's kind of the two lenses that we've looked at it. And I will say over the last decade plus, we've learned a lot about the historical way we've looked at it and frankly why a lot of it might be wrong. So when we started looking at risk, we looked at it really through what had always been the surgical lens, which is the STS risk score.
And it said that these patients are high risk, if their STS score was less than 4, if they were 4 to 8, they were intermediate risk and if they were less than 4, then they were low risk. And one of the first problems with that is the whole concept of risk is wrong. And what I mean by that is, it sends a wrong message to patients. Telling a patient they are low risk leaves the patient thinking, well, okay, I am low risk, this isn't a major problem. That's not true.
And I had a patient illustrate this for me and I apologize, I told this story before and I'm sorry if somebody some of you may have heard it. I had a patient call one time, this is the abbreviated version and he said, hey, I really want to get TAVR. He was about 70 years old and he said my doctor won't let me get it. And he went through all of his risk criteria and I said, yes, you're not eligible for low risk TAVR. And he said, my doctor said if I don't get my aortic valve replaced, I'm going to die.
And I said, that's absolutely true. If you do not get your aortic valve replaced, you're going to die. And he goes, how can I be going to die and I'm low risk? I'm like, well, you're high risk of dying, you're just low risk of dying from surgery, which is true. And he says, well, what the hell does that have to do with anything?
And I said, well, you don't know how we do this. And we started out this because we wanted to be responsible about how the technology went. We wanted to start in the patients that we believe would benefit the most with a technology that was brand new and that's how we started with inoperable patients. And then we just kind of run down this risk curve, but it doesn't make a lot of sense to patients and every patient with severe aortic stenosis is high risk of dying. So the other problem with it is the risk scores don't capture everything.
Things like hostile chest and renal failure and those things aren't properly represented in the risk score. And so there's just a lot of other factors here and what it really depends upon is looking at a lot of factors, not just a singular one. It's not just the STS risk score. It's the patient's characteristics. It's a lot of other factors that have to be applied into that.
And so it's not these bright lines between all these things. And so one of the best parts about getting the low risk approval is we can take this whole risk scoring thing off the table. And for patients now, it's no longer going to be about what their SPS score is, it's going to be a conversation with them. It's going to be looking at TAVR outcomes versus surgical outcomes. It's going to be looking at anatomical considerations.
There are some patients that aren't good TAVR candidates because of same anatomical consideration. There are some patients that aren't good surgical patients because of some anatomical consideration. And for those things, they can be directed to the therapy that's best for them. The patient's age, the patient's lifestyle, their own personal preferences, some patients that are elderly, they might be low risk for having surgery, but perhaps they're also a caregiver for their spouse who has some other disease or has some other problem. And the idea of having a rehabilitation time for a long period of time just doesn't fit their lifestyle.
And this is going to create the opportunity for shared decision making. I don't know how much Matt talked to you guys about that last night, but he's been a real leader in thinking about how we do shared decision making, how we engage patients and how we make them part of the treatment process to where they decide what's best for them and it's a much more personal decision than somebody just saying, well, you're low risk. So we think this is going to be a big change and it's going to take time for this to work its way through the medical system, but long term, patients will have the option to get what they believe is best for them based on having all of the information available and we think that's going to be a big deal. The second way that we looked at it was patients that had symptoms and patients who didn't have symptoms. And I will tell you when we started the early TAVR trial and we were having our executive committee meetings on this, I was like, this is simple.
Patients that have symptoms are on indication and people that don't have symptoms are off indication, really easy. And the doctors go, what do you mean by symptoms? I'm like, well, symptoms, how hard is this? And they go, well, if I put anybody on a treadmill long enough, they'll develop symptoms. And I know from personal experience, that's true.
So I was like, okay, well, how do you do this then if you put somebody on treadmill for a while, how do you decide whether the symptoms are because of their AS or because of something else? And they said, well, it's a judgment we call in the making it imperfect. And so it was like, well, so when we did the early TAVR trial, we had to standardize the ECHO protocol, we had to standardize the stress test, we had to standardize those stuff. But I was shocked at how much debate there was about something that just seems simple on the surface of what are symptoms. So we standardized it and I feel very good about the trial, but we started getting deeper and deeper in this and a lot of the things we started to learn were that, a lot of times patients show up and their symptoms are shortness of breath or chest discomfort or fatigue or sometimes other things.
And those symptoms just don't automatically ring a bell with a lot of clinicians to say aortic stenosis, let's trigger an echo. Sometimes they think it might be COPD or they think it might be something else. And so they don't necessarily associate those symptoms and they don't necessarily send them for an echo. And even when the patient has the echo, when they come back, people still don't necessarily connect all the dots and put everything together. So if you went through a patient's chart and you look through all of the factors, you might find there's actually a documented record that they actually have symptoms.
But unless somebody puts it together at the same time, unless the patient comes in when the doctor has the echo in front of them and they have the patient in front of them saying, I have these symptoms that somebody is associating, sometimes it just gets missed. And the other thing about it is because aortic stenosis is a disease of the aging, there's just we all do it. We say grandpa is struggling to get up the stairs and we say, well, he's 75 now or he's 80 now. He's just not going get around as well as he used to and we start making exceptions for him or we start making it easier for them or taking the elevator more or doing other things and they just live within their symptoms and we just write it off as aging and a lot of times it doesn't have anything to do with age, it has to do with their aortic valve and the fact that it's narrowing. So this whole bright line between symptoms and non symptoms is not anywhere near as bright as we thought.
And this again, the early capital will drive a lot of this, but I think a lot of the work that Doctor. Martin is going to share with you is also going to enlighten how we can improve a lot of these things. Increasing awareness, this probably all ties together. We have a lot of different activities that we do on this. Certainly, we have a lot of things that are targeted to patients and families.
We have a lot of information out on the Internet, but we try to make some really good educational packages. A lot of what we do here isn't branded. It doesn't have any of the we have the Edwards logo on it because we always want people to be able to trace where it came from, but we don't talk about SAPIEN 3, we don't talk about things, we just try to talk about all of the therapy options and a lot of it what we've tried to focus on is the disease itself and how can you detect it and what question you should ask your doctor. So we have a lot of that. We do a lot of stuff with the referral base and general cardiologist.
We have programs that we do on that or we try to reach out to them and we try to make sure that they are aware of the latest technology, the latest data. And what we find is in the referral community, a lot of the stuff is just dated. There is a lot of people in the referral community that think this is just really for inoperable patients and they don't know the latest data and they don't know, how far we have come in terms of stroke and mortality and some of the other complications that they heard about literally years ago. And then we also have local programs. We have the ability to go into local regions and work directly with centers that have big TAVR programs that have a lot of success and figure out how to help them, get the word out in their local regions.
So we try to do a lot of things to try to raise awareness. The other thing that we spend a lot of time on and we've got a lot better on, and again, we're not perfect at it. I wouldn't even say we're necessarily great at it. But we've gotten the ability to harness a lot of large databases where we've got a lot of more sophisticated on analytics. So we have the ability to drill down into any particular county and say, hey, what's the size of this county?
What's the population density? How many patients have had echoes? How many patients are diagnosed with aortic stenosis? And then what percentage of them get TAVR? What percentage of them get surgery?
And how does that compare to the national averages? Is this a county that maybe TAVR is underrepresented or undertreated? Is this a place that valve replacement is underrepresented or undertreated? Because this helps us target specific places for regional programs where we feel awareness may be lacking. We can also go look at underserved patient populations.
And I know Matt touched on some of this last night, but African Americans and Hispanics and women tend to be very underrepresented for valve replacement in general, but they also tend to be very underrepresented as it relates to TAVR. So this gives us the ability to drill deeper in that. And it actually led us to run a particular study. So we're running a registry inside of PARTNER 3 that's specifically intended to go look at underserved patients, that's specifically intended we're going to hospitals that serve minority communities primarily and we're going to try to see if we start TAVR programs there and maybe they don't meet all the requirements of the NCD and that's why we're doing it under an IDE, but we're seeing if we can add those programs, can we actually improve the under treatment of these populations that are so underrepresented. So, it's not a big registry, it's about 100 patients, but we think this could be very meaningful for those patient population.
So, the last thing is technology. We're very excited about our SAPIEN 3 Ultra System. Rolled this we've been rolling this out in Europe and we're very excited with how it's going so far. It's the Ultra valve, which has the new skirt on it. We have a new delivery system that's on balloon, really simplifies the procedure and takes steps out.
And we have our new seller sheet that we are very excited about. We still anticipate getting the FDA approval right about year end and we remain on track for that. So we think this is going to be a very important advancement on our SAPIEN three platform. CENTERA, we have CE Mark on this and we're rolling this out in Europe as well. We're very, very impressed the clinical beta on this.
We feel it's very differentiated from any of the other self expanding systems. We have very low PV leak rates. We have very low pacemaker rates, and it's a short valve. So we don't have to jail the coronaries, which I think is going to be a very important thing, especially on the long term as we get into lower risk patients. We start our U.
S. Trial with the inpatient enrollment, I believe in October. And so we're excited about getting this trial going. And an odd randomized trial, it's a registry. So we think that it can enroll pretty briskly as we get our sites up and running and we think this is going to be a great platform for us.
This is a program that's not big in terms of size, in terms of its necessarily financial opportunity, but boy, it sure is big when you think about the patients that are affected by this. For patients with congenital heart disease, specifically the pulmonic valve, we are able to use our transcatheter valve in a subset of those patients, but the problem is a lot of times their anatomy just can't accommodate a transcatheter heart valve. So, we actually worked closely with FDA on this and they identified what a huge need this was. And so we worked closely to come up with a stent that we believe you could put in first and then that will open up the opportunity for so many more patients to be able to be treated with transcatheter valve rather than have to have surgery. And again, so much of what we do in aortic stenosis is trying to get a person from where they are today to end of life.
That's not what we're trying to do with this patient population. Some of the patients that were treated there the first patient we treated with a pulmonic valve was I think 15 or 16 years old and he'd already had 4 open heart surgeries. So what we're really trying to do here is, we're not trying to get somebody to do their life, we're trying to say, hey, if you had to have 4 surgeries over this 15 year period of time, could we make that 1 or could we make that maybe 2 instead of 4 and reduce these and get them to adult options or even when these adult congenital patients come back, can we take a surgery out of their treatment course and give them other options. And so financially, it's not gigantic, but it's not terribly small either. But if you have a family member that has this and we can take a surgery out of their treatment course, it's a gigantic deal.
And we move that into a pivotal trial Q1 next year. So we have a lot of stuff. We have a lot of big milestones. We talked about Centerra and Ultra. We talked about our indication expansion.
I touched briefly on Alterra. But if you look at the other things we have over the really long term, we have a couple more platforms that we're deep in development on that are both revolutionary and evolutionary. We have our early TAVR trial that eventually will lead to an approval. So we think we have a lot of catalysts beyond the 2020. So we said that we think it doubles by 2024, it gets to $7,000,000,000 but that's really not going to be the end of the story.
We think emerging markets continues to play a role. We haven't even touched really on moderate AS. Should we be waiting till every patient gets to severe? Does that make a lot of sense because damage is done to the heart? Should we be treating these patients sooner?
Outside the U. S. Therapy awareness, I think we're still a little bit more in our infancy there. So I think this has a large opportunity and it has a long way to go. So as we look at 2019, we think our growth rate is going to be in the 11% to 15% range globally.
Our tailwinds, increasing awareness, we have our new products, which we're excited about and we have the low risk approval. The headwinds, we expect competition to increase. We expect new platforms to come in next year in the U. S. And global reimbursement pressures, I think are always something that we try to stay mindful of and those would be our tailwinds, but that's how we're looking at 2019 right now.
And then just again to kind of summarize, we believe our growth drivers are going to continue to be indication expansion, therapy awareness and the technology advancements we make. I think the biggest thing is the treatment of this deadly disease remains really low. And these patients when they don't get therapy, they have horrible quality of life and they die. And so we think that transcatheter valve has a real opportunity to really change that. We continue to invest in not just the technology, but also in the groundbreaking trials and we think those are going to be the things that really drive this over the long term.
So with that, I'll turn it over to Doctor. Martin. If you've ever seen him speak, it's always a treat. He's a fantastic speaker and a real expert in this field and we're just delighted to have
him here. Thanks, Larry. Good to be here. Thank you, sir. Good job.
So I'm going to take you in a little bit different direction. I'm going to talk about valves in general. Valves are good for you as long as they're good. They're bad for you when they're bad. But we're going to talk a little bit about artificial intelligence, a lot of hype about this.
It's everywhere and I'll try to take it through and take home some points that we're going to look at, does it have a role in quality, value, access and then most importantly, an outcome, because that's going to be really important. I do have disclosures. I am, they said I'm a paid consultant. I'm actually on the Speaker's Bureau and involved with CardioCare, but I also work with Medtronic and I also work with Abbott. And I am a recent, about a year and a half of Chief Medical Officer for 1 of the companies I'll be talking about.
This is me in 1953, okay, January of 1953, I was 10, okay. 1953 was when Watson and Crick had the double helix for the beginning of genetics. It's also an interesting year in that Robin Bush, George and Barbara's Bush daughter who died at age 3 in 1953 of leukemia, If she had been alive today, she'd been cured. So one of the breakthroughs in my lifetime has been childhood leukemias. The second breakthrough in my long lifetime has been TAVR, something I would have never envisioned.
So I'm 75 years old, Larry, I'm grandpa, if you look at that thing. I have paid my dues. I'm going to tell you stuff from my heart because I'm not selling you anything, okay? But I'm really experienced in this field. I went to graduated from medical school in 1969 from memory, did my training at Stanford, was on the faculty there.
At Stanford, I learned what excellence in cardiac surgery is all about, fell in love with cardiac surgery. If we hadn't had 2 children and a third on the way, I would have gone back and been a surgeon. And I've had the opportunity to know the top surgeons in the world as colleagues and I mean top because of the excellence in what they do. I am about a passion for excellence in what you do and that's really why I'm here that I agreed to come for Don and Mike and the company here because this is a company that has a passion for excellence. I then went on to be faculty at UVA, faculty at Mayo, went back to Emory from Rochester to thaw out, if you leave Rochester, Minnesota and was associate dean there.
But in all this trial and times, I was fortunate at Stanford to be in the ground for the the development of non invasive cardiology, really echo. There was no angioplasty, surgery was it. And I was also Dean of the specialists. I'm just giving you a background, not patting myself on the back. And then in a crazy thing about 25 years ago, I said, we got to do something to educate the consumers.
We got very interested in consumer education to the point that I spent 15 years as the Chief Medical Correspondent for Cox Communication, I was live on television 3 to 5 times a week, many opportunities to go to network TV, but I was busy in my practice and busy with what I was doing. But I learned a Mike and Don, if you'll forgive me. This is a slide that shows 2 things up there, the give a shit and the age, okay? So you already know where I am. I'm over here.
There's not a lot of things I give a shit about, okay? I don't care whether you like my talk or not. I'm going to educate you with my talk, okay? But I do have this passion for excellence. I don't care what you do in your life, but if you don't have a passion for excellence, you're not going to make a contribution.
People and relationships are most important. Your family, your friends, your coworkers, they're what's going to be there and then you got to give of yourself. Give of yourself, thanking the people that are in your office, cleaning up your office when you're in there at 9 o'clock at night, thanks to people who drive you to the Uber driver who all tried to kill me yesterday, I didn't thank you. But these are things that are very important, okay. Cardiovascular disease is a major killer.
Mike said that, I know that, I've lived it in my lifetime, 1 out of 3 deaths in the United States. I like to think of silos of cardiovascular disease, okay? And congenital is in here, but we have valve disease, heart failure, coronary artery disease, vascular disease and arrhythmias, okay. We're going to focus on these 2, but these 2 and the others affect arrhythmias and arrhythmias affect those. Valve disease causes heart failure, heart failure causes valve disease.
And there is no doubt that it's increasing dramatically because of the comorbidities of obesity, diabetes, as Mike mentioned and aging, okay. Tremendous advances in therapies in my lifetime. When I was at Stanford, Fogarty was there, in some way it was unbelievable. I had the opportunity through close associations professionally and personally with people like Tyrone But the advances that have come about with transcatheter therapy is something I would have never envisioned. And to Edward's credit and Cribier's and Marty Leon and all the people that helped bring this along, this is a dramatic development and it's going to continue for multiple reasons, but tremendous, tremendous development.
But as you saw last night, you've heard today, we're not even treating, we're not even diagnosing the tip of the iceberg. I see this because I see patients, I've been fortunate to have a lot of patients referred to me over the years and consistently from out of town, they send me their echos, docs call me and say, can you help me? We're missing mild and moderate disease like crazy. It's being under diagnosed and misdiagnosed. And so we have no idea of the spectrum, but a recent study out of the European Society of Cardiology said that in a population of patients over 65 in a primary care study, as much as 20% of them had mild aortic stenosis.
Mitral valve disease is a bigger burden and tricuspid valve disease, you're going to hear a little bit about today is the big, big elephant that's going to come through the room because if you have a bad right ventricle and a lot of TR, you're going to die really fast and horribly, okay? So these are big deals. So what are the key issues? We're not diagnosing mild and moderate disease. Patients are not getting referred for evaluation that is good and quality and that doesn't mean they're all going to have devices, but they're going to be monitored.
And we're not having quality and value in our imaging technology. And I've been arguing about this for a long time. And then we're overwhelmed with data. Jeff knows this. I'm sure Matt knows this.
There's data coming at us all the time. And we don't have that tied to really outcomes. Artificial intelligence will play a role in this. In the continuum of care, I want you to think about where you go from healthy living to detection, diagnosis, treatment and recovery. Let's talk about that.
So how do we diagnose valvular heart disease? You take a comprehensive history, you want to know the patient has symptoms or not, come back to that, you listen to their heart. You actually do a couple of things. It's basically inspection, palpitation, feeling their chest. I trained Matt in the 60s and when I was really taught the old style, then you listen to them, okay, and then you do other things along there.
But in the current times, we listen to patients' heart, then you hopefully they're going to get an echo. And echo is the gateway. I was in the ground floor of the development of echo. I've been through every technology and had been a leader in that because I was fascinated with it and I saw that it helped me help people. I'm not bragging on myself.
I spent untold hours doing this thing, okay? And then you diagnose that. But the problem is when you take symptoms and symptoms are critical in the guidelines, Larry is exactly right. Most people are not going to come in and tell you they're symptomatic, okay. But symptoms or no symptoms of the breakpoint in the guidelines for management of AS and MR, okay?
But you talk to patients, I'm fine. I don't have any symptoms because patients with AS and my wife had to add AS, come back to that in a minute, They just crank back their exertion level, okay? If they're short of breath and people with MR, they're not symptomatic. Nobody is symptomatic till they drop dead and then you are symptomatic, okay. And what I'm worried about for 20 years is that I'm not worried about the patient symptom, I'm worried about the heart.
Untreated AS causes fibrosis of the myocardium as my wife has because she was undiagnosed by excellent internists, okay. Then they have fibrosis, okay. Untreated mitral regurgitation causes the left ventricle dilate, its ejection fraction falls off, the left atrium gets big, you get atrial fibrillation, you develop pulmonary hypertension, you can treat that MR, but the heart's been damaged. So I worry about the heart. Then we listen to patients with the stethoscope.
I can tell you a zillion times about people not knowing how to listen. Matt talked about it well last night. The medical students and the residents today don't know how to listen to patients' heart. I grew up on that. A large study came out that only 54% of patients with severe MR were listened to by their doctors and it's worse with AS.
So auscultation and the technology you saw last night is going help. Then you refer patients for an echo. Now I was at the ground floor of echo. I've done or looked at over a 1000000 echoes. My little brain has got echo it is in it, okay.
I can look at any screen and in a nanosecond I see everything that's on that screen, I know what the diagnosis is, I know where the transducer is or should go. And if my little old brain can learn that stuff, then couldn't we be able to teach some artificial intelligence, some semblance of that. The big problem is it takes years to become experts, okay, and the machines have gotten bigger and there are clear inaccuracies, Matt pointed that out. There's a big study for the ACC that found that 25% of the echoes for mitral regurgitation were inadequate or inaccurate, okay. It's a higher percentage with AS.
I know because I was at the ground floor of the development of Doppler to diagnose AS with echo. So the echo evolution goes along. So we're reaching the miniaturization phase and we are going to have very small instruments. We have some today that they're going to be really small. And if you think about it, if Echos is the gateway to the diagnosis of heart disease, wouldn't it be nice if you had a little smart thing that I could take anybody and I could teach them how to get basic views and then the technology might be able to say, you've got this category of disease, you probably need to go see somebody, okay?
So you're picking up disease and it's going to happen. And in fact, it is the 5th pillar of our used to be physical diagnosis with very small machines coming. Catherine Otto, who's a dear friend and a very prominent person in the field said this that point of care ultrasound will improve the detection of the valve of your heart disease and machine learning is probably going to say automated interpretation. And so if we look at this continuum of care and I've got 2 patients, somebody with primary and somebody with secondary MR and then somebody with AS down there, that artificial intelligence coupled with miniaturization of equipment is going to help. So what are we talking about?
Take another 5 or 7 minutes and talk about this. These are the terms and there's an excellent article in Fortune by some years ago about this. But basically artificial intelligence is any technique that allows a computer to mimic what we do, not be as good as us, but do that. Machine learning is a subset where statistical techniques improve that process. And what we want to talk about is what's called deep learning.
And I'm trying to I was trying to think about deep learning. And when I started working with these guys about 3 years ago, I had no idea what this stuff was. At my age, I'd take any intelligence artificial or native, but that deep learning is a really interesting and it really came about over the last 10 years coming out of MIT and Berkeley and places like that. It's where algorithms are built like the neurons in our brain. We have layers of neurons in our brain that can give you image recognition, voice recognition, those sort of things.
And you have an outer layer and another layer and it gets smarter and smarter and smarter as it goes down. But the neat thing about deep learning is the more data you feed it, the smarter it gets. The more echoes I saw, the smarter I got over my lifetime. So it's really important. So it's these layers of neural networks that are called convoluted neural networks that really make you learn.
And so it's the ability for a child to learn what a dog looks like versus a wolf, although my beautiful Belgian Malinois here, who we saved 15 years ago from a horrible fate. My grandchildren knew who George was pretty fast when they were young. But deep machine learning means that you learn from the data using these deep layers and you get pretty smart. And the more you see, the better you get. You know it and basically Yahoo!
And Flickr and voice recognition and self driving cars, I agree with Mike, I could have used the self driving car yesterday instead of my Uber driver. Why has this come about? Tremendous advances in computer power. The NVIDIA chip is now more powerful than a mainframe was about 6 years ago, one little NVIDIA chip, okay? And then you got these advances in mathematical algorithmic building, building these neural networks and then you feed it lots of data, feed it 100,000, a 1000000 ECHO studies and it gets pretty hard of that.
How will machine learning change the diagnosis of valvular heart disease?
Sorry, I don't know that.
There goes Alexa. I do know that Alexa. I'm going to tell you. We're going to talk about it quickly on 2 areas that it may play it's going to play a role, I think, in ultrasound. It can play a big role, you saw that last night in auscultation and other areas, but acquisition of images and interpretation.
We have shown and there is people out there that you can take by teaching these algorithms what a standard view looks like and teaching taking somebody so they can acquire those views, you can help a novice, a total novice acquire images and then you can do interpretation. You saw the technology last night that we basically built an Echo GPS system in there, taught the system what certain views look like and then you can take a novice and they can learn how to get those views and it auto records it tells them to move on to the next view. And then so you've acquired standard views and in fact this is happening now with nurses and certified medical assistants and they're learning how to do this in a primary care setting and that's being done. And then the key thing is, can you interpret it? Ejection fraction, as Matt and Jeff know, is a very rough gold standard, but it is the gold standard for looking at ventricular function.
So our system can go in and acquire images that's needed and then auto calculate the EF. And in clinical trials, it's very, very accurate. So we're doing the same thing. It's going to happen with mitral regurgitation, primary and secondary and then rheumatic disease. And speaking of rheumatic disease, in the underserved populations in Asia and Africa and other places where rheumatic disease is big, we took this system out and could accurately diagnose with a novice, this was a school teacher doing echos, the state of rheumatic disease or not and doing the same thing with aortic stenosis.
So this is a continuum where artificial intelligence and deep learning is going to play a role, I think, along with miniaturization of ultrasound machines in making the diagnosis of valvular heart disease earlier, Will it come to consumers? It may well. I don't have I have no doubts about that. And the final key in this and then I'll stop is really this whole area of dealing with data, dealing with data and figuring out what's important in helping with outcomes, because I think that's really and there's some really neat stuff coming with that. So the key issues I told you about is we're not diagnosing disease, we're not referring patients appropriately, we don't have good quality physicians who have smart clinicians and physicians who have rational thoughts and things like that can guide a lot of this and will aid us in detecting patients earlier, aid us in managing patients earlier and aid us in improving outcomes.
And it's not going to be we're not going to get to the point where they're going to replace humans, but they are going to give you value and access and will lower cost in the systems, no doubt. Can you turn Alexa up? Can I have Alexa one more time? Will machine learning be a big innovation in healthcare?
This might answer your question. The largest mattress by area in the U. S. And Canada is a Grand King bed at 54.41 Square Feet. Did that answer your question?
No, but it was interesting. So let me just finish by saying that I do this is my wife on the 2nd day in the ICU. She had a SAVR done 2 years ago. Long story for not, as the surgeon who did her things and told her a day on the heart lung machine is a big day in your life. You can't believe what it was like for her and me because I've been in the OR all my life and I know everything that could go wrong.
But the long and short story of this is she wasn't diagnosed with AS. Nobody listened to her. The intern has finally said, well, I thought you'd listen to her. I said, sure, I'll go home every night with my stethoscope and say, honey, take off your nightgown. Let me listen to you and see what this stuff.
But she ended up getting an Edwards valve because it was my choice along with the surgeon to put an Edwards valve in. And why was that the choice? Because I knew the quality and excellence and passion for excellence that this company had their engineers and everything else. And I figured this was going to give her the best shot. So we're I'm here because of Edwards Technology, because I believe in them as a company.
Thank you very much.
Thanks. We are going to open it up for some Q and A. We will mostly focus it on what Larry and Randy had to say. So we'll get started. We're going to get a microphone.
If you just tap the microphone that's in front of
you, it should turn green.
There you go.
Can you hear me? Yes, perfect.
Okay. Two questions for me. I guess first for Larry. The big issue in 2018 obviously was TAVR guidance. I think raising guidance early part of the year, probably a decision maybe management may want back.
So if you think about 2019 CAFR guidance at 11% to 15%, can you just help us understand how risk adjusted in your mind is that guidance? You have if Boston, you're saying, comes mid year, if it comes earlier in the year or
low risk implications are not as material. I'm just trying
to understand how you thought about the 11% to 15% for 2019?
Well, I think that's why we try to give you guys a range and we make some assumptions in there in terms of when the competition is going to come. And obviously, if they came sooner, that'd be a headwind. If they came later, that'd be a tailwind. But I think we feel good about our 11% to 15% range. I think you know the things that are baked into that in terms of when the data going to come out on low risk and Yes.
What I might add is there's actually a section in Scott's presentation where it actually lists the assumptions that support that range. So,
if Boston comes early by 3 months, for example, you think, for example, that is something that's captured in the range?
Again, I think there's always a little bit of if you look at our range, there's always a little bit of room to move either way, the market will grow faster. We try to account for all of that. We feel overall good about our range. I mean, if they came tomorrow, could that impact stuff? But I mean, it's just hard to speculate about all that stuff.
We make our assumptions. We put together our range, and we think that's the best work we can do. And the second question is just
the last 24 hours, the big focus has been undertreated AS market opportunity. And this is sort of 2 camps that I'm hearing. There is the imaging piece of the equation. We're not actually finding the disease, the visual identification of the disease. And the second is, maybe we find it, maybe we don't, but the referring cardiologist perhaps is making a different or uninformed treatment decision.
I guess I wonder for Doctor. Martin and for you, Larry, what is the bigger pain point? Is the bigger problem the imaging piece, the echocardiography piece? Or is the bigger problem the referring cardiologists?
I think they're both. It's an excellent point. Patients are not being identified by the echo, but then even when they are the cardiologist and I'm talking about prominent, very knowledgeable, big name people are saying you're asymptomatic, we'll just see you next year. So they're not knowledgeable of the effects of that valve disease has on the myocardium. So I think it's 3 pronged and we've really got to aggressively go after educating the cardiologists and even the primary care physicians and we've got to aggressively go after educating the consumers about this stuff too.
So, but it's both and we're going to try to work on improving the quality of the diagnostic studies.
We spend a lot of time with patients and we follow their journey and there's 10 links in the chain, it only takes one link to break for a patient to get delayed or for patients to just get hung up. So I think all of those represent opportunities to improve and I think that's why the treatment rates are so low because it can fall off at any different point and I think we're really trying to focus on all of them.
Chris Pasquale, Guggenheim. Larry, you mentioned we're coming to the end of maybe the 1st year of TAVR where risk stratification was the primary determinant of therapy choice for AS. Age seems like it's going to be the next big one. You guys haven't specifically sort of spelled out what you can do to move the needle there or maybe better define the lower bound for age. Other than just letting these trials play out and following these patients for 10 plus years, are there other things that Edwards is contemplating to try and move the needle there?
Well, I think if we look at what happened with coronary disease, the long term durability of stents wasn't shown, but patients even at younger ages opted for stents because they wanted to lessen base. I keep looking at Randy, because I know he's going to call me out if I'm wrong, but patients opt for the less invasive procedure when it's available to them and when they're educated about it and when they know. And so, I'm 53, I guess, and if I needed to have my aortic valve replaced tomorrow and anatomically, I could get a TAVR, I'd get a TAVR and I'd say it's going to last however long it's going to last and I get another valve down the road and I would try to delay that major chest invasion as long as I possibly could, so that I can limit it to 1 in the course of my lifetime. So even if that meant TAVR, TAVR and then surgery when I was 75, heck, I take that all day long. So the whole problem with how we looked at the lens from surgery was it's just flipped on its head with TAVR.
And I think it's going to take time for that message to get out and it's going to take time for people to understand it. But I just I think when patients have the option and they have all the things in front of them, including what's known and what's unknown about durability and what the pros and cons of both the therapies are, I think history has just shown people take
the less invasive option when they're fully informed. You really want durability and outcomes. So the big argument, I'm sure as Jeff and Matt know is when a young patient needs an aortic valve done and the question of mechanical valves, which relegates you to a non TAVR backup and it relegates you to a lifetime of anticoagulation versus tissue valves. So it's clear that the tissue valves are clearly the way that most people want to go. And with the development, Larry is exactly right.
I've never had anybody come in and ask me, I'd like to have open heart surgery, Okay.
I mean,
it is a bitch, okay. I've been at it. I've seen it my whole life. It is a tough thing. It's wonderful, okay.
So the patients are going to elect for not limited approach TAVR type therapies, transcatheters. If there is a role because none of these valves are going to last forever. And so I think the designs that Edwards has done with making the TAVR valves be more expandable, so you could do valve in valve. And Larry is exactly right, if you can put off having to have surgery, but it's really about durability and then outcomes from those valves.
Yes. And just to add, you're on the key point here. This is we're seeing the old way drawn. The new way of the map is yet to be drawn and it's probably going to be informed to some extent by the data that we see next spring.
So, thanks. Bob Hopkins from Bank of America. So, two questions. I'll just throw them out. One for Doctor.
Martin, one for Larry. Larry, just quickly on the $7,000,000,000 number, can you just give us a sense for roughly what percentage of that is low risk versus sort of asymptomatic? What are you including in terms of those populations in that $7,000,000,000 number? And then for Doctor. Martin, just curious, where are we in your view in terms of addressing these problems that you're highlighting?
How long is it going to take to really move the needle in terms of fixing these roadblocks, if you will? Thank you.
Yes. I think one of the great advantages we've had is we try to segment this stuff out by high risk, low risk and intermediate risk. And I think historically, we've been wrong about the high I think it's fair to say the high risk or even the inoper group ended up being much larger than what we originally would have modeled or anticipated just looking at STS score. I think as we know low risk is we are very confident low risk is coming. Obviously, the trial has to be positive and whatnot, but we remain very confident in that trial.
I think what we look at now is we look at the overall treatment rates of patients with severe AF and how is that going to change over time and I think that's what's in how we see the market growing. So I don't think we get as deep in the percentage of who's high, who's medium, who's low because I think we can throw that to the side now and we can think about just overall treatment rates. Again, I said it earlier, but just to be really clear, the elimination of this risk criteria, the best part about it is, we can just throw that to the side and it can become a very, very different discussion for patients. And so I think that changes even how we model it and how
we think about it. The guidelines that are out are guidelines, okay, but they're very conservative guidelines and they've not paid attention to this thing of symptoms versus no symptoms or the heart being damaged. So we spent a lot of time educating our colleagues in the cardiology and primarily in the non invasive field, because they are the people sitting on these patients and see them. And I think we're also going to do a lot of push to educate the consumers and the primary care people. I think the structural and heart centers that are growing up that most places have, you've got to really hammer there.
So we go out at professional and go out at consumer is going to be very important. And we're going to make a big push with this with 2 institutions that I'm working with in the educational arena.
Rick Wise, it's Stifel. Mike, a question for you and then one for Larry and Doctor. Martin. I mean, this is the first time I feel like I'm hearing you talk about artificial intelligence. Maybe talk about how big a theme is this going to be going forward for investment for M and A?
I mean, is this a whole separate sort of undertaking that we're going to hear be hearing more about? And do you have the technology in house or do you have to go outside to get what you need?
Yes. So, thanks for the question. Yes, artificial intelligence is becoming very important and we do have some expertise within house. It's in pockets. So we actually use it right in our operations to improve our operations, improve our human resources within the critical care business that's used to do and we'll talk about it later to do some smart monitoring.
And we're going to start using it now and you can see it already coming in play here as we start talking about diagnosing disease and applying it to populations and properly moving people through. So I have to smile about it, because I understand it's even coming into the world of analyzing stocks that now using artificial intelligence can count the number of positive words versus negative words that are shared at an analyst meeting, facial recognition and tone. So I have to be careful. If I say crap, the score goes down, right?
There. So just to follow-up for Larry and Doctor. Martin. Is not optimally treated. Don Bobo was telling me a story about his mother-in-law not being optimally diagnosed.
So I'm ultimately excited as an analyst at the long term potential and the opportunity for growth and penetration and use of this technology. I'm also alternately horrified and frightened. And maybe, Larry, to get to the questions finally, I mean, if somebody were responsible for the long term and the short term, shouldn't we should I be should I leave more anxious about the any given short term period because I just don't understand how you can even with all the great things you're doing, how you can feel comfortable driving and predicting sort of short term results and the effects of all the whether it's DTC or technology or trials, is it greater now that short term risk?
Well, I don't know that I ever said comfort. I think if the question is, should I be more optimistic or should I have more anxiety, I think the answer that I always have is yes. The opportunity is gigantic. The under treatment rates are so high and the disease is so deadly that I don't know of anything that the fundamentals have been stronger than what we have on aortic stenosis in terms of beating up a deadly disease with the under treatment rates with I think a pretty spectacular technology to do it in such a less invasive way. So all those fundamentals are there.
But the task of changing the healthcare and referrals and all that stuff, I mean, it's not something you just throw a switch and everybody is smart. They talk about the number of years it takes for medical practice to change. When we first started TAVR, nobody coming through medical school had had any exposure to TAVR, so it was all new. Now you have people coming through that TAVR is not weird anymore, it's just part of what they grew up with. And so all these things will change it over time.
It's not going to be a light switch, it's not going to be radical step function where people were done yesterday and they're smart tomorrow. But the other thing that just to touch on briefly is, 2 years ago at a medical meeting, I never heard anybody use the phrase share decision making, not once. Doctors made decisions that's just how it was. You can't go to a medical meeting now and not have robust discussions as it relates to shared decision making and bringing the patient in the loop. And so I think all these things are going to change as the knowledge gets out there, but there's a ton of work that's got to
be done. Yes, I think it's Rod.
There we go. Okay. Technically challenged over here. Kristen Stewart at Barclays.
I was just wondering if
you could revisit Bob's questions on how you get comfortable or how you kind of size that $7,000,000,000 opportunity in terms of what do you see as the longer term growth rate of the patient population? And how do you think about the penetration of transcatheter valves versus surgical valves? And I'm sure you'll talk more about surgical valves later. But it seems today that we've probably pretty well penetrated the severe symptomatic kind of only aortic valve market. But just how do we think about the longer term growth from a patient's perspective demographic and penetration?
For as much as we've grown, there's still a whole bunch of 80 year olds who are getting surgery, like a bunch. On one hand, we're very proud of what's happened. On the other hand, if I go back and I look at our patient registry and I look at the ages of patients that are still getting surgery, I feel like we've we've failed a lot of patients, frankly. It's I think there's so much left to go penetrate into. And we talked about the surgical side of it.
I know all these elderly patients are getting surgery that I just have to believe a lot of them would have been better served by getting TAVR, but that misses the bigger point, which is we're still only treating 10%, 15%, pick a number, we're only treating that much of the group of the population that actually has the disease. So I think what we again with the risk scores kind of getting into more in the rear view mirror, I think what we're trying to do is look at how much we can change the overall penetration rate in valvular disease and then what do we think the split of that is between TAVR and between surgery and we look at concomitant procedures and all those things and say an anatomical considerations and that's sort of how we model it out. But again, the opportunity and the fundamentals are all there. Yes.
I would just add, I don't think we're close to say we penetrated anything so far. I mean, we're humbled by how hard it is to change the practice of medicine. We've done groundbreaking trials. The guidelines have changed and we're kind of scratching the surface. So we still have a lot of work
to do. Most of growing to the $7,000,000,000 is driven by patient numbers, not necessarily how much of that seems like price erosion or anything like that?
Yes. We have modest price erosion.
Thank you.
Yes, Larry.
Larry,
it was nice to see you stated that you expect PARTNER 3 to be favorable in the press release. So, how do you define favorable results? Do you know the top line results today? And lastly, I saw reimbursement pressure in TAVR twice in the slide deck. Can you talk about some of
trial is. We haven't unblinded the data yet. So I don't know what the trial is. We haven't unblinded the data yet. So none of our position to know what the data says.
Nobody right now on the planet knows what the data says. So that part we don't know. My basis for being optimistic, frankly, as I go back and look at our intermediate risk data, and if you look at our intermediate risk data, we had 30 day mortality was 1% in a population, I think the STS risk score was, I want to say, 5.3%. So given that, I feel like our intermediate results would have compared pretty well to low risk surgery. So that's kind of where I say, I feel like we're going to do pretty well.
Now, the trial itself, we're in the best surgical programs in the country. So, we expect the surgical outcomes to be stellar and we powered and designed this trial for non inferiority surgery and so that's our expectation. But we're pleased with how TAVR is done and I think you guys have you're probably as deep on the data as more than most of my doctors. So I think you can make your own judgments on that. In terms of reimbursement pressure, I think we've been pretty open about it in Europe.
There's always reimbursement pressures. I think those are more of an OUS issue to some degree than they are a U. S. Issue. I think our U.
S. Issue is really we're a victim a little bit of our of the success of the therapy. As length of stay has fallen and all those things have happened, the CMS captures actual resource usage and so we've actually seen reimbursement going down. But from a societal standpoint, TAVR is now actually cheaper than surgery, which has got to be which is a huge win that we can offer this therapy and we can actually do it more cost effectively and a recent publication just came out on that from the PARTNER II study that was really impressive. So if you haven't seen that, I'd definitely pull that and go deep on it.
But we just remain very encouraged that TAVR is a great value, but there's always going to be reimbursement pressure.
Bruce Nadell from SunTrust. I have two questions on the shift in your thinking on the lens that you apply to symptomatic versus asymptomatic. So it looks like your penetration assumption went from 20% to 10%. It looks like you just say you really aren't truly asymptomatic patients. So firstly, are you seeing that in your roll in of early TAVR, so that there's a lot more failures when you actually interrogate a person carefully?
And secondly, how is it going to play in terms of market development? Like what will it take to kind of change the paradigm of like how people are judged asymptomatic? And I guess that's it.
Yes. Well, I
mean, just really transparently, I think what our belief system is, is that patients should be judged on the disease because that's definitive and quantitative rather than this Olympic figure skating way of doing it of looking at symptoms. I'm not going to get into deepened what we've learned so far from early TAVR. Certainly, when you stress test all the patients, there's people that show up with symptoms. I think anecdotally, one story I heard from a patient experience was a patient who had been confirmed by stress test to be asymptomatic ended up getting randomized to TAVR and we came back for his follow-up, but he says, God, I can't believe how much better I feel. So asymptomatic doesn't necessarily mean that you felt great.
So this is all the things we're going to learn and this is why we have to do this rigorous trial where we collect the quality of life data and we collect all this other information so that we can do that. Again, I feel just personally that we are on the right side of this that we can improve patients' quality of life and we can improve their long term outcomes. We got to do the trial. We got to do the evidence. And Regnava, if it was negative, you wouldn't want somebody to get their valve replaced sooner than they needed to.
But I just feel like and I'd be interested in Doctor. Martin's thoughts, but waiting until someone actually feels so bad from their disease that they go for therapy, you've done damage to their heart that cannot be a good thing for them. So, I think when the trial comes out, I think it's going to lead to a lot of discussion, a lot of interest. A lot of those things that happened just by doing the research and I think that, that again over time and this is more of a long term play is going to change the way we think about and treat the disease.
Two quick points. One is that the TAVR has back end educated the average cardiologist and even the PCPs that saying there's therapy out there that you don't have to get your chest ripped open. And so people are beginning to percolate up and improve and they're just thinking about it. The second thing is that aortic valve disease is robust, but mitral valve disease is gigantic. You're going to hear from Jeff later this morning about this.
It is gigantic and therapies that to Edward's credit, they've got a stable therapies because it is complex and then you add tricuspid valve in there. So this whole field of detection of valve disease before the patient develops symptoms, which means that their heart's damage is going to grow immensely over the next few years. And part of what we're trying to do with the artificial intelligence is figure out a way to get something simple in the hands of the common denominator and that might be a nurse, it might be a certified medical assistant. And so I think you're going to see growth in all of
these areas. So I'm mindful of the clock. Raj, one short question and short answer guys.
Sure. Maybe just Larry, one of the things that obviously been talked a lot about is this MCAC panel and access, right. So when you think about low risk approval next year, how much of a impediment is that going to be in a sense to maybe patients getting surgery in centers that currently don't offer TAVR and having to change the referral patterns those sort
of things, that just becomes much more broadly available next year?
Yes. Again, I think our education right now has to be limited to the indications that we have. So, all of our promotional materials and all the education marketing we do have to say, if you're at elevated risk and all these sorts of things, which leaves patients a little bit confused. I think once we get to a point where we say, hey, any patient that has severe aortic stenosis and has symptoms is now eligible for a less invasive therapy, I think that's going to help us educate a lot of these people. Clearly, patients that end up in a surgical only program and have aortic stenosis, especially if they're low risk, it's going to be a challenge to get them referred out.
And I think that's why we have to ensure that we are engaging the caregivers and the patients themselves so that they are aware of the therapy, because I don't think just there is going to be a natural inclination for Baskin Robbins to refer patients to frozen yogurt. So, I think we're going to have to figure out how
we do that. Thanks, Saul. We're going to have a chance for more questions later. And at this point, thank you very much, Larry and Randy. I'd like to before we say that surgery doesn't have a bright future, we would like to actually point to an alternative view of that.
And so, Dubeen Chopra, if you are willing to line up and have a quick presentation. Thank you.
Thanks so much, Mike. It's a real pleasure to talk to you all today about the Edwards surgical structural heart business. As many of you know, our business was formerly known as Heart Valve Therapies or HBT and we recently actually just changed your name to Surgical Structural Heart to really reflect our expanded vision to advance and transform cardiac surgery. And this aligns really well with the overall Edwards Structural Heart strategy. And I think this new vision for us really allows us to continue to invest in our core therapies for surgical valve replacement and repair.
It really allows us to continue to strengthen our relationship with the cardiac surgeons with new tools and new techniques. And I think it really allows us to continue to examine and create strategy and kind of adjacent surgical structural heart areas. Over the course of this presentation, I'll talk a little bit about the multiple growth opportunities that still exist in surgical structural heart. I'll talk a little bit about how we're going to extend our leadership position as the partner of choice with cardiac surgeons. And I'll give you an update kind of on our pipeline of leading innovations to continue to help patients.
So first talking a little bit about the multiple growth opportunities, we've talked a lot already last night and this morning about if you look at the under treatment, under diagnosis of valves of heart disease, the continued work on therapy awareness and disease awareness is actually going to raise all boats and actually help surgical valve replacement as well. Additionally, we think actually in select patient groups, surgical aortic valve replacement will continue to grow and this includes a lot of the younger, more active patients. Complex patients where they might need multiple different procedures at the same time, as well as disease states like aortic insufficiency. And these are disease states in areas of patients that we think will continue to grow the overall surgical market. Finally with Next, we think there's a continued opportunity to treat patients more comprehensively with new adjacent therapies.
And finally, we think there's actually a huge opportunity in emerging markets, especially emerging markets where there's a very high prevalence of mechanical valve usage, we think there's a great opportunity to continue to convert patients to the Edwards Pericardial solution. Moving a little bit to our kind of leadership position, as you heard from Mike this morning, 60 years ago, our company was founded on the relationship between an engineer and a cardiac surgeon working together. And throughout our history, that kind of collaboration between those engineers, the innovators and our cardiac surgeons has created a multitude of different great technologies that really help patients. And there's our strategy today and our strategy going forward that we'll actually continue to have that close collaboration with the cardiac surgeon, really continue to deliver future innovation and really transform patient care. Looking a little bit of our pipeline, we've continued to make large R and D investments in our pipeline.
In the last few years, this has led to new amazing technologies like our Intuity and our Inspirit aortic valve. And in the future, it will lead to a continued cadence of kind of new products coming out each year that we really think have an opportunity to not only continue to grow in our core market, but provide new techniques and solutions for cardiac surgeons. The first product I actually want to talk a little bit about is our Inspiris product. This is our flagship surgical aortic valve, which was launched earlier this year in most of the major markets. Some of the key features of this product is that it has our newest resilient tissue technology, which really thinks extends durability as well as has this VFIT technology, which is really designed for future valve and valve procedures, help aligns the patients so if they have to have a TAVR in the future it's very amenable to using that product.
For us we've seen that as this product has come to the marketplace we've seen leading physicians and leading institutions start to adopt this across the U. S, across Europe, across Japan And for us, we've seen that its usage is coming in a variety of different ways. There are some physicians and patients who are using it instead of existing Edwards products. There are actually some physicians and patients who are using instead of existing competitive tissue product. But I think most importantly, we're starting to see its usage now instead of existing potential mechanical valves.
For instance, the very first patient treated commercially in America was a 42 year old woman from West Virginia, a medical assistant, a mother of 3. She had a very active lifestyle and for her the blood thinners that are required with the use of mechanical valve were just incompatible with her active lifestyle. So for her and her physician, the INSPIRIS valve made a lot of sense and she was the 1st commercial implant and had a great operation and is doing very well and is continuing her very active lifestyle today. And so for us that's a great example of the INSPIRIS valve and what we expect to see from it with its extended durability. INSPIRIT is kind of the first of this class that we're calling resilient surgical valves and these are valves that are kind of built off this resilient tissue.
I'll talk in a couple more minutes about our next product which is to connect the aortic valve conduit and kind of its opportunity. And in the future we're already working a pipeline of our next generation mitral valve which will also have the Resilia tissue. And for us overall, Resilia really represents an opportunity to extend durability on the tissue, allowing it to last for a longer period of time by really enhancing anti calcification properties. Talking a little bit about Connect, in 2019 we expect to launch this product in both the U. S.
And Europe. And what this product is doing is treating now a subsection of more complex aortic valve replacement product of patients. These are patients who have to replace both the aortic valve as well as the aortic root. And today patients are physicians are pulling multiple products off the shelf and piecing things together to help treat these more complex patients at the largest kind of cardiac surgeon centers. What this provides now is ready to implant off the shelf tissue valve conduit that can really simplify the solution and offer great value to the patient and to the physician to make the procedure a lot easier and a lot safer.
We think there approximately today in the U. S. And Europe, for instance, maybe about 11,000 of these types of procedures happening each year, which we think that this product would be very eligible for. After Connect, another technology I want to talk to you a little bit about is our Harpoon technology. As people may remember, this is a product that's a beating heart mitral valve repair product for degenerative mitral regurgitation.
So this to us is a very exciting product that instead of open mitral surgery you now have a much less invasive approach with a much faster recovery. And for us, if you look at all the open mitral valve repairs that happen each year today that are already happening for open surgeries, we think maybe in the major markets there's about 30,000 patients for whom this device could make anatomical and clinical sense for. So that's kind of our starting opportunity for today's patients who are already getting open mitral valve repair. As an update for you all, I think you remember in the late spring we had CE Mark this product and we were looking forward to commercially launching this in Europe. We at that time had some limited cases learned from the CE Mark study of limited cases of synthetic cord rupture.
To that point we put things on hold, we put together a very extensive root cause analysis team, getting the best experts we can in the world to help us out here to understand what was going on. We went through a very rigorous kind of root cause analysis and actually learned from this that these synthetic cord ruptures were due to undue tension being put on the cord, which generally occurred from excessive annular reduction or where the physician was trying to reduce reducing the mitral annulus diameter by pulling extra hard on the cord. And so with learning this, we also then figured out that this actually can be mitigated away with the proper technique and training. Physicians were doing a technique that the device was never intended for nor tested for. And so that point we think that technique can change can stop this from occurring and we don't need to do any kind of design changes to the device.
So we've gained agreement already with our notified body that we don't need another pre market trial in Europe and we're now working with them very carefully in the reintroduction as well as the design of an appropriate post market clinical study. And we anticipate treating patients with this device in Europe by mid year 2019.
So if you
look at the overall surgical structural heart business, next year we're expecting between 1% and 3% growth. Obviously one of our top tailwinds to help us would be the continued adoption of Inspirce, our new flagship aortic valve. And for this it continues to grow in various markets around the world and I think upside on that is probably our best tailwind on the global basis. In terms of on the surgical side, obviously the biggest headwind is really going to be where does how does TAVR continue to expand. As Larry talked about, we're obviously bringing out the low risk data next year.
And then late year, we'll have a new indication expansion in the U. S. But that new data and just the expanded use of TAVR presents a headwind that could deter our kind of growth overall. So in summary, for the surgical structural heart business, we think there's still a lot of growth opportunities that exist in surgery. Surgery is very alive and well.
For ourselves, we were built upon being the partner of choice for the cardiac surgeons and their team and we're going to continue to partner with the cardiac surgeon and new innovation. And finally, we really think with our pipeline of innovations, we can really transform patients' lives by advancing surgical structural heart. So that's all I've got for you today. But I do think we have a couple of minutes for questions before we head into the break. So I'm happy to take any questions now.
One of the things as we get into low risk is the idea of further penetration into the surgical
now with the low risk TAVR approval?
And then when you think about your business, how do you model, those who do LetITGO and the impact on a surgical valve business. If you look at
our current business today, the surgical valve business, there are obviously different types of patients from isolated AVRs to more complex patients with other disease areas, aortic insufficiency that I talked about as well. So for us, obviously, we think there's growth opportunities in different disease states that may not different aortic valve disease that may not be TAVR applicable, like complex disease where you have to do 2 mitral valve replacements at the same time. So we do see continued growth there as well happening. So for that, that kind of helps to flex kind of the isolated ABR potential reduction that would happen with low risk. Yes, I think we think there is a the heart teams here, there's always a community there can be continued opportunity for heart teams to work together with the surgeons.
I think with the appropriate data that we're putting together, working with our partners will really help make the right decision in a shared decision making process. And I think that kind of opportunity is what's going to help the overall patient care for us is that kind of offer. So we do think surgeons will look at the data very carefully, talk about it, examine it and work with their heart teams to make the best decision for patients.
This is Josh Jennings from Cowen. I was intrigued by the Connect download and just wanted to hear your thoughts on the development of that product and is there anything in the TAVR first strategy over the long term as you get into low risk for TAVR that where you could potentially do TAVR in a younger patient than do SAVR and then have valve and valve down the line giving a patient potentially 30 plus years of only with only 1 sternotomy? Yes. So, I
have both those questions. First one on Connect, obviously, this is a product we've had in development for a couple of years. These dental products are really complex and we're excited now to help make easier solution, reduce the operating time with this rigid implant. So for us it's a great hopefully improvement for this subsection of kind of patients. Related to the care continuum of patients, I think our goal is if you look at surgery, how do we not burn any options, right?
So whether you have TAVR first or surgical first and you have a TAVR after and there's different obviously protocols. Larry went through one up there. But our goal especially with INSPIRIS is to help keep the great. It's no problem to come back in with a TAVR, have that valve expand as hopefully some of you saw last night at our booth and really be ready to take a TAVR on. So that's how we kind of thinking about it.
Thanks. And as a follow-up on just durability, I think it's an important aspect of your business, how it all plays out is PBT. But if you think about your customer base and you think about new bioprosthetic surgical valves being introduced in the market with virtually no durability data. Can you just give us an update in terms of how the cardiac surgeon community is thinking about durability of these latest generation bioprosthetic surgical valves versus TAVR which we now have 5 year data on at least? Thanks a lot.
So our newest tissues like Resiliant for instance is already approaching the 5 year mark of follow-up. The new is a relative term. And I think for us, we've got really strong preclinical animal data that kind of helps show the durability. So the adoption curve
for us
it's going well from what we expect where people are starting to use the new product, but understanding the community wants to continue to see that robust data which we are continuing to So each year is the expected adoption to continue to accelerate. And I think we're out of questions right now and out of time, but I'm happy to talk to people to break as well. Yes.
So we'll take a break right now and reconvene at 9:55. 9:55. Thank you. Everyone, please take your seats. We'll begin
Okay, group, please take your seats. We are restarting the meeting. It's my pleasure at this point to introduce our next speaker, Doctor. Jeff Popman. He is a true global leader in cardiology.
We are so fortunate to have him as a partner on our mitral programs and he is going to help kick off this section of the agenda where we talk about transcatheter and mitral and tricuspid therapies. Jeff, thanks so much for being with us today.
Thank you. Hi, well, good morning, everybody. It's good to see a lot of friends and be able to catch them. I really always enjoy these sessions because I always learn so much and the talks this morning was spectacular in the morning. I want to do something different for the next 20 minutes though.
I want to now put you in a clinical hat and that clinical hat is being a structural interventionalist or a heart surgeon at institution and trying to sort out what the next few years are going to be and why this is such a complex area for us now in our academic centers.
I'm going to do 6 topics very, very quickly, but I'm
going to start out with this unmet clinical challenge that we have in patients suffering from mitral regurgitation and it truly is an unmet challenge. Randy showed you some of this earlier. I think it's just important to note that on the lower curve are the aortics as one ages. On the higher curves are the tricuspid and mitral. And in fact, the prevalence of mitral and tricuspid disease dwarfs the prevalence of aortic valve disease in the elderly population, so much so that we know that it's about 10% of patients over the age of 75 have some form of valvular heart disease more common with tricuspid and with mitral.
But I think the fundamental question for us as clinicians is we not we need to understand this under penetration issue a little bit better. And so the question I'm going to ask is how often are symptomatic hospitalized heart failure patients with mitronchricuspid valve regurgitation actually treated with surgical or transcatheter therapies. And I have to turn and thank Bruce Nadell, who a few years ago, this is out of the Nadell Archives from a report that he published a while back. I think it's still very, very important information, information that we in fact reconfirmed in our analysis of the CMS databases that Bobby Yeh is doing at the Smith Center. And now let's take, for example, in the mitral arena, all patients who are admitted with heart failure, a bunch of right, 4,600,000.
And then those that actually have mitral valve disease about 1,000,000 and that intersection between heart failure admissions and mitral valve disease is about a half 1000000 patients a year, that's a bunch. These are out of the national inpatient sample, which is a pretty good representation of what goes on in the United States. And then taking the number of patients that had any sort of transcatheter surgical treatment, the number comes up to about 50,000. So that means of hospitalized patients with heart failure who have concomitant ICD-nine coded and documented mitral valve disease, only 10% of them are actually getting some sort of transcatheter surgical treatment. And the next thing that Bruce taught us was the tricuspids, not much different, 4.6% heart failure diagnosed 4,600,000 heart failure diagnosis, about 500,000 patients with tricuspid disease and that means that the intersection for that was about 260,000 patients or so.
The number of tricuspid interventions, much, much lower because surgery is such an abysmal option for tricuspid valve disease 5% of the penetrated population. So, even conservatively, of those patients who are symptomatic, who come to the hospital with heart failure and diagnose heart disease, we're only treating about 5% to 10% with some sort of definitive therapy. So, thanks for that, Bruce. And the last component of this is that who are these patients? Well, they're elderly.
About half of them are between 60 85 and about a third of them are over 84 years of age. And that's really not a surgical area. It's really going to think about how we're going to grow in transcatheter therapy. So, it's hard to put numbers around this, but let's just say a few things. It's going to grow But what we've underappreciated is the mortality impact of mild, moderate and most importantly severe mitral regurgitation.
5 year survival rates of 40% 5 years of 40% in patients with severe mitral regurgitation. So, it's prevalent, it's undertreated and it's got a tremendous impact upon the mortality of patients. Well, let's just kind of focus about what we should be doing. We talk about repair and placement. Bernard is going have a lot of good information about what that means exactly.
And we know from the cardiac surgery trial network study in patients who underwent repair versus replacement for ischemic mitral regurgitation that the left ventricular modeling of survival was the same in both different groups. Now, when you have degenerative mitral regurgitation from a prolapse, you want to go to a heart surgeon that does repair and Randy was just telling me about a case of Barlow's disease, very complex, got a repair. That's actually the gold standard for patients with degenerative disease. But across the country, in patients who undergo who have isolated mitral valve surgery, including both patients with degenerative and functional disease, it's very interesting. In red, a replacement and in green is repair.
Lower risk patients more often have repair. But as one moves to the higher risk, high and extreme risk patients, the prevalence of mitral valve replacement is much higher because the patients are very complex, hard to get a good repair in that population. So, when we think about trial strategies and we think about what we need as transcatheter therapists, we have to have a combination of repair techniques and of replacement techniques that are going to fit some of the anatomy. The last point I'm going to make is surgical risk. Now, we might think that surgery is the gold standard for some of these patients.
The problem is, like aortic valve disease, it's of higher risk. In this series of patients that met analysis, those patients who are over 80, didn't know how healthy they're just over 80, a substantial impact upon their procedure mortality, up to 20% procedure mortalities in some of these patients. So, we are going to find patients who are going to be amenable to trans catheter therapy because they are not good surgical candidates. That's certainly going to be a central theme. Now this slide, I think, is an important slide because I think it's going to change.
And the reason it's going to change is we've classically always thought of aortic valve disease as the fatal disease that caused them suffering and mitral valve disease as a not so fatal disease that caused a lot of suffering and mitral valve disease as a not so fatal disease that caused a lot of suffering. But with the COAP results, which we'll review in just a second, that's probably going to change. We may now need to intervene earlier in patients with mitral valve disease to save their lives. And I'll show you some of that information in the data in just a second, not just make them suffer less. So, what this means is that heart failure patients who have mitral and tricuspid valve disease are tremendously undertreated and have very bad prognosis.
We know that there is equal outcomes in ischemic MR with repair and replacement for the surgical perspective, But mitral valve replacement is performed much more often in patients with high risk surgery. That's appropriate to our populations. We've discussed them. And many of those patients who are deemed increased risk for surgery could be candidates, but as we all said throughout the morning, they just never make it in to see a heart team specialist. What about the anatomy?
I think the anatomy is incredibly important. This is an image from the aortic side of the aortic valve is very simple, 3 leaflets, circular. When we go to the mitral valve and tricuspid valve, 2 valve leaflets on the mitral side, a remnant third on the tricuspid side. But let me just show you this image, which I think will tell you a little bit about why these 2 are so complex. Up on the upper left hand side is the aortic valve circular 3 leaflets, very easy to treat with kind of any sort of transcatheter valve therapy we put in.
On the lower right is the 2 leaflet mitral valve. It has an annulus. It has 2 leaflets. It has chordae. It has papillary muscles, all of which need to be considered as we're thinking about our transcatheter repair and replacement techniques.
This is now on the left atrial side. On the top part of the screen was the anterior leaflet, bottom part posterior leaflet. But you see then all of the cordi that make much more complex are approaches to the transcatheter therapy themselves. This is the last one I'll show the images, which is incredibly important from a conceptual standpoint. If you could just replay that, which is let me see if I can go back and just replay that again.
Let me just start that. Let me go back one and see if I can replay this one again. What you'll see is the left atrial in the upper right. Could you punch and play that? I don't know if everybody's back there.
But the idea is going to be that the vortices are be incredibly important to determine left ventricular function. Thank you for that. That the left atrium then fills the left ventric with the lateral wall and then that is actually pushed forward. That's how it's preserved with repair techniques. With replacement, these vortices change.
And the vortex goes central part of the ventricle, then the ventricles under undue strain as it tries to then eject that blood out of the rest of the body. Lots of different manifestations of mitral regurgitation with degenerative disease, but this is what's changing. We previously thought functional regurgitation was due to left ventricular disease not related to the ability to treat the mitral valve. That's now changing, I think, because we can, in fact, intervene on the prognosis of functional regurgitation by intervening upon the mitral valve. I'll show you that data from COAPT in just a second.
So, what does this means? Well, we got to have technical solutions that are going to be much more complex for mitral valve disease than the ergosive. That's why it's been a bit of a challenge. The mitral valve devices need to account for the mitral annulus to asymmetrical lessees, primary and secondary core, 2 papillary muscles. And because surgeons use multiple techniques, we need to start thinking about how we're going to use multiple techniques in the mitral valve repair toolbox that's going to allow us to get the best results in individual patients.
Bernard will probably talk about some of these combination therapies in just a bit. Well, what about the multidisciplinary team? Well, we had to train folks to do aortic valve disease and I think we did a good job with it. It's a retrograde approach. It's pretty simple for most interventional cardiologists to be able to figure out.
Cardiac surgeons are pretty familiar with AVR CABGs. We don't really need a heart failure specialist as part of the aortic teams. Imaging wasn't quite so complex. We can often do this with TEE guided, procedural TEE, but look what happens when we move to mitral. You have to know how to sterilize wires.
You have to be transeptals. You have to be proficient in ASD, PFL closures. The surgeons have to have mitral valve expertise. Oftentimes, it's a dedicated surgeon at each institution. The heart failure specialist is now a mandated portion of our heart team in the mitral arena because of what's done and what we've learned from COAPT.
Have to have advanced imaging, I'll show you. Coordinator is incredibly busy with the mitral valve disease and it may well be that we have to think about separate teams for mitral multidisciplinary clinics themselves. So, we've got these multivarities established for TAVR. Heart failure specialists are key. They're key to the referral of patients into our system and now they're on board.
The interpretation of prohibited risk by our surgeons varies from center to center. I think that's going to be important as we talk about some of our DMR trials. And then, we absolutely have to have advanced training. This is going to take more effort and work on our part in order to make certain that we have the procedural skills, which are more advanced for mitral than aortic. And in order to spend those out, then we really have to focus on teaching, which an integral part of what we're doing.
I'll just show you a couple of quick slides for imaging. Patients who are undergoing transcatheter mitral valve replacement all have CT scans, very sophisticated analysis. This is from 3 months ago, measuring the annular size, measuring the degree of calcification location as well. And then, the most important part of what we do with our transcatheter mitral valve therapies is having good procedural transesophageal imaging. Can't do it without having good transesophageal imaging.
Now, we may think about ICE. We may think about other techniques. But as of today, we have to be able to really look at the valve leaflet while we're working and that's really best performed with transesophageal echo. So, what's this mean now from imaging? Again, raise the bar.
Raise the bar because we have to do CTAs, annual sizing, location of the coronary vessels. We have to have good proceduralists for TEE in the lab, severity of regurgitation, FLT and for case planning. The procedural imaging can't be done without having an expert individual. We have cardiac anesthesiologists do that at our institution. Randy, of course, does those at Piedmont.
It gets excellent imaging during the procedure. And most importantly, that we need to follow these patients very closely for the procedure results themselves. So, let's challenge over the next couple of minutes some mitral valve paradigms. We've demonstrated unmet need, it's complex patients, complex morphology, complex techniques we need to use, what changed? Well, in my universe, everything changed dramatically on September 23, 2018.
I know many of you were in the audience in the front row and watched Greg Stone's spectacular presentation, kind of buttoned up at least to us as the investigators, maybe not so buttoned up for you guys ahead of time. But we really sat in the audience waiting to see what these results were going to be because they were going to change things around. And as you know, the COAPT study randomly assigned over 600 patients to either MitraClip and guideline directed medical therapy or to guideline directed medical therapy alone with a primary endpoint of repeat hospitalization at 24 months. Okay. What was different from this versus mitral FR that had been published in The New England Journal about 2 weeks before?
1, the guideline directed medical therapy. Incredibly rigorous central screening committee that reviewed all the medications that before the patients were treated randomized, they were on optimal medical therapy. 2nd, a central core laboratory that really assess the degree with a little bit more rigid criteria for the degree of mitral regurgitation and a 2 year, not 1 year endpoint. So, these trials were very, very different. And Matt and I were talking about coming over saying, can you really approve something off of a single study?
We've got other studies that are out there that are a little bit controversial. Can you really do it off a single study? And you can, As long as your P equal 0.052. And as long as we're dealing with outcomes that are P of 1, there's not much question that, in fact, as a single trial, this is demonstrative and definitive because it's the same thing as 2 trials that have a less than a PO 0.05, barely getting across the streaky mark. Now the right side of the slide is important because you've heard a lot about Coept, 2 rigorous central screening committee, patients couldn't get in, too long to get there.
How can you do this complex trial? But from my perspective, the number one reason we didn't enroll patients more quickly in this was we didn't have heart failure specialists on board. And the day that this was presented, my 2 heart failure specialists called me and said, we have to talk, okay? Because now they're thinking about all the patients that have been in their been in their things on their optimal therapy that they just not felt that there was going to be a reason. And why did they call?
They called because of this slide. I'm going to just get to the slide here next. This slide. Now, remember that when does an interventional cardiologist get a standing ovation at a meeting with their presentation? Well, Greg does, right?
And he should and he deserves because this slide changed the way that we thought that functional mitral regurgitation could be treated in the United States. Unbelievably important. With these kind of separations of the primary endpoint of rehospitalization, there is no doubt that, in fact, that this therapy works. Now, it works however you look at it, whatever subsets and Greg had 10 secondary endpoints that were in a hierarchical design standpoint. They met every single one of the hierarchy, but that never happens because remember what you have to do is you have to hit your significance on the first one and then you go to the second one and the third one.
So, at any point that you don't need significance, you lose it. The whole thing just lit up like a prism saying every single way you look at this, this is a positive trial. But for me, the one that really said we're on to something here is this slide because it wasn't the fact that between 1 2 years, there were less hospitalizations. It wasn't, in fact, that patients could walk a little bit farther, that they had better quality of life, which they did, by the way. It was the fact that, in 2 years, we saved lives by intervening in heart failure on what everyone would agree is optimal guideline directed medical therapy.
So, when we talk about number of needed to treat of 6, remember that thrombolysis and primary PCI for acute myocardial infarction has a number of needed to treat about 100. It was a 1% difference in the mortality. This is you treat 6 patients, not 100 patients and you save a life. So, this changed everything. And it changed everything from our perspective because when you have mortality reductions, as this is the primary endpoint, it changes the way we think, which I think is really where we stand right now.
And, of course, what we also learned was that not all the patients in this study were prohibitive risk. Some of them weren't prohibited risk and these forest plot show that whether you were not high risk or high risk, you still had the same beneficial outcome in the treatment of functional mitral regurgitation. Now there is going to be a lot of controversy and there will be a lot of controversy about comparison for these 2 different trials, but they're not the same trials in my opinion. They're not the same trials. MitralFR, wonderful investigators, didn't probably see a heart failure specialist until they got enrolled in the trial versus having seen heart failure specialist for months on the COAPT side, that the mitral regurgitation was a little bit less severe in mitral FR, a little bit more severe in COAPT.
The ventricles were a little bit worse in mitral FR than they were with CoAPT. As a result of that, the ventrals were a little sicker with less MR, not on Optomed Medical Therapy. It's not really the same population as what the COAPT investigators demonstrated, incredibly important. So, what does this mean? We'll talk about how we get to guideline directed medical therapy, but we have to get there as background therapy.
Severe MR in its non end stage ventricle is probably going to be preferred and that's certainly where they intervened in this particular area. I think that, similar to surgery, that we need to think earlier about intervening earlier in patients with functional mitral regurgitation. We learned that with surgery. You can learn with other things as well. And it's always important to have optimal patient selection.
You don't want patients too sick. You don't want patients too healthy. You need to be able to have these patients suffer with mitral regurgitation in order to show a benefit and that's what CoAP did. And for the first time, I think that we see that mitral valve therapy altered the course of FMR. In those patients who were treated, their ventricles stayed the same in size and their quality of life stayed the same.
In those patients who were not treated, the ventricles got bigger, the function got worse and the quality of life was worse. So, we intervened, incredibly important piece going forward. And as we think about our trial portfolio, which Bernard will share with you in just a second, it's really going to be the functional indices of benefit that we're going to use to supplement along the way. So what about clinical trial considerations? Well, we won't have to try to Bernard is going to talk about some of the trials that are coming forward.
We didn't touch much on tricuspid. As complex as mitral is, take an order of magnitude greater and take it to our cruspid disease, maybe we can take that up in the Q and A session, incredibly difficult paradigm to treat. So, what are our take home messages? Well, we got to get better. I got to get better at what I do.
I have to get pick up different procedural skills that are more advanced. Education, promulgation of that education of the community is going to be incredibly important. COAP showed that we can alter the natural history of mitral regurgitation and we can reduce mortality by intervening, incredibly important. But as I hope I've been able to convince you, the heterogeneous nature of the mitral valve compared to the aortic valve really necessitates that we do take a toolbox approach to pathology and use the right technology to match with the pathology that we see. And obviously, we're going to have to as we think about world, the world of COAP is now going to be a world where everyone's going to try to replicate COAP results and we need to think about innovative trial designs providing more insights into the functional improvements of patients undergoing these therapies.
Thanks for your attention.
Good morning, everyone. It is now my pleasure to talk about our newly formed division TMTT. I'm sure you all know what TMTT stands for, Transcatheter Mitral and Tracheal Therapy, and we have a very exciting plan for next year. I'd like to start with a recap of our strategy. And you heard it off from Doctor.
Poma, he did an amazing job highlighting the fact that these 2 diseases in a microelectronic are still very complex. The patients are prevalent. They are not the same. There is a large diversity of patients. And therefore, like in surgery, we probably need a toolbox to treat these patients.
And we are very pleased with the meaningful toolbox we put together, highly differentiated. As you have seen from Eduard on the aortic side, we are not only committed to bring innovative therapies, but also world class evidence and education, which is going to be key to success. So over the years to come, what you can expect from us is a cadence of meaningful innovation, starting with having free commercial products in Europe next year. Given the emerging evidence, COAPT and our increased confidence in our portfolio, we now believe that in 2024, the TMTT opportunity globally is going to be around 3,000,000,000 euros which is going to be achieved 1 year earlier than what we said last year. I feel very fortunate of leaving this new division, TMTT.
We are uniquely positioned. We have 60 years experience on the surgical mitral side, about more than 15 years of experience on the transcatheter mitral side. Not all of the transcatheter project were successful, but all of them provided great learning, positioning us here for success today. And today, with our broader portfolio and highly differentiated portfolio, all of these therapies are in a clinical evaluation today, adding a lot of learning to our experience. Very quickly now because Doctor.
Palmer went in great detail. So we believe the opportunity is 3 times bigger than on the aortic side and patients are fewer treated, very complex, serious complication, high mortality rate, they have basically very few options. And this is just to recap how diverse are the patients, diverse within Mitra, diverse within Tricuspid. So for sure, we need a portfolio and pleased about very excited about the portfolio we built. 7 platform across Tricuspid and Mitral, we are making progress on all of them and we are looking at ways to further innovate the next generation internally, but we are also looking externally to make sure that we are going to be the leader in the space and transform Innovation Care.
What I'm going to do right now is go 1 by 1 for each platform. PASCAL is mimicking a well known surgical technique, so Alfieri Stitch. So this technology has 4 very important elements. The first one is a very innovative delivery system, stable, which is making the procedure reproducible. And then we added 3 things around the implant, specifically designed paddle to reduce the stress on the leaflet.
Clasp, who can be activated independently or together to optimize the EMR reduction. And finally, the space here to fill the space in between the reflect. So these four things together, the delivery system, the panel, the clasp and the spacer, it is what is making this device highly differentiated compared to what existed in the marketplace. We have some evidence, early evidence, but we have strong evidence. We are very pleased about what we are seeing.
And we have a very aggressive plan for next year. First, clinically, given the evidence existing for the FMR patient population and DMR patient population, we are going to be focusing on 2 pivotal studies in the U. S. So the first one, Class IID, is for the DMR patient population. This one is approved already by FDA and CMS, and we are currently activating this study in the U.
S. CLASP IIF for the FMR patient population, we are planning to initiate this study by the end of the year next year. And then on the TycoSPEED side, we want to get some more learning and we are going to start in the U. S. An early feasibility study.
So a lot of clinical activity on the PASCAL front. Commercially, we expect to get C Mark and to launch the device by midyear next year. We are right now building the plan, a dedicated field team to make sure we can execute at a very high level. Quick one on the Class 2d study. So, it is a 2:1 randomized against MitraClip.
It is a non inferiority study. We have selected highly experienced people in the field to lead the studies. And what you see also in varieties is a very unique registry because we believe we can get some learning by looking at patients that might not be eligible to a MitraClip, but can be treated with a PASCAL. So for sure, you're more learning and coming here. Now let me move to our second product, Cardioband.
Cardiobat also mimic a surgical procedure. We are placing a band around the analyst, above the analyst and then we are deploying anchor. And at the end of the procedure, we are deploying tension to reduce the analyst dimension. The beauty is that we can do that in a beating heart. So the cardiologist and the team can look at it over the MR reduction or the TR reduction and decide if the reduction is enough or not.
We have some evidence, very strong evidence. We have 2 CE Mark study for the MR side and the TR side, showing durability and effectiveness of the device. But having said that, and you all know that, we know that we need to improve a couple of things. The first one is, even though there is great excitement in the marketplace and clinician want to use this device for their patients because it is making a big impact, the procedure is too long. So, we are dedicating some efforts to make the procedure shorter, 1.
2 is the supply. We had some supply limitation this year. And Mike talked about it at different earning calls during the year. As you know, we are transferring production from Israel to our Elouard plant. The plant is underway, looking good, and we are going to progressively improve supply throughout 2019.
On the clinical front, we had a pivotal study active for the AMR patient population. Given COAPT, we are going to assess the learning from COAPT and look at if we need to change the design or not of active. So for now, the steady spot until we know better. Because the Trichospi patient population has very few options And we believe that most of the Tricusp patients have a functional disease and Cardioband is truly could be a first line therapy for these patients. We are also expecting to start a pivotal study by the end of the year next year with a VTR patient population.
So I talk about 2 repair technology, PASCAL and Cardiobat. Now let me move into our replacement option. You remember that a long time ago, we made a decision to go transseptal, transfemoral only. It is the most patient centric. For sure, it is much more difficult to design, but we love in this company to do it to take on this kind of technological challenge and we love to solve that.
I'm very pleased to say that this is the perfect example of our Eduard strategy in action. We leverage our leading position on the surgical side. We leverage our proven Sapiens free device using the position, more than 3,000 procedures done since the beginning. We leverage also the learning from our internal transcatheter mitral program Fortis, together with the acquisition we made, Cardiacute, a couple of years ago to develop what I believe is the 2 best transseptal platform today, Evoque and Infrae. Let me talk a little bit about each one of them.
Evoque has been specifically designed as a valve for the mitral anatomy. We have a unique delivery system, very stable, reproducible, low profile and 2 valves in our size to be able to treat a large spectrum of patients. And we are just beginning. We have done few patients. We just started an EFS in the U.
S. And what we plan to do here, we are very encouraged by the early clinical experience in 2019. M3. M3 is using the Sapient 3 platform, which has been slightly modified, and we have specifically designed a very low profiled, easy to use delivery system and a docking system, basically to offering a landing zone to the VARs. We have here, we have had a little bit more experience, more than 30 patients.
Doctor. Raj Makar at TCT this year presented 15 patients and showing 0 mortality at 30 days and great technical success rate. So we are very encouraged about the fact that we have more experience, 1. 2 is using our proven device, CPLN3. So in 2019, we are going to expand on our EFS learning, together with expecting to start the pivotal by the end of the year next year.
Froma. Forma is our latest platform in the portfolio. Very simple device, easy to use. The clinical community love it. Short process of time.
So basically, what it is, it is a spacer that you place in between the really flat and that you anchor in the right ventricular wall of the patient. What we have done in 2018 is we have modified and redesigned and improved the device and we are about to restart an early feasibility study with this improved device and we plan to do that in 2019. You look at this portfolio and you see, I believe it is one of the most the broadest portfolio, highest differentiated portfolio I have ever seen in the medical device industry. And to complement this portfolio, we are very serious about bringing the evidence. So look at this very ambitious clinical plan, 5 early feasibility studies across 5 technologies.
So here, the objective is what, is to get some learning. So by the end of 2019, to Mike's point early on, we are going to be much more knowledgeable on the disease, on the therapy, on the product, on the type of patient for what technology. At the same time, we expect to start 4 pivotal studies to support our U. S. Approval.
And in Europe, we are going to continue doing our free post market approval studies, which is going to be very important to complement our clinical data with a VLOE dividend. Very excited about the guiding of our portfolio and the kind of evidence we're going to generate in the next year. In summary, we are the only company having this kind of experience. 60 years in the surgical side, 15 years in the transcatheter mitral and tricuspid side, we have a momentum. So not only next year, we are going to add 12 studies, EFS and pivotal study and post market study, but also already this year, we are having a ton of studies running.
And we have an unmatched commitment, 7 products in the portfolio, and we have about 600 people fully dedicated to TMTT. So this is all what we do, TMTT. And we have dedicated team across functions in clinical, in R and D, and we are building a dedicated team in Europe to be able to support, commercialize, educate our partner physician in Europe. With this plan, we will deliver €40,000,000 in revenue next year. And for sure, we are going to face headwinds like there is many clinical study happening right now.
So for sure, there will be some competition here. For sure, we feel good about our supply plan. It is going to progressively improve. It could be a headwind. But Tailwind co ops is validated in the space.
But I feel very well prepared to navigate this, deliver this EUR40 1,000,000 in sales and more importantly, advance our portfolio from a clinical standpoint and from an innovation standpoint. In closing, so these patients are prevalent, complex, very different to one to another. We need multiple therapy. I do believe we have the best toolbox in the marketplace today, and we are committed to further innovate. And finally, you have and our clinician, your partner have a commitment that not only we are going to bring the best innovation, world class dividends, but also education to treat in a better service patient, lead the space and transform patient care.
Thank you so much.
Session at this point. We'll ask Doctor. Padma and Bernard to join me. Bernard, please grab a seat and we'll begin.
Joanne Wuensch from BMO Capital Markets. Two questions, one for Doctor. Padma. How do you see mitral valve, minimally invasive mitral valve adoption and having lived through the TAVR adoption rate, should we think of it as maybe the same, deeper or worse?
Well, I don't know what worse means. Similar. Similar. So, I think that this is going to be incremental. I think that the bolus was the enthusiasm in MitraClip for FMR.
We don't have an approval yet. So, we're going to have to wait for the approval by the FDA of COAPT or MitraClip in patients with FMR before we can really move forward from a perspective of advocating this to sites of patients. So, we still are very selective about where we go. But when that happens, I think there will be a bolus patients into the mitral arena. But more importantly, there's an awareness now that we have alternative therapies available to us for our heart failure specialists.
I can't emphasize that enough is that the awareness of these patients have been some of them have gotten from the primary care physicians, the cardiologists and they're very well managed in the heart failure clinical practices. But that's going to be, I think, a big referral base for us. So, we need to expand out the tools in order to expand out the base. And certainly, we're working on that. DMR is certainly going forward with Class 2D.
But on the FMR side, I think we have to wait for approval. At least in this country, we have to wait for approval. But then I think it's going to be an incremental pop up.
Thank you. And then for Bernard, we started 2018 looking for $15,000,000 in TMTT revenues, it's called back closer to $2,000,000 and you just put out $40,000,000 for next year. How do we bridge from $2,000,000 to $40,000,000 And which products are the drivers for that?
Yes. No, thanks, Mark. So, you remember, we covered this topic during the earnings calls. Most of our limitation were from the supply the Caliban supply front. We took action.
We made a decision to move production from Israel to our large Edwards facility, which is happening. So, that's about what happened in 2018. Regarding for 2019, we believe that Pascal will represent a bigger part than Caribouan, but Caribouan will be also a contributor to the EUR 40,000,000.
Okay, thanks. Two questions for Jeff. 1, given the powerful COAP data, there's going to be numerous trials in replacement and repair. How easy is it going to be to recruit these patients now that we have such a phenomenal result out of COAP? That's number 1.
And then number 2, on replacement, Edwards has gone all in on transseptal, Medtronic and Abbott are going transapical. How important is to market development if all these technologies eventually come to the market? How important is transeptal to market development versus transepical? Thank you.
So let me 2 issues, very good questions. And so let me just take the first one. As a trialist, with the positive COAP results, now we have a benchmark against which other therapies can be evaluated. Before that, the only thing we really had was versus medical therapy and that was very, very difficult for patients and for physicians and for everyone. We really had to randomize against medical therapy.
We were doing things like weighted randomization and alternative endpoints to try to lower the sample size. But with CoAPT as a benchmark for those patients who are suitable for MitraClip, I think that ultimately from a trial perspective, once there's approval for the MitraClip, that that's going to be the predicate. So, we'll certainly use that from a class side. We could use that potentially in the future at the Cardioband side. You can actually even think about using that as a comparative for a transseptal mitral replacement because what's your the potential advantage is that you don't just reduce the mitral regurgitation, you take it away.
So, if there is a non morbid way of getting a transcatheter mitral valve in transeptally, that even could be against the COAPT MitroClip data as well. So, I think it opened up the ability then to be able to do clinical trials. And I have to say, to answer your question, I think it's a very short I mean, I think that one of the commitments for Edwards has always been that Transseptal was going to be the preferred way, even though it took maybe the technology a little farther to evolve to that. But that's a much less morbid way of treating the patient than being at the Apex. The Apex is still a problem and I think that the Transseptal portfolio is a very, very important one.
Thanks, Mike. Doctor. Papa, at its essence, the COAP study showed that the reduction of MR to 1 is likely the reason that you saw the curves diverge the way they did in mortality hospitalization. So a couple of questions based on that. Do you believe that any device repair or replacement, if they show similar reduction in MR, similar rates are going to show the same curves?
Why or why not?
And then also, what are the next considerations if indeed reduction of MR is the Holy Grail here? Is it durability of that reduction? Is it complications associated with the devices delivery? What are the other as the analysts and investors in the space, should we look out for these data that would give us insight into maybe what's going to succeed over other
So, these are very provocative questions. But let me just try to put it in a simplistic perspective. The mitral regurgitation would be the surrogate endpoint and that surrogate endpoint is that in order to have a therapeutic benefit for clinical outcome, you have to something has to happen that relates to that anatomically and the reduction of MR is certainly an important one. But we have to balance that against the risk of the procedure. And so, it may well be that for the same reduction of MR, for some devices, there may be higher complication rates, there may be higher detachment rates, there may be higher complication rates that have to be and that all that balances into the clinical outcome.
What's the net benefit on a risk benefit ratio to the patient? So, I think that, in general, I think the high level view is that, yes, if you can reduce mitral regurgitation, that would be associated with a good clinical benefit. But for FMR, I think that we're still going to have to buttress ourselves in having some clinical endpoints that are going to be involved. And just remind me the second question was?
That's essentially what I was asking about with respect to what other considerations. We've got all these devices that can reduce MR to 1, we would expect these curves to look similar. What's going to be the mode of competition between those devices or how are you as clinicians going to be able going to decide the algorithm for treating a patient, 1 device, 2 device combo therapy, replacement, does that take, albeit, the need for anything else? It's such a heterogeneous disease data and also a heterogeneous solution as well as it relates to patient by patient treatment. So, I
was thinking that your second question was the provocative question going forward because we just don't know yet. So, I think the idea is that we have to have we know that the morphology of the mitral valve is very heterogeneous and individual patients will have different medication from DMR from the spectrum of just a form of use all the way to a Barlow disease that may take different tools. The FMR may be different in terms of particular function size, degree of regurgitation, annual size, the amount of calcium and it may well be that we ultimately, 5 years from now make those decisions based on how we sometimes select transcatheter valves in our current market based on iterative knowledge and analysis and comparisons. So, I don't I think your first question was just spot on the mark. Yes, we should be able to reduce MR that's the have to be able to do that.
Should be associated with clinical benefits. But how we're going to pick which device for which anatomic morphology, I think is something we still need a ton more data on. It's a great question.
Vijay Kumar from Evercore. Thanks for taking my question. So you mentioned the PASCAL launch in Europe, great of next year. What kind of share should PASCAL garner, given the device has some benefits versus microscope?
That's a very good question. We are going to take a very fruitful approach, which is going to be building on what Doctor. Palmer said, making sure that our team is ready. We are going to train the team in Europe even though there is a product in the marketplace, it is a different product. So we will have we are going to take a very fruitful approach next year to ensure the best patient outcome and to make sure that we show that it is a differentiated product.
So I'm not really in a position right now to give you a share number.
And maybe one quick follow-up on, I guess, Doctor. Poffman, on Cardiobank, you mentioned different ways for different morphologies. It's difficult to decide what's the place for Cardiobank or annual platinum, I guess, related to the procedural innovation, like what's the current procedure trying and what kind of innovation, like can you reduce by 50%? Is that what's going to open up this market?
So, yes, I'll just very briefly say that you have to start with something. And I think the PASCAL program is really where the initial start was. But as we start to screen more patients for PASCAL, we'll realize that there are just some patients that are not going to be optimal for PASCAL therapy that still suffer. If we couple that with the anatomic information that we get about annular size, you could think that maybe there's going to be a subset of patients who have an enlarged annulus, who have a favorable morphology for Cardioband and maybe in fact that that's going to be the niche for those that aren't going to be completely suitable for PASCAL, maybe that calcium on their leaflets as an example. But the other one that I think is going to be very intriguing and we have to sort this out is combination therapy, which would be annual reduction and leaflet coaptation.
And we're going to have to study this. So I think that Cardioband will have a set place and it may well be at least initially in those areas that PASCAL might not work perfectly, but we'll certainly be able to get where we need to go quickly.
We see a great result from Cardioband in the functional disease, both MR and tricuspid. Clinicians are excited about it. Patients are doing extremely well at the end of the procedure. For sure, we need to reduce the procedure time, and we are working on it.
Great. Let's see if we get some folks that we haven't asked for. I guess we're all right, Chris, go for everybody.
Thanks. Chris Pasquale. Doctor. Padma, two questions for you, 1 on mitral, 1 on tricuspid. On mitral, I'm curious about the real world application of what we learned in COAPT.
It was a trial that pointed out several key selection criteria that seem to be very important to good outcomes seems to suggest that achieving guideline directed medical therapy is pretty tough in the real world. We've heard a lot about how ECHO standards are maybe not up to snuff at various institutions around the country. So what does this trial mean in terms of how you're going to treat the patients that come through your door and do you need to first go through some elevation of the medical therapy before you should even consider intervention?
So, to answer your question, I don't know that the central committee would agree that it was just hard to get patients there. I think that once in talking with Bill Abraham and Joan Linfield, who gave us tremendous insight, patients who came into the trial later on had a much higher compliance rate for optimal medical therapy than very early on. So, I think number 1, the recognition by most heart teams of the important involvement of a heart failure specialist adherence to guideline directed medical therapy is going to be important Whether we do it by central committee, whether we do it by algorithm, whether we do our checklist that we do need to assure we can get patients on optimal medical therapy and that's good care. I mean that saves their life straight off the mark. And I think the rest of the issue is that how do we get the echocardiographers to do a good I wouldn't I would say that going to a core laboratory for a clinical trial allows you to have more rigor, if you will, than following standard definitions.
But I agree as well and Randy Martin will be probably, I hope agree with this is that we always need to educate physicians better. The message is that probably the American guidelines, the ASC guidelines were pretty good in determining what really meant to be severe MR. And treating milder MR at this point of time, at least with bad ventricles, may not be the right thing to do. So I'm not sure it's the bad echo eating per se. I think instead, it's just education of physicians what criteria we're using, pretty simple.
And do you just tease on the
tricuspid size, just complexity there? Can you share some high level thoughts on what you think it's going
to take? Absolutely. And I just ran out of time, but I think the patients with tricuspidality suffer more than any other patients we take care of, because the way they clinically manifest themselves is with edema, with ascites and with lack of fatigue and lack of energy. Can you imagine how horrible that life would be with your belly swollen, your legs very, very thick? And that's and if the right ventricle doesn't work as in the very end stage of things, then it's a very, very miserable place to be.
So, I think we absolutely need to have tricuspid therapies as part of the mix. And probably we can really get some good clinical benefit. Do you want to comment on that?
Bruce Siedel from SunTrust. I had one question for Chad and one for Bernard. So Jeff, the most interesting subgroup in COAP was the group with relatively small EROA, but small ventricle. So it's like how much leak relative to the size of the ventricle. And that really speaks to the idea of treating people early.
What's your view on that population? And what do you think the long term impact will be on their prognosis? And then my follow-up for Bernard is, why M3 and ANNOYVO? What is why have that portfolio? Do they speak to different groups of patients?
And just kind of why too?
Well, I mean, I do think that ultimately we're going to be able to get data that suggests that treating earlier is important and you're right about the subgroup that was approved in coAP, but those are always hypothesis generating. So, I am going to be very all of us are going to be very, very mindful about what the FDA label is going to be in terms of weighing in about how much regurgitation is actually going to be important. But absolutely, I think we have to do some more clinical studies to sort out the earlier treatment of patients with MR because maybe that's the time to intervene.
You asked me 2 questions. Why 2 programs and why F3? So why 2 programs? Look, this the technical challenge to solve this one and the anatomy, the difference, the mitral valve requires we want to be the leader in the space. And for us, we want to have a variety of short term goal here.
So we believe that adding 2 programs is better. Why M3 first? I talk about it. M3 has one, has more patient experience about your 30 plus patients with great results. 2, is using a proven platform, the SAPIEN 3, which has been slightly modified.
So, because of we are using a proven platform, SAPIEN-three, together with we have more experience, good experience, we feel that we are ready to move now to a pivotal study.
Okay. Thanks. Harry Von Hopkins, P of A. So a couple of quick questions. Doctor.
Palmer, just curious, one of the things that we heard a lot about at CCT is in the enrollment process for the clinical trial, when you got patients on guideline medical directed therapy, many of them went home and got better. So is there a
way to put numbers to
that as we try to think about sizing this market opportunity? What percentage of patients just get better and don't eat up needing some sort of therapy? And is it practical to think about it that way? Are we going to if you see someone this disease state, are you really going to have to wait, we'll see MS mandate that? Just want to talk about that for a quick second.
Great questions. What I would just say at the top line is that a third of half the time we can get patients stabilize their medical therapy for a while. So, it's not that we are eliminating the patient from the pool. We are just delaying the patient from presenting further on down the line. So, can we stabilize patients with get their MR down to moderate and get them feeling better?
We can. And that's why some of the inclusion criteria have actually included a prior hospitalization or a biomarker BNP that's elevated to try to get to the patients who were treated and were better, but they still are going to come back in the pool a little bit later on. So, I think we can stabilize probably almost half the patients we can stabilize, but we don't take them out of the pool completely. They're going to be back 6 months, 12 months later.
And then just sort of procedural question, on your the mitral data for PASCAL that you show in 2019, can you just give us a sense of the venue for that disclosure and kind of timelines?
Are you talking about the 2 pivotal studies?
Yes. The studies for PASCAL and Europe.
They are U. S. Studies. So we are going to initiate one study, the PASCAL DMR study class study is already approved and we are currently activating this study in the U. S.
For PASCAL for FMR patient population in Class IIF is not yet designed, but we are planning to initiate the study by the end of the year next year.
No, no, I'm curious when you're going
to see the data for your The headcount data.
Oh, the CMR data, sorry, I missed your question. Early to midyear next year, it could be ACC, the earliest or PCR. Thank you.
Matt Taylor from UBS. Just want to confirm, we're not using any AI to analyze this meeting. So use as much negative language as you like. So the first question I wanted to ask was kind of a subset of some other questions that were asked. But I guess, Doctor.
Papa, given the learnings that we have from MitraFR COAP, we have some pieces of the puzzle now in terms of where those technologies could work and could not work. So I think my question is, as you're looking to design trials for replacements, how would you set the inclusion criteria? What are some of the key things that you would look for either in a replacement versus a repair technology? Or is there a sweet spot where you think replacements could outperform repair from what we know from these two trials and other earnings?
Yes. I mean,
those are excellent questions. There will be everything from a clinical trial perspective has to start out with what's suitable for the MitraClip if one's going to do a randomized trial. So it's all going to start with what's clippable, what's a clippable technique. And you'll notice that in COAPT, they didn't really have the same criteria that they were in EVRS 2. In fact, it was just the that was the screening committee and the investigators who felt the patient was amenable to a clip.
So, initially, with the TMVRs, it's going to be versus a clip suitable technology. But then, one thing that all the Edwards has done extremely well in the past is they've been able to do nested registries of those patients who are CLIP ineligible, but still do a nested registry of a TMVR that would be in those patients who are CLIP ineligible and look at those outcomes as a registry. That's a very important tool and technique. So, I think that, at least from my view, that it's going to be against the current therapy. Now, where it gets a little bit tricky and I don't think we've really thought it out is that, certainly, the TMVRs are suitable for both degenerative and for functional disease.
And the easy bar is coaplifunctional and that's going to be for patients who are deemed to be suitable by the heart team. The prohibitive risk labeling that goes on to the MitraClip, it's in the DMR2D study right now, maybe a little bit tricky for those patients who have the primary presentation with degenerative morphology for this randomized versus the CLIP. So, are some nuances that we have to sort out. You're right, it's a little bit complicated. But in general, I think it's going to be versus clippable patients and then an analysis of those patients who aren't clippable in a nested registry.
And then that will be the big kahuna in the sense that if you eliminate MR, which you will effectively do with the transcatheter mitral valve replacement, you could hypothesize patients are going to do even better than those in whom you just reduce it most of the time. So, I think that's going to be the trial questions that we're going to have.
And just to add on what Doctor. Thomas said is, for the Class IIF FMR patient population and the M4E pivotal study, we have a lot of work to do in 2019. We need to finalize the design, which is not yet finalized.
One last quick question.
Rick Wise, this is Stifel. Jeff, you were kind enough when I spoke to you after TCT to say that post COAP, heart failure docs who hadn't given you the time of day were calling you and banging at your door that patients you never heard of or trying to get appointments. I'm just curious 2 things. 1 is that continuing? And 2, more importantly, should we read that as an indication of the interest in solving this problem and patients just directionally, is that the right way to react?
I'm not sure exactly I said that.
But it's a close quote that we get along very well with our heart failure specialist for the record and always have for the record. And they're very, very
good dedicated team. But what I what it was absolutely true was that I got a phone call from the emails and phone calls from our heart failure team after COAP saying, we really need to talk about how we're going to make this work together as a program. So, I do think that the heart failure specialists always work with the structuralist, no question. But I think the interest was now we can actually do something to save their lives. And that was really not a discussion we all had before.
So, thanks very much, Doctor. Popman and Bernard. We appreciate you taking the Q and A. There's going to be a chance for more Q and A later, but right now I'd like to introduce Katie Ziman to share with you Edwards' vision for critical care of the future. Katie?
Thank you. So first of all, I'd just like to thank Doctor. Randy Martin for doing an amazing job introducing the topic of artificial intelligence and the impact that it's going to have on the future of healthcare. As we all know, we're kind of entering the age of digital health and no one knows exactly how it's going to play out. But as Mike mentioned earlier, critical care really provides an amazing strategic window for Edwards into the world of digital health and what's going to happen.
He also talked about 2 revolutions that he's experienced in his lifetime, the cancer treatment revolution and then the now TAVR revolution. And I think I would challenge your thinking to say that I think we're in the midst of another revolution related to artificial intelligence and it will happen and be the 3rd revolution on your slides in the future. So, today, I'm here to talk to you about how we're driving growth and leadership with innovation in critical care. And the reason why I bring up artificial intelligence is it's really for us, we're driving growth in 3 key ways. The first is by pioneering and creating a new category that we call smart monitoring That's really enabled us to benefit more patients with smart technologies, and I'll explain what that means.
The second is with the HemoSphere platform. So, we're moving towards an all in one platform that's really, as we roll it out, starting to drive accelerated growth for critical care. And finally, our Smart Acumen IQ technology is going to expand the market overall. So, I have for the people in the room. How many of you have Alexa or Siri or some kind of a smart home at your home?
Okay. How many people wear smart watches in general that are digitally monitoring your health? Wow! Not hardly anybody, you guys need some help. And how many of you wear just a plastic watch, an old plastic watch?
Okay. And how many of you have jumped and don't even wear a watch like me anywhere more and you just use your phone? Okay. So a lot of people. That's great.
So the reason why I bring that up is as we look at the shifting trends in healthcare and try to imagine the hospital of the future, we see the hospital of the future really becoming like a giant intensive care unit. Look at heart surgery, right? It used to be you'd go in for a heart replacement, you'd be in the hospital 1 to 2 weeks. And now with TAVR or even our advanced surgical technologies, you might be in the hospital 1 to 2 days. So, the people who are left in the hospitals are your truly sick patients.
And so, what happens and what we envision for the future is what's required then is when you come into some of our most advanced adopters of new technologies into a hospital, you'll have a Fitbit put on and you'll be monitored all the way through your hospital stay. So, it's important to have less invasive technologies and then to have artificial intelligence. So, as a less invasive kind of basic monitor recognizes that a patient is getting sicker, then it will have an algorithm that triggers that it needs our most advanced monitoring technologies that we have in critical care. So smart monitoring, I can't possibly describe artificial intelligence how well it was described by Doctor. Martin earlier.
But what we think about today in monitoring is that we do descriptive monitoring. So, we tell the doctors how the patients are doing right now. We believe the future is predictive monitoring, and we have the 1st approved hypotension prediction indicator that it took us over 18 months to get approved through the FDA as we kind of tried to educate FDA on how we should be able to predict the future. And then beyond that, we think we can go into really clinical decision support where we make recommendations to the physicians and tell them, hey, this is what you should do and we'll see how many physicians are willing to adopt that technology. Not all of them are as adaptive as Doctor.
Martin earlier. But to give you an idea of how much data it took us to develop these algorithms, we have in a single waveform from a heartbeat of a patient, 2,300,000 data points. And our computers have helped us focus on the most 23 most important data points. And if you look at deep learning, it's kind of like all these sheets of paper on these 23 learning points that the computer is managing and going towards deep learning. And we have over 300,000,000 waveforms that were used to actually develop our algorithms.
So, to start with though, we need a new hemisphere platform that enables our artificial intelligence capabilities and allows us to get what we call the hemispheres like the tree trunk for us. So, it's bringing all of our different sensors onto one platform, so that a physician can determine, do they want a more invasive or less invasive solution depending on the needs of the patient. We're in Phase 1 of the rollout. So, you saw a significant uptick in our growth rate this year associated with the beginning of the Phase 1 rollout of HemoSphere. And you'll see that Phase 2, which had a press release earlier this week, is starting to roll out and will be rolling out here in Q1 in U.
S, Europe and Japan. And the Phase 2 technology has our FlowTrak sensor. It also has the Acumen Hypotension Prediction Index on it in the U. S. And Europe.
And it's going to have an incremental sensor called the Acumen IQ Sensor, which is specifically designed to meet and work with our advanced algorithms. The year after next year, so in 2020, we'll then roll out the final integration of all of our sensors, our ClearSight non invasive sensor that you might have seen last night at the product fair will be rolled into HemoSphere in 2020. And with that, we will also activate the Wi Fi technologies and enable us to go truly Wi Fi and send the data to a physician's phone so that physicians can see how a patient is doing wherever they are at any time in the hospital. So HemoSphere really is our tree trunk. And if you look at the variety of sensors that we offer today, we have our Swan GaNS and our TruWave sensors, which really are tried and true core business, standard of care in the hospital and really have been around for 30 years.
If you look to the further right, Flowtrac and Acumen IQ sensors are attached to arterial lines and are much more not less invasive. And then finally, ClearSight is truly non invasive. So, it's attaching to your finger and able to get you many of the most advanced parameters that we offer with the Swan Ganz that is inserted into the patient's heart system. So, we believe that FlowTrak and ClearSite are the technologies where we will apply our most advanced algorithms and really develop artificial intelligence. So, what is it?
What do these technologies do? We have 2 algorithms in development or already approved today. The first is Acumen Hypotension Prediction Index. So, what happens when a patient goes through surgery, they often will have moments during the surgery where they have a dangerously low blood pressure event. So, we look at the average of your systolic and diastolic blood pressure to something called your mean arterial pressure.
And any patient who has a mean arterial pressure below 65, even for 1 minute during a surgery, can have very serious complications. We've studied over 80,000 patients and we've found that in high risk surgeries, approximately, 39 minutes will happen that patients will be below 65. And so, we're in the process and we've developed an algorithm that actually triggers for physicians to know up to 15 minutes in advance before a patient is going to have a dangerous low event to prevent the event from actually happening. And that reduction of the duration of that 39 minutes per surgery will reduce the poor clinical outcomes and even can have an impact on 30 day mortality. On assisted fluid management, we have an artificial intelligence algorithm there that's actually working on trying to get the optimal level of fluid for a patient during their stay in the ICU or in the OR.
And this is very difficult for physicians to calculate in their heads. There's a significant study that was published in the UK by the National Institute of Health that showed that when physicians give fluid during a surgery, they're only accurate about 30% of the time. And so our assisted fluid management technology is going to, we believe, beat that. Don't you think we should be able to? But in order to pioneer this new category, we've got to build clinical evidence and that's truly not really been done much before in the monitoring space.
In monitoring, mostly you just show that it works and then people start to use it. So with these two algorithms, we're starting clinical studies that we think will expand the claims that we can make and truly show that we impact patient care. So, the first with hypotension prediction, we already have the algorithm approved in the US market, but we're doing a study with the Cleveland Clinic, a randomized controlled study of about 220 patients. We have 70 of them already enrolled in the study. We're studying the duration of how much time is the standard of care when you do nothing or just manage them as you do today.
And then how much time will a patient have below 65 if they're using our HPI prediction index. After that, we will be starting in Q1 of this year a multicenter study with up to 10 centers across the United States and up to 300 patients studying hypotension across a multi center environment. And we hope to not only get claims in the U. S. For that, but globally, but also start to ask the question, should there be a national quality standard around hypotension?
Should there be quality requirements for On assisted fluid management, we're almost finished enrolling our study. On assisted fluid management, we're almost finished enrolling our study. We'll finish it by the end of Q1 of next year. We are going to submit it to FDA. And really what we are doing there is saying the baseline historical control is this UK study, which was called OPTIMIZE 2 and had a 30% accuracy rate, if you will, of physicians manually deciding about fluid boluses.
And we're saying that we will beat that and that will be the study that we will submit to FDA. So you say, okay, well, what impact does have? How much is it going to impact the growth in the future of critical care? So we think of ourselves as really a component of the overall hospital patient monitoring business or world, if you will. And we're our subset that overall world grows at a growth rate of around 3% to 4% annually.
And in our subset, we believe that really with the enhanced recovery with these advanced artificial intelligence algorithms and moving more and more towards non invasive that we're going to see almost double the industry growth rate. So the overall projection that we have for next year is 5% to 7% growth, and that's really building on a very high growth rate this year as we had the 1st year of the HemoSphere rollout. So the tailwind or the benefit we have is we're rolling out Phase 2 of HemoSphere and it's going to continue to be a fantastic platform as we get the full trunk of the tree built out. The headwinds that we face is really a little bit of what we saw in this room, right? So, not everyone is adopting smart technologies, hardly anybody was in terms of smart monitoring.
So, if you're an anesthesiologist and you've been trained for 10 years on how to make decisions for your patient, you sure are not necessarily going to adopt any new technologies until you see the clinical evidence, you see the claims and you get to try it yourself and you certainly never do have low blood pressure events on your patients. And so we think the adoption curves are going to be a little bit slow, but over time, we really believe these are going to be transformative technologies for care of patients in critical care. Think I'm frozen here. So in summary, just want to come back to that we are pioneering smart monitoring. This is kind of a big risk for us to take in these clinical studies because it's really never been done before, but we believe we can change care with these new technologies.
The foundation of it all for us is the tree trunk of Hemispheres and that with this new technology, these new algorithms, we really can expand our growth rate in the future. But what gets everyone up every morning in critical care is fact that we impact over 14,000,000 patients per year with our technology. So thank you very much. And I'm going to open it up now for any questions that you might have. Rick?
There we go. Katie, you did have a great 2018, I think exceeding the high end of 6% to 8% that you highlighted a couple of points. But should we view the 5% to 7% for 2019 as conservative? Again, you're emphasizing it's twice the market growth rate, but I mean is this quote sort of
more normal growth, stable growth?
And I'll ask my second question. Just help us think about the longer term critical care strategy as we everything we've seen today in the rest of the company talking about all these new opportunities. You emphasized you're a subset of the hospital patient monitoring market. Is your long term opportunity about penetrating the existing opportunity or would you be open to adding a new growth rate in adjacent but related market opportunity? Could that be a more significant growth driver going forward?
Thanks.
Yes. So, great question. So, the question is, is our growth rate really slowing down? How should we think about that based on the projections? So, the reason why it looks a little bit lower is just because the base is higher and with the rollout of the capital platform, you're trying to build upon that growth.
So, that's a little bit why it might seem slower. But it's a real challenge for us to keep up that growth rate, if you will. On the question about strategic adjacent markets and how we think about that, as you saw in that overall, there's a lot of adjacent markets, but the way we think about it is, if there's a market where we could apply artificial intelligence and really use our algorithmic expertise to make a difference in patient lives, that would be the market that we would be most interested in. Thank you. Yes.
Katie, Jason Mills, Canaccord Genuity. Could you talk about the competitive landscape, either the competitors do well, what the mode of competition is in critical care, where you what kind of keeps you up at night? Is it the predictive monitoring or someone getting to big data and using big data to their advantage before you or is it breadth where you seem to have a competitive advantage that you think you can maintain and you just continue to build on that. Can you just talk about the different factors that you factor into your assessment of the landscape?
Yes. Thank you. So we have a lot of competitors that are very, very small relative to the size of Edwards Critical Care. And so we try to just think, well, we're the leader, we've got to set the standard and really create the market opportunities going forward. And so developing these advanced algorithms, for example, it took us 7 years to build the data.
And as far as we're aware, no one else has anything close to that. So, for us, it's around really continuing to focus on improving the care for patients and assuming that people will follow. The real competitive landscape for us is different business models. So, they might say, instead of charging a certain price per sensor, they'll come in and say, we'll guarantee that you could use as many sensors as you want. So, they're really competing more on hospital based solutions at lower pricing and that's really the basic competition.
I mean we see some of it around the world for sure. It's incredibly competitive in the European market, for example, where we have many more competitors. But if we look at globally, it's really just upon us to lead. So thank you. Okay.
Well, thank you very much. It's my honor and privilege to introduce Scott Olimar, Chief Financial Officer. Thanks.
Thanks, Katie. Good morning, everyone. Before I get started with my presentation, I need to read a couple of words because Mike earlier this morning said a word that's spelled C R A P and we have a room full of NVIDIA computer chips using algorithms and artificial intelligence counting what kind of positive and negative words we have in the transcript. So I want to add healthy, fine, sound, virtuous, morality, righteousness and my favorite
tip top, TIPTOP. So with
that, let's talk about the 3 pillars of our financial strategy, which linked to the 3 elements of our corporate strategy and those are exceptional sales growth, strong profitability and robust cash flow with disciplined capital allocation. In terms of sales growth, it's really driven by durable positions in new and growing large total addressable markets and successful research and development investments that are generating top line organic growth. Looking back at our guidance in 2017, so a year ago in New York, we said overall guidance for growth for Edwards 9% to 10% fueled by different business unit growth rates you can see on the left. Turns out it is a year that looks a little bit like we thought it would look like a year ago, albeit with some ups and downs in TAVR where we increased our guidance to the high end of that range during the year and then lower later we lowered the guidance back to about 12.5%. But overall, a good year and we're pleased with what we think the results are going to be.
Beyond sales, we also are expecting similar results to what we projected with the exception of a little bit higher, a lot higher EPS driven by a lower tax rate from tax reform last December.
It was
a good earnings per share year regardless, but it was even better as a result of the tax reform. Other highlights from 2018, corporate tax reform benefited tax rate by 500 basis points or 600 basis points, more than half of that was reinvested to accelerate different growth initiatives. We're also continuing to make significant investments in CapEx and that CapEx investment cycle will continue for the next couple of years. This year, we expect CapEx to be over $250,000,000 to fund new facilities and expansion in the U. S, Costa Rica, Ireland and the Dominican.
We are making a decision to impair some intangible assets associated with Cardioband And this ties to what Bernard talked about earlier, the redesign of the Cardioband trial in the U. S. We're still working on the numbers right now, but assume that it's going to be somewhere in the neighborhood of a $100,000,000 adjustment reduction in intangible assets for that business.
And finally, we bought back a lot
of shares this year. So almost $800,000,000 in share repurchase, including a $250,000,000 accelerated share repurchase that we completed earlier this Q4. Turning to 2019, we're expecting 9% to 12% top line consolidated underlying constant currency growth. It's really reflecting growth across regions and across business units. It's important to note that that growth is going to be back end loaded.
So you've heard during the presentations this morning a lot of discussions about expecting late 2019. So in the Q1 2019, we're expecting growth rates probably below the bottom end of the ranges that we provided. We'll give more specific guidance for the Q1 in January, but know that the second half of twenty nineteen will demonstrate based upon our forecast higher growth than the first half. In terms of guidance by product group, you've seen this in the press release that we sent out this morning, 11% to 15% underlying growth just for TAVR. So remember, we separated now our historic Transcatheter Heart Valve Therapies Group into TAVR and into TMTT.
So TAVR alone 11% to 15%. For transcatheter mitral and tricuspid, we're expecting around $40,000,000 in sales. Surgical structural heart 1% to 3%, critical care 5% to 7% and for total Edwards 9% to 12% organic growth. In TAVR, as Larry described, we're still pursuing a large under penetrated patient population and there are 3 growth drivers that we're really looking to in 2019. The first one is continuing market growth lifted by PARTNER 3, the data release later in 2019, the expected label expansion.
2nd is new products. So we'll have a full year of SAPIEN 3 Ultra. We're continuing to roll out CENTERA and we think those will be beneficial, especially get into the later part of 2019. And finally, the therapy awareness programs that Don talked about last night and you've heard about more this morning. Headwinds for TAVR include competition and reimbursement pressures.
In terms of some more specific themes that we think will impact our business in 2019, we think the global industry will continue to grow in the mid teens. We believe that the Partner 3 results, as Larry said, will be favorable at ACC at March and our sales guidance reflects the benefits of that assumption that the trial will be successful. We are expecting LOTUS mid year 2019. We're expecting that Portico gets approved late in 2019. And as a result, we're expecting modest share erosion during the course of the year in the U.
S. We're also expecting a modest decline in average selling price resulting from volume discounts and rebates for centers that are earning those at higher volume thresholds. And we're not assuming in our numbers and our guidance any significant impact from litigation. PMTT, 3 priorities, increasing production and trying to get through these production capacity PASCAL, mitral e launched by mid year and we're PASCAL mitral E launched by mid year and we're expecting continued clinical evidence and favorable data to support the regulatory approvals and expansion and other TMTT platforms. In terms of surgical structural heart, three priorities in 2019, inspirus driving sales and continuing to overcome the cannibalization from TAVR.
2nd is accelerating growth in regions that are less penetrated by TAVR. And the third, while we will contribute minimal sales in 2019, we believe is reactivating, relaunching ARPU. In critical care, you heard from Katie the 3 priorities rolling out HemoSphere, Acumen IQ and continuing to work on pioneering smart monitoring technologies. Turning to profitability. We are investing aggressively for long term future organic growth while also expecting to deliver improved margins in 2019.
Let's start with gross profit margin. So sales mix, we believe will be positive. Global Supply Chain, probably a net neutral and I'll talk about that in a minute. FX, we're expecting almost $100,000,000 in headwind based upon today's rates, which will be offset and more than offset by the time we get to earnings per share. And the net impact of that is going to be 76% to 78% gross margins for 2019.
That's our guidance. Let's just go through some of those in a little bit more detail. In terms of sales mix, continuing growth of TAVR, which is one of our higher margin business, of course, is going to offset some of the new product margins that will come lower than they will build to as we grow volumes of those new products. But generally, when we introduce new product, it comes at a lower gross margin. And as we get lines leaned out and volumes improve, we see higher gross margins.
In terms of supply chain, there are a number of different things we're working on in supply chain that will benefit our gross margin, including increasing capacity, aligning production with our global sales channels, creating redundant supply and upgrading our shop floor ERP systems. Now those also come with costs, but net benefit I think is going to be evident in the years ahead as we continue to see capacity come online and getting benefits of the scale up that we're in the middle of funding with these brick and mortar investments right now. Quality, you've heard us talk about our quality system and the integration in particular Valtech into our Edwards corporate quality system, we're continuing to invest in doing that both for our own internal processes as well as with suppliers. FX, I mentioned before, and I'll show you the numbers in just a second, but it's a $90,000,000 FX headwind at the sales line today. Other things we're working on and funding this year in 2019, we'll be funding the medical device regulation requirements that will cost us about $15,000,000 We're seeing typical inflationary pressures on materials and labor and that we're trying to overcome those with some of the lean initiatives that I mentioned a minute ago.
Turning to R and D, research and development this year we're a step up in R and D as a percentage of sales to fund a lot of the different program activities that you've heard about this morning, especially in TAVR and TMTT. TAVR will remain our biggest source of investment of R and D dollars followed by TMTT in 2019. And we're also making targeted investments to support surgical structural heart critical care. Today, about a
third of our R and
D expense goes to fund clinical trials, the other 2 thirds is on the research side. Turning to selling, general and administrative expenses. We're funding this year at an even greater level investments in disease awareness and therapy awareness initiatives. Again, the types of things we talked about last night that we talked about in the THV or the TAVR presentation this morning. We're also ramping up teams to support our commercial and our clinical activities in TMTT in Europe and that hits us at the SG and A line.
In terms of earnings per share, in 2017, our EPS was $3.80 This year, our guidance, which remains unchanged from October is EPS of $4.60 to $4.75 and we expect that to go to $530,000,000 driven by these different buckets, principally improvement in operating performance with some contributions from FX. So we've got these option contracts that I'll talk about in a minute, but those are more than offsetting the headwind and the reduction in translation of OUS sales. And the third is a combination of tax rate and reduced shares outstanding that contribute a $0.08 to $0.07 a share. So to summarize our guidance across the board, you can see this inventory here. Note that on the right hand column, net interest income is $10,000,000 set expense in your books, it's net income, net interest income of $10,000,000 in 2019.
Our tax rate of 12% to 14% reflects 3 to 4 percentage points of contribution from this excess tax benefit accounting convention that we started recording now. It's unpredictable. And so one of the reasons why we've been showcasing more and highlighting more operating margin is because our EPS gets affected and volatile as a result of this accounting convention. So I'll spend a minute just talk about longer term guidance. We don't give longer term financial numerical guidance, but we do want to share with you what we think the pushes and takes will be over the next couple of years.
Gross margin this year I mentioned is going up, but principally it's going up because of FX. Longer term FX were neutralized, we'll get improvements from mix and improvements from just better overhead absorption offset by the introduction of new products, which generally as I mentioned come at a lower gross margin in early days. Research and development this year going up to 17%, 18%, we think is probably a high watermark. Longer term, we expect the top line to grow faster than our investments. SG and A this year, 28% to 29% is probably a good modeling assumption longer term as a percentage of sales.
Our operating margin, we expect and plan and our strategy is to continue to improve operating margin modestly over time. We could improve operating margin more significantly, but our primary focus and our strategy is to really invest for long term top line growth and so that tempers our desire and our ability to improve operating margins significantly in any one period of time. Our tax rate we believe right now at the 12% to 14% range will probably go up over time. We just got a new 750 page interpretation document from IRS that is yet more residual impact from tax reform last December 22. So we're working through that.
But we think longer term our tax rate is probably going to be higher than where we're running today. Outstanding shares over time, we're planning to continue to bring down at a minimum when we buy back stock, we are offsetting the effects of incentive compensation and the dilution from exercise of stock options. But in addition to that, we like to reduce our net shares outstanding over time through share repurchase. We do have an effective foreign currency hedging program in place and it really does 2 things. 1, we hedge cash flows and monthly we're entering into forward costless exchange contracts, especially for the euro and the yen, but some other countries some other currencies as well.
And it enables us to give more predictability, less volatility on our EPS guidance. We're not getting away from the impact of FX, we're just deferring it by about a year. We also hedge our balance sheet exposures and we typically try to hedge 100% of our receivables in payables exposure in major currencies. Finally, we're trying to be very disciplined about how we utilize our capital and our two priorities today for cash flow are to invest in research development and to invest in growing our capacity. We're also expecting to increase our CapEx in 2019 to around $350,000,000 and that reflects brick and mortar investment that I mentioned earlier in the U.
S, Doctor, Ireland, Costa Rica and continuing to build capacity and make investments in our existing facilities here in the U. S, Irvine, Salt Lake City and in Singapore. In terms of returning capital to shareholders, we're really looking at plans to repurchase shares next year and we'll talk more about that as we get into the year, but we've got about $500,000,000 of repurchase authority remaining. And so expect that we're going to continue to be repurchasing shares using the same methods that we've used historically. So accelerated share repurchase, 10b5 programs and open market repurchase programs as well.
So that's predictable. We try to be opportunistic about it, but that is our principal plan for returning capital to shareholders. Finally, those three financial strategies are really set on improving long term shareholder returns. We look at TSR, management gets compensated on TSR. We have a pay performance pay for performance plan that really is across senior leaders, across Edwards.
And we've got a tenured management team and a consistent strategy. So none of this should be very new to those who have been following Edwards for a long time. We continue to expect it to yield good results for shareholders. With that, Mike, we'll turn it over and we'll do closing comments and then we'll open it up for Q and A after Mike's done.
Scott? Yes.
All right. Before Q and A, let me do a little bit of wrap up here. So you know our strategy. It's a differentiated strategy. We are proud of it.
It works well for us. If you were to walk around the halls of Edwards, we spend less time talking about how we beat the competition. We spend more time thinking about how we have transformative therapies, how we beat these diseases, that's where the real opportunity is for us. So we think this strategy positions us well-to-do that. We're in a nice position in each of our businesses.
And transcatheter aortic valves, you know how big this opportunity is. It's been one of those remarkable procedures that you maybe see once in a lifetime where it really is transformative. It's got a long way to go and we have our foot on the gas in all areas, right, whether it's indication expansion, therapy awareness or new technology. And we believe there is so much more that we can do for the world in this space. Transcatheter mitral and tricuspid, this one is a rich We call it a business.
We are reporting it separately as a business. If you We call it a business. We are reporting it separately as a business. If you look at the business, it's almost all spending, nothing coming in right now. But that's sort of the nature of it.
But we sincerely and Bernard talked about how broad this is. We are sincerely committed to the long term because we're believers that we could make a difference in this disease state. In the area of surgical heart valves, we're committed to be the partner of choice in surgery. It's easy to sell LG with these catheter based technologies, surgery. It's easy to sell, gee, with these catheter based technologies, we're going to need less surgery.
Surgery is going to stay a vital, vital importance and we're going to be the surgeon's best friend. We're going to provide them with the tools that they need to do the critical jobs that they need to do in the future. And in critical care, it's a very exciting time. We are able to now do what Katie calls smart monitoring, right, to start applying some tools that have never been available to us before, feed it with data and allow clinicians to make better decisions to get these patients through really tough surgeries or get them out of a critical situation. It's an exciting time in critical care and we're excited about embracing this as well.
So 2019, it's going to be a nice year. We're going to have my expectation is we'll be able to put double digit growth up there. That's what we're going to go for, of course. There's going to you're going to see a lot of momentum in TAVR is still going to go, transcatheter mitral, you know what's coming in that space. Our core franchises of critical care and surgical structural heart are also we think going to be very robust and strengthen their leadership and we're going to make these investments in the future.
Scott mentioned, we probably never spent anything like this in research and development before. Maybe this is our hard watermark, but there's so much clinical work that's happening. A matter of fact, when you look ahead, we've never had this kind of a profile before. About half of that maybe comes from the fact that TMTT is in this growth spurt, so many clinical trials. But really across all of our businesses, even in critical care or what you see the groundbreaking trials that are going on in TAVR, we have a lot happening and we're planting seeds today.
What we're living off today are seeds that were planted years ago. We are planting seeds today that are going to matter not just 1 or 2 years from now, but 5 years 10 years from now and we are committed to do that. We take being a good corporate citizen, a good citizen in our communities seriously. When we set goals for ourselves and so forth, we align it with our aspirations. It's not, okay, stop doing Edwards business.
Okay, now let's go be a good corporate citizen. It's kind of integrated. It's who we are. We care about it. And it's one of those that's just part of our fabric that we've been fortunate enough to win some awards, but we never do it with that in mind.
We do it because that's kind of the nature of the employee base here at Edwards. I'm really proud of our Board of Directors. They are strong. They are independent. You'd be pleased if you were able to watch Board meetings.
They're strategic. They're close to our leadership team. They're supportive and they care about shareholders. They expect us to live by our credo and to create shareholder value and they are very mindful of that responsibility. We're fortunate, very fortunate to be a successful company and to have nice earnings.
Part of what we like to do is to be able to give back to those that are less fortunate. We do some things in our communities where we live and work, but we also do some strategic things. We've talked before about this core big bold goal we took on, which we call every heartbeat matters. And that is to impact 1,000,000 underserved people through education, screening and treatment, right, for heart valve disease. We set that goal back in 2014.
We're pleased to say we actually reached the goal this year. And so, we've just expanded it to 1,500,000 people by 2020. And we're proud to go after that. Another key part of philanthropy at Edwards is to ask our team to get involved. We actually aspire that 100% of the employees of Edwards do something charitable every year for something they care about and they embrace that and impress us with what they do.
So we've got a culture and I think it goes along with joining the med tech industry. I think you tend to be that kind of a person who is a giver. So, I'll just summarize by saying that on our core is our patient focus. It's why I sleep well at night knowing that all of our employees know and they have in their heart that it's patients first. When we do that right, then it sort of gives us permission to do all this bold innovating.
We've got a differentiated strategy and we've talked about that quite a bit. I'm really proud of our R and D efforts. If we don't crack the code on these really tough clinical problems, we don't fulfill our mission, but we have an extraordinary team and it's getting stronger all the time. Because we're focused, we're able to and we work hard at maintaining credibility with all those stakeholders that are so important. The physicians that we serve, the regulators, the payers, they need to trust us.
We're doing important work. We're expected to be part of the team that saves lives. And so it's one of those things that's most important for us. And because we're kind of narrow and focused, we can be nimble and agile. And when we get all that right, you should be able to generate the returns that would make shareholders happy and we really care about doing that as well.
So, I'll stop at that point and we'll just open it up for Q and A for Scott and I. Go first, Larry.
Larry Biegelsen, Wells Fargo. Mike, 2 for you. First, you're not first in mitral like you were in TAVR. So can you eventually become the market leader of mitral and is the 60% share still at mitral like you have in TAVR plausible? And just second, Mike, I'm going to ask a similar question as I think Joanne asked earlier.
Your confidence in the $40,000,000 PMTT guidance in 2019? I'm asking because obviously the last 2 years, you've missed that guidance number. So I just want to hear from you, your confidence in that. Thanks for taking the question.
Yes. 2 things. 1 is, when it comes to Transcatheter, Mitral and Tricuspid, we're singularly focused on being leader, nothing short. We're not interested in being number 2, not a close number 2, not a number 3. We want to be leader, period.
Our strategy is designed to make sure that we lead the field. And that's all aspects, not just in market share, but the way we behave, the problems we solve, the breadth of our portfolio, the number of patients that we're able to touch. In terms of our guidance, we always try and put guidance out there with the idea in mind that it's realistic guidance. It's challenging. Is it conservative?
Is it aggressive? We really believe that our guidance for 2019 is realistic. We wouldn't say it if we didn't believe in it. And so, we do have clear belief in it. We take that as our responsibility when we share that kind of guidance.
Yeah. Thanks.
Hi, good morning. Danielle Antalffy with Leerink Partners. Thanks so much for taking the question. Just a quick question on guidance. I appreciate you guys provide a range for a reason.
Where do you see the biggest risk that puts you at the low end versus the high end and then high end versus low end as far as by business segment or
Be my guest, Scott. Well, you've heard
a lot of the
puts and takes during the course of the morning. I think a lot of it has to do with timing. So for example, we're doing this targeted rollout of Ultra in Europe and to the extent that that accelerates faster that could push this up towards the higher end of the range. CENTERA similar in theme. I think that the TMTT portfolio and the timing on the approval for PASCAL and when we introduce PASCAL in the market will be influential on whether we end up at the higher or lower end of the range for consolidated Edwards.
I think really that's probably going to be the bigger drivers is timing on our own initiatives. Some of it will also be influenced by competitive entry, for example, in the U. S. With 2 competitors coming in the U. S.
In 2019.
Okay, great. And then just one quick follow-up on share repurchase. What drives you to do how do you decide whether to do an ASR versus a standard buyback? And then also, what percentage of free cash flow are you willing to commit to share repurchase?
So we use all different methodologies and mechanics for share repurchase. Part of it's driven by how quickly we want to retire the shares. So in an ASR, we need to retire about 80% of the shares in the trade immediately. And so that's an immediate benefit to share count and earnings per share. It's less, I think, driven by trying to time the market.
We're really a little more agnostic and try to dollar cost average. So it's partly what we think the market conditions are like in a particular period of time and partly how quickly we'd like to retire shares. And then we're doing open market repurchases just as we see favorable windows of opportunity to go in and get shares right away, even if we don't have them being covered in a 10b5 program, for example. We're not going to commit to a percentage of free cash flow or any other kind of metric for share repurchase. We try to be opportunistic about it.
You'll see some periods of time when we're probably more aggressive than others when we're less aggressive. Part of it is also influenced by acquisitions. So as we're making investments externally, minority investments, seed capital, options to purchase companies, outright acquisitions of companies that probably tempers our appetite for share repurchase in a given period.
David Lewis, Morgan Stanley. Scott, I just want to come back to a comment, a few questions regarding maybe one quick on gross margins. You made a comment the Q1 coming in below the end of the range. Let's call that 10% midpoint of your guidance is closer to 13%. So Pascal is worth about a point, but I hope you could just unpack for us first half versus second half, why is there a big spread between the 2?
And related to that, you said new legal decisions in your guidance, but there is an existing decision in the UK. Is that in the first half number?
So, I thought you mentioned gross margin, you mean just sales?
I'm going to
come back to gross margin. Revenue first.
Okay. So, just on revenue and what I said was below the bottom end of the range of full year guidance in the Q1. Again, we'll be more precise about that next month when we give the Q4 results and guidance for Q1, but at this point, that's what you should expect. Danielle asked about the puts and takes. I think that's the answer I gave before is probably as representative as I can be about that.
There were some year over year issues. We had a strong Q1 across the board in 2018 and that will influence the year over year performance in the Q1 of 2019. In terms of litigation, there are a whole bunch of different scenarios that could play out. We've got proceeding underway in the U. S.
Right now. We've got another proceeding later this month in the UK. And because it's difficult to predict what discussions to continue for some period of time in different jurisdictions and proceedings to continue over time. We're just not factoring in any assumptions about impact positive or negative from litigation.
Once again, my impression was the UK decision was sort of out of
the control of corporations. It was a judge driven decision.
So I was curious, it sounds like that's not in the number for the first half of the year if you're
joined in the UK? So the expectation is that we will be in May, if the stay expires. So SAPIEN 3 at this point without any other kind of influence would be off the market in the UK. However, we have CENTERA that we can also introduce in the UK that's not a part of these proceedings at all.
Okay. And just last on
gross margin, if I think about your gross margin guidance, is the way to think about this year, the positive mix benefits are offset by some of the investments and the real benefit to GP is largely FX, that one to two points is majority is FX?
That's exactly right. The improvement in GP guidance for 2019 over what we think 2018 will look like is largely FX.
Okay. Thanks. Isaac from Goldman Sachs. So TMTT, I want to talk a little bit about your assumptions behind the $1,000,000,000 opportunity you see in 2021. And the reason I ask is it seems a little conservative if you look at probably where Microchip will be at that point in time on the trajectory they have and of course some of the things you guys are working on.
Maybe help dissect the framework you applied to get to that $1,000,000,000 number. And Mike to your earlier comment on wanting to be number 1, that seems like a 3 year or more kind of goal to get to that point, just given the math here. Just help us think about when you guys will be able to confidently say, hey, we've hit our number one goal.
Sure. When we talk about the PMTT guidance, we are probably more focused on we didn't really update 2021. You are right. You could arguably say, yes, it could be faster based on the tailwind that comes from the COAPT trial. So, no argument there.
We just we put our marker out there in 2024 more to be similar to what kind of a marker we have out there in TAVR. In terms of when do we want to be leader, tomorrow will be fine. I mean, we are very serious about that. You know what kind of a portfolio and what kind of a more importantly, what kind of an effort that we are putting in that area. We think we can make a big difference.
I don't know when numbers change. I mean, we are not really giving long term guidance at this point. Much is going to depend on the quality of the data that we generate in the near term with these new technologies. If that quality of data is really strong, then we're going to go faster. And if there's issues that we need to address, then we're going to go slower.
And so we're going to have to play that out.
Great. So, follow-up for Scott on the TAVR market
assumption for 2019, you talked about mid teens.
It'd be helpful to understand. You talked a just trying to compare how you think pricing will look for the overall TAVR industry relative to what you're going to see?
It's tough to say. We've traded a significant price premium in Europe. In the U. S. Up until this point, I think there's been comparable pricing across different offerings.
But I think over time, we're expecting that the ASP will come down, at least for us. We can do whatever we want with our pricing. We can't really control necessarily what others do. But we've been really focused on trying to offer incentives for higher volumes at different centers and that's going to drive ASP down over time. That's what we model and that's what's in our guidance as we talk about $7,000,000,000 in 20.24 for TAVR.
But commenting on investors pricing is tough for us to do competitors pricing is tough for us to do.
Bob Hopkins from BofA. There we go. Just one question and it's on not the long term, but on the 2019 guidance for TAVR at that 11% to 15%. It's just it's a little higher than what I thought you were going to give. And the reason is that obviously Boston could get approval earlier some of the UK issues.
I was just wondering why you weren't just a little more conservative than that TAVR. Boston obviously a dominant, dominant company when it comes to interventional cardiology with good relationships. And so just curious why you weren't a little more conservative with that guidance?
Yes, it's tempting. Mike mentioned this earlier, it's tempting to say, let's put on a number that we are sure we can beat and we're just that's not our approach. We're really trying to call it the way we see it and we've got a process internally that's really integrated. It starts with long term strategy planning during the beginning of the year. The management team and the Board approve that strategy mid and late in the year and then it rolls right into our operating planning process.
And that AOP that we set up is really the basis for the guidance that we provide to you all today. And so, we're trying to give you a realistic sense of what we think the range of outcomes will be, and we'll hopefully be within that range. I think this year like I said we feel really good about where we turned out notwithstanding the up and down that we had in TAVR during the course of 2018.
Thanks. Josh Jennings, Cowen. Just had one question on CENTERA and another follow-up question on the TAVR guidance. But on CENTERA, huge win, single arm, 1,000 patient kind of registry trial, if you will, not a registry, excuse me, but a single arm prospective trial. I mean, can you give us any details on how you got there?
Should we be thinking about CENTERA low risk design potentially being a single arm trial as well, huge win, but also is there competitive risk now that other devices may be single arm trials in intermediate risk and high risk, extreme risk all
in one bucket? Well, what I hope I say this correctly, but what we have the ability to do with CENTERA is to use a previous control group, right. And so this control group that Edwards did in an Edwards trial, what we would argue is a contemporary control group for surgery is one that we can use in the CENTERA trial. Other companies, if they've already done a large randomized trial and have a control group that's comparable, could do the same thing. I just don't know that other competitors have that.
That's helpful. And then any comments on the pace of enrollment in the US ID trial for CENTERA? And then also just on US TAVR guidance, we think about 2018 and the headwinds that were in play. Is it is the correct math, you had about 100 basis point headwind on U. S.
Royalties and 100 basis point headwind on U. S. Clinical trial revenue and basically this 12.5% worldwide TAVR performance that you're guiding to is actually potentially 2 points higher on the commercial side? And is there a U. S.
Clinical trial revenue tail from the 2019? Thanks a lot.
Scott, I will answer the CENTERA and you should take on the second part of the question. On CENTERA, we expect it to roll pretty quickly. Right now, we have estimated that enrollment would complete in 2020.
On TAVR, you are right, we had a headwind this year over year because in 2017, we overachieved the royalty expectation. We got almost $60,000,000 in royalty in 2017, 2018, it looked more like $40,000,000 So yes, from that standpoint, it looks like lower year over year growth. But when we talk about growth in THVT, we typically are talking about procedural growth, not just the revenue growth, which is inclusive of royalties. In terms of next year, I think you should assume that we're assuming $40,000,000 in royalties, so somewhere to 2018 and that's baked into our guidance for TAVR. We tend to think now about clinical trials as being part of commercial and they range anywhere from a point or 2 as a percentage of sales.
I wouldn't say there's anything really significantly different in terms of clinical as a component of overall sales for TAVR.
Hi, Glenn DeBarrow with RBC. Two questions. First for Scott, in one of your slides, you talk about the outlook beyond 2019 and you talk about gross margin going higher and operating margin going higher. Over time, where could these margins go? Can gross margin over time go to 80% and operating margins over time go to 35%.
That's for you. Then for Mike, can you give us your view on embolic protection? Years ago, you bought an embolic protection company that did the technology never materialized. Boston Scientific now has Claret. We all think that they'll use that to bundle LOTUS.
So what's your view on embolic protection, something that you need to have and does Boston now have an advantage with the Claret? Thanks.
So, I'll start on margins. If we decided to stop growing, yes, our gross margins could go closer to the high 70s and our operating margins could go to the mid-30s, but we're not going to do that as a result. I think our gross margins will probably be similar to where they are and have been for the last couple of years. So, call it mid-70s is probably a good modeling assumption. And again, it's because as we introduce new products that come at a lower gross margin at least right out of the chute, it tends to constrain the ability for the mix improvement to drive gross margins up.
Similarly, at the operating profit line, we're just investing aggressively in SG and A and in R and D to support the growth of these new product initiatives, and we're going to continue to do that. There's no real structural limitation on what kind of EBIT margins we could generate. It's more a strategic decision that we're going to really focus on driving top line organic growth.
Yes. And on embolic protection, I think to your question, will it become a bigger issue? Will it be discussed more at meetings? Will it potentially be a factor in bidding? All those things are possible.
You put embolic protection in the hands of a large strategic company, I think that's likely. Does it change our view? No, it doesn't. We stay focused on what difference do we think it really is going to make to patients. If we look at their actual data set in terms of what it did for patients that got a SAPIEN three valve, it didn't help them.
As a matter of fact, it may have been a decrement. And so we continue to take solace with the fact that there is a reported stroke rate in our last trial, PARTNER II trial that was around 1% of debilitating stroke. We will have some new data coming out at the ACC in March and we will see. I just don't expect that it's going to be that sort of issue. Thanks, Jason.
Thanks, Mike. Scott, I guess for you first. You sort of walked us through how you do your planning, starting at the beginning of the year, long term planning, end of the year, it sort of rolls into your guidance for 2019. Unless you were very, very pressured, which I'm sure you are to some extent, probably couldn't have predicted the positivity that came out of COAPT. So I'm wondering, did the COAPT data change your profile for R and D and ultimately earnings when it came out?
Did it accelerate things to an extent that it actually your R and D budget went up sort of towards the end of the year as you finalized your process?
Yes, it's tough to isolate one influence on how we plan, but certainly COAP was influential. And as Bernard talked about, I think we would have originally planned to be getting more clinical revenues from Cardioband in the U. S, because we're redesigning that active trial. We'll end up getting more PASCAL as a composition of the total TMTT revenues in 20 19. So yes, it was certainly influential.
I think if anything, we're more confident now and feeling more aggressive about investing in transcatheter mitral and tricuspids because of what we've learned over the last several months.
Thank you. And as a follow-up, Mike, just a broad question on TAVR. You and others have demonstrated outcomes in stroke, paravolvial leak that I'm sure can be improved, but there's less room for improvement than there was 3 or 4 years ago. So what do you think the next competitive frontier will be in TAVR?
Yes. So Larry shared with you that we've got next generations program, one that's more evolutionary and other more revolutionary. We tend not to make talk about granularly what that would be, but we think that we can make this procedure much better than it is as good as this procedure is, both in terms of making it something that's easier and more mistake proof for clinicians and also to be able to improve performance for patients. So I'm going to have to leave it at that. Anybody want one last question, Isaac?
Thanks, guys. This is Vijay Kumar from Evercore. So maybe just one on guidance. Scott, the Q1 guide of below the low end of the range, does it contemplate Boston launching LOTUS in Europe? When you think about the 11% to 15% range for the year, you have critical care and saver coming in below those ranges or below 18%.
So that implicitly assumes TAVR accelerates. Is that the right way to be thinking in a post lower risk taper TAVR acceleration?
Yes, we're expecting a TAVR acceleration probably starting in Q2 and even more so in Q3 and Q4. I hesitate a little bit because last time we forecasted a higher second half than first half, it didn't come to pass for a couple of different reasons. But based upon what we see right now, the Q1 is looking like it will come in lower than Qs 2, 3 and 4.
And is that assuming Boston launches Lotus in Europe?
Yes, with Boston, I guess the guidance we can share is what we talked about in the U. S, which is they come to the U. S. In mid-twenty 19. In Europe, I think it's tough to call by country what their activities are going to be for LOTUS.
So thanks all. Like we do with our employees, we never like to end the meeting without sharing a patient story and we've got one to share with you now and I hope you find it informative.