Good morning. I'm Josh Jennings from the TD Cowen Medical Devices team, and we're moving through the medical devices track here on day two of the 45th Annual TD Cowen Healthcare Conference. We are excited to have executives from the West Coast and Edwards Lifesciences joining us once again. A brief introduction: we have Scott Ullem to my right, Chief Financial Officer and Senior Vice President of Finance, Mark Wilterding. Gentlemen, thanks for supporting our efforts and participating once again here in Boston at our conference. Great to see you in person, as always. Maybe I'll just start off and just, you know, you guys have implemented some strategic moves with executing the spin of the critical care business, tacking on some new categories in terms of interventional heart failure and devices for aortic regurgitation.
Maybe Scott, to start, we could just talk about how 2025 is kind of, in so many ways, a rebasing year for the new Edwards, and the playbook from here, is it still category leadership, which I think you've been clear about in structural heart, which includes interventional heart failure, and continuing this high level of R&D to maintain your position there. But maybe talk about the strategy and then just the margin potential expansion as we move into 2026 and beyond.
Yeah, sure. Happy to do it. And thanks for having us, Josh. It's good to be here, as always. We feel really positive about the way we're set up now as a company focused solely on structural heart. So we have therapies for patients who suffer from valvular diseases and patients who are suffering from non-valvular diseases, but they're all in the area of structural heart. You know, our biggest business, of course, is TAVR, and we're continuing to grow TAVR and feel positive about the impact of the results of the EARLY TAVR clinical trial that was released last year that we think opens up the pathway for patients who have severe aortic stenosis without symptoms. So we're expecting the guideline to change to accommodate asymptomatic patients this year in the U.S.
And then for the guideline to evolve and for the NCD to evolve as well, which will be an even bigger influence to this multi-year growth opportunity that we have for TAVR. And TMTT, we've got this really neat portfolio that's come together of therapies for patients who are suffering from mitral regurgitation and tricuspid regurgitation, and we have both repair and replacement technologies to address those diseases. You mentioned heart failure as well, which is an exciting new opportunity for us, but early days. So we think the patient population is even larger for patients who are suffering from HFrEF and HFpEF than patients who are suffering from valvular diseases, which is the reason why we took a real interest in this and because there's a lot of overlap between patients who suffer from mitral regurgitation, tricuspid regurgitation, and patients who end up developing heart failure.
And so there's a connection there from a disease perspective, and there's a connection there from the perspective of devices that we can design and produce that are in the area of structural heart. In terms of research and development, which you asked about, Josh, we're an aggressive investor, and we invest to grow the top line organically and have done that historically successfully, and we expect to continue to do it. At the same time, this year in 2025, our R&D spending will be flattish across quarters, and we expect that our R&D investment as a percentage of sales will decline over time. In fact, we're expecting 50-100 basis points improvement in our operating margin annually starting in 2026. So that, I think, touched on some of your questions there, Josh.
Absolutely. And thank you for handling that multi-tiered question so effectively. I mean, wanted to, and just on 2025, you guys have issued guidance 8-10 corporate-wide fourth quarter, and TMTT contributed stronger than expected. TAVR was kind of as expected to a degree. And wanted to just start on the transcatheter mitral and tricuspid franchise and then tricuspid specifically. The EVOQUE launch, as you guys continue to be methodical and have success and drive new account penetration and volume growth. And wanted to just test, just to review just your outlook on the tricuspid market. You have another tool that you're going to introduce into the Edwards toolbox with PASCAL TR down the line.
But maybe just talk about that market, early launch trends, just both on the repair and replacement side, and can we see this market evolve into a $1 billion-$2 billion market in the next five-plus years?
Yeah. Why don't, Mark, you start in EVOQUE, and I can talk more about the PASCAL and the overall opportunity for TMTT.
I think in terms of the launch itself of EVOQUE, methodical is a good word to use, Josh. That's how we're thinking about it too, and that's kind of how we've thought about the launch from the beginning. Our team has a very well-defined strategy to broaden it over time, but we want to make sure first and foremost that the outcomes with this device are as good as possible right from the start, and then to get to a point where they are reproducible and we can determine kind of how long on average those procedures will take, which today is running right around an hour, which is excellent. The outcomes have been good. The feedback from physicians has been very positive. They like the device. The before and after with these patients is tremendous.
And you maybe heard Daveen, the leader of our TMTT business, talking about it on the Q4 call. Some of the patient stories that come out of these are really amazing. And this is a disease that previously was not treated. They called the tricuspid valve the forgotten valve because there weren't surgical alternatives to treat these patients. Medical management was often varied in terms of the outcomes there too. So it's really rewarding, I think, to have now a portfolio of products that can treat patients with TR. And you want to touch on the market itself between PASCAL and.
Just overall, you mentioned the multi-billion dollar opportunity here, which is the reason why we've been investors in mitral and tricuspid therapies for, boy, almost 10 years now. We think that tricuspid is a sizable opportunity, and we're also really excited about the PASCAL device that could be used to treat patients with tricuspid regurgitation. And on the mitral side, similar story where PASCAL can clasp these leaflets together in a regurgitant mitral valve. And we've got another replacement device that we expect to get approved as well. We can talk about that if you'd like.
Maybe just for a couple more questions on the tricuspid franchise. Just as we think about, I mean, we've heard from clinicians as others have too, just about there's going to be learnings in the real-world experience. Patient selection is a big one, and honing in on which patients will benefit most from a tricuspid intervention, particularly a replacement, but also repair. As we think about that and then just procedural efficiencies, I mean, what are the next steps just on the data front to help the clinical community kind of become more effective in patient selection and potentially also show outcomes? I think you're going to continue to follow up on TRISCEND II in terms of, may see a mortality benefit at some point in year two, year three, year four. I mean, we don't know.
But any other clinical evidence build out that we should be expecting for EVOQUE?
You're right about patient selection. It's a key part of the process. And I think there are some obvious cases, right, which Scott touched on with respect to the leaflets. And in the case where the leaflets are not coming together as they should, preventing a clip approach, then a replacement valve is a nice option for those patients, certainly. In terms of what to look forward to, we anticipate, and we've been saying this for a little while now, NCD at the end of this quarter. And so working towards that. Additional data, you're right, certainly. We showed one-year data at TCT last year on TRISCEND II. We will continue to follow these patients. A little premature to speculate on mortality benefit or anything like that, but quality of life is tremendous.
And going back to the point I was making earlier, the before and after's, when you talk to these patients who have been treated with EVOQUE, it's stunning. I don't know if there's anything else you want to add to that.
Just from the workflow perspective, you know, I think a CT Edwards team evaluates and then has a team schedule the procedure and guide the provider team to make sure the procedure goes well and that they're delivering the best outcome as possible. How does that all evolve? Do we ultimately see centers evaluating their own CT results and sizing up the EVOQUE valve or determining whether the patient is a candidate? And does that effort from the clinical team from Edwards, the manpower, woman power, get reduced at some point? And how do you see that evolving?
We're just at early stages still. You know, we're in the initial introduction and launch of EVOQUE, and we're learning along with the different centers that are active in treating these patients with the EVOQUE technology. You know, in terms of the workload split and sharing the responsibilities, at this point, it really is a partnership. It's not either/or. The Edwards people out in the field are embedded with and integrally connected with the imagers and the operators who perform these procedures. For the time being, we're going to keep it just like that. It's really constructive to have this partnership, and we're learning, the centers are learning, and we share the objective of making sure that patients have great outcomes.
Maybe the last question on the tricuspid replacement front. It sounds like from the fourth quarter update, you indicated earlier, late last year, that the Edwards team is as excited about the tricuspid replacement opportunity in these early days of the commercial launch as you were prior to approval. Is that the right assessment of the team's kind of sentiment towards the EVOQUE opportunity and tricuspid replacement?
Oh, for sure. No, we think it's a big opportunity. We've seen such favorable results since approval. And when you get the same kind of outcomes as the centers expand, as you did with the original trial sites, it's really encouraging. And we've seen physicians who have had these really amazing experiences and outcomes with their patients. And when that happens, a physician gains confidence and says, "I want to use this technology to treat other patients in need." And that's what we're seeing.
You guys have PASCAL TR in the pipeline. Maybe just help refresh us on how you guys are looking at the potential split. I mean, there's a lot of learning still. It's still early days with a repair and replacement device in commercial use currently. But is it a 50/50 split replacement versus repair? Do you think it could be 60/40 because of the quality of life benefits and the complete elimination of TR on the replacement side? In the out years, it doesn't matter to Edwards because you're going to have devices for both buckets. But maybe talk about how you see the market evolving and how PASCAL TR is going to be a big addition to the tricuspid toolbox.
Yeah. Well, we speculate a lot internally about what the ultimate split may be between repair and replacement for tricuspid. Same for mitral, by the way, what the split may be. And we don't know. It's too soon to say. But what is important is that we've got this toolbox approach where we can sit down with the physician and talk about agnostically repair versus replacement and try to help them determine what the right solution is for their patients or at least offer alternative solutions for physicians to decide which ones they want to use for their patients. That's the important part. It's a different conversation than if we only had a repair or if we only had a replacement.
To have the full toolbox ends up changing the dialogue with physician and changing the pathway that a patient can take as they're trying to get through these life-altering diseases.
Excellent. And just to remind us of the timelines of PASCAL TR when we could see U.S. approval or data and then submission.
We're working on, we're continuing to, well, maybe Mark you can help clarify for the second part of the question.
I think it was completely enrolled as of late last year. One-year follow-up is what we had said. No additional detail in terms of commercialization time.
Great. Great.
And then a couple months plus to go through the data and make sure that we've interpreted the clinical trial results, right?
Excellent. And thinking about PASCAL for mitral TR, you guys, it seems as if you're gaining traction in the marketplace, taking share. We had some positive feedback from some interventional cardiologists yesterday on a structural heart panel that we hosted that PASCAL was accounted for 80% plus share at their centers. Maybe just talk about the share capture trajectory. I mean, it's been, we're getting deeper into the launch, but where the commercial effort stands and how you expect PASCAL's share position to ultimately play out. Could you become the market leader over time?
You're right. And we're pleased with the performance of PASCAL, first with patients and second just in the marketplace. In the U.S., Europe, and Japan will be an important market longer term as well. It's not really about share. For us, it's really about growing the market. Keep in mind the TEER market, so the transcatheter edge-to-edge repair market, really has been driven by just one or two clinical trials. And so when we've introduced the results of our CLASP IID trial, it was additive to this body of evidence that physicians are relying on to determine whether TEER is an effective therapy for their patients who are suffering from regurgitation. So we're positive about our position.
We're really positive about our clinical trial data, but we're more focused on growing this early-stage market than we are about trying to capture a point or two of share here or there.
Just on the two different indications for Mitral TEER, degenerative and functional, CLASP IIF has continued to enroll. Any updates on that trial and ultimately unlocking that functional indication, which represents a bigger piece of the mitral repair opportunity?
We've said we're going to be continuing to enroll IIF through 2025. We haven't given any more guidance beyond that in terms of approval in the U.S. Keep in mind, we do have approval to treat patients with functional mitral regurgitation in Europe, and so we're active and have seen the technology work effectively for patients who are suffering from functional disease as well as degenerative disease.
And just on the follow-up for that study, has that been determined one-year, two-year follow-up requirement?
No.
Yes, no problem. SAPIEN M3, you guys have made a lot of progress in that clinical development program for mitral replacement. Maybe a similar question that I proposed for the tricuspid market, ultimately. I mean, I think the mitral TEER has been in place for a while. I think the assumption from our team, and I think the consensus view is that repair will be the dominant approach for a while going. But there are a significant number of patients that could benefit from replacement. Maybe just talk about that opportunity for M3 and what it can do for the TMTT franchise.
You're right. The mitral repair technologies have been around for quite a long time now. And so for some period of time, that will certainly be the largest sales driver. But we do think that mitral replacement offers an important alternative for physicians to consider for patients who have regurgitation and where TEER may not be the best solution. So we think it's a complement and will be a real growth opportunity alongside TEER for mitral regurgitation.
And just in terms of market growth for just transcatheter mitral interventions, maybe a little bit slower than the most optimistic view a couple of years ago. Some of that's been referral channel dynamics for the functional mitral regurgitation indication with the heart failure community. But more data will accrue. Should we be expecting acceleration with replacement, introduction of replacement technologies like SAPIEN M3, and then just more real-world data, but also some data that could be moving down the risk curve to open up the indication for more patients?
You just highlighted a lot of the drivers, Josh. I mean, it really is a combination of clinical evidence, clinical experience, new technologies, and all of those are coming for mitral and tricuspid. Big picture, it's the reason why we're so excited about this opportunity and why Edwards expects to grow 50%-60% in TMTT in 2025. Part of that is mitral, and we think it's going to be a really nice long-term growth opportunity for Edwards.
Great. And just moving into TAVR, which is still an awesome growth opportunity, huge market. You touched on the asymptomatic indication, label update, and I think guideline updates later in the year being a driver for deeper penetration into that new opportunity. I mean, we've been just in our checks over the last couple of years with interventional cardiologists. There have been this element of potentially asymptomatic creep. Do you think that's been in play? And has that muted any kind of push in the market just post-data presentation, or should we be thinking that the clinical community, the interventional cardiology community, and surgeon community are waiting for this label to expand and guidelines to be put in place?
Yeah, we're really excited about this and proud of the work the team has done. You know, this is, if you think about the evolution of TAVR, kind of the next step in the journey. And so we showed the data TCT last year. We think it will pave the way for indication approval around mid-year this year. You alluded to that. And then it affords us the opportunity to unlock this new set of patients and start treating them. So in terms of indication creep and whether or not we're seeing some of those patients already in the system, I would say yes, we're seeing them in the system. Are they being treated? Not really.
Yeah, there may be across all 850 sites, there could be some examples of that, but don't think it was a meaningful contributor to growth, for instance, in the most recent Q4 results that we reported a couple of weeks ago. But like I said, excited about the opportunity and think that longer term, this is kind of a setup for a multi-year growth driver for us.
If we think about the market and potential acceleration, asymptomatic's one driver. You guys have a study for moderate aortic stenosis, is another. We've got the TAVR-in-TAVR replacement cycle that could come at some point as some of these low-risk patients continue to survive out five and ten years. But maybe on the moderate aortic stenosis indication and the efforts there, sizable opportunity and could be massive, could be just as big as the severe aortic stenosis opportunity from a patient prevalence standpoint or if there's some modifications or just patient selection criteria that are put in place based on the data that's shown. But I mean, how has Edwards' sentiment evolved towards the expansion opportunity in moderate AS fared over the last year? I mean, you guys have been rolling the trial.
We haven't seen data yet, but maybe just to help us understand the evolution of Edwards' team's view on this new indication that's not that far away.
Right. Well, it's evolved, as have the views of physicians who participated in the PROGRESS trial. You know, this trial enrolled a lot faster than we had anticipated. And it reflects the fact that there's a belief and a concern that there should be earlier intervention for these patients who are suffering from aortic stenosis but haven't yet reached the severe stage of the disease. Keep in mind, the distinction between mild, moderate, and severe AS was sort of an artificial, arbitrary decision where a line was drawn. The reality is diseases don't affect patients that way. Diseases evolve and the disease progresses in such a way that it may be beneficial for patients to get earlier intervention, to get the disease addressed before the heart starts remodeling in a way that has negative consequences longer term for these patients.
I think our people are looking forward to seeing the results of the trial data as our physicians. If our hypothesis is accurate, then there will be an opportunity for these patients to be treated in the future.
Thanks for that. And just moving on to the TAVR opportunity, I think Edwards has been super vocal, and maybe that's because the TAVR segment still represents roughly 1% of the market, is by our calculation the data that we have. But we are moving further and further out from low-risk approval, and patients are surviving longer. It's still yet to be determined the durability of TAVR platforms, including SAPIEN, and that could be extended out to past 10 years. But how are you guys thinking about the replacement market? It's not going to be a big tailwind for the market or for Edwards in 2025. But when do you think we could see that kick in? I think Dr.
Généreux did some equity research analysis of the presentation at New York Valves last year, and I think he represented it at TCT, just forecasting with assumptions on durability, some pretty healthy volumes for the TAVR-in- TAVR segment as we get out into the late 20s and into the early 30s.
I think you framed it well in terms of where we are today and what the opportunity is looking ahead. Today, relatively small, but given, like you said, the way that this indication approval has progressed over time into a younger patient population and the fact that Edwards does have the ability to treat both patients who initially received a surgical valve and then a TAVR valve, it's a nice option for them. It's really central to this idea that we provide lifetime management for these patients. It's something we'll continue to focus on. Don't have an estimate in terms of what % of growth it will represent in the future, but it will be a tailwind.
Great. And thinking about competition, Edwards has had a monopoly on the, or exclusivity, I should say, in the balloon expandable TAVR segment. There's some development programs from Anteris, from Abbott, I think Mitris, and maybe even Medtronic to develop balloon expandable systems as well. But you guys aren't standing still. Maybe let's talk about how the SAPIEN 3 Ultra RESILIA valve can progress. I mean, we got SAPIEN X4 in development, and we may see data soon. And then I think you guys have shared that there's obviously you're working on a future generation valve beyond X4 down the line. But anything new to share? You gave a breakdown at the investor day, but I'd love to just maybe review that and how the SAPIEN platform progresses from here.
So short answer is nothing new to present publicly, but we are actively working on advancing our technology platform in TAVR. And this has been such an important benefit to patients and to the growth in this marketplace over the last almost 20 years now, where we started with SAPIEN and then went to SAPIEN XT, SAPIEN 3, SAPIEN 3 Ultra, SAPIEN 3 Ultra RESILIA. You mentioned SAPIEN X4 is next in the line and you're right. We feel really proud of the investments that we've made and the advancements that we've made in developing these technologies for the benefit of patients. Obviously, we've got thousands and thousands of patients that have been through clinical trials, and we're proud of the results of those trials and of the results that physicians and patients have experienced in the real world.
We intend to stay a step or two ahead of others who are investing in the space and to generate clinical trial evidence that supports the benefits of Edwards' therapies.
There are attempts to compete in the balloon expandable segment. Edwards, in years past, had a development program for a self-expanding valve. Is that a potential R&D effort? If others are trying to kind of encroach on the self-expandable territory, could Edwards go back and develop a self-expanding valve? I would say that would not be on the top of my list of to do for Edwards, but just wanted to throw the question out there.
As you know, we had a program for the valve called CENTERA, which at the time generated the best clinical evidence that we had seen for a self-expanding valve. We decided to pause that program and focus all of our attention and our resources on continuing to advance the technologies of our balloon expandable platform. We're so far ahead and have so much more momentum around approval pathways and timelines for expanded indications that it makes sense to really focus our energy on balloon expandable. We like our hand. We think we've got the very best technology and clinical evidence and field force to support the continued adoption of balloon expandable SAPIEN family valves from Edwards.
Thinking about some of the strategic moves you've made on the acquisition front, you continue to generate strong cash flows, strong balance sheet. Maybe talk us through the capital allocation strategy going forward. And our assumption is you're going to continue to build out your market-leading structural heart portfolio, but would love to just hear any updates in terms of how you guys are thinking about capital allocation going forward.
Your assumption is correct. That's certainly the goal. We're in a great spot. I think from a capital allocation perspective, we've always had and continue to have a very strong balance sheet. And so we'll look to deploy that effectively over time. I think first and foremost, it comes with a focus on reinvestment back into the business. That includes build-out of infrastructure to support new products coming to market. I think two and three on the list, depending on the environment, is share repurchase and M&A. And we've shown a healthy appetite for both over the years, and I think that will continue. We've got strong dedicated teams that look at both opportunities. Jennifer Powers, our treasurer, focuses on share repurchase. We've got a BD team as well that is very focused on the environment and competition and up-and-coming new technologies.
So again, good position to be in, and I think we like the setup here.
Excellent. Maybe we can just end on just reiterating the kind of LRP target of getting back to 10% organic revenue growth now in the new Edwards era ex critical care. I mean, 9% in 2024, despite experiencing some turbulence in the TAVR market. TMTT is going stronger. You have these new efforts in aortic regurgitation and interventional heart failure. But how should we be thinking about the breakdown? I mean, could TAVR continue to chug along in this mid to high single-digit range and TMTT and the new products driving incremental growth and getting Edwards to 10%?
You said it really well. We are expecting mid- to high single-digit growth for TAVR. TMTT is going to continue to be a strong and important contributor to the company's overall growth rate, and then complemented by surgical's continuing strong performance and the addition of implantable heart failure management and aortic regurgitation. It's a multi-source growth strategy that we think is going to play out over the next several years, and we're super excited about it.
Excellent. It's an exciting trajectory. A lot in front of you. Looking forward to tracking all the progress this year and then beyond. Scott, Mark, thank you guys so much for joining again, and have a great day.
Yeah, our pleasure. Thanks, Josh.