Edwards Lifesciences released their second quarter 2023 financial results and held a conference call to discuss them. Mark Wilterding, Senior Vice President, Investor Relations and Treasurer, hosted the call and was joined by Chief Executive Officer Bernard Zovighian and Chief Financial Officer Scott Ullem, as well as Larry Wood and Daveen Chopra. During the call, forward-looking statements were made, and there was a Q&A session for participants. Katie Szyman was absent, but will join future earnings calls.

Edwards reported strong second quarter performance with total sales of $1.53 billion, growing 12% on a constant currency basis. Bernard Zovighian discussed the broad-based growth across all of Edwards portfolio, their patient-focused innovation strategy, and their confidence in the outlook for Edwards in the years ahead. Edwards expects strong results in 2023 and have lifted their full year 2023 sales and EPS guidance.

Edwards reported strong demand for its SAPIEN platform in TAVR, with sales increasing 10% year-over-year on a constant currency basis. In the U.S., hospital staffing levels and the successful launch of SAPIEN 3 Ultra RESILIA aided sales growth. Edwards also restarted enrollment in its pivotal trial, ALLIANCE, designed to study of next-generation TAVR technology, SAPIEN X4. Outside of the U.S., all regions reported positive constant currency sales growth, with Europe driven by broad-based adoption of the SAPIEN platform. In Japan, sales grew sequentially and year-over-year, but were impacted by lower-than-expected market growth and competitive trialing. TMTT had global sales of $48 million, increasing 17% on a constant currency basis versus the prior year.

In the second quarter of 2021, Edwards Lifesciences experienced strong overall procedure volumes and adoption of their PASCAL Precision platform, as well as activation of more centers across the U.S. and Europe. Additionally, enrollment is ongoing in the Class IIF pivotal trial for functional mitral patients and the Class IITR pivotal trial for tricuspid patients. In Surgical, sales increased 13% due to adoption of their RESILIA products. In Critical Care, sales also increased 13%, due to contributions from their Smart Recovery portfolio and Acumen IQ sensor. Momentum for their HemoSphere monitoring platform was also positive.

Bernard discussed the expectations for the upcoming TCT Conference in October, which will include presentations of five-year clinical data from the PARTNER 3 low-risk pivotal trial, one-year full cohort of the CLASP IID pivotal trial results, and the planned interim analysis of the TRISCEND II randomized cohort. The company also plans to host an Investor Event at TCT. Scott then discussed the company's sales performance in the first half of the year, posting double-digit constant currency growth, and their adjusted earnings per share of $0.66. However, the GAAP earnings per share of $0.50 was impacted by the Intellectual Property Agreement, which required a payment of $300 million.

Edwards' second quarter sales results and 2023 outlook was driven by strong adoption of their SAPIEN family of valves and PASCAL Precision platform. This led to double-digit global TAVR growth and TMTT growth driven by strong procedure volumes. The low-end of their TAVR outlook was adjusted slightly higher to $3.85 billion to $4.0 billion with a 10-13% growth rate on a constant currency basis. Their TMTT sales outlook was increased to $180 million to $200 million.

Edwards reported a 13% constant currency sales growth in the quarter for Surgical Structural Heart. This has led to an increase in their full year 2023 sales forecast to a range of $5.9 billion to $6.1 billion, with total company sales growth of 10-13% on a constant currency basis. The adjusted earnings per share is expected to be between $2.50 and $2.60, with third quarter sales of $1.44 billion to $1.52 billion and adjusted EPS of $0.55 to $0.61. The adjusted gross profit margin for the second quarter was 77.7%, and is expected to be between 76% and 78% for the full year. Selling, general and administrative expenses were 30.6% of sales, driven by performance-based compensation and investments in transcatheter field-based personnel.

In the second quarter, research and development expenses grew 8% to $270 million, and the company expects it to be 17-18% of sales for the full year. A $27 million reduction in contingent consideration liabilities benefited earnings per share by $0.04, and the reported tax rate was 9.7%. Foreign exchange rates negatively impacted the second quarter gross profit margin by 220 basis points, but had a minimal impact on earnings per share.

Scott provided an update on the company's adjusted free cash flow for the second quarter of $286 million, and they are expecting full year 2023 adjusted free cash flow to be between $1.0 billion and $1.4 billion. He also mentioned that they have a solid and flexible balance sheet with approximately $1.5 billion in cash, cash equivalents, and short-term investments as of June 30th, and have approximately $650 million remaining under their current share repurchase authorization. Bernard then concluded that they are well positioned for success and opened up the Q&A portion of the call.

Bernard Zovighian and Larry Wood discussed the global TAVR growth in the second quarter, which was 10% constant currency growth, driven by strong demand for their SAPIEN platform. They noted that hospital staffing levels have improved globally, but they are still not back to pre-COVID levels. They also noted that diagnosis are up and patients are moving through the system, but there is still some constraint at the Cath Lab level. Finally, they noted that the recovery process varies across Europe and Japan, depending on the level of COVID.

Bernard Zovighian and Daveen Chopra discussed the success of the mitral market in Q2, with it almost reaching double-digit growth. They also discussed the adoption of PASCAL Precision, which is going very well in the U.S. and Europe, with more centers being activated. They also noted that while the market has recovered from staffing issues due to COVID, there is still room to improve in that area.

The PASCAL system has been receiving positive feedback from physicians due to its differentiated features and benefits, and new centers are being opened in the US and Europe each week. In Europe, tricuspid therapy is seeing strong growth due to the system's tailored-treatment capabilities. The company is feeling positive about the progress of TMTT in 2023, and has increased its sales guidance range from $160 million to $200 million to $170 million to $200 million.

Scott Ullem answers a question from Matthew Taylor about gross margins and operating expenses. He notes that there is a benefit from mix in 2023, but it is offset by the impact of foreign exchange, which will become more impactful in Q3 and Q4. Operating expenses are increasing due to investments in field-based personnel, but they expect to end up in the range of their gross margin guidance for 2023.

Scott Ullem explains that the company has raised its TAVR guidance to 13% due to their confidence in their ability to drive top-line growth. They have identified areas where they can gradually expand their operating margin, but the primary focus is investing for long-term top-line growth. They are also investing in clinical trials, such as those run by Larry in TAVR and Daveen in TMTT, to contribute to the body of clinical evidence and drive sales.

Bernard Zovighian and Larry Wood discussed the growth of Medtronic's SAVR and TAVR business, with SAVR growth exceeding TAVR due to market growth, premium pricing of innovative technologies, and a better competitive position. These components, combined with positive growth, contributed to the higher growth rate of SAVR compared to TAVR.

TRISCEND II, a trial for EVOQUE, the most important pipeline product for the company, has completed its enrollment. The trial will take some time to analyze the data and present it to the FDA, with an expected approval in late 2024. The results of the TRILUMINATE trial, which used a different technology, are not necessarily indicative of what the results of TRISCEND II will be.

Daveen Chopra and Larry Wood discussed tricuspid disease, with Chopra noting that the interim analysis of the TRISCEND II study had already been planned and was expected to show positive results. Wood commented that physicians will be looking at the five-year data from the PARTNER 3 trial, which was designed to measure a composite endpoint of death, stroke, and rehospitalization.

Larry Wood explains that the 10% growth of TAVR in the US is largely driven by procedure growth, rather than price increase. The list price increase of 1,500 was much smaller than the surgical side and is only a small contributor. However, it is still a long-term contributor and the launch of RESILIA is not yet halfway through.

The operator asked Josh Jennings, of Cowen, to ask his two TAVR questions. His first question was about the recovery trajectory of Japan, and Scott Ullem responded by saying that the increase in the guide was largely reflective of their stronger-than-expected first half performance, and that the range they put out for total company sales in the third quarter incorporates what they see so far month-to-date. He also mentioned that it depends upon seasonality, and they will be able to talk more about that impact when they get to their third quarter call.

Bernard Zovighian and Larry Wood discussed the recovery of the Japanese market, which had been impacted by COVID. They noted that while there was growth year-over-year and sequentially, it was below their expectations. They are optimistic that the market will continue to recover in the back half of the year and are pleased with the progress of the PROGRESS trial.

Scott Ullem and Bernard Zovighian answered a question from Chris Pasquale about the 3Q EPS guidance and the dip in operating margin. They explained that this was due to summer seasonality, with expenses continuing to go through while the top line is affected. Matt Miksic then asked about the strong performance in SAVR and good but not as strong performance in TAVR, and how it relates to staffing.

In TAVR interventions, there is more turnover with clinic coordinators due to the demanding nature of the job. This is because patients have to get a CT and go through more work up than for SAVR surgical interventions. SAVR surgical interventions are easier to move through the process as patients can move right to surgery within a few days or a week.

Bernard Zovighian explains that the company is investing in innovation, such as PASCAL Gen 2, Gen 3, Gen 4, and EVOQUE, in order to build a comprehensive portfolio to unlock the large market opportunity in TMTT. He also emphasizes the importance of evidence, as was seen in TAVR with the multiple randomized clinical studies conducted by the company and its competition.

Larry Wood commented that there may be a possibility of a backlog growth for TAVR procedures due to the front end of the funnel starting to fill back up again. He also noted that the growth in TAVR seen in the first two quarters of the year was due to patient flow and not centers having to search for patients.

Scott Ullem discussed the growth of large and small centers during the COVID-19 pandemic, noting that smaller centers grew faster but that the last quarter saw more growth in large centers. Ullem then explained that Japan is a small percentage of overall TAVR sales, but is an important growth driver for the company. He also noted that RESILIA pricing is contributing to the U.S. TAVR market, which is currently at 10%.

Larry Wood and Scott Ullem discuss their confidence in the long-term growth of the TAVR market, and their belief that the total addressable market in 2028 will be $10 billion. They believe that COVID has interrupted the trajectory to this larger TAM, but that they still have a lot of confidence in big growth ahead with their current product portfolio and new technologies and broader indications in the US, Europe, and beyond.

Larry Wood explains that there is less variation between states in terms of how they react to COVID-19 compared to when the pandemic initially began. Bernard Zovighian and Daveen Chopra add that the mitral market in the U.S. and Europe has seen a nice recovery in Q1 and Q2.

The TMTT market is growing globally at a rate of around 20%, and in the US the mitral market is growing at a double-digit rate. The technology is still being launched into many countries, and the US is launching S3 Ultra RESILIA. The ALLIANCE study is restarting enrollment this quarter, with changes to the X4 delivery system being the only changes made to the valve.

Bernard Zovighian closes the meeting by expressing his excitement for Edwards' performance so far in 2023 and their outlook for the rest of the year. He is also pleased with their progress on pipeline development, clinical trials, and their long-term strategy to help more patients. They are approved to begin enrollment at multiple centers, and they expect to begin enrollment again shortly. They have approval in Japan and the United States, and they are working with European regulators for approval. They will provide an update on enrollment at the investor conference.

The conference has come to an end and all participants are thanked for their time. They are encouraged to have a good evening.

This summary was generated with AI and may contain some inaccuracies.