Q2 2020 Edwards Lifesciences Corp Earnings Call
Greetings and welcome to the Edwards Life Science Corporation second quarter, 2020 results conference call and webcast.
At this time, all participants are in listen only mode.
Question answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
I will now turn the conference over to our host Mark will <unk> Vice President of Investor Relations. Thank you you may begin.
Thanks Diego good afternoon, everyone. Thank you for joining with.
With me on today's call or Mike Mussallem, Chairman and Chief Executive Officer, That's got all Chief Financial Officer.
After the close of regular trading Edward Life Sciences, really second quarter 2020 financial results. During today's call management will discuss those results included in the press release and accompanying financial statements and then use the remaining time for Q1 I.
Please note that management will be making forward looking statements that are based on estimates assumptions and projection. These statements include but are limited to financial guidance and expectations for longer term growth opportunities regulatory approval clinical trial litigation reimbursement competitive matters and foreign currency fluctuations.
These statements speak only as of the date on which they were made and Edwards does not undertake any obligation to update them. After today. Additionally, the statements involve risks and uncertainties, including but not limited to both associated with cobot 19 pandemic that could cause actual results could differ materially information concerning factors that could cause these differences and important thing.
The information may be found in the press release, our 2019th annual report on form 10-K, and Edwards other FCC filings all of which are available on the company's website and Edwards Dot com.
Finally, a quick reminder, that when you come to terms underlying adjusted management is referring to non-GAAP financial measures otherwise, they're referring to GAAP results reconciliations between GAAP and non-GAAP numbers mentioned during this call are included in todays press release.
With that I'd like to turn the call over to Mike for his comments Mike.
Oh before we get into the specifics of the second quarter I'd like to make a few comments on the overall environment and how Edwards striving to deliver during these challenging times. There's no question that the world has changed considerably as a result public cobot pandemic. However, some things haven't changed most importantly, our pace.
Focused strategy, our aspirations as a company that Edwards, our dedication to providing innovative solutions for people fighting cardiovascular disease remains central to our credo, our aspiration to excel as a trusted partner and to foster an inclusive culture, where all employees growing thrive is stronger than that.
And our desire to improve access to our therapies for underserved and undertreated patient populations around the world motivates our 14000 employees every day.
Unfortunately consequence of the intense focus of the pandemic. During the first few months was that many patients like those with structural heart disease were not treated.
One interesting published source highlighted how old the cobot 19 surge in March and April overwhelmed Dutch hospitals, and undermined regular ongoing care and this study. They estimated there were more there were approximately 10 times more healthy life fears lost from regular care not being.
The libert compared to cope with life Irrs lost during that period.
Closer to home in the U.S. recall that the data published in the Annals of thoracic surgery suggests that patients waiting for aortic valve replacement had a 4% mortality at one month, 8% at three months and 12% after waiting six months.
The provider community is aggressively and creatively adapting to be able to treat covert patients while at the same time, providing the necessary care to patients with life threatening underlying conditions, we'd like to thank all the health care providers on the front line who've had to face the challenges of Cobot 19, without a road map and who have made.
Made difficult decisions and innovate at the same time to provide the necessary quality of care for patients in need.
Well the number of cobot cases remains a priority provide for providers. We observed already in Q2 providers are adapting to ensure treatment treatment other structural heart patients.
It was alarming it's cold videos.
Yes remains a deadly disease and treatment delays will inevitably result in increased mortality for a condition, which has proven therapies with excellent clinical outcomes in the case of TAVR also minimal use of hospital resources.
Even with the heroic efforts of the health care community. We know that this remains a very difficult time for the patients we serve as they continue to weigh the risks of cobot 19 against the severe effects of progressive heart valve disease.
This is committed to providing the opportunity for faster procedures shorter hospital stays an exceptional patient outcomes.
Irrespective of the unpredictable surges, others steadily pandemic, there's a growing recognition that valve therapy should not be postponed.
Not all procedures are the same.
Valve replacement therapy is less selective and these patients have a more urgent need we found ourselves more aligned than ever with the interests of patients and providers. During this challenging time.
Now turning to the second quarter, despite challenges related to the ongoing pandemic. We're pleased to report much better than expected second quarter results sales of $925 billion exceeded the top end of our April guidance up $7 million to $900 million driven by the continued adoption of our life saving time.
Allergies around the World. This performance was made possible by our dedicated team, which includes our committed field organization and our global supply chain.
Sales were balanced across all major geographies and benefited from improving month to month trends as we progressed through the second quarter.
We also started the gradually resume patient enrollment in clinical trials there were slowed at the under the first quarter and we're working with additional centers as many are now are ready to reengage.
Furthermore, at TBT connect and the virtual Euro PCR last month, we highlighted positive clinical results in multiple breakthrough therapies.
Even though many on our team we're working remotely during Q2, we made positive progress on a number of very important new technology milestones that will be detailed later in our carmax.
Finally, we were pleased the recently announced an intellectual property agreement.
<unk>, which allows us to fully dedicate time and resources to helping patients.
And tavern second quarter global sales of $594 million declined 11% on an underlying basis globally. Our average selling price remains stable as we continue to exercise pricing discipline.
As noted on our first quarter call sales were severely depressed in April as provider turned their attention to the pandemic response.
However, we were encouraged by the steady improvement in procedure volumes throughout May and June one approximately 90% of our active sites per for performed Passover cases. This is a testament to the dedicated heart teams and are committed clinical field teams.
We hear from a number of clinicians that new patients are increasingly entering the system as they seek treatment for severe aortic stenosis, we've seen a significant improvement from the steep troughed in April.
Put things in perspective during the second quarter in the midst of the onset of this tragic global pandemic there were more than 20000 patients around the world who were treated with our sapiens technology.
In the U.S., our TAVR sales declined in the low teens versus last year as expected April Mark the most severe month year over year, U.S. Tapper sales declines and procedure rates remain highly variable across the country.
In the last week of April we observed the first signs of recovery and in May and June we experience a significant step up in <unk> procedure volumes as previously screen patients who temporarily delayed treatment began to return.
Recently, we submitted additional data supporting the safety of our SAPIEN three platform and bicuspid patients and based on these data F.D.A. has approved the removal of the per caution from the labeling.
Outside the U.S. and the second quarter, our tower sales declined in the high single digits year over year on an underlying basis in Europe. The pace of recovery was faster than expected despite difficult early headwinds from coal that 19.
In Japan second quarter procedures were less impacted by cold that 19 than initially expected aortic stenosis remains an immensely undertreated disease in that region, where Edwards is very focused on increasing the availability of TAVR therapy.
It's also worth noting recent tapper approvals outside the U.S. last month in China Edwards received regulatory approval to begin treating patients suffering from severe aaas and at high risk for open heart surgery with SAPIEN three we look forward to partnering with hospitals throughout China to introduce this therapy.
Earlier this month, Australia join unless the countries that approved our SAPIEN platform for treatment of severe yes patients independent of their restore we believe these approvals represent important milestones for patients outside the U.S.
Now shifting gears to our latest TAVR innovation SAPIEN three ultra clinical feedback on improved Paravalvular leak performance remains outstanding last month, the virtual TV T. connect conference a propensity matched analysis of 1300 patients was presented.
Using data from the TBT registry to compare outcomes of patients treated with SAPIEN three ultra and SAPIEN three valves. This was the largest analysis or whatever outcomes with ultra to date.
Valves demonstrated outstanding outcomes for Paravalvular leak with ultra redefining the benchmark for Transcatheter heart valve technology is moving forward.
This analysis indicated that 90% of the patients treated treated with SAPIEN three ultra had no reported paravalvular leak at discharge.
We're also very encouraged by additional data in this study, which confirm sapiens ability to facilitate a more expedited in hospital experience for patients. This included fewer I see you stays with over 40% of the patients requiring no I see you time at all and show.
Order total hospital length of stay with approximately 50% of patients discharged within 24 hours and 80% by 48 hours.
In Q2 ultra accounted for approximately 40% of our U.S. and European TAVR volumes up from 30% at the under the first quarter.
You'll recall that we temporarily pause SAPIEN three ultra proctoring centers that were not already trained on the device and we resumed training in the second quarter.
In summary.
While the sharp decline in April was not as prolonged as we expected we continue to envision a second half similar to our April expectations. Although there continues to be a high level of site to site variability.
Based on our second quarter performance, we now anticipate global PEVAR sales growth for 2020 will be at the high end of our previous range of minus five plus 5%.
Based on how we've begun the third quarter, we continue to expect in the third quarter <unk>. We continue to expect sales in the third quarter to be approximately flat to our strong 29, p. in third quarter, and a fourth quarter that transitions to growth over 29 Pete.
Furthermore, as patients and clinicians increasingly choose however, we remain confident that the opportunity will grow to over $7 billion by 2024.
Turning to TMT tea, which is the transcatheter mitral and tricuspid therapies for patients suffering from diseases obese heart valves in the micro position, we're developing repair therapies with Pascal and Cardioband as well as replacement therapies with M. three Andy bulk.
In the tricuspid position, we're pursuing the Pascal I'm cardioband repair therapies and today, we are announcing a pivotal trial of evoke for tricuspid valve replacement. We have early commercial sales in Europe with several of these therapies and we're advancing each of these platforms, including five pivotal studies.
Underway in the U.S.
We continue to be very pleased with our robust real world evidence with Pascal mitral repair as highlighted during a presentation at virtual Euro PCR the analysis of more than 1200 commercially treated patients demonstrated an excellent safety profile and confirmed that significant reduction.
Mitral regurgitation can be achieved after only a short learning curve for physicians.
As previously announced we're pleased to have received CE Mark for Pascal repair system for the treatment of patients with tricuspid regurgitation based on our early and positive class tricuspid eat up S. data, we have initiated an introduction in Europe with a focus on excellent outcome for this new.
Hi cost, but repair therapy.
Last quarter, we announced a temporary pause up new enrollments for our active mitral and tricuspid pivotal clinical trials in consultation with investigators in hospitals more than half of our trial sites have begun have been reactivated and are beginning to treat patients we anticipate enroll.
Element in our three class studies will continue to ramp and the third and fourth quarter and we're still targeting U.S. approval of Pascal DMR and 2022.
Now turning to replacement therapies.
We're encouraged by the early clinical experience with a bulk tricuspid in 25 patients recently presented by Dr., Neal Fab, which demonstrated 100% 30 day survival as well as very significant acute reduction of tricuspid regurgitation and improve.
But in functional status.
We're pleased to announce that we've received approval to initiate a pivotal study for the a bulk tricuspid replacement system, which is designed to gain U.S. approval and has break through device designation from the FDA.
The try send to study is a prospective multi center randomized pivotal clinical trial to evaluate the a book system compared to optimal medical therapy in patients with severe T. R.
It makes a replacement we continue to gain experience lets say PNM three in a bulk both systems utilize the transfemoral delivery approach. We are encouraged by the early experience with evoke in patients with severe AMR and high surgical risk.
Additionally, we anticipate enrollment in our sapiens M. Three pivotal trial to begin by the end of the year.
Second quarter global sales for T. M. T T were $6 million, we expect to progressively ramp in Q3 and Q4.
And as we activate more centers in Europe, and their resume procedures and patient referrals increase.
In summary, we reiterate our competence in the long term opportunity and T. MTT and are passionate about the significant progress, we're making and bringing solutions to these deadly disease is to improve patients' lives around the world. We continue to expect total T. M. T. T sales this year to be 30.
To $45 million.
In surgical structural heart sales for the second quarter of $161 million declined 25% on an underlying basis, primarily related to the impact of covert 19.
This was better than our expectations back in April the ongoing adoption of tab or also contributed to U.S. surgical aortic valve procedure headwinds.
Despite the decline in Q2 sales were encouraged by the recovery of procedure demand as we progressed through the quarter increase it improved management of I see you capacity as well as prioritization of heart surgery, and many hospitals continue to two contributed to rebounding case volumes.
In late Q2.
We continue to be encouraged by the steady adoption of our most advanced resilient tissue technology and the Edwards portfolio are in spirits RESILIA aortic tissue valve grew in both new and existing sites in the U.S. and abroad, driven by increasing demand among younger and more active patients in spirit.
It is becoming the surgical valves standard of care and many geographies around the world and remains the number one and planet surgical aortic valve in the <unk> in the U.S. and Japan.
We recently gained U.S. approval and treated our first patients with our second resilient offering the pre assembled ready to implant connect RESILIA aortic valve conduit.
Connect combines our leading resilient surgical valve technology with a proven surgical graph.
This combination allows for the treatment of can flex patient anatomy, whereas necessary to replace a valve and repair the ascending aorta.
Elsewhere in the surgical structural heart portfolio recently, the first commercial cases about harpoon were successfully completed in Europe. This beating heart mitral valve repair system offers the potential for earlier treatment of degenerative mitral valve disease with faster recovery and more consistent outcomes for surgical pain.
Patients.
In summary, we continue to expect surgical structural heart sales for full year 2020.
I will decline, 5% to 15% in 2019 localized hot spots could continue to limit hospital capacity slow disease diagnosis and impact patient willingness to undergo treatment. However, our expectation is that the recovery experience in late Q2 will extend in the U.S. in Europe.
Into Q3, we continue to anticipate that in Q4, our sales will return to positive growth driven by the market adoption of our newest technologies.
We're excited about our ability to provide innovative surgical treatment options for patients and extend our global leadership in premiums surgical structural heart technologies.
In critical care second quarter sales of $164 million decreased 10% on an underlying basis.
Increased demand for our true true wave disposable pressure monitoring devices used in the I see you remains strong, but we're not enough to offset the cold that drove an impact of delayed elective procedures soft global demand was also also partially offset by large orders in Europe associated with.
I see you capacity increases.
We also experienced a decline in hemisphere orders in the U.S. as hospitals continue to limit their capital spending as a result of covert 19.
Towards the ended the quarter. However, we started to see positive signs of recovery in demand for our products used in cardiac surgeries, well demand and products used in more elective surgeries remains depressed.
We'd also like to highlight the recently announced collaboration between our critical care team and the anesthesia quality Institute. The main focus of the shared initiative will be to improve data collection and analysis of inter operative hypotension, which according to research is associated with poor clinical.
Outcomes.
We're optimistic those joint effort will result in the advancement of patient care through the you through the use of enhanced data collection to create updated guidelines.
In summary, we now estimate the critical care sales growth will be negative for 20, twomey largely due to anticipated reduced capital spending in the U.S., but still within our previous guidance of minus five two plus 5%.
Before I turn it over to Scott I'd like to make one last comment.
We realize it's difficult to predict the progression of covert 19, including additional waves and isolated flare ups and the associated impact on the health care system.
We're planning on dealing with the ups and downs of this pandemic for the Sip for the foreseeable future because of the severe condition of the patients we serve and our strong patient focused team I remain confident in our ability to continue to successfully deliver during this global crisis.
And now I'll turn the call over to Scott.
Yeah, we can't hear Scotts.
Scott's voice coming through.
So let me start over again just in case, you missed that today I'm going to provide additional perspective on the second quarter, along with some indicators of how we anticipate the rest of the year may unfold.
Our sales performance in the second quarter was better than we expected because the trough was not as deep as we anticipated April was the weakest month of the quarter and we saw sequential improvements in May and June as hospital procedure volumes started to recover earnings were also stronger than we expected both because.
The stronger topline as well as because of constrained spending.
We implemented cost control measures, but we intentionally did not take any actions to significantly impact our employees or reduce investments supporting our long term strategy.
This allowed us to deliver an adjusted 25% operating profit margin and adjusted earnings per share in the second quarter of 34 cents, which was 26% below last years second quarter.
GAAP earnings per share was negative 20 cents as a result of the intellectual property agreement, which I will address in a few minutes.
A full reconciliation between GAAP and adjusted earnings per share is included with todays release.
Now I'll cover the details of our second quarter results as well as discuss guidance for the balance of the year.
For the second quarter, our adjusted gross profit margin was 74.4% down from 76.4% in the prior year quarter.
This year's rate included incremental costs associated with responding to covert and a negative impact from foreign exchange.
And the second half of the year, we expect to see less pronounced impact from Covidien on our gross margin compared to the second quarter.
Selling general and administrative expenses in the second quarter were $275 million or 29.7% of sales compared to $308 million in the prior year.
This reduced spending resulted from covert which interrupted our planned flow of operating expenses.
As I mentioned earlier, we did not initiate any actions to significantly impact our employees nor to reduce investment plans supporting our long term growth strategy.
Research and development expenses in the second quarter were $182 million or 19.7% of sales compared to $192 million in the prior year.
This decrease was primarily the result of high clinical spending in the prior year for partner three continued access as well as for Centera.
And paused clinical trial trial activity. This year due to covert we expect R&D expenses to resume sequential growth in the second half of the year.
As Mike mentioned earlier. This month, we were pleased to settle the T. MTT intellectual property matter.
This impacts our income statement as well as our cash flow statement.
The principal impact to our PL was a 368 million dollar pretax charge in the second quarter.
In addition, we will incur a total of approximately $100 million and royalty expenses between now and May 2024, which will be recorded in cost of sales.
The cash flow impact includes a one time 100 million dollar payment to Abbott made earlier this month, along with quarterly payments in future years.
Turning to taxes, we had negative earnings in the second quarter due to the special settlement charge as a result, we reported a 46 million dollar tax benefit and the second quarter.
Excluding the impact of special items, our tax rate was 8.2% for the quarter.
This unusually low rate included an approximate $20 million benefit or three cents per share from the accounting for employee stock based compensation.
The stock based compensation benefit was inline with our expectation.
We continue to expect our full year 2020 tax rate, excluding special items to be between 11 and 15%.
Foreign exchange rates decreased second quarter sales growth by approximately 1.1% or $12 million compared to the prior year at current rates. We now expect an approximately $30 million negative impact or about 1.0% to full year 2020 sales versus 29.
18.
FX rates negatively impacted our second quarter gross profit margin by 50 basis points compared to the prior year.
Relative to our April guidance, FX rates had less than a penny impact on earnings per share, reflecting our effective currency hedging program.
Turning to the balance sheet, we have a strong balance sheet with approximately $1.7 billion in cash and investments at the end of the quarter.
In addition, we have an undrawn line of credit of up to $1 billion.
Our public bonds of approximately $600 million don't mature until 2028. Additionally, we continue to generate healthy cash flows.
Average adjusted shares outstanding in the second quarter were 630 million on a pump.
Post split basis, and we expect average shares outstanding for the full year trouble.
Recall that in June we increased the number of shares outstanding by executing a three for one stock split.
Adjusted free cash flow for the second quarter was $123 million defined as cash flow from operating activities of $231 million less capital spending of $108 million.
We are not updating our free cash flow guidance for the year. Although we continue to expect that it will fall short of our original expectation of $1 billion to $1.1 billion.
Now I'll turn to guidance for the full year 2020.
Our guidance assumes that the worst of the covert financial impact to Edwards is behind US and then we'll see a progressive recovery during the second half of the year anticipating that will be dealing with ups and downs along the way.
Remember that Edward sales grew 19% in the second half of 2019, So we have high year over year comparisons even so we expect total sales in the third quarter to return to 2019 levels and for sales to start growing again in the fourth quarter.
So while the second quarter sales decline was less severe than we expected our expectations for the second half of the year haven't significantly changed from earlier guidance in April.
We estimate total company sales growth for the full year to be approximately flat to 2019 with a range of minus five to plus 5%.
We now estimate tavern growth to be at the high end of our previous range of minus five to plus 5% and critical care growth to be negative for 2020, but still within our previous guidance range of minus five to plus 5%.
Surgical growth remains in a range of minus five to minus 15% versus 2019, and we continue to expect that T. MTT sales will be $30 million to $45 million.
Full year sales guidance for the total company continues to be $4 billion to $4.5 billion and for the third quarter, we estimate sales of $1 billion to $1.2 billion.
We are raising our full year adjusted earnings per share guidance range to $1.75 cents to $1.95 cents on a post split basis up 11% from our previous guidance of $1.58 cents to $1.75 cents or on a pre split basis for 75 to 525.
Yes.
And with that I'll turn it back over to Mike.
Thanks, Scott I want to conclude by once again expressing our gratitude to our clinician partners in the global health care community for their tireless dedication to serving patients. During this challenging time, we appreciate their strong leadership and brave commitment to patient care and were dedicated to supporting them as they had.
Yes, this global health crisis.
I also want to recognize the extraordinary actions that our employees around the world have taken to overcome the unique challenges associated with Cobot 19 Edwards is proud to be a member of <unk> of a critical healthcare infrastructure and I admire the agility resourcefulness and passion of our employees and maintaining their important.
Work on behalf of patients and with that I'll turn it back over to Mark.
Thank you Mike ready to take questions now in order to allow for broad participation. We ask you. Please limit the number of questions to one plus one follow up if you have additional questions. Please reenter the queue and management will answer as many participants as possible during the remainder of the call Diego.
Thank you and pick you up for a question press Star one on your telephone keypad. That's a starkey followed by the number one key on your telephone keypad.
Permission totally indicate that your line is in the question Q.
And as a gentleman just said please limit yourself to one question and one follow up for Q. You May also press the Starkey followed by the number two key if you would like to remove your question from the Q.
Our first question comes from Josh Jennings with Cowen and company. Please state your question.
Hi, good afternoon, gentlemen, it's great to see upside to that Youve navigated through the pandemic.
Maybe I could just start.
With no two questions on towers first taking you use tavern European tavern results and matching against our assumptions for the April and May decline. It seems as if those units may have already returned to growth in June I did the U.S. for you to ever business has returned to growth in June or even in the first weeks to July here.
Yes, thanks for the question Josh.
You know in general.
We'd rather not get into the week to week and month to month expectations. We've been encouraged by the steady improvement in procedures across all of our business as we progress through Q2.
The specifics on June sales are not likely to be as helpful.
As it probably include working down some backlog in addition to.
New patients screenings, so and as we said you know based on how we become Q3, we continue to expect sales in Q3 to be approximately flat to our a pretty strong 2019 Q3, and the Q4 is going to transition to growth over 29 team.
And then maybe just a follow up it would be great you any data points you can share regarding there's two elements you just talked about.
Maybe importance to piece recovery from here.
First where do you think centers are in terms working through the cobot 19 induced however backlog and then second are you seeing evidence to new patient screenings and referral channel is ramping back up and stuff.
Take whatever case volumes, thanks for taking the questions.
Sure. Thanks, Josh So we've heard anecdotally from many centers, who have already worked off their covert driven backlog and as you may know some centers operate with no backlog at all.
The reason that some of the backlogs didn't grow is that when treatment stopped a soda screening.
Now that's this isn't true all over the world. We know some centers outside the U.S., where the waiting list as have gotten longer and they're likely to get worked down over 2020, but in the U.S.. We don't think that there's much of a backlog at this point and unfortunately due to the deadly nature of severe house or something.
These patients who delayed treatment may never be treated.
Thank you.
Our next question comes from David Lewis with Morgan Stanley. Please state your question.
Good afternoon.
Mike just maybe one more specific one on tavern a follow up on Michael just in terms of just recent resurgence I think investor very focused on the specific areas, Texas, Florida and the age of these patients has there been any sense of your mine in the month of July or late June specifically in July that just resurgence in some of these key geographic markets had any impact.
Act on trends here in July.
Yes. Thanks, David Yeah, you know, we have heard anecdotally of cases being.
Canceled and in places like Texas, and Florida, and some of southern States.
But you know that again as we mentioned we had a chance to sort of you don't see how Q2 finish and see how Q3 started and that's kind of built into our guidance. We anticipated there we're going to be some levels of ups and downs and so when we project. The Q3 that we think is approximately flat. The 2019 it takes that into account.
Okay very helpful. And then as it relates to TMT loss, you resolve and any kind of reiterated your TMT guidance for the year, but.
The losses resolved as the Pascal strategy X U.S. change in any way as relates to either the spending associated with the launch the breadth of the launch where the pricing of the valve in the in ex us markets. Thanks, So much.
Yes, Thanks, David No broadly there's no change in the strategy. We continue to have a lot of confidence in this platform. We will continue to offer at a premium price we're very pleased.
With the way, it's been performing and we were happy to see that 1200 patient experience reported at the virtual Euro Pcr.
Well one of the reasons why there's no real changes, we really try and focus on great outcomes and so we're very deliberate about training center by center.
Across Europe, as we as we implement and so you'll see more of a continuation of what you've seen in the past.
Thank you.
Our next question comes from Bob Hopkins with Bank of America. They say your question.
Oh thanks.
<unk>.
Bob you're breaking up a little bit.
Yes, we can't hear Mr. Hopkins.
Please be connecting.
Go ahead Diego around the same page okay. Thank you. Our next question comes from Matt Miksic with Credit Suisse. Please state your question.
Hi, Thanks, so much for taking your question. So one if you could just on.
You mentioned.
Rebuilding the pipeline and sort of improving clinic visits and I'm wondering if you could talk a little bit about the role that some of that some of the newer technology investments that you made over the last couple of years.
And partnerships.
Sure the technology companies.
You know that fit into this sort of telemedicine model.
Neither cardiac care or are you kao and maybe talk about the role that they're playing if any at this point in helping to.
Close that gap and then I had one follow up.
Okay. Thanks, Matt Yeah, you know the newest technologies are not quite ready to have a broad impact, but what are the things. We've seen is an incredible amount of agility and creativity on the part of the heart teams to make things happen I mean, obviously, we've tried to support them along the way, but they just pivoted they find ways.
To get patients and they found ways to bring patients to a safe place to do a work up they found ways to do some things virtually that they had always done in person. So it was a remarkable to us to observe sort of a pivot on their part to make it happen.
Okay sounds a little more hustle, maybe to get that done it sounds like for now anyway and then the other is you gave some color on the number of centers performing TAVR procedures I'm wondering.
Given that new center growth has been such a big part of this market over the past several years, you could talk a little bit about maybe the way in which some of the new centers are responding or or or staying in that on trend on pace.
How their value being affected if it differently than some of the large academic centers and I expect to that to kind of playing out as we get further into the recovery.
Yeah. Thanks, Matt. So you know things have been very different to buy a region of the world and certainly region of the country in terms of the new centers. They didn't have a tremendous impact on the on the second quarter. Most of it came from centers that were already in place and again.
Chance to spend time with a number of hospital Ceos and we've been impressed that they've just set their mind to trying to make a pivot.
And be able to treat structural heart in particular I ask patients. During this time. So I think would last time that we address that Matt We said there were about.
700, U.S. centers and that we were headed toward 850, I think covert does slow that down some so it'll continue but it wasn't a big part of the story in this quarter.
Thanks, so much.
Thank you.
Next question comes from Bob Hopkins with Bank of America. Please go ahead.
Hi, sorry can you hear me, Okay Yep here to find Bob.
I apologize if I missed this given I was in transition, but just a quick question on the fourth quarter guidance.
Yeah, I realize there's a lot uncertainty you said you'd returned to growth I'm. Just curious you comfortable with where the street is at around 8% growth trend just trying to understand what's implicit in the guide.
Yeah, you know.
You know what we're dealing with right now there's so much uncertainty associated with the progression of coal that it's very difficult, where we're being somewhat courageous here to offer guidance at this point with the uncertainty in front of us. So we're not ready to dial into anything very specific we do have a competence to say no we read.
We believe we're gonna be and growth mode, but we're not prepared to.
Get that precise.
Okay, and then just one.
Question on China, I'm, just curious how you're thinking about the ramp in tavern in China.
Could you maybe talk about how you think what the market opportunity and especially how how much of an infrastructure you think exist in China, and how big an opportunity you think that could be over the next 12 months, obviously, a nice opportunity long term, but just curious about the ramp.
Yeah. Thanks, Bob you know, we're really looking forward to launching in China.
Our belief is that there were maybe I don't know 24, 2500 cases performed and 2019. So a nice opportunity. That's been served almost exclusive or not almost but exclusively by local companies, we're going to come in with a very different kind of approach, where we really focus on outstanding outcomes, we're going to try and really service those accounts.
We're going to try and train them and make sure that they have great proctoring and support along the way. So we're not expecting us to be a fast start matter back it'll be slow and deliberate I. We don't expect that they have an appreciable difference on our 2020 performance, but we really like what it could do out of long term basis.
Great. Thanks, Mike.
Our next question comes from Robbie Marcus with JP Morgan. Please state your question.
Great. Thanks for taking the question and congrats on a much better than expected corridor.
I was wondering if you could talk about global pricing and competition from and I know you said you're.
ASP globally with stable are you seeing any of your competitors or are you going forward.
Pursuing any major changes to pricing or for a strategy that you're saying.
Yeah, I can't say Robbie the we've seen anything thats major during the quarter. So we feel like much of it has been somewhat consistent to what we've seen in the past we continue to be very disciplined ourselves I'm not positive exactly what other competitors are doing but I haven't heard anything that's a particularly noteworthy.
[music].
Got it and then just as a quick follow up five congrats on getting the bicuspid warning or are not wanting but a native suggestion removed from the label how should we think about that in helping your adoption in low risk here, where it is more important.
Yeah. Thanks, So you know there I think sometimes there was a misconception we were never Contra indicated there was just always this notion that.
We didnt have the data that demonstrated safety. So now with the data that's been submitted.
We're in a position theres no longer that safety concern I don't know if it makes a big difference we have routinely treat these patients right along and so it that's a positive for patients.
We're not expected to have a big difference on our on our future volumes.
Appreciate it thanks sure.
Our next question comes from Larry Biegelsen with Wells Fargo. Please state your question.
Good afternoon. Thanks for taking the question one on tavern, Mike one on a on a t. MTT.
So Mike early on you talked about doctors adapting to coded and keeping the shorter length of stay with TAVR do you see cobot accelerating the transition to tavern from Saver and I had one follow up.
No the thanks Larry.
No we really don't see that you know a.
You, probably imagine what we what would it would be going on and 2020, if it wasn't for coal, but we would be enjoying we thank you know some pretty hefty double digit growth rates and so no cobas not a we don't see it as an accelerator, but we've been so impressed by the ability to assist them to adapt and find ways of treating covert patients.
And various patients.
Thanks, Mike I Didnt hear you reiterate a the 3 billion dollar TMT market in 2024, I apologize if I missed that but it did is that did you not a reiterate it as and is the market you know.
Developing slower than you expected or is just coded maybe pushing that 3 billion dollar market size out a year or so thanks for taking it if it's a good question. Larry you know, we're not prepared to update how big we think the T. M. Two t. market isn't 2024, Oh, you can tell we continue to be really excited about it we wouldn't.
Be putting this kind of energy into it if we didn't think it was a big opportunity by 24 and and that's just the beginning a it's gonna get much bigger.
Matt, but you'd have to say that given it's a developing market and it needs clinical trials for develop that cobot as somewhat of a setback we will see what it is we're hoping that it's pretty contained but.
But we're not prepared to update any thinking at this point.
Thank you.
Sure.
Our next question comes from Matt Taylor with Yes. Please state your question.
I think you I'm I just had a follow up on the prior question about.
Centers and could you just give us any color on.
Many centers have been added in the recent period, where are you able to do that or hospitals really focused on managing patients and managing coated can you talk about when that will review.
Yeah.
Thanks, Matt you know I don't know the the number but my <unk> I would say, it's really low [laughter] I don't think that new centers were trying to do however, during the onset of a global pandemic I mean, it just it just wasn't there. So it wasn't really much of a factor there may have been a few that I'm not aware of but I think it was an obstacle for people.
To start that they had bigger issues.
And just related to that a little bit its.
Idea that United incumbent in a market leader does that give you an advantage during a kogan period, because doctors don't want to train on a new things are necessarily bus with.
With newer less proven things are smaller companies.
Yeah. Thanks, Matt Yeah, there may have been some advantage that where the incumbent but you know maybe the the bigger issue is that we've got some really trustworthy and proven results. We've got you know people can count on the safety and platform in terms of how it's going to perform they don't.
I have to worry so much about a pacemaker that's good I mean, the patient has to stay in the hospital longer very little chance of IC and so they just have more competence in the system and the in frankly, there's just not many opportunities. If you have something brand new to be able to train centers and so there there are some advantage, but I almost think the bigger advantages from having.
A reliable system.
Great. Thanks Bye.
Our next question comes from Raj Denhoy with Jefferies. Please state your question.
Hi, Thanks, and good evening.
Let me start with Scott on the S.J. spending in the quarter. It was down almost exit was $40 million last year I know you didnt purposely cut a lot of expenses in the quarter and I'm curious about whether we should think about this is kind of a sustained levels of expense at this point or they're going to be changes in a way that you go to market now and given the access to hospitals will there.
Any sort of permanent change the expense levels you guys.
Probably nothing material I mean, we're learning a lot about how to operate in this environment, but we're expecting that the flow of operating expenses, probably gonna start to increase again as our sales increase.
Okay Fair enough and then maybe one for Mike I'm, just curious your thoughts on.
Given that towers in such an elderly population do you think there's going to be any.
Protracted impact on on patients willingness to go Uh huh.
Longer to get to a more normalized level of demand for tab or do you think will snap back relatively quickly.
No. It it's a good question, we've actually been wondering that and we spent a lot of time with people across the health care system.
But that worry about how do you get patients to Reengage and come back to the hospitals hospitals have really worked on it and they try and provide a safe place there are encouraging direct.
Contact with a position, but the one thing that we know about a us it as a deadly disease.
It just got a lousy future and so those patients are highly incented to enter the system and I guess, where kind of learning like everybody else. We saw rebound much faster in may and June than we were expecting.
Great. Thank you.
Our next question comes from Chris Pasquale with Guggenheim. Please state your question.
Thanks, Mike a couple of quick ones on the mitral tricuspid programs is the plans still to develop evoke for mitral or is that becoming more of a tricuspid system.
Any update on Cardioband.
Yes. Thanks, we're very excited about starting this evoke trial and the tricuspid.
Position, it really turns out to be a a great platform.
It is it as a platform that can be used in mitral.
We have decided that we were going to advance M. Three first as the first platform for mitral regurgitation, we still like evoke up and it may have a role, but we're gonna have evoke lead in the tricuspid position and M. Three lead in the mitral position.
In anything new on current event.
Well, we continue to do cases in Cardioband most of them get done in the tricuspid position and we're very pleased with the positive clinical outcomes that it's not broadly adopted but for those that are engaged with it there there are quite happy and that the the procedure times are coming down.
We are really focused on updating that design to be able to be one that is more easily use by many other clinicians and that I can lead to shorter times a more effective procedure. So that's also a key priority for the company.
Thanks.
Our next question comes from Vijay Kumar with Evercore ISI. Please state your question.
Oh, Thanks for taking my question can match in a good execution here.
Mike I had one tended to like no one financial maybe on the clinical site.
I think I heard is that correct evoke tricuspid, that's a trend some.
Correct and now doesn't imply the seeping into the and then also Transfemoral Alex.
Uh huh.
So the second part of the question if you used to discuss a say it again please be Jay.
The sapiens and see Oh, yes, if you.
So yeah. So the the the M. Three on a bulk systems are both transfemoral right. So if that really gets out it. Yes. So we think that there are they have the opportunity here to be adopted if we can demonstrate strong evidence.
That's a wonderful NSX and somewhere along the arc here and not though I mean, it sounds like Mike.
So and the mitral side, you were going to be coming up the the the Vienna side right. So the transfemoral for Amar is.
And so also it so it's.
So if you will we come across the supply them in the case or the mitral valve, whereas we come transfemoral for the tricuspid valve.
That's helpful. My that's created Eric's yet, it's just that one stocked with one on the guidance here or.
At the high end.
It implies mid single digits for the back half you they stayed down mid singles in.
Outlets have.
CQ at the midpoint guidance for flattish or that would imply double <unk> Q4 is that something you know you know a Q4, assuming we don't have a second there that's something that you guys are comfortable with thank you.
Well I can say, we're not or expecting they're going to be some ups and downs here and the third and fourth quarter, but with some kind of a risk adjustment to factor in little flare ups that may happen. We do expect that the high end is probably the right way to pencil in TAVR for the full year largely as a result of the Overperformed.
It's in the second quarter less as a result of our expectations for Q3 in Q4, having really changed much since April.
Thank you.
Thank you. Our next question comes from Peter checking with Deutsche Bank. Please state your question.
Good afternoon, guys. Thanks for taking my questions back to Bob's question on China, I understand the ramp will be slow here, but I can you guys size, but the market opportunity is for every five years from now in China.
[laughter] you know I've. Thanks, Bill, it's it's hard for us the no and let me tell you why and we're not trying to be a base of here, we're going into a market where it's the individual pays its private pay it comes out of their pocket and so our experiences and other places the world are just not as applicable we also.
We're going into a market, where there's local competitors and they were local first so it's it's it's not clear to us how fast it's going to develop and I'll begin is gonna be we think there's a lot of disease and we think there are lot of people that will be interested in a first class system. They get their disease treated but we're just not able to size it yet.
Okay fair enough.
It's been a pretty challenging quarter for obvious reasons, but can you give us any color on the weicker tighter market share was in second quarter versus the first quarter and its performance from old to driving any market share gains. So much yeah. Thanks, Pete <unk> ago. During this difficult time, it's really tough for us to know what market shares it doesn't know allfast the mark.
<unk> grew its something were just not comfortable to talk about the the data is lagging a food and complete and where we just don't have a clearer picture.
Great. Thanks, so much sure.
Thank you. Our next question comes from Joanne lunch with Citi. Please state your question.
Good afternoon, and thank you were referring this quarter.
Quick question I may have missed it can you talk about what percentage of revenue.
And you exited the quarter.
So say it again Joanne please.
What percentage of revenue your run rate was as you exit at the corner.
[laughter].
You mean like what was that what are we exit as a growth rate.
Oh around here year over year, how you think about or your growth all I'm just trying to understand you know you're jumping off point.
Well I can say first a joint I think if you see your question in the U.S., our our TAVR business declined in the low teens in the second quarter.
So are your dawn.
I am trying to get a little bit more granular.
To not just for the full quarter.
Yeah, so yes.
Go ahead, Mike Oh, we're just saying we does we don't feel comfortable that the exit rate as a good proxy for the rest of the year remember probably some of the cases that we were doing in June or probably catch up from what was postponed and earlier in the quarter and so I probably not an ideal.
All way to to be able to do modeling out we've tried to share with you. Our best estimate we've even included how we started the third quarter and say based on that this is how we think Q3 is going to go and we think it's likely to be flat, but you know the exit rate, although interesting is probably not the best measure.
Okay. That's helpful.
Sure they.
I should have to do a little bit with clinical trial enrollment I mean could you just provide a little bit of color. How people are beginning to reengage and bring patients and into Vietnam and process. Thank you.
Yeah. Thank John So what we're pleased with as we saw willingness on the part of centers to get back evolve I think it was we shared a 50% number so about a 50% of the of the people in the class trials that we said Hey, we're pausing have already approaches and said we're ready to go now for one.
There are ready to go to when they're actually treating patients take some time it was actually a much smaller number though centers have actually treated patients, but they're coming back. So it's going to cost us timed around clearly on these clinical trials. It will you have to be seen whether it's two quarters more or less I don't know, but they're clearly as such.
I'm kind of a pause and it'll be somewhat dependent on the progressive a regression of covert 19.
Very helpful. Thanks.
Sure.
And our final question from today comes from Rick Wise with Stifel. Please go ahead with your question.
Thanks, and good afternoon, Mike I got.
Mike I'm going to turn back the IP agreement settlement and maybe you could just expand a little bit I'm. Just curious if you expand a little bit on the implications.
With agreement in hand.
Maybe talk just a little bit about what you.
Can do now that you felt uncomfortable tackling.
Before you know what does it.
Either you know clinically marketing just help US appreciate you know next steps there and I just when I think about of the you know how you decade honestly and these kinds of agreement, it's often been a positive.
Companies timing it because the bars raised on competition et cetera. So what are the implications broader implications. It's nice to have done I get that.
Yeah. Thanks. Thanks, right you know we're passionate about this whole area of being able to help these mitral and tricuspid patients when you're involved in a lawsuit. It just consumes a lot about energy it cannot only consumes the energy of the legal team, but it pulls a bunch of the senior team into it it pulls our field teams into it.
Pulls our R&D teams into it and that's just the distraction. So instead of having people focused on how can I do great things for patients how do I advance this therapy.
You are involved in some kind of a chess match. So it's a real joy for us to say that that time consuming distraction is gone and we can focus on the exciting innovations that help patients that are suffering from valve disease.
And.
Just last.
Roughly I know this is not about next quarter. The second half I just I always good to hear your latest thinking on new indication TAVR indications.
We've touched on by Constellium, but anything incremental on asymptomatic or moderate yeah.
Sure. Thanks, so much.
Yes. Thanks, Rick Yeah, you know those are little continued to be very important you can imagine things like early power you got slowed down a little bit when you go through something like coal, but but we are continuing to be passionate about being able to treat asymptomatic patients and we're optimistic about that and we also really Wanna get after these moderate patients.
We continue to do a lot of thinking about that we're not ready.
With a clinical trial design, because that'll be a very important one but that is one that's clearly on our radar screen that we're going to continue to evaluate.
Thanks, Mike.
Sure.
Okay well.
Hi, Thanks, all for your continued interest in Edwards, Scott Mark and I are going to welcome any additional questions by telephone and so I'll I'll turn it back to you.
Thank you that concludes today's conference all parties may disconnect have a good day.