Q4 2020 Edwards Lifesciences Corp Earnings Call
Greetings and welcome to the Edwards Lifesciences Corporation fourth quarter, 2000, and 'twenty results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During this conference. Please.
Press Star Zero on your telephone keypad.
Please note that this conference is being recorded.
I'll now turn the conference over to our host Mark <unk>, Vice President of Investor Relations. Thank you you may begin.
Thanks Diego good afternoon, and thank you for joining US everyone with me on today's call are Mike Michelle I'm, Chairman and Chief Executive Officer, and Scott, All I'm Chief Financial Officer.
Just after the close of regular trading Edwards Lifesciences released fourth quarter, 'twenty and 'twenty financial results. During today's call management will discuss those results included in the press release and accompanying financial schedules and then use the remaining time for Q&A.
Please note that management will be making forward looking statements that are based on estimates assumptions and projections. These statements include but aren't limited to financial guidance and expectations for longer term growth opportunities and regulatory approvals.
Trials litigation reimbursement competitive matters matters and foreign currency fluctuations.
These statements speak only as of the day when they were made and Edwards does not take undertake any obligation to update them. After today. Additionally, the statements involve risks and uncertainties, including but not limited to those associated with the pandemic that could cause actual results to differ materially information concerning factors that could cause these differences and <unk>.
And safety information may be found in the press release, our 'twenty and 19 annual report on form 10-K, and Edwards other SEC filings all of which are available on the company's website at Edwards dotcom.
And finally, a quick reminder, that when using the terms underlying and adjusted management is referring to non-GAAP financial measures otherwise they are referring to GAAP results reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today's press release with that I'd like to turn the call over to Mike for his comments Mike.
Thank you Mark before we discuss fourth quarter results and our expectations for 'twenty and 'twenty, one and beyond I want to spend a minute, reflecting on 'twenty and 'twenty structural heart patients were severely impacted beginning in March experiencing significant difficulties entering the system, which also had a profound impact on the second.
Florida procedures.
And even though our health care systems adapted to the challenge the resurgence of Covid that began late in the year AR continues to impact structural heart patients who need care.
Despite unprecedented challenges throughout the year I'm proud of our team's steadfast dedication to our patient focused strategy, we continued to invest and developing solutions that extend lives improve the quality of life and offer greater value for the health care system.
Along those lines, we celebrated some exciting milestones in 'twenty and 'twenty the directly impacted patients and tapper, despite headwinds more than 100000 patients benefited from treatment with SAPIEN valves worldwide.
And surgical structural heart, we launched our Quebec to aortic valve conduit and inspire us became the leading aortic surgical bell worldwide.
And we've seen early positive clinical evidence across the T. M. T. T platform physician feedback is encouraging and patient outcomes had been distinguished and and critical care. We met the increased demand for core pressure monitoring products due to the pandemic and we're proud that we're able to help over 1 million COVID-19.
Patients globally with our monitoring technology.
To support our innovation and growth, we continued to invest and our people and our infrastructure during ear when job losses impacted many families across the globe Edwards prioritize protecting our employees and we grew our team to 15000 worldwide.
We continued to make strategic R&D investments that enabled us to fuel progress.
And despite this unique environment and extraordinary prior year growth underlying sales grew 1% and 'twenty 'twenty two for point $4 billion, which is a reflection of the life threatening needs of the patients that Edwards serves.
Looking into 'twenty and 'twenty, one while we expect the pandemic to continue to impact the global health care system. We remain optimistic about the year ahead as we indicated at our Investor Conference. We expect full year sales between for 0.9 and $5 $3 billion, representing mid teens under.
A line growth on a year over year basis.
Based on our year to date experience, we expect Q1 sales to be slightly down sequentially. Although in line with the first quarter of last year, which was largely unaffected by COVID-19.
Our 'twenty 'twenty one guidance continues to assume Covid will stress the global health care system at least through the winter months with procedures ramping later in the year.
And this expectation assumes that vaccines are effective and widely administered by midyear 'twenty 'twenty, one and hospitals continue to improve their ability to treat non COVID-19 patients who need care for conditions, such as aortic stenosis.
And even though we expect the COVID-19 impact on sales at the start of the year, we're continuing to invest now and our innovations that have the tremendous opportunity to enhance patients' lives and bring significant value to the health care system, we recognize the uncertain impact and timeframe for recovery from this unique global challenge.
But we remain confident that our patient focused strategy of continued investment positions us well and even stronger when the world emerges from the pandemic.
Now turning to our quarterly results.
Consistent with our guidance at our Investor Conference last month fourth quarter sales of $1.2 billion were in line with the year ago period. When Edwards grew nearly 20% on an underlying basis, reflecting the strength even during the ongoing pandemic.
Full year, 'twenty, and 'twenty global sales tab or global tablet sales of 2.9 billion increased 4% on an underlying basis over the prior year.
'twenty and 'twenty growth reflected increased sales and every region lifted by greater awareness of the benefits of <unk> therapy and increased adoption of our leading technologies.
Based on the strength of the SAPIEN platform, we retained our strong leadership position, while also maintaining our disciplined price strategy.
And the fourth quarter global tab for sales were $776 million up slightly from a year ago period, we estimate global tab of procedure growth was comparable with our growth and globally average selling prices were stable.
Although the rollout was somewhat impacted SAPIEN three ultra now represents more than two thirds of our global tab for sales and physician feedback on ease of use and improved per valvular leak performance remains outstanding.
And the U S. Our Q4 tab for sales were approximately level with the third quarter and declined in the mid single digit range versus last year.
We estimate overall Q for U S procedures declined at a comparable rate.
Recall that our U S tower sales and the year ago period increased nearly 40% driven by the strong partner three evidence that led to a third quarter 2019 indication expansion and and improve patient access under and updated Tauber N C. D and we expect these factors to resume lifting treatment.
Rates as the pandemic subsides.
Growth and smaller tab for centers, which are providing local access to aortic stenosis patients was more than offset by declines in larger accounts, where referrals have been disrupted by the resurgence of COVID-19.
Outside the us in the fourth quarter, we estimated total debt tab for procedures grew in the high single digits on a year over year basis, and Edwards growth was comparable.
Edwards underlying tab for growth in Europe versus the prior year was and the mid single digit range growth was driven by continued strong adoption of our SAPIEN platform and was more pronounced in countries that were more severely impacted by the first wave of Covid in 'twenty and 'twenty.
Outside of the U S and Europe, we continue to see very good tavern adoption and the fourth quarter.
Sales growth and Japan, Australia, and Korea were strong where therapy adoption is still low in Japan, we continue to anticipate providing SAPIEN three for low risk patients prior to the end of this year.
And China, which was a minor contributor to Q4 sales we remain focused on growing our dedicated clinical support team to assist leading hospitals as they build their tableau programs.
In addition to geographic expansion of our tab for therapies, we remain focused on indication expansion, we talked at our recent Investor Conference about our early tab, our trial, which is focused on the treatment of asymptomatic patients enrollment is now two thirds complete and we remain optimistic that the trial will be.
Fully enrolled in 'twenty 'twenty one.
Separately, we continue to plan to initiate and important pivotal trial for moderate aortic stenosis to determine the optimal time to treat patients who have this progressive disease. We believe that some patients may benefit from earlier treatment when they have moderate a us rather than risking irreversible damage.
And as the disease progresses.
We're optimistic about the potential of this trial and we anticipate FDA approval to begin enrollment this year.
And November 'twenty 'twenty, we're pleased at the American Heart Association announced the launch of an initiative called target aortic stenosis, a quality improvement program aimed to develop optimal standards of care. The program features a learning collaborative comprised of experts and volunteers from Pi.
And what hospital locations around the nation.
H I noticed that if left untreated the condition worsens and patients with severe aortic stenosis have a survival rate as low as 50% at two years aortic stenosis is also a risk factor for heart failure, a costly disease projected to cost the U S health care system 70 billion.
And 2030.
In summary, we continue to anticipate 2021 underlying tavern sales growth and the 15% to 20% range as we shared at our Investor Conference. We expect continuing COVID-19 related challenges early in 'twenty and 'twenty, one turning to a more normalized growth environment and the second half of the year.
And we remain confident and this large global opportunity will exceed $7 billion by 'twenty and 'twenty, four which implies a compounded annual growth rate and the low double digit range.
Turning to Transcatheter, mitral and tricuspid therapies or T. M. T. T. We've made meaningful progress moving from early stage development to clinical use across all of our platforms with over 3000 patients treated to date.
To transform treatment and unlock the significant long term growth opportunity. We remain focused on three key value drivers our portfolio of differentiated therapies positive pivotal trial results to support approvals and adoption and favorable real world clinical outcomes.
And Europe Pascal leaflet repair continues to deliver excellent results in Q4, we continued the introduction of Pascal Ace for mitral and tricuspid patients and we're pleased with the early real real world results and positive physician feedback regarding its differentiated features and narrower pro.
File we plan to make both Pascal Ace and Pascal available I'm a single next generation platform called the Pascal precision system.
The new system is designed to elevate the user experience with enhanced maneuverability navigation and stability and enabling improved procedural precision.
From a clinical perspective, and this challenging near term and vibrant environment, we're experiencing a negative impact to clinical trial enrollment. However, our team and research partners are highly motivated to build on the differentiated data presented and Twenty-twenty and expand our body of clinical evidence and this exciting field.
We will look forward to presenting meaningful follow up data across our portfolio at medical meetings later this year.
We progressed and the enrollment of our three clasp pivotal studies. We also received approval for use of the Edwards Pascal precision system in these pivotal studies.
The company still expects U S approval of Pascal for patients with DMR late next year.
We continue to enrolling sapiens M. Three pivotal study and circle designed to demonstrate strong safety and efficacy for Transcatheter mitral replacement and we're on track to initiate our first clinical experience with our next generation evoke mitral replacement system.
The Evo tricuspid replacement study try send continues continued to enroll and Q4 and we're on track to initiate the Tri son, two randomized pivotal study based on Fda's breakthrough pathway designation, we will look forward to bringing this important treatment option to more patients.
And that are in significant need.
Turning to recent news, we come in and CMS for ensuring mitral valve disease patients have improved access to therapy options through the updated and C. D. This update which includes coverage with evidence development achieves the balance of patient access with high quality outcomes.
Fourth quarter global sales were $13 million, representing sequential improvement versus Q3.
Full year, 'twenty and 'twenty sales were $42 million, we expect continuing COVID-19 related challenges early in 'twenty and 'twenty, one, but we anticipate a ramp up through the rest of the year.
We maintain our belief that the total T. M. T T sales will approximately double in 'twenty and 'twenty. One we continue to estimate the global T. M. T T opportunity to reach $3 billion by 2025 with significant growth beyond we remain committed to transforming the treatment of these patients and believe our poor.
Folio strategy positions us well for ultimate leadership.
And surgical structural heart for year, 'twenty, and 'twenty global sales of $762 million decreased 10% on an underlying basis over the prior year and line of our guidance with our guidance of 5% to 15% decline.
Fourth quarter sales of 204 million held steady with Q3 and declined 2% year over year on an underlying basis, which was below our previous expectation for positive growth over the course of the quarter hospitals experienced an influx of COVID-19 patients limiting surgical procedures.
Despite this impact we are encouraged that the.
The U S achieved positive growth in Q4, driven by adoption of our newest premium technologies.
We remain very encouraged by the steady global adoption of Edwards premium resilient tissue valves, including the and spirits aortic surgical valve and the recently launched connect aortic valve conduit and the fourth quarter and spirits about utilization grew in all regions and we continued to add new centers.
Sales and the U S are ramping for connect the first pre assembled ready to implant aortic tissue valve conduit for patients who require replacement of the aortic valve route and the ascending aorta, which is a critical unmet patient need.
We continue to focus on comprehensive physician training and robust data collection for the harpoon, beating heart mitral valve repair system, we're seeing favorable patient outcomes with faster surgery and recovery times with this minimally invasive therapy. The U S. Pivotal trial is now underway and the first patient was.
Treated in December.
In summary, we expect full year 'twenty 'twenty, one underlying sales growth and the high single digit range for surgical structural heart driven by.
Market adoption of our newest technologies.
After a challenging start we expect improving year over year comparisons as we progress through the year. We are excited by our ability to provide innovative surgical treatment options for more patients and to extend our global leadership and premium surgical structural heart technologies. We believe the current one 8 billion.
Dollar surgical structural heart opportunity will grow mid single digits through 'twenty and 'twenty six.
And critical care and full year, 'twenty and 'twenty global sales of $725 million decreased 3% on an underlying basis versus the prior year in line with our guidance of flat to down 5%.
Fourth quarter critical care sales of $198 million decreased 2% on an underlying basis, driven by the decline and hemo spare orders in the U S as hospitals limited their capital spending.
Sales of our true wave disposable pressure monitoring devices used in the ICU were lifted by the increased Covid hospitalizations late in the fourth quarter and both of you us and Europe.
Demand for our products used and more intense surgeries remained strong but were more than offset by the impact of delayed elective procedures.
In summary, we expect full year 'twenty 'twenty, one underlying sales growth and the high single digit range for critical care. We remain excited about our pipeline and critical care innovations as we continue to shift our focus to smart recovery technologies designed to help clinicians make better.
<unk> for their patients.
Now I will ask Scott to provide some more detail on the company's financial results.
Hey, Thanks, a lot Mike today, I'll provide a wrap up of 'twenty and 'twenty, including detailed results from the fourth quarter as well as provide and update on guidance for the first quarter and full year of 2021.
Despite the wave of Covid that began during the fourth quarter. We are pleased that we were able to achieve our sales guidance ranges across all product lines.
Sales and the fourth quarter were flat year over year on an underlying basis and adjusted earnings per share grew 2% to 50 cents versus the prior year.
GAAP earnings per share was similar at 49 cents for.
For the full year, 'twenty and 'twenty sales increased 1% on an underlying basis just for point $4 billion.
And earnings per share was flat at one dollar and 86 cents and we generated over $700 million of adjusted free cash flow.
And during 'twenty and 'twenty, we achieved cost efficiencies, but we intentionally did not take any actions to significantly impact our employees or reduce investments supporting our long term strategy.
I'll now cover the details of our results and then discuss guidance for 'twenty and 'twenty one.
For the fourth quarter, our adjusted gross profit margin was 75, 3% compared to 75, 8% and the same period last year.
This reduction was driven by a negative impact from foreign exchange and incremental costs associated with responding to COVID-19.
Partially offset by lower performance based compensation.
We continue to expect our 'twenty 'twenty, one adjusted gross profit margin to be between 76 and 77%.
And our rates should be lifted by and improved product mix, partially offset by a negative impact from foreign exchange.
Selling general and administrative expenses and the fourth quarter were $339 million or 28 point for percent of sales compared to $347 million and the prior year.
This decrease was primarily driven by reduced spending resulting from COVID-19 and lower performance based compensation, partially offset by the impact from foreign exchange.
We continue to expect full year 'twenty 'twenty, one SG&A as a percentage of sales excluding special items to be 28% to 29%, which is similar to pre COVID-19 levels.
Research and development expenses and the quarter grew 1% to $196 million or 16 point for percent of sales.
This small increase was primarily the result of higher investments and T. M T T and costs associated with discontinuing our suite for a fixed program, partially offset by reduced performance based compensation.
For the full year 'twenty 'twenty, one we continued to expect R&D as a percentage of sales to be and the 17% to 18% range similar to pre COVID-19 levels, as we invest and developing new technologies and generating evidence to expand indications for <unk> and T. M T T, including enrolling seven clinical trials.
Myles.
Turning to taxes, our reported tax rate this quarter was 13.1% or 13, 9%, excluding the impact of special items.
This rate included a 350 basis point benefit from the accounting for stock based compensation.
Our full year, 'twenty and 'twenty tax rate, excluding special items was 12, 5%.
We continue to expect our full year rate in 'twenty and 'twenty, one excluding special items to be between 11, and and 15%, including an estimated benefit of five percentage points from stock based compensation accounting.
Foreign exchange rates increased fourth quarter reported sales growth by 150 basis points or $18 million compared to the prior year.
At current rates, we now expect and approximate $100 million positive impact or about 2% to full year 2021 sales compared to 2020.
FX rates negatively impacted our fourth quarter gross profit margin by 150 basis points compared to the prior year.
Free cash flow for the fourth quarter was $287 million defined as cash flow from operating activities of $400 million less capital spending of $113 million.
Now turning to the balance sheet, we have a strong balance sheet with approximately $2.2 billion and cash and investments as of the end of the year. In addition, we have and Undrawn line of credit of up to $1 billion.
We have public bonds outstanding of about $600 million that don't mature until 'twenty and 'twenty eight.
Average shares outstanding during the fourth quarter were 632 million relatively consistent with the prior quarter.
We now expect average diluted shares outstanding for 'twenty, and 'twenty, one to be between 630 and $635 million.
So before turning the call back over to Mike I'll finish with financial guidance for 2021.
We are maintaining all of our previous sales guidance ranges for 2021.
For total Edwards, we expect sales of $4 9 billion to $5 $3 billion for cover we expect sales of $3 2 billion to $3 $6 billion.
And for T. M T T. We expect sales of approximately $80 million.
We expect surgical structural heart sales of 800, and $900 million and critical care sales of $725 million to $800 million.
For the full year 'twenty 'twenty, one we continue to expect adjusted earnings per share of $2 to $2 20.
For the first quarter of 'twenty 'twenty, one we project total sales to be between 1.1 and $1.2 billion and adjusted earnings per share of 43% to 50.
And so with that I'll pass it back to Mike.
Thanks, Scott Oh, you're like 'twenty, and 'twenty could threaten to cause persistent disruptions our strategy of patient focused innovations remains unwavering as we look to 2021 and beyond I'm as excited as ever about the work happening at Edwards and more importantly, what we envision for.
For the future of patient care and I continue to believe we are poised for success and that our innovation and cultural imperative to put patients first and will drive strong organic sales growth and create long term value.
And with that I'll turn it back over to Mark. Thanks, a lot Mike with that we're ready to take questions in order to allow for broad participation. We ask that 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 at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is and the question queue you.
You May press the Star key followed by the number two if you would like to remove your question from from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Bob Hopkins with Bank of America. Please state your question.
Yes.
Oh, great and good afternoon I'm Mike.
Mike I was wondering you know since we just met and in December if you comment on maybe two just two quick things.
First question would be just how different is the environment out there right now the selling environment out there right now versus what you were seeing at the time of the analyst day and.
And you know kind of and on the margins are things getting a little worse, they are getting a little better.
Would love some thoughts on that topic, and then I'll have one quick follow up.
Yeah, I would say in general it's been a little worse. It was already trending negative and we anticipated it was going to be a tough winter and it certainly has turned out to be that way, but probably trying to little worse since that time.
Okay and then the other thing I'd love to get your comments on Us just.
Thinking a little bit long term on the on the tricuspid opportunity and the reason I ask because it obviously avid is reported for the numbers to and you know Theyre tricuspid business is already annualizing at over $50 million. If you just take their results this quarter and multiply it and time for so it looks like some pretty robust interest.
And tricuspid repair right off the bat and we'd love your thoughts on that market and how quickly you think that could develop and what hurdles might be thank you.
Yeah. Thanks, Bob.
You know it's interesting so the tricuspid market size in terms of number of patients. It's very large it's certainly as big as the mitral opportunity and we've talked about the fact that that patient group is greatly underserved. So in terms of people actually getting procedures, you're talking about you know, 1% and 2% three per se.
Very low numbers, so if we could actually develop a great solution for them.
It's going to be and important deal. They they don't have great answers and so the burden is going to be on us to develop great solutions and to create evidence that we're actually doing that we have a we have a high level of confidence that we can do it Oh of course mitral is gonna be bigger here and the near term it's got an earlier start.
But we think theres a lot of potential and and those are the patients who themselves are a are very diverse and that's why we think when it's all done for tricuspid patients that's going to require a portfolio.
Yeah.
Thank you.
Our next question comes from David Lewis with Morgan Stanley. Please state your question.
Oh, great. Thanks for taking the question.
Micro Scott just final follow up here on guidance for a second.
And so obviously from researchers trends and probably trended more negatively than when you sort of gave early guidance and in December so.
And why things are training more natively, you're still sort of holding the outlook for 'twenty, one and so I guess, what's providing that kind of comfort that even though near term things are heading.
Difficultly, you still feel very good about the 'twenty. One numbers is that just what youre seeing here and the first quarter is that in your account recovery is that just the pace and recover you saw last time, but you know same.
The same confidence facts have changed what's providing that confidence and a quick follow up.
Yeah. Thanks, David So we always anticipated it was going to be a slow start to the year. It was going to take what it takes a while for vaccines to have any impact its probably turned out to be a little worse than we thought but it really hasnt changed our outlook. We really believe that you know coming out of the winter. There was good and we're gonna start gaining ground on this.
And that you're gonna have vaccines widely distributed by the middle of the year and then we're gonna be returning to normalization. So when we put that together it gives us considerable confidence yeah is it maybe slightly weaker than it was when we gave the guidance at the Investor Conference, yet, maybe but we're still very much and the range.
Okay, and then just Mike just strategically you just comment on clinical trial enrollment is coming up a lot from you other companies now and.
Under two things. The first is have you rethought and you have a.
Significant number of clinical trials sort of ongoing have you thought at all about changing their clinical trial strategy slowing some emphasizing others and sort of question, one and and related it's just figuring benefits the income and for all the companies and they're trying to get into this marketplace and they've lost basically 18 months and sort of competitively does it start becoming a bigger advantage to those.
And are already and the market, specifically and structural heart and Teva with the trial burden us is very high thanks, so much.
Yeah. Thanks, David you make a good point the trial burden is high and so it is it is more difficult right now I can tell you that the re our team and our researchers are very committed and they're ready to get back at it and so there. Although there were delays I don't know if it's fair to characterize that is it 18 month delay David I think that's probably.
Overstating it to some extent I think we talked when we said what happened in 'twenty and 'twenty for example, and some of the T. M. T T trials.
Certainly cost us a couple of quarters and now we're seeing it a little slow again, but our team really feels through conversations with researchers that it's going to come back you know when you're trying to develop real new opportunities like T. M T T or expand indications and tab or like early tavern and moderate a us.
Those are heavy lifts that take a long term commitment and we're getting really nice participation and cooperation with F. D. A so it's gonna get done at it just as a bit of a headwind right now.
Thank you. Our next question comes from Raj <unk> with Jefferies. Please state your question.
Hi, good evening.
In order for I, absolutely on the near term as well you mentioned that some of the larger centers, where maybe seen slow referrals.
Is there anything you can comment really on how that pipeline looks and how quickly you can refill if things do start to open up and essentially will there be a kind of continued lag effect on your recovery relative to what happens and the broader market because of that referral network.
Yes. Thanks Raj So what we were referring to is just reflecting back on the fourth quarter. We had this observation that the larger centers saw less growth than the smaller centers.
And the exactly why that happened.
And we only kind of speculate Raj. So we obviously have conversations with them and we have and the anecdotal information that suggests hey, you know those larger centers may be used to pull from much broader geography, and maybe there's less referrals are during this time of COVID-19 than you would expect and and.
Normal environment, so having said that well.
When when they set or slow down and yes. They also a slowdown.
Qualifying patients. So it takes a while for that pipeline to refill. So that is that's legitimate but then again when we gave our estimates we've taken that into account. So when we say hey, we think Teva is going to grow 15% to 20% in 'twenty and 'twenty. One we've taken into account that yeah. There's this lag at the beginning of the year.
And so we're still kind of on sites to engage with patients and they're very motivated to do that but give you you know where we're headed right.
Understood and then just.
One quick follow up on that so loaded obviously off the market globally have you seen much impact in the marketplace and have you been able to capture some of that share.
Any thoughts early on and how that's fairing.
Yeah. Thanks Raj.
They didn't have a really large share position and so yeah I'm sure. We were the beneficiary to a small extent and you know if I reflect all the way back to our Investor Conference and 'twenty and 19, we estimated that we would probably have some small share loss during 'twenty and 'twenty and where we don't we it's kind of tough for us to.
And that at this point, we're not sure that that happened.
That may have been part of a contributor.
Okay.
Thank you and next question comes from Larry <unk> with Wells Fargo. Please state your question.
Good afternoon, and thanks for taking the question.
And one on Pascal for me.
One on a different one separately so Mike do you expect to launch Pascal and the U S and late 'twenty two does that assume completing enrollment in 'twenty and 'twenty one of US class two two D and presenting the data in early 'twenty two.
And Pascal precision and Mike what are the benefits of that and and the timing and and I had one follow up.
Yeah, Thanks, Larry so.
So let me be a little bit more precise.
And so what we said is that we will get approval by the end of 'twenty, two and the next year and it'll probably be launching and 23, so I wouldn't want to other necessarily model sales in 'twenty and 'twenty to exactly what the run up looks like before that.
We're not we haven't really talked about we haven't laid it up obviously youre right theres multiple steps when do we completed enrollment and when do we complete the follow up when do the reports show up and I don't have clear estimates for you at this time of when that's going to happen.
As it relates to the Pascal precision.
And we're really proud of that system is designed to deliver significant advancements to our stabilizer and our catheter and our handle.
It's it's.
You know the precision one is not we haven't really laid out timing I think that's good and sort of evolve over the course of 2021, but I would probably come back with more accurate timing it'll later day.
And Mike Thanks for that and a few years ago, you were developing a product for free and where to get insufficiency, what what's the status and what are your thoughts on that market opportunity is it just too too small you know.
Given all the bigger opportunities that youre pursuing now thank you.
Well, we really don't have there Larry to say that that the pipe line item that's imminent.
And that goes that goes back quite a ways.
For the one product that we have that sort of helps for that group of patients is really and the surgical side. This connect product that also replaces the Arctic route that that certainly helps those kind of patients but.
Suggests that we have a transcatheter and one around the corner would be overstating it.
Thank you. Our next question comes from Robbie Marcus with Jpmorgan. Please state your question.
Oh, great and thanks for taking the question and.
And so with a little slow down.
Here with Covid, what are you seeing in terms of trial enrollment is that also getting delayed and is that is that assumed and the timelines that you gave us today.
Yeah, Thanks, Robbie and so yeah, we are feeling it and trial enrollment is this is not an easy time.
One we're going through what we just saw here at the end of the quarter and the start of this quarter. It is a tough time and you know it's kind of a funny I mean, the hospitals that it felt like all hospitals have been impacted but the ones that have been impacted are a really a really full up right. They really are they really struggled.
And to be able to handle new patients, which includes clinical trials, so, but having said that all the dates that we gave you anticipate and what's going on and we would give you a new dates if we didn't think that we could achieve those so yes, yes as other tough time right now yes. It is but do we think that there's going to be a recovery. There's there's a lot of interest.
Amongst other clinical researchers to get back at it and and really there they're enthusiastic about it as we are and so we think that we're going to get after it pretty hard when it opens back up again.
Great and still a lot of sick patients that need help and yes. There are.
Unfortunately, and maybe just a quick follow up and.
And you know you're still generating a very healthy amount of cash even.
Even in 'twenty and 'twenty one here.
How should we think about the priorities for that use of cash and you know are there any areas to the business that might see some M&A potential.
And Ravi it's Scott. Thanks for the question. So you know our focus and our priorities for use of cash haven't really changed the first one and of course is making sure that we've got sufficient cash to invest and internal growth opportunities and that includes building out our plant infrastructure. So we've got now a multiple <unk>.
And facilities around the world we've recently.
<unk> gotten a lot further along and are and are almost completed with Costa Rica, we've broken ground on a new facility in Ireland and as the company continues to grow we'll continue to and a disciplined fashion and invest capital to support that growth on the production side as it relates to M&A, we're very active on the business development front and we are.
Continually looking for external growth opportunities as you know most of these are typically small we usually buy pre revenue companies or technologies, or we'll make investments and companies or buy options to acquire companies based upon how they perform and development efforts and so those those activities will continue we've got this.
We've got a good problem to have which is we continue to generate net cash and that's why we've got over $2 billion now and the balance sheet and and so we think carefully about how to do that and we think carefully about how to manage the share count and for the time being and for the foreseeable future. Our preferred means of returning capital to shareholders will be through continued share repurchase and we've.
Got over $600 million of share repurchase authorization left.
Thanks, a lot.
Our next question comes from Josh Jennings with Cowen. Please state your question.
Hi, good evening, thanks for taking the questions.
Two two and the $7 billion $7 billion Tam and market by 2020 for the firm.
And that target for a couple of us.
Little while now in front of the China approval does that include and internal assumptions for within the market for China Tavern and and.
And second layer is just thinking about tavern, and taverns taverns Sam or.
Could those two indications represent 10 per cent or more than $7 billion opportunity in 2020 for thanks for taking the questions guys. Yes.
Yes, Thanks, Josh Yeah. So we are we feel pretty confident and that plus $7 billion to ever market opportunity. It does include China. It also includes most of those indication expansions like you just mentioned like tableau, and <unk> and tavern and silver.
And what's not and there really is a early tower. So this asymptomatic patients if we got that it would be very late in the period, so probably hardly any impact and we're not expecting moderate to read out and really impact that number as well. So maybe does that maybe that is is that sufficient.
To answer your question.
Yeah, Thanks for the help and I appreciate it.
Sure.
Okay.
Thank you.
Our next question comes from Suraj Kalia with Oppenheimer. Please state your question.
Good afternoon, everyone and thanks for taking my questions.
Mike a couple of quick question I just wanted to follow up on Roger's question on net cover and then I have a T. M. T T question.
Forgive me if I heard it wrong why would referrals in the largest centers in the us be different than the smaller centers.
And if I could throw and my TMT T question.
For Pascal and Europe, Mike.
For the centers that are early adopters what is the if a patient comes in what would be the key rationale for them choosing Pascal versus let's say a G. III mitraclip. Thank you for taking my question.
Sure.
So.
Going back to the large centers versus small centers first of all this was simply an observation on our part if we looked at our largest centers versus our smallest centers. The smallest centers grew faster in the fourth quarter than the largest centers. So now why is that well.
Now we started speculating to some extent because we really don't have that clearer picture. It's just the fact of how that happened part of what we have heard anecdotally is that the large centers will offer and prove a matter of fact attract patients and let's say from a multi state area, whereas a small center.
Might only attract patients and their local area and given COVID-19 being what it is or are these elderly patients willing to travel long distances to a referral center, we wonder and we hear from others speculate that that's the reason. So again you can take that for what it's worth but that's.
Probably the best answer that we have on that one.
The in terms of.
And the.
The centers that are adopters, how does it compare.
And we feel really good about the outcomes, we've been doing a lot of work in Europe and trying to help people have outstanding outcomes and so clinicians have experienced with Pascal and many of those experiences have many of those clinicians also have experience with the Mitraclip system, we have.
We have both Pascal and Pascal Ace so they have options in terms of what they might use and I think it's a patient specific decision that clinicians are making at this point of what they think might be best for their patients. So it's still early.
Our data by comparison is still relatively light. Although we're proud that we have 3000 patients who were treated last year and most of those are with Pascal. So we're starting to get some pretty good experience, but it's still there is some time before this plays out.
Thank you our net.
Question comes from Matt <unk> with Credit Suisse. Please state your question.
Thanks, so much for squeezing us and so I did want to have a follow up on mitraclip.
And on the mitral repair I should say and Pascal in Europe.
And I'm wondering if you're seeing any difference.
And they sort of us.
And the ability or through.
<unk> mitral repair and the small relatively smaller footprint that you have there versus <unk> versus <unk>.
And just wondering.
And what are your competitors reported and those numbers were down a little harder maybe than ever volumes are down and just trying to sort through what that could mean, if anything and any color you have would be I appreciate it and one follow up.
Yeah, Thanks, Matt and I think I understand your question are you, saying, hey, it looks like the mitral numbers are down more than the aortic numbers and us.
Is that the us.
Okay Yeah.
And in fact that debt is our observation as well it appears that about us Indeed, the case and now I'm going to speculate as to why.
<unk> been out there for quite a while we have really compelling evidence we have very mature systems are very reproducible results.
And well trained infrastructure by comparison on the mitral side, it's still relatively young the indications aren't nearly as clear. So it's a it's a less mature market and not a surprise probably that's taken place, but I think your observations are correct one.
Great and then just a follow up and.
Oh, JJ, if I can ask that.
Just the sort of maybe confidence and in the and the sort of call it acceleration and maybe off of a slightly lower and more sluggish Q1, and then getting to your to your original range for full year.
And what gives you that confidence that you'll be able to kind of bounce back in Q2, and still wind up and roughly the same place.
Yeah, and there was a version of that that was that math, but that's that's fine yeah. We really do have confidence that it's going to come back we think it's gonna be ramp during the course of the year.
Q1, we just based on what we're seeing so far is gonna be a tough quarter and so we acknowledge that but we are we always thought it would be tough and it might be a little tougher than we thought but we really believe that there's a lot of pent up demand of patients and that they are very much going to seek treatment and once the fear of COVID-19 and once hospitals get.
Themselves squared away and we think they really will and there'll be a much better shape by the time, we get into the second half of the year, but we're going to realize those kind of growth rates.
Super Thank you.
Our next question comes from Danielle and healthy with SBB Leerink. Please state your question.
Hey, good afternoon, guys. Thanks, so much for taking the cash.
Question Mike.
And if I can just follow up on the referral question and I'm not sure what level of visibility you guys you had.
And to the referral channel, but just curious what you saw and in.
And that's sort of June July August timeframe as far as free filling the funnel and how quickly that happens.
And and whether that could serve as a proxy for what we could see you know whenever we get past. This most recent Covid research and then I don't know if you.
Right way to think about it is you know.
Diagnostic facilities are operating at a per cent of abnormal levels or what but any color you could give there would be great.
Yes, Danielle your your observation is a good one.
I think we all remember and the trauma that happened when the sort of the bottom fell out and.
The middle of March last year, and but we also remember that things recovered pretty quickly right. There was a pretty sharp V that we felt and so this this question about how fast is the pipeline fill up and how fast the patients come back if that's any indication and it didn't take.
Barry It wasn't quarter. So it was you know it was and it was a matter of months when things really started to bounce and pack. So yeah, you're right you could use that as some kind of a proxy to try and estimate what might happen now.
That's it for me thanks.
Sure.
Yeah.
Our next question comes from Vijay Kumar with Evercore ISI. Please state your question.
Hey, guys. Thanks for taking my question a couple of quick I guess guidance questions gross margins I think I heard you.
Scott mentioned net 150 basis points of headwind in Q4.
Given your comments and I know FX.
Any changes on how FX impacts gross margins for fiscal 'twenty, one or Q1, perhaps.
Sure. So in 'twenty, one, we think FX, probably hits us another 50 basis points negative.
On the gross margin line and so we're coming off of you know and the fourth quarter. We finished at 75.3.
But we're also expecting a better mix as Teva continues to grow. We've also got some operational efficiencies and theyre going to continue to benefit us on the gross margin line and so we think we'll be able to largely offset that additional 50 basis points of FX pressure on gross margin and ended up and that 76% to 77%.
<unk> range that we guided to.
That's helpful and then perhaps Mike you can chime in on this but I'm curious the share count assumption here for Q1.
Assumes no buybacks I'm, just curious given that the cash position.
What would cause I guess for you.
They used to be a little bit more aggressive on the buybacks.
Yeah, I'll start and are encouraged Scott to jump in because he is very much the leader of this and a good partner you know we have a we have a long history of Opportunistically buying shares when we think that there's a disconnect. But you know what we do routinely is to try and offset the dilution associated.
<unk> with our with our equity programs. So we're going to expect to do that and Ah.
And I think that would be something that's typical in terms of doing something opportunistic opportunistic we basically just looked for disconnects and so we we don't match exactly period by period.
The offsetting of dilution from equity awards, but we do over time try to not only offset that dilution, but also by down the total net shares outstanding and you've seen us do that consistently over time. So last year, we bought back about $625 million for the stock which was in excess of the dilution from.
Employee option exercises and delivery of restricted stock and the like.
So you should expect that we're going to continue to be opportunistic as Mike said and and be active re purchasers overtime.
Thanks, guys.
And.
Sure.
And we considered that and opportunity.
Yeah.
Thank you.
Our next question comes from Matt Taylor with UBS. Please state your question.
Hi, Thank you for taking questions for me.
So I had.
Two related questions and so we've talked a lot about your clinical pipeline and new product flow and I was just hoping you could give us a couple of key guideposts. What are what are you looking for this year in terms of data at PCR and other places.
Approval that we should be watching out for and then as we're talking about the clinical trial.
<unk>.
Terms of enrolment and they've gotten to a point, where you feel like you need to adjust.
Any of your timelines or is it just a little bit slower and we're not there yet.
Yeah, So I'll start with the second question.
We really are not changing our timelines. If we were if we were changing our timelines we would certainly tell you and.
We believe that we're going to hit those and those are our best estimates and we try and do that as accurately as we can in terms of what youre going to expect to see this year out of meetings like Euro PCR I think what youre going to see for the most part is follow up on the many many trials everything from pass to CE Mark.
Trials and more Sotheby's there'll be more patients that'll be longer Timeframes, where day there'll be shared and so you'll see that we've got quite a extensive portfolio and T. M. T. T. So I think you're going to see a number of reports over the course of the year.
Okay.
Yeah.
Thank you. Thanks, Matt Diego next question. Thank you and our last question comes from.
Peter I'm sorry, our next question comes from Peter Chickering with Deutsche Bank. Please state your question.
Good afternoon, guys. Thanks for fitting me and for two quick ones here.
For the U S and Margaret.
Peter has been pretty granular try and take back market share and the back half of 'twenty and 'twenty I'm just curious if they get it.
It gives me and color on where your market share ended up doing for you and fourth quarter and how we should think about market share changing one way or the other in 'twenty and 'twenty one.
Yeah. So yeah, I think what we tried to do is provide a statement and our prepared remarks that said that we felt like the market grew pretty much at the same pace that we did so we didn't really see appreciable share change in the quarter. So again, having said that.
It's pretty hard to determine.
What exact share positions are and and it's even more difficult during a pandemic. So we're not suggesting that it's exact but and our.
Our estimates are it was pretty flat.
Great and then a quick follow up for.
And you know our newest markets and Europe is obviously weaker than you expected in December we talked about strength, and Japan, Australia and South Korea.
Can you walk us through if those markets have accelerated and versus a year ago or your guidance at the analyst day, and you'll get more color on this mark thanks, so much.
So.
We're not suggesting that those three countries for example, where better since the analyst day, what we're saying and as those are examples of countries, where the penetration is low and the growth rate is high. So those were really healthy growth rates significantly above the rest of the portfolio. That's pulling it up now some of those are pretty.
Base by comparison, and you know like like Korea, and Australia would be pretty small compared to what's going on and Europe, etc. But Nonetheless, you know as those treatment rates increase and those countries that certainly helps the <unk>.
Growth rate.
Thank you.
And we have time, alright, and last question and that comes from Joanne Wuensch with Citibank. Please state your question.
Thank you for fitting me in and good evening, I'll make a click and.
Doubling TMT G revenues.
And in 'twenty, one is impressive and do you think you've hit sort of a tipping point can we think of this as an accelerant over the next couple of years or how do you think broadly speaking and I recognize Kevin it makes it more difficult and the TMT market and Europe. Thanks.
Yeah, I think maybe it's just fair to say Joanna this is a really big market opportunity remember when we talk about it we talk about it and billions and when you look at where our sales are right now they're really low so our opportunity to grow at a pretty significant and pace I don't think it should be that surprising.
And the the doubling is nice and we're pleased to do that but we've got a long way to go we really think it's and it's important it's a it's a big opportunity for US. The you know the big drivers are going to be our evidence when we really put a strong clinical evidence up there that's compelling and and.
Clinical trials those are the kinds of things that are going to really go and drive even more significant inflection.
And <unk> points. If you will of course, we've got a great team and a nice reputation and a nice.
Really differentiated products, but the data is going to be the bigger issue and again, it's a it's scott much more potential than this and the long run.
Thank you.
And that's all the questions we have I'll turn it back to Mr. Marcel and for closing remarks.
Well thanks for all the continued interest and Edwards and even though Covid is challenging right now we do see better days ahead, and we're very optimistic about the future of Edwards Lifesciences, So mark Scott and I are welcome any additional questions by telephone and with that back to you Mark.
I don't think my Mark Mike is open now Sir.
Thank you.
And this concludes today's conference and.
You can access the replay by dialing eight seven and seven and 660 6853. Please.
Please use conference I'd 1371 zero for seven to once again to ask taxes and replay. Please dial eight seven and seven and 660 6853.
Using conference I'd 130, 710 for seven to have a good day. Thank you.