Q3 2024 Edwards Lifesciences Corp Earnings Call
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Speaker Change: Greetings and welcome to Edwards Life Sciences 3rd Quarter, 2024 Results Conference Call.
Speaker Change: At this time, I'll participate in the list and only mode. A question and 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.
Speaker Change: I will now turn the conference over to your host, Mark Wilterding, the Enterprise President of the Investor Relations. Thank you, you may begin.
Mark Wilterding: Thank you very much Diego and welcome everyone. Thank you for joining us this afternoon with me on today's call as our CEO Bernard Zovighian, and our CFO Scott Ullem.
Mark Wilterding: Also joining us for the Q&A portion of the call will be Larry Wood, our group president of tavern and surgical structural heart.
Mark Wilterding: The V-Enchopre, our global leader of TMTT and Wayne Markowitz, our global leader of surgical structural heart.
Mark Wilterding: To staff to the close, regular trading, Edwards Life Sciences released 3rd quarter, 2024 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 Q&A.
Mark Wilterding: Please note that management will be making forward-looking statements that are based on estimates, assumptions, and projections.
Mark Wilterding: These statements include Bernard Limited to Financial Guidance and Expectations for Growth Opportunities, Strategy, Leverage and Integration of our Acquisitions, Regulatory Approvals, Clinical Trials, Litigation.
Mark Wilterding: Reimbursed Mint, Competitive Matters, and Foreign Currency Fluctuations.
Mark Wilterding: 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.
Mark Wilterding: Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially.
Mark Wilterding: Information concerning factors that could cause these differences and important products safety information may be found in the press release.
Mark Wilterding: Our 2023 Annual Report on Form 10K and Edwards Other SEC filings, all of which are available on the company's website at Edwards.com.
Mark Wilterding: Unless otherwise noted our commentary on sales growth refers to constant currency sales growth, which is defined in the quarterly press release issued earlier today. Reconciliation between gap and non-gap numbers mentioned during this call are also included in today's press release.
Speaker Change: Rothrates referred to continuing operations and do not include contributions from critical care which was sold on September 3rd. With that I'd like to turn the call over to Bernard for his comments. Bernard?
Speaker Change: The New York Times
Speaker Change: The End
Speaker Change: of $1.4 billion increase 10% on a constant currency basis versus the year-go period. Slide the ahead of our expectations.
Speaker Change: Tavur and TNTT both contributed significantly to grow in the third quarter, as more patients, globally benefited from our Cated Air Base Truck General Heart Therapy.
Speaker Change: During the Quartet, our team made important advancements in our clinical research and new product in production.
Speaker Change: to address the unmednied of structural health patients around the world.
Speaker Change: Next week at TCT, you will hear more about our commitment to generating important clinical evidence to help physicians and the health care ecosystem take care of the many patients in need.
Speaker Change: At the conference, we will be discussing the pivotal clinical data presentation of early tavern, pricing to and class to D, along with more than 20 over important updates.
Speaker Change: Edwell is leading the advancement of science in this large, diverse and rapidly growing field.
Speaker Change: Operatoric teammates positioning tavern for long-term growth.
Speaker Change: In addition to unautomatic differentiated next gen technologies, we are leading several global initiatives, including reaching more patients.
Speaker Change: from Patient A Wellness, Activation and Access, and then Hensing Physician Training and Support Programs.
Speaker Change: For TMT, we continue to scale our fast growing business, and we are pleased with its trajectory of our last several quarters.
Speaker Change: Key initiatives include broadening the launch of Pascal, advancing the introduction of the work in the US and in Europe, and launching Sapien M3 in Europe next year. Edward's unique pipeline of innovation should drive strong, multi-year growth.
Speaker Change: We are also committed to bringing differentiated surgical innovation to patients, supported by strong evidence generation, ensuring we remain at the forefront of surgical advancement.
Speaker Change: Moreover, we're entering new foreign political area such as Eortick Regurgitation or AR and implantable have failure management or IHFM.
Speaker Change: This initiative, aligned with our long-term vision of expanding into more therapies, driving sustainable growth or eduels.
Speaker Change: It was a specially-busier quarter, as our team run the world, deliver our strategy.
Speaker Change: We closed the self-critical care in September to can port an action to sharpen our focus on structural heart, including integrating recent acquisition and right-sizing the company for long-term profitable growth.
Speaker Change: As we look ahead.
Speaker Change: We see significant growth opportunities across our differentiated portfolio of leading structural health therapies for taverias taver air TNTT, surgical and IHFM.
Speaker Change: This commitment will be discussed in detail of the upcoming investor conference, where we will outline our strategies for different shaded value creation in the year ahead.
Speaker Change: Now I will provide detail on Q-free results by Product Group.
Speaker Change: in Taver.
Speaker Change: Soared Quartier GlobalSense of $1 billion, increased 6%
Speaker Change: Wanda Justin for currency and billing days.
Speaker Change: A law strong competitive position and pricing remains stable globally, although we experience a few instances of regional pressure.
Speaker Change: We are confident in our differentiated technology, high-quality evidence, and the value we continue to demonstrate to patients, clinicians, and healthcare citizens.
Speaker Change: We are a made deeply committed to advancing evidence for AS patients.
Speaker Change: in August, one year data from the Rea trial.
Speaker Change: A first of its kind, prior, for Christ exclusively on outcomes for women, receiving tavern. We are presented at the E.S. emitting held in London.
Speaker Change: and the investigators reported super-areld come for women receiving the Edward Stepian-free or Stepian-free ultra-versa as compared those receiving surgical and your tick value replacement for the primary endpoints of death.
Speaker Change: Strock, Rehospitalization, at one year.
Speaker Change: We are proud of his high quality clicker research.
Speaker Change: The outstanding success of terror points to the importance of value selection for women and their going e-artic value replacement.
Speaker Change: Special divorce with small anime.
Speaker Change: to preserve their option for a future-valve in-valve procedures ensuring the life-term management of their disease.
Speaker Change: Next week at TCT, the clinical community will hear results from the early terror trial.
Speaker Change: The trial is the first and largest randomized controlled trial to date studying asymptomatic severe airspacions and the impact on of early intervention with staffer.
Speaker Change: Turning to the U.S.
Speaker Change: Our year of the year, third quarter, tavern self-graph rate, was in line with a global tavern constant current of the year.
Speaker Change: We believe our U.S. competitive position was lovely and changed.
Speaker Change: In the US, also all those hospitals in physician continue to acknowledge you know, hard team, capacity to come through internationally, it is encouraging that many hospitals are exploring additional investments.
Speaker Change: to address future war flow needs to manage with space.
Speaker Change: We know from experience that hospitals have historically demonstrated the ability to scale, support, trans-catitia, for city of growth over time.
Speaker Change: Out of the US, in the third quarter, a constant goings, it's heavier, self-growth, what is line with a global terror growth.
Speaker Change: In Europe, our market position improved sequentially, supported by the continued launch of the Russian-Sports World Cup.
Speaker Change: We are pleased with the exception of patient outcome delivered with this platform.
Speaker Change: And we expect this momentum to continue as more centres at dot com, at dot dot best in class server platform.
Speaker Change: Additionally, the first time I've seen this video, I'm going to show you how to make a video.
Speaker Change: We are the Steve Seemark approval for our Altera System for the Genital Heart Patience.
Speaker Change: Altera, to resulted in quality of life improvement and reduction in the number of procedures that vis younger patients will require over the lifetime.
Speaker Change: We have initiated the introduction of its novel Surapini Europe and initial feedback from Christians has been positive.
Speaker Change: In Japan?
Speaker Change: Flow-wealth Market Growth, pleasure to our results.
Speaker Change: We are a main dedicated to expanding this therapy to address significant and equipment of air among the substantial, ideally population in Japan.
Speaker Change: In closing, we are pleased with our Q3 Tever result, which we are slightly above our expectation.
Speaker Change: How we're 5-7% growth guidance for the full year remains unchanged. However, we expect the Q4 year of the year sells growth rate to be lower.
Speaker Change: Due to some one-time items that Scott will describe later.
Speaker Change: We are a main confident.
Speaker Change: that L.O.V. is positioned for healthy and sustainable tavern growth.
Speaker Change: Revenge by our different, differentiated tavern technology, our deep commitment to advancing patient care through high quality clinical evidence, new education and our investment in patient activation initiatives.
Speaker Change: That's Quartet, we are now the acquisition of Jesse Medical and Genevals, early innovators in the treatment of AR.
Speaker Change: Vliesaquisitions provide the opportunity.
Speaker Change: in a new therapeutic area to address the unmanaged of air patients around the world. A deadly disease that impacts more than 100,000 patients in the U.S. alone and is largely unprettyed today.
Speaker Change: As the pioneer in evaluation, we believe Edward is best positioned to develop, study, and deliver novel technologies.
Speaker Change: I am pleased to report that we perform our first implant in the journey pivotal trial with the Edward J. Valve AR system, recently acquired from Jesse Medical.
Speaker Change: As noted, in our announcement of Yenavall transaction, the acquisition is subject to regulatory review and the other customary closing condition.
Speaker Change: We are responding to a second request from the FTC in connection with their review and anticipate closing their acquisition mid 2025.
Speaker Change: Now turning to TMTT.
Speaker Change: Our unique innovations, including the past-tall-web-air system, were evoked by conspiracy-replacement system and the upcoming CEPI-LM-3-M-I-Trullary-placement system.
Speaker Change: Provided broad set of treatment options to serve the many diverse and complex patients in need.
Speaker Change: We are pleased with the Q3 result, achieving 91 million in sales, representing 74% growth over the prior year.
Speaker Change: Since we are led by Pascal Groff Globally, we continue the initial commercial expansion of Ivok in the US and Europe.
Speaker Change: Grabbly.
Speaker Change: We continue to see more patient, diagnosed and treated as long as strong therapy adoption, resulting in my 12 procedures, experiencing ongoing double-digit growth and even stronger try cut speed therapy growth.
Speaker Change: Adoption of a different trip to Pascal Technology is expanding in both new and existing sites around the world.
Speaker Change: We look forward to presenting the two-year-old comms of a cast of a cast to the pivotal trial, studying de-emerpatient at TCT next week.
Speaker Change: We are also pleased to announce the earlier than expected completion of enrollment for the class 2TR trial, studying TR patient with Pascal randomised against optimal medical therapy alone.
Speaker Change: With the achievement is great new for patients suffering from tracuspid regurgitation given the deforeenchated characteristic of Pascal.
Speaker Change: The Evoc launch continue to progress well as we successfully activate new sites in the US and Europe beyond our initial trial centers.
Speaker Change: We are also increasing our field teams deliver all our high touch model to support new sites, as they bring evoke into their clinical practice, in order to achieve excellent patient outcome.
Speaker Change: The strong interest in this therapy continues to highlight the large and manned, the full 400 patient cohort of a twice in two pivotal study at one year will also be presented at TCT Network.
Speaker Change: The
Speaker Change: in our country to the 4th to reach more patients. A 4th and larger size evoke valves, the 56mm, was recently approved in the US.
Speaker Change: The addition of his larger valves, size will expand the addressable patient population.
Speaker Change: On October 1st
Speaker Change: He worked became eligible for Medicare's new technology Adam Payment
Speaker Change: With additional payments, both standard reimbursement is an effect for 3 years and will support increase access to this Brexit therapy for the many US patients in need.
Speaker Change: Based on the ongoing global adoption of our two therapies, Pascal Enivogg, we remain confident in our fully air TMT-t self guidance at the high-hand of 320 to 340 million.
Speaker Change: in surgical.
Speaker Change: Fert Quartier sells from continuing operation of 240 million dollars increased 5% of a prior year. Gross was driven by strong global adoption of Edward's premium surgical technologies in spirit, nitrous and connect.
Speaker Change: We continue to see positive procedure growth globally for the many patients best treated surgically including those undergoing complex procedures.
Speaker Change: We expand, we continue to expand the overall body of a resilient evidence.
Speaker Change: An enrollment in Europe for a moment is critical trial, staling my trace is a hairscadder.
Speaker Change: In addition, a commence airman is great and we've been published.
Speaker Change: in the journal for usic and cardiovascular surgery, which shows positive outcome for patients with air treated with resilience, tissue valves after five years.
Speaker Change: Finally, to investigate the history of the history of Europe and the U-Rain Impact, have shown favorable outcome in younger and more complex patients who were implanted with the reveal in spirit vals.
Speaker Change: In summary, we continue to believe that our full year 2024 surgical cell scruff will be 6-8%
Speaker Change: Turning to structural heart failure. In Q4ing, we close the air acquisition of endothronics, making marking our entry into implantable heart failure management or IHSM.
Speaker Change: The End
Speaker Change: our vision for IHFM is consistent with our other structural haptic knowledge.
Speaker Change: To establish a platform that ensures best in class of convocations in need, resulting in multi-years of growth.
Speaker Change: We released strong 12-month results from the proactive HF Pivotal Triangle at the HFFA conference, which demonstrated significant benefit to patients, managed with the Cordila system.
Speaker Change: An implantable pulmonary pressure sensor, allowing early targeted heart failure intervention.
Speaker Change: In addition, the proactive HF2 trial has also been initiated which will extend the evidence, bays for implantable heart failure management and serve their most rate, the value of data driven heart failure management.
Speaker Change: With the recent approval of Cordellin the U.S. and the completion of our first case.
Speaker Change: Our focus is on building our commercial team, deploying physician training, case support to ensure high quality of outcomes.
Speaker Change: Revenue will ramp over time as we focus on discipline, commercialization, outcome, system usage and patient engagement.
Speaker Change: And now I will turn the coat over to Scott.
Scott Ullem: Hey, thanks a lot, Bernard. We were pleased with our financial results in the third quarter, starting with third quarter sales from continuing operations of $1.35 billion.
Scott Ullem: Our continuing operations underlying sales growth was 9.6% and Edwards adjusted earnings for share was 67 cents. Both slightly ahead of what we modeled for Q3 guidance provided in July.
Scott Ullem: A full reconciliation between our gap and adjusted earnings per share for continuing operations is included with today's press release.
Scott Ullem: The sale of critical care, as well as the acquisitions we announced last month, resulted in some new features in the presentation of our financial results this quarter.
Scott Ullem: First, it's important to note that our original sales guidance for Q3, assumed we would own critical care for all of Q3.
Scott Ullem: We were pleased to close the sale of critical care in early September, so we did not have critical care sales in the last month of Q3.
Scott Ullem: Second, the discontinued operations in today's release and the 10Q that we will file in early November are comprised of the two components that represent our plan to exit product groups that are not focused on implantable medical innovations for structural heart disease.
Scott Ullem: The discontinued operations includes critical care, as well as a small, non-core product group that reduces the reported sales of surgical structural heart.
Scott Ullem: Third, as it relates to previously announced acquisitions, we do not expect meaningful contribution to Edward sales in 2024 and 2025.
Scott Ullem: The additional operating expense from three of the four acquisitions announced is included in our fourth quarter earnings per shared guidance.
Scott Ullem: Additionally, there is a new line of the Prophet and Lost Statement above operating income, called other operating expense and income, reflecting an impact related to critical care transition service agreements.
Scott Ullem: So now we'll cover additional details of our continuing operations P&L.
Scott Ullem: For the third quarter, our adjusted gross profit margin was elevated at 80.7%. Slightly higher year over year and sequentially due to variable expense timing.
Scott Ullem: We expect fourth quarter gross margin to be in line with the high end of our 76-78% full-year guidance range.
Scott Ullem: which is also a reasonable preliminary modeling assumption for 2025.
Scott Ullem: Selling General Administrative Expenses in the Quarter, or $421 million, or $31.1% of sales, compared to $382 million in the prior year.
Scott Ullem: This increase was driven by an expansion of field-based personnel to support growth of our trans-gatherer therapies, including the launch and roll-out of Pascal and evoke.
Scott Ullem: Research and Development expenses in the third quarter grew 4% over the prior year to $253 million or $18.7% of sales.
Scott Ullem: This increase was primarily the result of continued investments in our trans-Catheter valve innovations, including increased clinical trial activity.
Scott Ullem: A justed operating profit margin in Q3 was elevated at 31.4% reflecting unusual benefits of variable expense timing.
Scott Ullem: We expect Q4 adjusted operating margin to decline to the mid-20s.
Scott Ullem: Resulting in full year 2024 average adjusted operating profit margin of approximately 27-28% which is also a reasonable preliminary modeling assumption for 2025, with forecast for expanding margin thereafter.
Scott Ullem: Turning to taxes, our reported tax rate this quarter was 10.1% or adjusted 12.4%.
Scott Ullem: We expect a similar adjusted tax rate in Q4.
Scott Ullem: As a reminder, our original 2024 adjusted tax rate guidance range was 14 to 17 percent, and we are benefiting this year from several one-time tax events resulting in a lower than originally expected rate.
Scott Ullem: Born Exchange rates decreased third quarter adjusted sales growth by 70 basis points, or $7.9 million compared to the prior year.
Scott Ullem: Gap earnings per share of $5.13, reflects the one-time gain on the sale of critical care.
Scott Ullem: Also unique to this quarter were several special items, including a restructuring charge, a gain on our original investment in endotronics, and a $30 million charitable combination to support the work of the Edwards Life Sciences Foundation.
Scott Ullem: Turning to the balance sheet.
Scott Ullem: Following the critical care sale, we had approximately $3.5 billion of cash and cash equivalents as of September 30th.
Scott Ullem: You'll see a balance sheet in our 10 Q filing in early November.
Scott Ullem: During the third quarter, the company repurchased $1 billion stock through a combination of pre-established trading plans and accelerated share-reported programs.
Scott Ullem: Edwards currently has approximately $1.4 billion remaining under its share-reporteous authorization.
Scott Ullem: Based on our year-to-date share of our purchase activity, we expect average-deluded shares outstanding for Q4, 2024, to be between 590 and 595 million.
Scott Ullem: I'll finish with comments related to guidance.
Scott Ullem: Our four-year guidance for Edward Sales Growth of 8-10% remains unchanged, as does our guidance for our three product groups.
Scott Ullem: Our guidance assumes fourth quarter year over year taver growth below the full year taver range of 5 to 7 percent.
Scott Ullem: Recall Q4 of 2023 was an especially strong quarter for tavern.
Scott Ullem: and Q4 of this year, we have seen impact from the hurricanes in the southeast, as well as a one-time impact from a China distributor rebate adjustment, and fewer selling days versus Q3.
Scott Ullem: It's important to note that our daily tavern procedure volume is still forecasted to be sequentially higher in Q4 vs Q3.
Scott Ullem: We expect Q4 sales of 1.33 to 1.39 billion dollars and Q4 earnings per share of 53 to 57 cents.
Scott Ullem: We look forward to providing detailed 2025 financial guidance that our investor conference in New York on December 4th.
Speaker Change: and with that I'll pass it back to Bernard.
Bernard Zovighian: Thank you Scott, we are in confidence that our innovative therapy will allow adults to with more patients around the world.
Bernard Zovighian: and continue to drive strong organic growth in the year of the country.
Bernard Zovighian: Our special inclusion increasingly organised the significant benefit of breakthrough technologies we remain as optimistic as ever, about the long-term growth of opportunity.
Speaker Change: with that Charlie Back to Mark.
Mark Wilterding: Thank you very much, Bernard.
Mark Wilterding: Ready to take questions now. 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 re-enter the queue and management will answer as many participants as possible during the remainder of the call.
Mark Wilterding: Please refrain from asking questions related to our early tavern or tricep into pivotal trials. We will present data on those trials next week at TCT and host investor briefings on both Monday and on Wednesday after the presentations to discuss the results in more details. We really hope to see you there.
Speaker Change: Diego, please go ahead with additional details on how participants can access the Q&A portion of the calls.
Diego: Thank you, and at this time we will conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question 2.
Diego: You can press star 2 if you would like to remove your question from the queue.
Diego: Once again to ask a question at this time, press star 1 on your telephone keypad. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Diego: The End
Speaker Change: And our first question comes from Larry Begelson with Wells Fargo. Please stay your question.
Larry Begelson: Good afternoon, thanks for taking the question. Scott, I guess...
Larry Begelson: Maybe help us bridge the Q4 guidance and applies about $200 and $0.20 on an annual basis, just using the midpoint times 4. Can you bridge from the prior guidance to $275 at the midpoint? Did it only change for critical care, which we felt was going to be 40 cents that alluded.
Larry Begelson: seems like something else changed and had one bow loss.
Speaker Change: Thanks for the question Larry. There are a couple of things to change. One was the elimination of critical care, which on a full year basis would have impacted earnings per share to the tune of about 35 cents.
Speaker Change: We're also picking up in the fourth quarter some additional expense related to three of the four acquisitions that we announced earlier, which hit us in Q4. Q4 does not reflect some of the benefits of the right-sizing that we conducted earlier and that we will see in 2025.
Larry Begelson: That's all about Scott, and then you know, just a follow up, Matt.
Larry Begelson: Dory.
Speaker Change: No, just to remember what Scott said, you know, Larry, you know, obviously, you know, we are also going to expect you, you know, growth from our continued operation in 2025.
Larry Begelson: Together with the EPS leverage.
Larry Begelson: and we will provide you know a fool guidance during the circumference in December.
Larry Begelson: Okay, I mean that was my follow up, Scott. I mean I know you anticipated the question.
Larry Begelson: Using that kind of Q4 EPS of 55 cents at the midpoint, people are going to multiply it into 220.
Larry Begelson: How should we think about that in the context of 2025, BSI? You gave some helpful, helpful color on the operating margin. The journey is something else we should consider when we're trying to model 2025 here.
Speaker Change: Obviously, the big driver is top-line growth and we'll be prepared to talk about that for Edwards and for different product lines on December 4th. And you're right, we try to give you some building blocks for margins, both operating margin. We talked about the...
Speaker Change: Special Tax Rate Benefits. We achieved in 2024, which were not going to model achieving in 2025.
Speaker Change: and as Bernard just mentioned we're going to see benefits from some of the actions we've taken this year when we hit the full year 2025. So those are the moving pieces that we can give you for an hour and we'll take you through the top line impact in December.
Speaker Change: Thanks so much, guys.
Speaker Change: Thank you and our next question comes from Vijay Kumar with Evercore ISI, at least their questions.
Vijay Kumar: Hi guys, thank you for taking my question. Scott maybe if I could go back to this Q4 guidance assumption to be called out a few.
Vijay Kumar: Lianite and Sun Tower between the Hurricane China.
Vijay Kumar: Could you parse out what the impact of...
Scott Ullem: At Hurricane Amazement, we've already seen some impact and what was China?
Scott Ullem: Is this just one timer on China could there be some lingering impact as we think about next year? In days, I know you said lesser days were just third quarter, but on a year on your basis, any change in number of days and two four.
Speaker Change: Sure, thanks for the question, BJ. First on China. Now this is a one-time adjustment to a rebate for a distributor in China. It does not have anything to do with our operations or our sales growth in China at this point.
Speaker Change: Um...
Speaker Change: As it relates to selling days, you know, there are three fewer selling days in Q4 than there were in Q3 and that impact says when we start talking about sales dollars. But what's important to note and remember is the procedure volume on an average daily basis is growing sequentially in Q4 over Q3.
Speaker Change: and then maybe one more of a link to the guidance here. What is the implied operating margins here for Q4, right? What when you look at the BPS and the revenue sales dollars?
Speaker Change: is that something like mid-25s and I'm just trying to think what is the right one right here on operating margins as you get the benefit from by sizing, expens line item and sorry, on back on the stage, on a year on your basis was it consistent or did they year on your basis change?
Speaker Change: Well, I understood the first part of your question, let me answer it and then maybe you can help me on the second part of the question. So, yes, for Q4, the guidance assumes mid-20s or implies mid-20s percentage operating margin.
Speaker Change: For next year we expect that to grow to the range of 27 to 28%.
Speaker Change: which is also the same as our full year 2024 operating margin. And help me with the other piece of your question, VGA.
Speaker Change: Satsang on the days, at the fourth quarter of days, we're just fourth quarter of 20 p.m. and you can look on a year on your basis on the days common.
Speaker Change: Now believe the selling days were comparable or the same in Q4 of 2023 as in 2024, we'll check that and I'll come back on if that's not right.
Speaker Change: Thank you guys.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Robbie Marcus with JP Morgan, please stay your question.
Speaker Change: Oh great, thanks for taking the questions. I'll switch it over to some of the products. TMTT again came in better than expected. We've seen from your competitor.
Robbie Marcus: A nice quarter on the repair side. I was wondering if you could talk about...
Robbie Marcus: on a tri-cuspid repair specifically. I was wondering if you could talk about your tri-cuspid replacement and how you're seeing doctors choose in the market which patients are appropriate for which and the decision-making process.
Speaker Change: Hey, thanks for all of you. This is doing an appreciate the question. Maybe I'll just start off with a couple overall comments on a vote. Obviously, we've been a very pleased so far with the introduction of a vote in both the US and in Europe. We've really seen strong position and patient demand, which really enforces that there's a lot of unmet needs for these patients.
Speaker Change: and we've loved to see so far of the vote that we've got very predictable times that are very similar to the clinical trial that are very similar from both clinical trial sites as well as new sites and clinical outcomes are very much similar to try some too.
Speaker Change: and we also have seen in the U.S. where we just have a vote that, from our experience in Europe where we have both repair and replacement, we see that it's important to have a portfolio of both repair and replacement technologies to really treat the diversity of these complex patients that are a tricuspid patients.
Speaker Change: And so right now, we're continuing to open up new centers, activating new sites, focusing on other big try-cuspid centers, really with robust training and high clinical support, and we're continuing to add to our clinical kind of support training team.
Speaker Change: So, so to the dear question about repair and replacement, I think we're all still figuring that out about who's the right patient for each.
Speaker Change: We see that there may be some anatomical considerations where one may be better for than another, but I think as the world we're still all trying to figure this out, but we really do believe that you need both technologies to really see, to really see, to treat the most number of patients.
Speaker Change: To other quick comments, obviously over time we believe that a vote in our portfolio now, if you pull back up and look at Team T.D. of votes, can become a larger and larger percent of our portfolio, but right now Pascal is still our largest growth driver in a year in your basis, just because it's a more stoutless space in a larger space overall, where we look exciting to treating more and more patients with both a vote and Pascal.
Speaker Change: really dig into the capacity issue. And I'm asking this more from a market perspective, because none of your competitors kind of validated a capacity issue. And so,
Speaker Change: When you see it, I imagine that, you know...
Speaker Change: You're one of the biggest in the Structural Heart Lab, so I imagine you probably have the best view, but how are you thinking about capacity here? Is it more of a TAVR volume issue versus capacity? I know the market is still substantial from a top-down basis. Just because we don't hear anybody else kind of validating.
Speaker Change: Thanks a lot.
Speaker Change: Sure, thanks Robbie. This is Larry. Yeah, you know, it's something we spent a lot of time on in the quarter. We spent a lot of time with hospital administrators.
Speaker Change: and with our positions in the field. And I think one of the things to just think about is, given our market position overall, we're more dependent on market growth than any of our competitors are.
Speaker Change: For people that are coming off small bases, you know, if they pick up a little bit of share or a few cases here and there, they don't really necessarily see the capacity constraints in the same way.
Speaker Change: I also think, you know, you just have to look at all of the new technology in the last couple of years.
Speaker Change: that's coming to the Cath Lab space, and frankly, we're part of the problem.
Speaker Change: As the bean's growing and bringing in new products like Evoque, and we see continued adoption of Pascal, and you see adoption of other technologies, it's just putting tremendous pressure on the structural heart teams to be able to.
Speaker Change: to prioritize patients and to move patients around. Now, we've been very encouraged in our discussions with administrators that, you know, they see this as being a long-term growth part of their hospital systems.
Speaker Change: which means they now, I think, are starting to realize...
Speaker Change: Just not that they're going to have to add some capacity, but they're just not going to be able to move.
Speaker Change: resources around to be able to address the patient needs so
Speaker Change: We have heard of hospitals that are now specifically investing in their structural heart space so that you can meet these needs.
Speaker Change: It's more just a staffing issue and they can prioritize it. But one of the reasons we brought together a lot of administrators is so that they could share best practices for how they're trying to manage.
Speaker Change: all of the challenges that they have and try to move that forward and and we'll continue to do that or you know until this
Speaker Change: until this gets resolved. But that's kind of an update on where we are. But one thing I will stress is, it's not a shortage of patients. I think we do see backlogs growing. We say time to treat is increasing for our TAVR patients.
Speaker Change: And, you know, that's just the other issue that we have to address because we know these patients don't.
Speaker Change: don't wait
Speaker Change: I don't know, Bernard, do you have anything to add just as a...
Bernard Zovighian: I think you said it all and well, Larry. We are part of the issue here. We are such an innovator in the space with Pascal, with Evoque, with TAVR. We have a market-leading position in TAVR. And you need to realize also that when...
Bernard Zovighian: We bring in Ivoque in one of the larger tavern centers.
Bernard Zovighian: It is taking, it is needing a lot of resource. You know, we want to make it, TR is a new disease. So the, you know, the health, you know, basically, you know, this heart team is learning about the new disease, is training about the new device. We are, you know, we are, then they are screening, you know, patients.
Bernard Zovighian: So it's not like, you know, one day kind of adjusting, you know, their workflow. It is taking, you know, multiple days, weeks. But we are very confident that they are patients, tricuspid patient, mitral patient, AS patient.
Bernard Zovighian: We are bringing innovative technologies. The healthcare system has proven to us in the past, they know how to scale.
Bernard Zovighian: And all of these procedures are profitable. So, you know, we are confident that, yes, it is an issue right now. We don't believe that it is a long-term issue. It is not going to take, you know, a few weeks to solve, but it is not going to take a few years, you know, to solve also.
Speaker Change: I appreciate it. Thanks a lot.
Speaker Change: Thank you. And our next question comes from David Roman with Goldman Sachs. Please state your question.
David Roman: Thank you and good evening everybody. I wanted to start on just laying out some of the pieces here post TCT and I appreciate that you'll that we won't see the data until next week.
David Roman: But if you think about...
David Roman: the subsequent activities that would take place either on the asymptomatic patient population as it relates to label expansion or additional patient activation efforts. What happens next there? And maybe you can kind of talk through some of the dynamics on the tricuspid side as well, appreciating here that the FDA has already approved to evoke and NCD is already underway and you have the NTAP to support adoption, but maybe help us think about the activities that happen subsequent to TCT and then when we should realistically expect to see.
David Roman: a benefit of that flow through the business, assuming positive outcomes in these studies.
Speaker Change: Thanks David for the question. Anything related to TCT, I suggest we wait until next week. What we did in the next week, to make sure we can go very deep with you, we have an event on Monday and we have an event on Wednesday after the two presentations.
Speaker Change: So we will go deep then, and we are also going deep at the investor conference.
Speaker Change: Now, with regards to the NCD for Evocular, maybe you want to touch on that, Devin? Yeah, no problem at all. Yes, right now we are obviously in a national coverage analysis position where CMS is working along their pathway and through their work where we expect to see a draft NCD hopefully come out by year-end, and we hope to have an NCD in place by the end of Q1. And we're fully supportive of CMS's efforts to get this out as quickly as possible.
Speaker Change: to support patients.
Speaker Change: associated with the acquired assets and that that forms a new base of operating margin off of which we can see expansion longer term and then maybe just Devine to clarify, can you just describe the interplay between the NCD and the NTAP post Q1 of next year?
David Roman: Well I'll start, and you said it perfectly David, yes, 27 to 28% implies the impact of the acquisitions and the right sizing moves that we made this year, and it is a base off of which we will grow, and our plan is that we're going to continue to expand operating margins after we get through 2025.
Speaker Change: Yeah, sure. So, the NCAP, which started October 1st, is about incremental payment above the existing DRG.
Speaker Change: So a hospital center, depending on their cost structure and how it's very center dependent, can get incremental payment when they do an evoke case for Medicare for that case.
Speaker Change: The NCD is about coverage.
Speaker Change: meaning which patients are covered or not to get the payment.
Speaker Change: So the NCD and what is written in the NCD will help determine which patients and which centers do evoke and which patients would get reimbursed. The NTAP helps increase the amount of payment for each patient when they do a case.
Speaker Change: Thank you. And our next question comes from Travis Steed with Bank of America. Please state your question.
Travis Steed: Hey, thanks for taking the question. I just wanted to clarify the 27 to 28% margin, that that includes the genovalve, the deal that hasn't closed and includes kind of everything, the cost savings. And I don't know, it seems like that's like 240, 250 in earnings range. I don't know if there's a floor or if you'd like to comment on that for the EPS side.
Speaker Change: So the 27-28% includes three of the four acquisitions. We're not being very specific about what the implications would be for Yenna. As we mentioned, we're responding to questions that we've received, and we're expecting that we'll get that closed.
Speaker Change: next year. As it relates to earnings per share, yeah, let's not go there. I don't really want to get overly specific about what that looks like. Again, because we want to paint the full picture, including top line growth, when we get to the investor conference in December.
Speaker Change: That's fair. I don't know if there's any way to quantify the genovalve addition on that 27 to 28 op margin but that'd be gonna follow up but the other question I was going to ask was
Speaker Change: The 5-7% TAVR growth that you've been at this year, is that the way to think about your ongoing steady state, or do you think there's a catalyst that could re-accelerate that going forward? Just trying to think about the bigger picture, how you're thinking about the TAVR opportunity for Edwards.
Speaker Change: Yeah, Travis, we're thinking about it really positively. We've got a lot of positive catalysts for TAVR, and at the same time, it's just premature to start talking about what the growth rates look like. We're excited to lay it all out for you when we get to December.
Speaker Change: Maybe, you know, adding a general comment about, you know, profitability and all this kind of thing.
Speaker Change: as you are feeling too free.
Speaker Change: You know, we took action to optimize, you know, the company.
Speaker Change: You know, we are looking, you know, very seriously at, in a very thoughtful fashion about, you know, cost optimization, resource allocation. So what we want to deliver is sustainable, healthy, profitable growth, you know, for the years to come, you know, as a company.
Speaker Change: Thank you.
Speaker Change: Great. Thanks a lot.
Speaker Change: Thank you. And our next question comes from Matt Taylor with Jefferies. Please state your question.
Matt Taylor: Hi, thanks for taking the question. So I want to ask about the results, but I just want to ask about timing of impact. If these trials are positive next week, how quickly do you think you could see some positive lift on TAVR and or TMTT from early TAVR and the tricuspid results?
Speaker Change: It is a little bit not easy for us to discuss, you know, before, you know, Monday, you know, the trial is embargo, it is a blinded, you know, study, we cannot go there right now.
Speaker Change: But for sure, on one day...
Speaker Change: Please attend the event, and also at the investor conference, Larry is going to talk about TAVR.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Matt Mixich with Barclays. Please state your question.
Matt Mixich: 2025. I just wanted to maybe ask Scott if I, I'm not sure if I'd missed it, but you know, I appreciate the color on the operating margin. Wondering if at this stage you're ready to say anything about the gross margin, FX related or otherwise?
Speaker Change: Yeah, thanks a lot for the question.
Scott Ullem: Yeah, I think for gross margin, we're expecting in the fourth quarter that we'll be back to the high end of our original guidance range of 76 to 78 percent.
Scott Ullem: And that high end of 76 to 78% is also a reasonable preliminary modeling assumption for 2025. Obviously there's a lot that can change between now and then. We've got foreign exchange running through there, but at this point that's as much as we can do to help you out.
Speaker Change: Fair enough. Thanks so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joanne Wensch with Citibank. Please state your question.
Joanne Wensch: Good evening and thank you so much for taking the question. I'll put them both up at front. Can you quantify the one-time impacts for the fourth quarter for TAVR? It seems like that's causing a wee bit of confusion as people are thinking about how that's progressing sequentially.
Joanne Wensch: And then my second question has to do with products. I haven't heard you here or talk about M3 for mitral replacement in a while, and I don't know if you can just give a little bit of update on the timing of that or when we might see anything incremental. Thank you.
Speaker Change: Hey, Joanne. Thanks for the question. On the first one, the specific impact that we know is relating to the China distributor adjustment, which is about five million dollars. The other items that we mentioned are not something that we're ready to quantify at this point. Obviously, we'll talk about everything that happened in the quarter once we finish the quarter, but that's the one number that we can give you right now.
Speaker Change: Great, and a follow-up question you had, Joanne, just kind of about M3. No, we still continue to be excited about SAPI and M3. This is the first...
Speaker Change: transfemoral sub 30 French microvalve replacements.
Speaker Change: it's really built off SAPI, which we know has been put in thousands of different micro positions. So right now for Europe, we continue, last quarter we announced we continue to anticipate European launch in mid-2025.
Speaker Change: And we would have the U.S. at some point after.
Speaker Change: specifically related to the U.S. We are in the one-year follow-up period.
Speaker Change: this year of the M3 and then it takes some time obviously to put the data together, get the PMA in, and then there's a, you know, a standard kind of FDA timeline and review, whether there's a panel or not. But we continue to be excited about SAPI and M3. But Larry had a comment too here. Just to follow up on Scott's comment, Joanne,
Larry Begelson: We can't exactly quantify the hurricane and the IV solution issue. We know that we were impacted with cases early in the quarter, but I think that that's also behind us. Largely, I don't expect this to be a lingering thing.
Larry Begelson: throughout the quarter. And as Scott said previously, we are anticipating our average daily cases to be increasing Q4 over Q3. So I don't want to overstate the impact of these one-timer things when you look at it in the bigger picture.
Speaker Change: Excellent, thank you so much.
Speaker Change: Our next question comes from Danielle Antalfi with UBS. Please state your question.
Danielle Antalfi: Hey, good afternoon, everyone. Thanks so much for taking the question. Congrats on a good quarter, considering everything.
Danielle Antalfi: Even the receptivity so far with three valves of centers for taking on a third valve, who's losing share to that third valve, and also the pricing dynamic. Sorry, that was a lot, but that's my only question. Thanks so much.
Speaker Change: Hi Danielle, maybe I'll start and then let maybe Bernard comment on just kind of broader company aspects. Yeah, we you know we do charge a premium for our platform. We believe our F3UR represents
Speaker Change: Absolute best-in-class technology and best-in-class performance.
Speaker Change: You know, it takes all of the things that we've always loved about Sabine 3 Ultra, but added our resilient tissue, which, you know, we have a deep history with from our surgical business.
Speaker Change: So we think our platform deserves the premium that we charge globally. I think we always think carefully about competition. You know, we have deep respect for our competitors, but I think when you look at the body of evidence that we've put on the table through our clinical trials, you look at things like partner three.
Speaker Change: 99% of our patients were alive and well at a year. You look at five years, 90% of our patients were still alive. We think, you know, the technology, but also.
Speaker Change: The clinical evidence support our best-in-class premise, but it's our responsibility and it's our job to make sure we're always communicating that with our customers.
Speaker Change: And it's not just about the price of the device, it's the value we bring to their system. And we just simply think that we offer the best there is in lifetime management.
Speaker Change: of these patients and also running a very efficient TAVR program in terms of procedure time and predictability and discharge.
Speaker Change: But, you know, it's our job to continue to make that case. And I think it's about us being able to do that and execute at a high level.
Speaker Change: 65 years of pioneering innovation
Speaker Change: You know, today, you know, we are by far, you know, the global leader in premium pricing. You know, our valves, surgical valves, are the best valves. You know, when I look at, you know, TAVR, we are the global leader with the premium pricing, and it is the valve, our TAVR valve is the valve of choice.
Speaker Change: You know, if you look at what we are doing with Evoque.
Speaker Change: Again, you know, we are the first, you know, we are a pioneer again, you know, creating category, leading the space.
Speaker Change: We bring value to the entire healthcare ecosystem. So we are, one is we are proud about our history. We like our strategy. It's working. What we are bringing is breakthrough technologies, bringing value to patients and all stakeholders.
Speaker Change: We know that competition is coming, and it has been there for many years. The structural heart is a large space, there are many patients, it is growing, it is attracting a lot of competitors.
Speaker Change: But we lack our position, we lack our technology, we lack our strategy. And there are more patients to treat in surgical, in TAVR, in TMTT, in heart failure. And it is why we are so confident in us being able to deliver sustainable, profitable growth in the many years to come.
Speaker Change: Thanks for the question.
Speaker Change: Thank you. And our next question comes from Patrick Wood with Morgan Stanley. Please state your question.
Patrick Wood: Beautiful, thank you. I just had one quick one to follow up on that which was...
Patrick Wood: For TAVR, I can get a sense, but could you maybe give us a sense of how you're seeing growth in some of the larger centers relative to the smaller? I'm thinking about the commentary about where Evoque and Pascal have been rolling out and the disruption from that. So for the smaller programs, have you seen a different kind of a growth profile than what you've seen at the larger?
Speaker Change: Yeah, this is
Speaker Change: This is Larry. You know, that sort of moves around a little bit quarter to quarter.
Speaker Change: I will say that the larger academic programs are the ones that are most likely.
Speaker Change: to be adopting the new therapies and...
Speaker Change: very much for listening to this presentation.
Speaker Change: To a degree, they all have different challenges, but just broadly speaking, I think the large academic centers, who are the early adopters, is probably where we feel a significant amount of the pressure.
Speaker Change: Amazing. Thanks for the call, everyone. Bye. Thanks.
Speaker Change: Our next question comes from Adam Mader with Piper Sandler. Please state your question.
Adam Mader: Thank you. Thank you.
Adam Mader: Hi, good evening. Thank you for taking the questions. I'll keep it to one. I wanted to ask about Evoque and specifically the NTAP that went into effect on October 1st.
Adam Mader: Just wondering if you've seen any kind of noticeable impact.
Speaker Change: to uptake in the past couple of weeks. How do you think about the impact of improved reimbursement going forward? And then the second part of the question is just on the 56 millimeter valve size. Now that that's FDA approved, just curious, how big of a patient population does that valve size serve? Thank you.
Speaker Change: No, I appreciate the question, Adam. So, talking a little bit first about...
Speaker Change: the end tap and evokes. Obviously, I think when the incremental reimbursement obviously provides a tailwind to
Speaker Change: people wanting to use evoke. There were some centers who were maybe holding off a little bit or taking a little bit more time to get up the evoke training curve leading up to NTAP. But then they were waiting for NTAP to get on board. But that being said, we're still just seeing such strong demand across the board from different centers to open up new centers that I think it provides a little bit of a catalyst, but we just have to consider
Speaker Change: Thank you.
Speaker Change: specifically on the 56. We're excited with the 56 approval at that fourth size, now a larger size on it. We think from, you know, we don't have perfect data, but based on what we've seen from previously screened patients, it maybe adds 20 or 25 percent applicability to the overall pool. So we're glad to have this size available for those patients who need it.
Speaker Change: Thank you.
Speaker Change: Thank you. And we have run out of time for questions at this point, so I will now hand the floor back to Bernard Zovighian for closing remarks. Thank you.
Bernard Zovighian: Thank you for your continued interest in Edwards. Scott, Mark, Sinead and myself welcome any additional questions by telephone. Thank you everyone and see you next week at CCT.
Speaker Change: Thank you. And with that, we conclude today's conference. All parties may disconnect. Have a great day. Thank you.