Operator:

Greetings, and welcome to the Edwards Lifesciences Second Quarter 2024 Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Mark Wilterding, Senior Vice President, Investor Relations. Thank you. You may begin.

Bernard Zovighian:

Thank you, Mark, and thank you all for joining us. This afternoon we issued two press releases which the team and I will review in more detail with you now. The first, outlining our Q2 results. And the second, highlighting our acquisition of JenaValve, a pioneer in the transcatheter treatment of aortic rehabilitation or AR. And Endotronix, a leader in heart failure management solutions. I will start with our second quarter performance. Total company sales of $1.6 billion increased 8% on a constant currency basis versus the year ago period. In addition, we made important advancements in our clinical research, new product introductions and efforts by Edwards employees to address the unmet needs of many more patients around the world. TAVR growth in the second quarter was lower than expected, yet we are pleased with the increasingly significant contribution from TMTT. Our vision for TMTT is becoming a reality and our strategic commitment has developed into a growth portfolio of differentiated technology. Overall, Edwards remain well-positioned to deliver strong, sustainable growth. We also announced this afternoon two acquisitions, JenaValve and Endotronix. We have known this company for many years. Discussions with the companies have been ongoing for some time and the timing of these acquisitions coincided with earnings. We are pleased to expand into two new structural heart therapeutic areas, AR and heart failure, and we will leverage our innovation capabilities with worldclass science and clinical evidence to ensure accelerated access to life-saving technologies for patients around the world. Now, I will provide some additional detail on Q2 results by product group. In TAVR, second quarter global sales of $1.04 billion increased 6% year-over-year, lower than we planned. Edwards competitive position did not meaningfully change globally, although we experienced some regional pressure, and we maintain pricing. We are confident in our differentiated technology, high-quality evidence and the value we continue to demonstrate to patients, clinicians and the healthcare system. We remain focused on continuing our deep commitment to advancing evidence for AS patients. At the New York Valves meeting in June, we presented additional analysis from the PARTNER trials, which demonstrated excellent clinical outcome up to five years in women and patient with small annuli. Adding to the global body of evidence on the platform, we also anticipate additional data from the RHEIA study to be presented at the upcoming [ESC] (ph) Meeting in London. RHEIA is a prospective randomized study in more than 400 patients across 35 sites in Europe comparing the safety and efficacy of TAVR versus surgery in women with severe symptomatic aortic stenosis. We are actively pursuing significant opportunity to grow TAVR globally over the long-term and are proud to continue our deep commitment to advancing science for aortic stenosis patient through the progress and early TAVR trials, which could fundamentally change how AS patients are treated. Early TAVR trial results will be presented at TCT this year, and we believe if the data are compelling, it could have a meaningful impact on the timing for patient treatment, while also streamlining referral and patient care for all severe AS patients. In the US, our year-over-year second quarter TAVR sales growth was slightly below our global constant currency growth rate. We believe our US competitive position was largely unchanged. Second quarter, US TAVR sales grew slower than expected. The continued growth and expansion of structural heart therapies, including newly approved tricuspid therapies and other fast-growing structural heart therapies put pressure on hospital workflows, which impacted TAVR. These pressures were also observed in the recent spike in emergent TAVR cases as reflected in claims data. As centers adopt these new therapies and they become part of extended processes, we expect this will stabilize. We know from experience that hospital have historically demonstrated the ability to scale to support transcatheter procedure growth over time. We believe significant undertreatment of severe AS persists, evidence demonstrates that a large number of in-system patients currently go untreated. We are accelerating our efforts to improve referrals and treatment rates for patient already in the hospital system who are suffering from severe symptomatic aortic stenosis. We recently launched the Edwards ENACT patient activation program, which leverage a comprehensive cardiovascular AI platform and worldclass support to bring real-time insights to TAVR program and improve quality of care for patients. This first of its kind program is focused on streamlining the identification, evaluation and treatment of severe aortic stenosis patient within the hospital system. Outside of the US, in the second quarter, our constant currency TAVR sales growth was slightly above our global TAVR growth. In Japan, we generated double-digit sales growth driven by SAPIEN 3 Ultra RESILIA. We continue to focus on expanding the ability of this therapy and believe AS remain a significant under threated disease among the substantial elderly population in Japan. In Europe, while share is down slightly on an annualized basis, we were pleased with the momentum, driven by the launch of SAPIEN 3 Ultra RESILIA. We are pleased with high procedure success rate and exceptional patient outcome. We expect the momentum to continue to build as more centers have experienced with the first-choice valve for lifetime management. In closing, we now anticipate second half TAVR sales growth similar to the first half year-over-year growth rate of 5% to 7% full year growth rate versus previously guidance of 8% to 10%. This equate to full year global TAVR sales of $4 billion to $4.2 billion. We believe hospitals are motivated to continue scaling to accommodate increasing volume of transcatheter procedures, which will bring tremendous value to patients and the healthcare system. We remain confident that Edwards is positioned for healthy and sustainable TAVR growth, driven by our differentiated TAVR portfolio, our deep commitment to advancing patient care for high-quality clinical evidence and new indications and our investment in patient activation initiative. Turning to TMTT. Our deep structural heart expertise has enabled us to significantly advance our portfolio of differentiated technologies, including the PASCAL repair system, the EVOQUE tricuspid replacement system and the SAPIEN M3 mitral replacement system. Our exciting pipeline of innovations is addressing the large unmet needs for patients with mitral and tricuspid disease. In Q2, we achieved positive results with sales of $83 million, representing a 75% increase versus the prior year. Q2 sales were led by PASCAL globally and early commercial introduction of EVOQUE in the US and Europe. PASCAL adoption is growing, reflecting its premium differentiation and the value it brings to physician and patients. We believe the mitral tier markets continues to grow double-digit in both the US and Europe. We are excited to bring this therapy to more geographies, more physicians and more patients. The EVOQUE commercial launch continue to progress well. Our disciplined strategy is focused on outstanding patient outcome in centers investing resources required to grow a successful tricuspid program. We are now opening new centers both in Europe and the US after having started with our clinical trial sites. We continue to see strong interest in the therapy, which reflects the significant unmet need in this population of patient who have few options for treatment. Our early real-world commercial experience has demonstrated excellent clinical results. Consistent with those from the TRISCEND II trial. We look forward to presenting the full cohort of TRISCEND II data at the TCT Conference in October. Last month, CMS announced the opening of a national coverage analysis for transcatheter tricuspid valve replacement. Since EVOQUE was granted FDA breakthrough status and is utilizing the CMS parallel review process, we believe CMS can move quickly to finalize national coverage. SAPIEN M3 remains on-track to be our first transcatheter mitral valve replacement therapy to gain regulatory approval and launch around the world. We are also pleased to have received a breakthrough designation from the FDA, and we completed enrollment in the mitral annulus classification or MAC arm of our ENCIRCLE study. We now expect SAPIEN M3 to receive CE Mark earlier than previously expected by mid-2025, with FDA approval in the US to follow in 2026. Earlier this month, we announced the acquisition of JenaValve. JenaValve early-stage technology will add to our growing pipeline of innovative therapy in TMTT and we expect to close the acquisition later this year. We further expect that JenaValve technology combined with Edwards expertise in mitral disease will enhance the company TMVR technologies to address large unmet structural heart patient needs and support sustainable long-term growth. Based on the first half 2024 momentum and the ongoing global adoption of our differentiated technology PASCAL and EVOQUE we are increasing full year sales guidance for TMTT to the higher end of our previous $320 million to $340 million range. We remain confident that our unique portfolio strategy with repair and replacement therapies for both mitral and tricuspid disease will offer clinician the broader set of options needed to treat this complex and diverse patients. The advancement of our long-term TMTT strategy has positioned us for strong, sustainable growth over many years, driven by a growing portfolio of innovative therapies. In surgical structural heart second quarter sales of $264 million increased 5% over the prior year. Growth was driven by strong global adoption of Edwards premium surgical technologies INSPIRIS, MITRIS and KONECT. We continue to see positive procedure growth globally for the many patients best treated surgically, including those undergoing complex procedures. We continue to expand the overall body of RESILIA evidence and have completed enrollment in the US and Canada for our momentous critical trial studying RESILIA performance and the mitral position. MITRIS adoption in Europe is ramping up, and we are pleased to have been granted reimbursement for the device in France earlier than expected. In summary, we remain confident that our full year 2024 surgical sales will be 6% to 8% driven by continued adoption of our RESILIA portfolio and growth in overall heart valve surgeries. In Critical Care, second quarter sales were $246 million, which increased 7% versus the prior year. Growth was led by a pressure monitoring devices using the ICU with strong contribution from our SMART Recovery technologies, including the Acumen IQ sensor. Demand was also strong for Swan-Ganz catheter. Critical Care remains focused on driving growth through SMART Recovery and SMART Expansion, which are designed to help clinicians make more informed decision and get patients home to their family faster. Since announcing the sales of Critical Care to Becton Dickinson in June, our team has made significant progress and we plan to close by late Q3. I want to thank all of them for their hard work and dedication. Turning now to the strategic acquisition of JenaValve and Endotronix. These acquisitions provide an expanded opportunity in new therapeutic areas to address the unmet needs of AR and heart failure patients around the world. Furthermore, the acquisition reflects our deep commitment to advancing patient care through our unique strategy and reinforce our confidence in Edwards sustainable long-term growth. Starting with JenaValve, a pioneer in the transcatheter treatment of AR, a deadly disease that impacts more than 100,000 patients in the US alone and is largely untreated today. Edwards anticipate US FDA approval of the JenaValve Trilogy Heart Valve System in late 2025, which will represent the first approved therapy for patient suffering from AR. Edwards will invest to accelerate development of this novel technology to enable earlier patient access. As the pioneers in valve innovation, we believe we are best positioned to lead this next frontier of aortic valve disease treatment. We expect this to be the beginning of a long-term iterative strategy similar to TAVR. Turning to Endotronix. Edwards made its first investment in the company in 2016. So we are very familiar with the technology, the opportunity and the employees. Many structural heart patients Edwards serves today also suffer from heart failure with limited options. This acquisition will expand Edwards structural heart portfolio into a new therapeutic area to address the large unmet needs of patients suffering from heart failure, which we believe has a significant long-term growth opportunity. Last month, Endotronix received FDA approval for Cordella, an implantable preliminary artillery pressure sensor that directly measure the leading indicator of congestion following the publication of a successful US pivotal trial. We are pleased to enter the structural heart therapeutic area with innovation, worldclass science, and clinical evidence to provide access to life-saving technologies for patients around the world. We anticipate this investment will strengthen its leadership in structural heart innovation and represent long-term growth opportunity. Minimal revenue contribution from JenaValve and Endotronix is expected to begin late in 2025. As you can tell, we have a lot of positive momentum and many catalysts across our core businesses, TAVR, TMTT and Surgical combined with opportunities to reach new patient population. And now, I will turn the call over to Scott.

Bernard Zovighian:

Thank you, Scott. So let me share a few closing thoughts. In TAVR, we have significant opportunities, and we are committed to growing globally by advancing science over long-term, progress and early TAVR trials could fundamentally change how AS patient are treated. In TMTT, our deep expertise has enabled us to significantly advance our exciting portfolio of innovation. And our long-term TMTT strategy has position us for strong, sustainable growth over many years. In surgical structural heart, we continue to see strong global adoption of our premium surgical technologies. Our JenaValve and Endotronix acquisitions provide an expanded opportunity in new therapeutic areas. The buffer presents significant long-term opportunities. We remain confident that our innovative therapy will allow Edwards to treat more patient around the world and continue to drive strong organic growth in the years to come. Our special inclinations increasingly recognize the significant benefit of transcatheter-based technology, we remain as optimistic as ever about the long-term growth opportunity. With that, I will turn back to Mark.

Operator:

[Operator Instructions] Our first question is coming from Larry Biegelsen from Wells Fargo. Your line is now live.

Larry Wood:

Sure. Hey, Larry. This is Larry. Thanks for your question. I think at a very high level there needs to be a compelling story for why early intervention is better and basically make the case against watchful waiting. And we've done a lot of work when we were powering the trial, and we obviously had a lot of belief in it. The primary endpoint is death, stroke and rehospitalization. And so, it's really the composite of all those. And winning that trial and obviously, the more you would win it by makes the more compelling case. In terms of the individual components, we'll have to look at those. But when you think about it from the patient journey if they're waiting and bad things are happening to them while they're waiting, and it's resulting in unplanned rehospitalization, or it's resulting in stroke, or it's resulting in mortality, all those are very meaningful things, and that's why they're all composites in the endpoint, so we'll have to wait and see the data, we'll have to see the story, but death, stroke and rehospitalization has kind of become almost a standard now for most of these trials because the clinical community believe these are all important considerations and endpoints.

Larry Biegelsen:

That's helpful. And Scott, thanks for the initial color on 2025. I'm sure you know that's important. Everyone on this call right now to try to understand -- try to as best as we can to model that. So a couple of pieces, follow ups on that. The press release says strong sustainable growth. It doesn't say 10% operational growth for the remaining business in 2025. I just want to confirm that that 10% from the analyst meeting last year in December is not -- you're not reiterating that today. And second, on dilution, we estimate -- I think most of us estimate about $0.40 of dilution from Critical Care spin, any reaction to that? And the incremental spending you talked about from the acquisitions, any additional color on that? And just lastly, the use of the proceeds, should we just assume share, buyback or additional M&A? Thank you.

Bernard Zovighian:

Larry, on the guidance, I agree with what Scott said about. We are not planning to communicate the guidance on 2025. But if you look at the quarter, TAVR grew about 6%, the company about 8%. So you see a big contribution from TMTT, and we see that contribution to get bigger as we go because right now we are just at the beginning of PASCAL expansion. Just at the beginning of the EVOQUE expansion. We have M3 coming, in TAVR, we have asymptomatic end of the year, so are we confident about sustainable growth over the long-term? Yes. We are going to talk about guidance in December.

Operator:

Thank you. Next question Today is coming from Robbie Marcus from JP Morgan. Your line is live.

Scott Ullem:

Yes. Thanks, Robbie. Well, obviously we expected growth rate to be higher in Q2 than it was. We had a slow start in Q1, but we were exiting March and we felt good about where we were. So this did come as a surprise. I think when we reflect back on it, and we look more deeply at it, you have to think about all the things that have shown up that are going to the same structural heart team at all of these hospitals. We're seeing rapid growth in mitral repair. We're seeing a lot of growth in other procedures, and we had two new therapy approvals recently in the tricuspid space, and I think a little bit we looked at the procedure volumes and the hospitals have shown a pretty good job of being able to handle these things. We probably underestimated the burden of even starting these new programs, even preparing to start these new programs, because you have to screen the patients early on. There's a lot of learning, screen failures, all of those things, and I think it's just tackling the teams. Now, in terms of things we can do to help, there are certainly things we can do to help. We can do a lot of imaging workups and take some of the load off the team. We can do device prep. We can come in with our benchmark program and teach them efficiencies and do those things. But once a program has been optimized that it really does come down to the hospital to add another team or add additional days and do those sorts of things. So there are some things we can do, but we can't do everything. I think the other thing is, I think highlighting this for the clinicians and we're very confident, this isn't some slowdown because there's a lack of patients. We didn't see any of the fundamentals change in terms of new data that was concerning or any of these things, I think it's just a matter of the workflow right now. And we need to be able to engage with hospitals. But two important things we saw is we saw an increase in time from CT to procedure, which indicates patients are waiting longer and the other thing that we saw was a sharp increase in the number of cases being quoted as emergent versus routine. And I think that speaks to these patients waiting in the queue as these workflow issues sort out. So I think hospitals will certainly do that in time. These patients don't wait well, and we know that there's a lot of them, but we're going to have to continue to work through that with the hospitals.

Robbie Marcus:

Great. And maybe a follow-up to that guidance implies roughly stable TAVR first half into second half. I appreciate the need to be conservative, but it sounds like some of the learnings you saw in second quarter could possibly help in the back half of the year. Maybe just walk through the thought process of the 5% to 7% TAVR guide and kind of what you're baking into that? Thanks a lot.

Robbie Marcus:

Thanks.

Operator:

Thank you. Next question today is coming from David Roman from Goldman Sachs. Your line is now live.

Larry Wood:

Yes, it's a good question. And I'll defer to Daveen on EVOQUE, but I'll start with the TAVR side of it. It doesn't really change the pricing, and we don't think this is an economically driven thing. I think when new therapies come forward, hospitals are competitive. They want to be able to offer all of the therapies. And that means they want to aggressively start these newer programs and make sure that they can offer all of the options for their patients. And so, I think that's what's driving some of this more than other things. And I think all companies before they're willing to bring a new technology in, they want to -- the center has to demonstrate competence, right? They have to demonstrate they have the ability to screen, they have to have patients in queue and all those things. And I think it becomes a big thing, but I don't think this is an economically driven thing. I think it is just the result of all the new things that are coming into the cath lab and again, I think that does get corrected with time.

David Roman:

That's very helpful. And maybe just a related follow-up to that, can you maybe unpack the $83 million in the TMTT line for us in a little bit more detail. It sounds like minimal EVOQUE contribution with PASCAL accelerating. But maybe if you could sort of delineate a little bit the different product drivers within there, and then maybe some of the different geographic drivers? And then maybe if I could sneak a follow-up into the response there, how long do you think Larry it takes to dislodge the sort of capacity constrain or sort of that digestion of multiple therapies going to the systems?

Larry Wood:

Yes. And just to follow up, how long does it take to dislodge? It's hard for us to be exact, and I think we try to account for that in our guidance that it's not a light switch. But the best analogy I can say is when we brought TAVR into all these hospitals, we heard repeatedly that there was impact on coronary procedures and other things that were going on in the cath lab, and we were kind of taking up a little bit of that mind share, a little bit of that workflow space, but it wasn't sustainable. You can't just park your coronary patients forever. And you can't park AS patients forever. So I think once centers have certainty of the added workload and certainty of the volume, I think they add the resource, and they do the things necessary, but nobody's going to go hire a bunch of people in advance as the new therapy show up. They always are kind of recovering as the workload gets high, and I think to agree that's just how hospital systems operate.

David Roman:

Got it. Thank you for taking the questions.

Joshua Jennings:

Hi. Good afternoon. Thanks for taking the questions. Wanted to just start off with the TAVR outlook and kind of longer-term you guys have put a $10 billion kind of TAM forecast by 2028 in the past. Should we eventually still be thinking about that TAM opportunity being in place, but maybe pushed out a little bit or maybe the aortic regurgitation indication gets you there by 2028, but you may not be reiterating today, but it sounds like you're confident in the TAVR market in that $10 billion TAM, but not sure if you're reiterating it now.

Operator:

Thank you. Next question is coming from Travis Steed from Bank of America. Your line is now live.

Larry Wood:

Yes. Thanks, Travis. Yes. When we exited Q1, we thought we were on a good ramp, and we thought we were on a good pace, and that's why reiterated guidance and we felt good about it and we just didn't see that play out in Q2 the way that we anticipated and by no means do I mean to say this is all Daveen's fault and it's all EVOQUE because that's not accurate or fair when you look at the number of procedures. I think it's the cumulative impact of all the things that have hit the structural heart teams over the last year, and it's one of those things you can always increase a little capacity, work a little harder, increase a little capacity, work a little bit harder, but then at some point, you reach a breakpoint when it's simply too much. And the heaviest lift for centers is starting a program and it's not just the procedure volume. It's all that screening and all of the case reviews and all the interaction that just consumes a lot of resources and a lot of time and the training, they have to go to training and observe cases, in many cases, and all of those sorts of things. And so, I think it's just the cumulative impact of those things that happen over time. And we did see the slowdown more acutely in large centers and small centers, which fits a little bit of the model as well in terms of the centers that are most likely to be looking to start these new programs and are competitive about that. And again, I said it earlier, but we did see a spike in emerging cases over routine cases, and I think that fits what we're saying as well. But that's not going to be sustainable for people. Emerging cases have more complications. They don't have as good a patient outcomes and people will have longer length of stay and that's going to adversely impact patients and the hospitals themselves. So I think people will have to adjust it over time. And we're going to have to work closely with them to help them do that.

Scott Ullem:

Yes. Thanks for the question, Travis. In Q3, you're right, we do have a little help from extra selling days in the third quarter. And that's factored into our guidance. It's in the guide that we provided. In terms of dilution from acquisitions, again, we've got to first close the acquisitions, then work on integrating them. Obviously, we spent a lot of time with the plan, but it takes some time, actually, before we actually get businesses inhouse and start recording what kind of financial implications there are before we can report out on those. We'll know a lot more by the end of next quarter when we've actually gotten further down the path, and we'll talk about it then. And of course, we'll give full guidance for EPS in 2025 at our investor conference.

Operator:

Thank you. Next question today is coming from Matt Taylor from Jefferies. Your line is now live.

Larry Wood:

Yes. Thanks, Matt. The thing that I would say is, I guess if I were to draw an analogy, if you had a factory and you saw demand for your product going up, you can always add a little more hours and you always have a little bit of excess capacity. And you can adjust to those things. I think there is just a point in time where you hit a wall, and it's harder to do those things, and I think that's a little bit of what we saw here. It's the cumulative effect of all of these things that have played out over time. If you look at total cath lab procedures for the structural heart team in the last three years is probably close to double during that period of time, which is a lot of growth that these teams are having to absorb and they're having to adapt to, and I think it will take time. And again, when you're starting these new programs, these new therapies, that's the heaviest lift part of it. And again, I think this gets corrected over time, and we'll work closely with the hospitals to do that. But we reflected that in our guidance and just wanted to be realistic and not be tone deaf to what's happened, but on the same thing I'll tell you is none of us are happy with the growth rate. None of us are happy adjusting guidance and we're going to be working as hard as we can to do everything we can to restore the growth to where we think it should be.

Matthew Taylor:

Thank you.

Vijay Kumar:

Hey, guys. Thanks for taking my question. I guess one on, just based on what competition is saying, I know there's been noise on small and light trial. How do you respond to -- this is not competitive dynamics what we're seeing in the US market?

Vijay Kumar:

Understood. And maybe Scott, one for you on the guidance here, EPS, your prior guidance $2.70 to $2.80 inclusive of Critical Care, right, is that still intact or what's the new range? I just want to get an apples-to-apples sort of EPS baseline.

Vijay Kumar:

Or is there a comparable like, without Critical Care for the full year, what the underlying number is.

Vijay Kumar:

Understood. Thanks, guys.

Patrick Wood:

Fabulous. Thank you so much. Just two quick ones. I guess, on the EVOQUE side and the initial rollout on the clinical feedback and success that you guys have had. How's that been going? There's been a little bit of volatility in the more database. So I'm just curious how the clinician feedback has been.

Patrick Wood:

Very helpful. And then maybe just quickly on Endotronix. I was with Harry and Ariel at THT, and like the conical data on their side looks very interesting. How do you see this fitting into the business overall, because my understanding was that probably this would be initially used for fine-tuning medication management, right? Is this more about building the rolodex patients, so that you know them a little bit better further downstream when it comes to a trans catheter approach. How do you see it strategically fitting in? Thanks.

Patrick Wood:

Thank you.

Bernard Zovighian:

Thank you, everyone, for your continued interest in Edwards. Scott, Mark, and I welcome any additional question by telephone. Thank you so much. Have a great rest of your day.

Operator:

Greetings, and welcome to the Edwards Lifesciences first quarter 2024 results. [Operator Instructions]. As a reminder, this conference is being recorded.

Mark Wilterding:

Thanks a lot, Diego, and good afternoon, and thank you all for joining us. With me on today's call is our CEO, Bernard Zovighian, and our CFO, Scott Ullem. Also joining us for the Q&A portion of the call will be Larry Wood, our Global President of TAVR and Surgical Structural Heart; Daveen Chopra, our global leader of TMTT; Wayne Markowitz, our Global Leader of Surgical Structural Heart; and Katie Szyman, our Global Leader of Critical Care.

Bernard Zovighian:

Thank you, Mark. We are pleased with our total company performance with first quarter sales growth of 10% to $1.6 billion versus the year ago period. As a result, we are raising our 2024 sales guidance to the high end of 8% to 10%.

Bernard Zovighian:

Thank you, Scott. We are pleased with a strong start to the year as we continue to focus on helping even more patients worldwide and driving growth with leading innovative technologies. We remain confident in our increased 2024 financial outlook and look forward to launching breakthrough technologies and progressing multiple important clinical trials, while aggressively investing into our future.

Robert Marcus:

Great and congrats on a nice quarter. Two for me. I wanted to start first with EVOQUE. Clearly, TMTT had a really strong quarter. It came in well above consensus and some of the most optimistic numbers I was hearing. So I wanted to get a sense of what you're seeing, how much of the TMTT was EVOQUE. And clearly, you raised guidance. I imagine this is just the early stages of adoption here?

Daveen Chopra:

Yes. Thanks so much, Bernard. Thanks for the question, Robbie. Yes. And to follow up with Bernard's comments, obviously, the vast majority of our growth came from PASCAL, [indiscernible]. And overall though, we continue to be really pleased with the initial launch of EVOQUE both in Europe and the U.S. Right now, we're just starting to steadily kind of activate sites. We've had really good clinical outcomes, very consistent with what we saw in the clinical trial. And we see really predictable times and predictable procedure times is something that, obviously, physicians really love to see. We see that both at old sites that [indiscernible] as well as new sites that we've opened up kind of in Europe.

Robert Marcus:

Great. Maybe a follow-up. I caught the comments that the U.S. TAVR grew faster than the global organic TAVR growth rate and that procedure as accelerated throughout the quarter. So how are you thinking about TAVR growth for the rest of the year? And do you feel like the U.S. has finally recovered after some of the setbacks you saw during the disruptive years of COVID?

Operator:

Our next question comes from Travis Steed with Bank of America.

Larry Wood:

Yes, thanks. Yes, overall, we felt good about the quarter, and we just talked about the U.S. We saw a lot of strength in Japan, but Europe was -- it grew year-over-year and it grew sequentially, and we lost a couple of billing days. But even with that, we were a little bit disappointed with our overall growth in Europe. We saw some pretty aggressive pricing from competitors that I think led to some trialing. But we're really excited that we're launching S3UR that actually starts this month, and we're excited to bring that technology to Europe, and we expect these to normalize through the course of the year.

Travis Steed:

All right. That's helpful. And then on TAVR and some of that you've been doing with Egnite and kind of helping drive center growth and diagnosis. Curious to see how that's going and at what point do you start to kind of scale those programs out and an impact on -- see the impact on TAVR growth?

Operator:

And our next question comes from Larry Biegelsen with Wells Fargo.

Larry Wood:

Yes. Yes, we do expect to have procedures to ramp. That's always been a part of our plan, and so we continue to expect that to happen. And I think it's a lot of things, Larry, I think it's a lot of our patient activation work. But it's also just the market continues to improve, and we're very pleased where we finished Q4 last year. We were happy with the ramp in Q1. So I think we do expect to see an increase in Q2 over Q1. But even with that, we expect the second half to have a higher growth rate than the first half. So I think that that's good.

Bernard Zovighian:

So let me, Larry, let me add something about it. I know that there were plenty of questions about that trial at ACC. I was not at ACC. But our strategy to bring basically groundbreaking science, the highest quality of evidence to help over 1 million of patients who are not being treated today and being able to unlock this large tier market potential, this is what we are doing. This is our strategy.

Larry Biegelsen:

And Scott, if I saw correct, you raised the revenue guidance, but you did not change the EPS guidance. Why is that?

Operator:

Our next question comes from Matt Taylor with Jefferies.

Daveen Chopra:

Yes, this is Daveen. I'll answer that. No, honestly, if you look at quarter 1, no, I don't really think there was any significant kind of direct pull-through from EVOQUE versus PASCAL. But if you pull back up, I think us having our portfolio product to treat the maximum number of patients by having repair and replacement technologies for both mitral and tricuspid help show our leadership and that physicians would then want to continue to work with us as leaders in the space.

Joanne Wuensch:

Very nice quarter. I want to spend some time on Critical Care. I can't remember the last time I saw a 14% revenue growth in that segment. And particularly as it's sort of propping to go out on its own, what drove that growth? How sustainable is it?

Katie Szyman:

Yes. Thanks, Joanne, for the question. So for Critical Care, as you know, we have capital sales as part of the mix. And so we just see high variability of demand really every quarter across all our product lines. We also have distributor sales that can come up and down. So it was a great quarter for us overall. It's still early in the year. So you saw us raise guidance to 8% to 10%, and we're very confident in that 8% to 10% range. But we don't want to bring it up too much more at this point just because of that variability in demand.

Scott Ullem:

Profitability for the company, Joanne?

Scott Ullem:

Let's hold off on product line profitability. Suffice it to say, it was a good top line quarter, and that's helping our bottom line as well.

Daveen Chopra:

Yes. I mean I'll just add maybe some comments about the -- maybe the capacity question that you kind of asked, right? [indiscernible] in mitral repair [indiscernible] technology that's been around for several years and continues to grow with more and more patients being treated. The number of patients being treated and kind of EVOQUE, is relatively small in quarter 1 and for the future just based on these very large, more established numbers of procedures. So for us, overall, I don't necessarily believe that the EVOQUE procedures for any time in the near future are going to affect overall capacity. But I do also -- and to carry on to Larry's point, we collaborate very well together to ensure that when we're opening up a center or working with center for the first time, we're working with that center to ensure that they do have the capacity to then add in these incremental procedures.

Scott Ullem:

And Matt, it's Scott, your question about SG&A. You heard us say in the opening remarks that we're expecting SG&A as a percentage of sales to be around the top end of our original range of 29% to 30%. And that move up a little bit was largely based upon the increased investments that we're making in field resources and patient access initiatives.

Operator:

And our next question comes from Shagun Singh with RBC Capital Markets.

Larry Wood:

Sure. So the AHA program, we're very excited to partner with the AHA on this. And you're looking for an analog years and years ago, the whole door-to-balloon drive where they created a quality metric that was based on time. And because we know the faster when a patient is having an MI, they get a balloon across that lesion, the survival rate rises dramatically, and it's critical that they do that.

Operator:

Our next question comes from Chris Pasquale with Nephron Research.

Daveen Chopra:

Yes. Thanks for the question, Chris. Appreciate it. Yes. So first, just a couple of comments. We really believe that EVOQUE offers exceptional clinical and economic benefit to both patients and health care systems. We think that's a key factor. And we've seen a great increasing interest in demand from physicians to help have this technology to treat their patients. So the results, I think we're going to see continued centers opening up and continued kind of patient growth each quarter.

Bernard Zovighian:

Probably fair to say that NTAP will have a big impact next year and after, but not necessarily this year.

Daveen Chopra:

Yes. This is Daveen again. I'll make a couple of comments on this one. Generally, yes, we are believers that both repair and replacement technology for each valve really helps treat the maximum number of patients. These patients and these disease states are heterogeneous. There's no one magic bullet. There are a lot of patients that continue to need different types of technologies.

Daveen Chopra:

And I'll leave it up on your comment about kind of the clinical data, right? And that's why it's so important that we continue to enroll in trials like CLASP II TR. So that's our tricuspid trial, right? It's a randomized study where getting more data and understanding how these different technologies can really help patients. It's super important for ourselves. So not only post-market studies for EVOQUE but also these other randomized studies, pre-market studies that are so important to collect this data to continue to understand where these technologies can work best for patients.

Pito Chickering:

A follow-up to Chris' question. I just want to make sure that I heard that you expect limited EVOQUE sales until the NTAP kicks in October 1. And with G&A, at the high end of your previous guidance to 3%, how many centers will be ready to perform the procedure by that date?

Daveen Chopra:

And we're going to focus on centers that are already the higher-volume tricuspid centers that have their infrastructure set up, have their right side imaging set up. So it's going to be just a steady kind of growth [indiscernible] moving to other high-volume tricuspid centers.

Larry Wood:

Yes, thanks. Well, none of us know the trial results as yet. That won't happen until later this year. So if the trial is positive and obviously, the more positive trial is, the more benefit that you get from it. But I think it's really about how patients get referred for therapy. And I think that, that's going to be the key thing. So I think it speaks to the treatment in referral for aortic stenosis and the time frame we should do that more than a specific therapy.

Operator:

Our next question comes from Richard Newitter with Truist Securities.

Larry Wood:

Yes. We had a good Q4 in Europe. And so this does feel like it's probably more temporary, and it's something that we're going to put a little bit more focus on. We do sell at a premium in Europe and some people were pretty aggressive with discounting. And I think we have to beat that with our value proposition and with new technology. And we're super excited [indiscernible] the U.S. at this point and Japan, it's a brand-new product for Europe. They have no experience with it. So we're excited because it's the only platform in anywhere that has the RESILIA technology. And again, this is something that's been on our market-leading surgical valves for -- we're probably approaching a decade now.

Richard Newitter:

Okay. And following up here on just the selling days. I think you said, Scott, in 3Q, the billing days go the other way, positive for you. Order of magnitude similar to 1Q and then same geographic impact or anything you want to add there?

Richard Newitter:

Okay. So more evenly split by region?

Operator:

Our next question comes from Danielle Antalffy with UBS.

Larry Wood:

Yes. I appreciate the question, Danielle. It's a little hard to quantify. We're still putting some of these systems in place. And remember, it's not just identifying the patients. People have to start [indiscernible] the way patients get referred and the way they come in. And so I think we're really, really pleased with the pilots that we've run in the places that we've gone. We very clearly identify that there's an upstream population that many of the centers didn't even know existed. And now how we tap into those, how we move those patients through the system, how they add capacity to address these patients. That's where the pilot centers are kind of in that phase now. But we -- when I spoke of this in the investor conference, we have, in our minds, 100% validated the undertreatment of aortic stenosis. We've done it in enough centers with enough different people. It's been backed by enough publications, really even leading academic programs. Now it's a matter of going through all of the steps to get these patients off the sidelines and get the proper therapy.

Danielle Antalffy:

Sure. And I guess just one quick follow-up on TAVR plus asymptomatic. I mean you talked a little bit about this at the Analyst Day, but asymptomatic almost more about easing workflow and decision-making processes. I mean, asymptomatic, assuming the trial [indiscernible] plus this initiative, I mean, should we see growth acceleration specifically in TAVR in 2025? I know you're not going to give '25 guidance, but I thought I'd try.

Danielle Antalffy:

Thanks so much. Love those analogies.

Joshua Jennings:

I was hoping to ask about SAPIEN X4 and just thinking about the design and the ability to provide, I think, 16 different deployment diameters. I mean should investors be optimistic and clinicians that we could see lower gradients and a lower [indiscernible] mismatch rate with the SAPIEN X4 relative to the SAPIEN 3 Ultra or SAPIEN 3 system. And -- or is it really just the benefit for a future TAVR and TAVR that, that sizing action will provide?

Larry Wood:

The -- our platform with its frame design and its coronary access is really the ideal platform for that second procedure but it's also the ideal platform to use in that second procedure. I think a valve needs to be a good host but it needs to be a good guest, and that's, I think going to be critically important.

Larry Wood:

For sure. I think our surgical platform plays well into that as well.

Bernard Zovighian:

Thank you so much. Thanks, everyone. I want to close with offering some big-picture comment about the quarter. Obviously, we are very pleased about the strong performance for the company growing 10%. And when you think about it, this is the result of the strategy we put in place years ago. What we have today is a diversified portfolio with TAVR, mitral tricuspid and surgical, all of them contributing to the performance of the company.

Operator:

Greetings, and welcome to the Edwards Lifesciences Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Wilterding, Investor Relations and Treasurer. Thank you. You may begin.

Bernard Zovighian:

Thank you, Mark, and welcome, everyone. At our recent Investor Conference, I introduced our exciting vision of a new era of structural heart innovation to address significant unmet patient needs. Today, I will build on that theme and share key highlights of our team's strong performance in 2023 as well as our confidence in 2024. We are pleased with our strong 2023 financial performance, with full year sales up 12% to $6 billion, including strong growth across each of our four product groups. We invested more than $1 billion in research and development, and we achieved key strategic milestones, including the introduction of new technologies and indication expansion to ensure sustainable healthy growth in the near, mid, and long term. We exited the year with strong momentum, with Q4 growth of 13% and TAVR growth of 12%. These results were better than expected, driven by our broad portfolio of innovative therapies. In 2024, we are well-positioned to enter a new era of structural heart innovation. In TAVR, we are strengthening our leadership. We are experiencing strong adoption of our flagship SAPIEN 3 Ultra RESILIA and continuing enrollment in our ALLIANCE pivotal trial for next-gen TAVR technology SAPIEN X4. In January, we achieved very important milestones with the completion of enrollment in PROGRESS, a pivotal trial studying the treatment of moderate aortic stenosis patients, a population estimated to be twice as large as severe aortic stenosis. This randomized trial enrolled approximately 750 patients two years ahead of schedule. At TCT, later this year, we plan to present data from EARLY TAVR, a pivotal trial studying the treatment of patient with severe aortic stenosis, but without symptoms. We believe that all of these initiatives position us for healthy, sustainable TAVR growth well into the future. In TMTT, we achieved significant milestones with continued PASCAL global expansion and the introduction of EVOQUE in Europe. In Germany, EVOQUE was recently granted NUB Reimbursement Status 1, a very important step in therapy adoption. I am also pleased to announce that EVOQUE recently became the first transcatheter therapy to receive US FDA approval for the treatment of TR patients. This is an exciting development for a wide range of US patients. It will enable access to a groundbreaking treatment option that not only has the potential to significantly improve their quality of life, but also shows favorable clinical trends in all-cause mortality, reintervention, and heart failure hospitalization. With the ongoing introduction of EVOQUE, we are now offering a unique and broad portfolio of transcatheter repair and replacement solution for mitral and tricuspid patients. In addition, the completion of enrollment in the pivotal trial studying SAPIEN M3 puts us on track to further enhance our portfolio. I am confident that we are reaching an inflection point as the only company with a commercially approved portfolio of catheter-based technologies to treat the millions of patients suffering from mitral and tricuspid disease. In addition to the meaningful progress of TAVR and TMTT, we are pleased with the company innovative RESILIA tissue, which was pioneered by our surgical business. We are on track to treat half a million patients with RESILIA-based heart valve by the end of 2024, supported by seven years of clinical evidence. The previously announced spin-off of Critical Care is progressing as planned and will enable a sharpened focus on structural heart. As a result, Edwards' 2025 organic sales growth rate will be even more distinguished. In addition, this will give us more agility, increase our pace of innovation, and provide an expanded opportunity to serve a large and growing patient population. Because we are solely focused on structural heart disease, we are uniquely positioned to deliver sustainable growth and extend our leadership. Now, I will provide some additional details by product group. In TAVR, our full year 2023 global sales of $3.9 billion increased 10.6% year-over-year. Our US and OUS sales growth rates were similar. In the fourth quarter, our global TAVR sales of $979 million increased 12% year-over-year. Performance was driven by double-digit growth in the US, Europe, and Japan. The company competitive position was stable globally, and local selling price were also stable. In the US, we remain pleased with the continued expansion and adoption of a SAPIEN 3 Ultra RESILIA platform. This technology builds on Edwards' longstanding leadership in tissue technology and durability by combining advancements in tissue science with the industry-leading SAPIEN 3 Ultra RESILIA -- Ultra valve. Developing safe, effective, and durable heart valve requires significant long-term commitment, and we are proud to build on 65 years on valve innovation while leveraging the expertise and know-how of more than 2,000 engineers and R&D specialists across the company. We are proud of uninterrupted leadership in structural heart and will continue to invest vigorously in these platforms. In addition, our scaling of patient activation initiative along with next-gen TAVR and additional evidence on asymptomatic and moderate AS patients, position us for healthy, sustainable TAVR growth well into the future. Outside of the US, in the fourth quarter, our double-digit growth was comparable with our global TAVR growth, driven by Europe and Japan. Long term, we continue to anticipate excellent opportunities for growth, as international adoption of TAVR therapy remain quite low in many regions. In Europe, Edwards' sales growth was driven by the broad-based adoption of our SAPIEN platform. It is encouraging that the growth in Q4 was widespread across all major countries. Looking ahead, we are pleased with the recently announced CE Mark approval for SAPIEN 3 Ultra RESILIA, and we are planning for a disciplined launch. We were pleased with our sales growth in Japan, and as expected, we grew faster than overall procedural growth. After more than 20 years of rigorous clinical experience and over 1 million patients treated with SAPIEN valve around the world, our TAVR platform is positioned for continued global leadership and strong sustainable growth. Given the under-treatment rates, we are confident in the future of TAVR, driven by greater awareness, patient activation, a platform that delivers lifetime management for AS patients, advances in new technologies. such as RESILIA, as well as indication expansion and increased global adoption. Turning to TMTT now. In 2023, we remained focused on our key value drivers to unlock the significant long-term opportunity for patients, a portfolio of differentiated therapies, positive clinical trial results to support approvals and adoption, and favorable real-world clinical outcomes. Based on the deep learnings we have achieved from our clinical trial and real-world experiences, we have carefully constructed a strategic portfolio of leading transcatheter technologies to provide both repair and replacement solutions for mitral and tricuspid patients. PASCAL Precision, EVOQUE, and SAPIEN M3 will provide best-in-class therapies to treat the broadest range of patients. Full year global sales of $198 million increased 67% versus the prior year. TMTT's fourth quarter sales of $56 million increased 71% versus the prior year. Q4 sales were driven by the accelerating adoption of our differentiated PASCAL Precision platform and activation of more centers across the US and Europe. We were encouraged by the ongoing double-digit growth of overall transcatheter edge-to-edge repair procedure, which highlights the large unmet patient need. We continue to expand global access of PASCAL Precision in new countries, including Japan, where we recently completed our first cases. Since launch, we have proudly treated more than 20,000 patients around the globe with PASCAL repair system. In mitral replacement, we have received FDA approval for SAPIEN 3 continued access program. Physicians are continuing to treat patients with this novel therapy. In tricuspid replacement, we initiated the launch of EVOQUE in Europe, with a focus on outstanding outcomes and the goal of eliminating tricuspid regulation in patients. And in the US, following the recent early FDA approval, we are initiating the introduction of its novel therapy and building the foundation for long-term expansion. As we did for TAVR, we are focusing on best-in-class physician training, generating more evidence, and achieving excellent patient outcomes. We are grateful for the strong ongoing collaboration with clinicians all over the world to provide the treatment options to many patients suffering from tricuspid valve disease. In tricuspid repair, the CLASP II TR pivotal trial with PASCAL continues to enroll well and remains on track to complete enrollment by the end of this year. As a summary for TMTT, we are reaching an inflection point with the only portfolio of approved catheter-based mitral and tricuspid technologies. We remain committed to bringing our differentiated therapy to patients with this live threatening disease and believe our strategy positions us well for leadership. In our surgical product group, full year global sales of $999 million increased 13% versus the prior year. Fourth quarter global sales of $248 million increased 10%. Growth was driven by strong global adoption of Edwards' premium RESILIA technology and overall procedural volumes. We are confident about the future of its tissue technology and its role in improving patient lifetime management. We continue to see positive momentum in our innovation globally with continued adoption for patients best treated surgically, including those with complex and concomitant procedures. We continue to expand the overall body of RESILIA evidence, including ongoing patient enrollment of our MOMENTIS clinical study, we received CE Mark approval of our MITRIS RESILIA valve in the fourth quarter and have begun to launch in several European countries with favorable physician feedback. Turning to Critical Care. Full year global sales of $928 million increased 10% versus the prior year. Fourth quarter Critical Care sales of $250 million increased 11%. Growth was driven by contribution from all product lines, led by HemoSphere and Smart Recovery with strong adoption of our Acumen IQ sensor equipped with the Hypotension Prediction Index algorithm. Critical Care strategy is to drive growth through Smart Recovery and Smart Expansion, which are designed to help clinicians make more informed decisions and get patients home to their family faster. And with that, I will turn the call over to Scott.

Bernard Zovighian:

Thank you, Scott. In conclusion, we are proud of the significant progress we made in 2023, advancing new breakthrough therapies for patients and delivering solid financial performance and healthy profitability. We are even more excited about 2024. This year, we anticipate launching groundbreaking technologies and advancing multiple important clinical trials. These breakthroughs, along with significant unmet patient needs, give us confidence in our ability to accelerate growth in 2025 and beyond. In TAVR, we will continue to drive global adoption of SAPIEN 3 Ultra RESILIA, present pivotal trial data from EARLY TAVR, studying asymptomatic AS patients, and enroll in ALLIANCE, a pivotal trial studying the next-generation SAPIEN X4. We also look forward to a number of key developments in TMTT, including the US and European introduction of EVOQUE, the expanded global adoption of PASCAL Precision, CLASP II TR enrollment completion, and SAPIEN M3 approval in Europe by the end of 2025. And in Surgical and Critical Care, we remain committed to healthy growth and expanded leadership. In closing, longer term for Edwards, we are confident in our plan to expand the structural heart opportunity, which reflects our sharpened focus on valvular and non-valvular patients and our commitment to innovation. We believe that executing our strategy will create value for all of our stakeholders. With that, back to you, Mark.

Operator:

Thank you. [Operator Instructions] Our first question comes from Larry Biegelsen with Wells Fargo. Please state your question.

Bernard Zovighian:

Thank you, Larry. I hope you are doing well. Let me start and then I will ask Daveen to add some color here. So, first, the way we are thinking about this one is like we did in TAVR, we want to make sure that we are going to introduce this very novel therapy, having in mind, building foundation for long-term expansion. So, we're going to be focusing on physician training, generating more evidence, excellent patient outcome, making sure we have coverage, payment, reimbursement, established in the US and in Europe. So, we are having here a long-term view, the same way we did in TAVR in last 20 years. But again, Daveen, I'm sure you want to share some of your plan.

Larry Biegelsen:

Super helpful.

Larry Biegelsen:

That's helpful. And Daveen, just one follow-up for you. What are your thoughts on the likelihood of seeing a statistically significant mortality benefit at one year or 18 months when the full TRISCEND II data is presented at TCT? And how important is that for adoption and reimbursement? Thanks.

Larry Biegelsen:

All right. Thanks so much.

Robbie Marcus:

Great. Thanks for taking the questions, and congrats on a very nice data. Maybe just to follow up on that. We've seen just TMTT, in general, whether it's mitral or tricuspid maybe ramp over the past few years a little slower than expected. Obviously, COVID really disrupted that, that upward trajectory. Maybe just speak to some of the bottlenecks that you see in the system, especially with tricuspid replacement, it's a totally new therapy. There will be some education, I imagine. But maybe just speak to what you see as the bottlenecks and what Edwards can do to help ramp adoption in a pretty sick patient population?

Daveen Chopra:

Yeah, I'll make a couple of quick comments. First, we're really excited, because we see that the replacement technology really has the potential to treat a large number of patients. Because especially in tricuspid regurgitation, note one patient is alike. There's really a huge heterogeneity and replacement will really see as the core of treating the largest number of patients, and then we see other technologies like [TEER] (ph) as well as other modalities that are still in trials potentially to add new patient groups on top of that. We've seen in Europe where tricuspid as a therapy has been approved longer that centers are starting to continue to build up and grow the tricuspid practice. As you bring in technology to market, you start seeing the awareness of the disease to grow and you see more referrals and you see more patients getting to the heart team. And some of that becomes from how we imaging people correctly and we're referring them correctly at centers. And we can see that, that's exactly what we see potentially that will happen out with the new therapy of tricuspid in the US. We'll be able to start building up diagnosis referral to heart teams. And also, we see that there's an opportunity, as Larry talked about in the investor conference, in the TAVR group, we're doing so much with patient activation. And we see that all those learnings from patient activations in the future will be able to be leveraged over to the TMTT space, both for mitral and tricuspid to continue to grow the market.

Larry Wood:

Yeah. Thanks. This is Larry. That's a great question. I think the first thing is we're just going to learn a lot from this trial. There's a lot of unknown questions out there in terms of what percentage of patients are truly asymptomatic when subjected to a stress test. I think how fast do people progress and what happens to people while they're waiting. I think the biggest thing about it is, as we've talked about, and I spent a lot of time at the investor conference, the time from a patient to get diagnosed or treated is just really long. And a lot of that is the interpretation of the guidelines and this overlay of symptoms. And it's all really stand in the gears preventing the patients from moving through. And unfortunately, given the deadliness of the disease, a lot of people never actually make it to therapy. I think with the EARLY TAVR trial, assuming that it's successful, it will just streamline that process where we can just apply guideline criteria to aortic stenosis, and it won't require this additional evaluation of symptoms and people can just move through. But remember, only about 13% of patients right now with severe aortic stenosis actually get treated. So there's a huge under-treatment right now. We think asymptomatic just adds to that.

Larry Wood:

Yeah, I think that's right. And I think it's sort of returned to a little bit of the earlier days in TAVR, where I think we're planning on having a steady cadence of new trials and new data and new evidence that continues to not only raise awareness about the therapy, but also open up new opportunities for patients to get treated that don't currently get treated today.

Operator:

Our next question comes from Travis Steed with Bank of America. Please state your question.

Bernard Zovighian:

Go ahead?

Travis Steed:

Helpful. And a follow-up, curious on the SMART trial. If the data there is good? If you think there's an impact on the market? And then also, there was news last week, when last competitor comes to the market in 2024. Does that change your view on 2025? I'm just curious what kind of competition you had kind of baked into your long-term guidance. Thanks a lot.

Bernard Zovighian:

Yeah. And in addition, as me being in my first year as CEO, I'd like to reflect a little bit about where we are as a company. And when I think about valve, making heart valve, it is not easy. Given the nature of patient needs, this is not luck. We are committed and focused for more than 60 years and we bring experience, a very deep knowledge. What we have seen, even in the past few years, many platforms, many companies coming in and leaving the market after a year, two years or three years. So, we are leading the space with a very significant long-term commitment, more than 2,000 engineers, R&D, R&D specialists. We are proud of our uninterrupted leadership in the space. And we are going to continue investing. So, look, for sure, we take all the competitors very seriously, but we are very confident about our leadership, about our technologies, and about our evidence.

Operator:

Thank you. Our next question comes from Patrick Wood with Morgan Stanley. Please state your question.

Larry Wood:

Sure. I think what happens when new technology comes into Japan, just because of the way the certification process works and people having to move through that process, that certainly had an impact for us. I think in Q4, we grew faster than the market. And I think that really relates to some of the trialing ending and people kind of moving back to our platform. But this is sort of something that goes on, but we're very pleased with how we grew in Japan in Q4 and continue to look forward to that market growing because it's a very -- it's a much lower penetrated market than places like the US and Europe. So we continue to see that as a long-term growth driver for us.

Daveen Chopra:

Yeah. No, sure. This is Daveen again. I'll kind of jump in this one. Obviously, we received an approval through this FDA breakthrough pathway. And this was a really innovative pathway where the basis of approval was the breakthrough cohort of the 150 patients we presented at TCT. But at the same time, as we were working with the FDAs and answering their questions, we presented and gave them other data from our larger cohort, other descriptive statistics. And as we mentioned, it's that larger cohort where the results really showed those favorable trends in all-cause mortality, heart failure hospitalizations, tricuspid reinterventions. It was those kinds of trends that I think that we believe probably have the FDA come back to us and say, oh, yeah, this kind of makes sense. We probably don't need an advisory panel that led to our approval. And so, we're very excited that the full cohort of data, the full one-year cohort on the 400 patients will be presented at TCT, so we can kind of see all the data, not just kind of the breakthrough cohort plus the initial kind of look at the other data. And that going forward, right, for us, as we launch out this therapy, we're going to continue to have a great deal of evidence. We're going to continue to have trials and more data that help show how great this therapy really could be for patients. We're planning to build this therapy with really careful physician training, great clinical outcomes, and supporting this therapy just like we as an organization did for TAVR not that long ago. And so, I'm excited really for that long-term opportunity and what this means for helping patients.

Operator:

Our next question comes from Vijay Kumar with Evercore. Please state your question.

Daveen Chopra:

Yeah. No, I'll start off a little bit first on the totality of data. Now with EVOQUE, we've implanted and tracked data in clinical trials on over 1,000 patients in various studies. And what we've consistently seen is that these patients are patients who don't have an option. There are patients who are looking for options out there and don't feel great and can't do the things that they want to do every day in their life, and that -- the EVOQUE technology really makes a huge difference in their life. This concept, the quality of life really does matter for patients to be able to pick up -- play with your grandkids, walk up the stairs. It really does matter. And I'm not trying to discount that these other statistics matter, right, mortality, heart failure hospitalization. Those all matter as well. But we've, I think, shown in the breakthrough cohort that we at the starting point have this amazing quality of life improvement. And that's why our indications about improvement in health status. We've got the favorable trend in the other data points, all cohorts mortality, heart failure hospitalization, tricuspid intervention. And those favorable trends, we'll continue to see more data as we go in the future. But as I mentioned before, we're going to continue beyond just this study, the tricuspid [indiscernible]. We're going to continue to gather data on patients. We're going to continue to gather large data on large numbers of patients to help show how EVOQUE can really help patients. And I think it's that kind of data, along with kind of all the other key things we talked about, careful physician training, controlled rollout, excellent outcomes, that will really help create this market and really do the market development. And so, it's hard for me to speculate how will this compare maybe the technologies like TAVR, same question about mitral, but I'm excited for what it can do. I think there's so much opportunity to grow this market.

Larry Wood:

Yeah. Just, just to pile on that, having spent so much time in the TAVR space, when we deal with regulators and with payers and stuff, there's a lot of focus on mortality and people get really almost singularly focused on it. But spending the time with the patient groups that I spend, living longer, but living poorly is not a feature to them. If you told them they had this exact same life expectancy, but their quality of life would dramatically improve, that's far more valuable to them. And I think when you can get that quality of life improvement and you can get the mortality benefit, that's where you really have the home run therapy like what we've seen with TAVR. And so that's really what we're trying to build on. But I wouldn't discount the quality of life benefits. They're really significant for patients.

Scott Ullem:

Yeah. It's a couple of things, but largely it relates to just the lumpiness of SG&A and R&D and in what period we record those expenses. Q1, the increase in OpEx will outpace revenue according to our current forecast. And that's the reason why we end up with the midpoint of the range of $0.64 level with the EPS from the fourth quarter. But overall, it's important to remember that for the full year, we're expecting bottom-line growth to exceed top-line growth once you get through the different quarter-to-quarter cadence.

Operator:

Our next question comes from Matt Taylor with Jefferies. Please state your question.

Larry Wood:

We'll have to see what the impact is. Certainly, we've seen cases where US data has impacted international share in international markets. I think it just depends on what the data is. But I think the reality is there's been no data released. All those data just simply a signal that they're delaying their approval and waiting for additional data. So, I don't know that how much people are going to react to that. The other thing is there's more that goes into to the purchasing decision oftentimes, especially in Europe than clinical data. And for the people that are purchasing on price because there's favorable pricing and it's a significant discount, I don't know how much that will get impacted.

Larry Wood:

I think we continue to do a lot of new things. We're running a number of programs. I think one of the things that I talked about at the investor conference is I know there's a lot of speculation on -- and skepticism, frankly, on the under-treatment rates and are all those patients really there. I can tell you we've done enough work in major health systems where we've applied things like AI to the echo reports, and we can absolutely definitively say the patients are there. They're just not moving through the system for a variety of reasons. So, the first thing you have to do is validate. The second thing you have to do is get people to understand what to do about it, and then you have to move them through the process and get treated. And we have multiple things that we're working on to drive those patients through, but we are literally continually evolving these programs to try to optimize them to activate patients off the sidelines and move them through the system in a streamlined fashion.

Operator:

Our next question comes from Matt Miksic with Barclays. Please state your question.

Daveen Chopra:

No, Matt. Thanks so much for the question. It's Daveen again. Yeah, if you first look at the timing of it, right, we kind of said midyear was kind of our initial estimation, and midyear has got a couple of months kind of window. So this definitely was up by a couple of months earlier than we kind of expected. And so, based on what we know now, we continue to be confident in what we think EVOQUE can do. And obviously, we'll see as we get through adoption and we start moving through centers, training how fast the rate is, but that help us bring this up just a little bit. I think the other comment I'll make is things like new technology add-on payments, right, which are helpful for hospitals to help ensure that they're adequately kind of profitable and doing a good job comes online October 1, and that date doesn't really change whether you get earlier approval or late approval. So, there are some factors like that. But we'll continue to look at as we adapt over the course of the year and how it grows and give updates as -- if needed.

Scott Ullem:

Yeah. Thanks for the question, Matt. Yeah, we're just getting started with building out our field force both for EVOQUE, but as well as we continue to expand the presence of our overall TMTT portfolio. And so this is the beginning of an investment in building a foundation of a team in the field, not the end. You should expect that we're going to continue to grow our resources, invest in the field team. And by the way, that's not limited just to TMTT. TAVR continues to grow aggressively, and we're investing more resources to support that growth as well. One of the things we're doing, though, is looking carefully at general and administrative expenses globally. And as Edwards has put down a broader global footprint, it gives us an opportunity to get some leverage from scale. And so, we're going to be continuing to look closely at that and making sure that we're being as efficient as we can be on the P&L.

Scott Ullem:

Yeah. Matt, I think we saw some benefit from patient activation initiatives that we have in place. It's tough to isolate those from the other efforts that we have underway to continue to support the growth of TAVR. But no, that's certainly helping drive growth in the fourth quarter and beyond.

Bernard Zovighian:

What's fair to say though is, in the past few years, we have done many pilots, many initiatives. We have extracted so many learnings. What we are doing right now is scaling. We are scaling and spending. We are spending resources in Q4 last year, this year, and the next few years. So, you are going to see more and more because we believe there are so many patients in need not receiving a treatment.

Operator:

Thank you. And our next question comes from Chris Pasquale with Nephron Research. Please state your question.

Daveen Chopra:

Yeah. Hey, Chris. This is Daveen. No, I appreciate it. I think at least my reference toward in patient activation and how we think about in TMTT is more over the longer term, right? And we think about there's so much learning that TAVR is happening where, yeah, we're doing some things right now, we're testing small things, but it's really about over the midterm, how do we kind of help scale patient activation in a way that kind of TAVR has been doing and really helps drive kind of organic growth and a number of patients being diagnosed and being referred to our teams. Well, the other point I'll kind of make is that, right now, I think that most of our time or a lot of our energy is really about building capabilities for getting centers up and running. So, there are a lot of patients in the center. If you look at how our trials enrolled, especially the TRISCEND II trial, it enrolled really fast and enrolled very quickly. So, we know there's definitely groups of patients who now are looking for options. They've been diagnosed and looking for options. But as we grow over time, we're going to continue to try to build off that and leverage a lot of those kind of TAVR kind of patient activation efforts.

Larry Wood:

Yeah. I'll start, and then if Wayne has anything to add, he can. The price premiums are different in the different markets because it all depends on kind of where the starting price was. So, we went for larger premiums in Europe than what we did in the US. And so, a more price sensitive market, obviously, that's more of an issue. So, we've seen more rapid adoption of our RESILIA-based therapies in the US. But we continue to see this growing in Europe. And I think we're really gaining momentum on our RESILIA platforms in total. I don't know, Wayne, did you have anything to add?

Chris Pasquale:

Great. Thanks.

Danielle Antalffy:

Great. Thanks so much, guys. Thanks for taking the question. Larry, just a quick question for you on the PROGRESS trial in moderate aortic stenosis. I mean, I know this isn't the first time we're hearing about the speed of enrollment in that trial that it's certainly a positive signal. And I guess my question for you is, is there anything to read into the potential opportunity there based on the speed of enrollment? Was there anything unique about the trial that allowed us to enroll so much faster than you guys expected? And what could this mean for potential approval, number one; but number two, just more broadly, once we see this data uplift across the market?

Danielle Antalffy:

That makes sense. I'll leave it at that. Thanks so much, guys.

Operator:

Thank you. This concludes today's conference. All parties may now disconnect.

Operator:

Greetings, and welcome to the Edwards Lifesciences Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Wilterding, Senior Vice President, Investor Relations and Treasurer. Thank you. You may begin.

Bernard Zovighian:

Good afternoon, everyone. As Mark said, we are hosting today's call from TCT in San Francisco. I’m going to start by covering some of the exciting developments at the conference, share highlights of the significant progress our team has made advancing our strategy, review our strong third quarter results, and finally, discuss our confidence in the outlook for Edwards. We have a lot of data being presented this week about technologies, Edwards has developed. Included among these are results from free late-breaking clinical trials, all of which reflects Edwards' commitment to generating high quality evidence, to advance innovative therapies for patients, suffering from structural heart disease. Yesterday, physicians presented five year data from the PARTNER 3 low risk pivotal trial. We believe these data demonstrate that TAVR with the SAPIEN platform should continue to be the preferred therapy for treating patients, who have severe symptomatic aortic stenosis. Still more than 20 years of rigorous clinical experiences and trials, now eight New England Journal of Medicine Publication and over a million patients treated, SAPIEN technology offers patient unique benefits. SAPIEN 3 has demonstrated 99% freedom from death and disabling stroke at one year. 90% survival at five years and is the only valve with the THV and THV indication. This is true lifetime management benefit, which expands option for patients. Tomorrow at TCT, we are looking forward to the presentation of the six month analysis of our EVOQUE tricuspid valve, the first-of-its-kind of therapy for the millions of patients, suffering from tricuspid valve disease. In addition, tomorrow, you will receive a one year full cohort result of a CLASP IID pivotal trial with PASCAL. We continue to make meaningful progress to advance our vision of offering a portfolio of innovative transcatheter therapies to treat tricuspid and mitral valve disease. In the last several weeks, we achieved four important milestones in support of our commitment to patient-focused innovation. First, CE Mark approval for EVOQUE tricuspid valve replacement system. Second, CE Mark approval for the MITRIS RESILIA surgical mitral valve. Third, PASCAL Precision approval in Japan. Finally, the competition of the enrollment in the first-ever pivotal trial for any transfemoral mitral replacement therapy the ENCIRCLE trial for SAPIEN M3. Turning now to Q3 financial performance. Third quarter global sales grew 11% to $1.5 billion, led by our differentiated portfolio of innovative therapies. We were pleased with our results, which were in line with our expectation and/or present another quarter of double-digit sales growth. For the full year, we continue to expect total company sales growth to be in the 10% to 13% range. Now, I will provide an overview of the third quarter sales performance by product group. In TAVR, we continue to see strong demand for our leading SAPIEN platform with third quarter sales of $961 million, up 10% year-over-year. Our U.S. and OUS sales growth rates were comparable. Our U.S. and OUS competitive positions were stable and globally, local selling prices were stable. In the U.S., our third quarter TAVR sales were driven by the continued successful launch of SAPIEN 3 Ultra RESILIA. On the clinical side, we are pleased with the pace of enrollment in our pivotal trial alliance, designed to study SAPIEN X4, our groundbreaking next generation TAVR technology. In Europe, Edwards sales growth was driven by the broad-based adoption of our SAPIEN platform. We look forward to additional data, supporting the Edwards' benchmark program to be presented at the PCR London Valve's Conference in November. Our sales in Japan grew year-over-year, reflecting a gradual recovery in market growth and strong adoption of SAPIEN 3 Ultra RESILIA. Competitive trialing in the third quarter were -- was less pronounced versus the first half of this year. And as expected, we grew faster than overall procedure growth. Around the world, we remain focused on improving diagnosis and treatment of the many more patients who remain undertreated. In summary, the combination of our global TAVR leadership, along with the data presented at TCT this week, gives the company further confidence in the future of TAVR, and the company's expectation of a $10 billion opportunity by 2028. Now, turning to TMTT. Our commitment to the unmet needs of mitral and tricuspid patients, took a significant step forward with the achievement of several important milestones in this past quarter. TMTT third quarter global sales of $52 million increased 65% versus the prior year. This performance was driven by accelerating adoption of our differentiated PASCAL precision platform, the activation of more centers across the U.S. and Europe, as well as key TEER (ph) procedural growth. We continue to be pleased with our excellent clinical outcomes, reflecting the impressive performance of PASCAL Precision and the value brought by our comprehensive high touch model. We are continuing the expansion of PASCAL Precision globally, with the expected launch in Japan before the end of the year. In our mitral clinical trials, we look forward to the one year CLASP IID randomized pivotal trial, and CLASP IID registry outcomes with PASCAL to be presented as part of a late breaking scientific sessions tomorrow at TCT. This will add to the body of evidence, supporting TEER (ph) as an effective therapy for patients. With the earlier than expected completion of enrollment in the ENCIRCLE pivotal trial for SAPIEN M3, we believe we are one step closer to offering an important valve replacement option, beyond TEER to serve even more patients, suffering from mitral valve disease. In tricuspid, earlier this month, we received CE Mark approval for EVOQUE. We look forward to bringing this new therapy to Europe through disciplined launch that will focus on ensuring excellent patient outcomes. Now, with this approval physicians in Europe will have access to this groundbreaking option in addition to TEER. As noted, tomorrow at TCT late breaking data from the TRISCEND II pivotal trial of the EVOQUE replacement technology will be presented on the first 150 randomized patients, based on EVOQUE's FDA breakthrough pathway designation. This landmark presentation on a novel therapy demonstrate our leadership and commitment to innovation and science, and our focus on helping large population of patients with unmet needs. In summary for TMTT, we are proud of the new therapy introductions, clinical trial achievements and geographic expansion. We have achieved to advance our vision to build a portfolio of therapies to transform lives of mitral and tricuspid patients. In surgical, third quarter sales of $247 million increased 11%, driven by a balanced combination of strong global adoption of Edwards' premium technology and overall procedural growth. We continue to see strong momentum of our RESILIA portfolio globally, which has been widely adopted, because of the excellent durability of its proven tissue technology, supported by the recent seven year aortic data and five year mitral data from our commenced clinical trial. We are confident about the future of this technology, as we expand the overall body of RESILIA evidence, including ongoing patient enrollment of our momentous clinical study. Finally, we received CE Mark approval for our MITRIS RESILIA mitral valve earlier this month. We expect to introduce this valve in the fourth quarter, followed by full European launch in 2024. In Critical Care, third quarter sales of $221 million increased 6%, driven by a smart recovery portfolio, with strong adoption of our Acumen IQ sensors, equipped with the high potential prediction index algorithm. We remain confident in our pipeline of critical care innovation, as we continue to shift our focus to smart recovery technologies, designed to help clinicians make better decision and get patient home to their family faster. And now, I will turn the call over to Scott.

Bernard Zovighian:

Thank you, Scott. In closing, after more than 20 years of rigorous clinical experience over 1 million patients treated. In this week, five year PARTNER III results. Edwards TAVR is positioned for strong sustainable growth, as many patient remain undiagnosed and untreated. In addition, we have two strong global businesses, critical care and surgical, which our position for durable long-term growth driven by portfolios of differentiated technology. Moreover, we are achieving many, many significant milestones in TMTT, that gives us the confidence about progressing our vision to treat the many mitral and tricuspid patients in need. Altogether, we are convinced of the tremendous opportunity to drive success in the future through our patient focused, breakthrough technologies and leadership. With that, pass it back to Mark to open up Q&A.

Operator:

Thank you. [Operator Instructions] Our first question comes from Robbie Marcus with JP Morgan. Please state your question.

Bernard Zovighian:

Thank you, Robbie. Let me start and then I will ask, Larry, to continue here. First, we are pleased to this quarter. Again, it is the third quarter in a row of double-digit, sales growth, we are very pleased about it. Very balanced between U.S. and OUS. Our Ultra RESILIA adoption is going very well according to plan in U.S. and in Japan. And, and we look at the opportunity with, so many patients are undiagnosed and untreated. So we feel good about, what's ahead of us, we feel we are well-positioned. All of the data, presented this week give us even greater confidence. But, Larry, you want to add anything?

Robbie Marcus:

Great. Maybe one more product question here from me. You just kind of EVOQUE approved in Europe with CE Mark. We'll see the data for six months tomorrow in tricuspid replacement. This is a market we hear from doctors a lot, they may not be terribly excited about repair but replacement could be a really exciting option. What do you think Edwards needs to do as a company to take this market and accelerate adoption and drive uptake here in an area that's been pretty slow with tricuspid repair? Thanks.

Daveen Chopra:

Yeah. No. Thanks, Bernard. I appreciate it. No, I think, as Bernard has said, we really do believe that it's the comprehensive high touch model and outstanding outcomes is a key step. But it's much more than that. And us having the ability to take the TAVR playbook from long ago and help apply it to this news area is really important. And for us that includes not only technology, innovation, evidence, but also continuing to then overtime, work on helping improve diagnosis referral and eventually treatment of patients. But for us, this is a comprehensive kind of play, a long-term play for us to really build a new therapy that we're really excited about to help patients with.

Robbie Marcus:

Thank you.

Larry Biegelsen:

Good afternoon and thanks for taking the question. Hey, Scott, year-to-date the TAVR growth is a little over 10% I believe in the midpoint of the guidance it's about 11.5%. So should we be thinking about the low end of the TAVR range of 10% to 13% for the year. And if not, what drives the acceleration implied in Q4 for TAVR? Then I had one follow up.

Larry Biegelsen:

Thank you for that. And obviously, people are starting to think about '24 right now. So Bernard, at our conference you talked about targeting double digit annual revenue growth. Does that apply to 2024? And Scott you know '23 guidance implies margins are down year-over-year because of investments and currency. What are some of the puts and takes in the P&L you know, that we should be thinking about it. And any help on, on FX would be appreciated? Thank you.

Scott Ullem:

And Larry, it's Scott. For the second part of your question about FX. We'll talk about more of the specifics at the investor conference. But if you take our exchange rate environment right now and apply it to 2024, it would be a headwind to sales, and also a headwind to EPS. So we'll be able to quantify that more specifically. And we'll see what happens to FX rates between now and then as well.

Operator:

Our next question comes from Vijay Kumar with Evercore ISI. Please state your question.

Bernard Zovighian:

Thank you, Vijay. Let me start high level, I believe last night, investor event was, very insightful with Dr. Leon and Dr. Mark. They went very deep into the data. They went very deep into the meaning, the meaning of the data and the trial design. At the end of the day, you know, for me, it is I like to keep it very simple. 90% survival at five years. That's amazing for patients that's in my mind, what we should remember, but I'm going to ask Larry to comment and with a greater detail here.

Bernard Zovighian:

And in addition, Vijay, if you think about what we have been seeing all along about the underdiagnosis and undertreatment of this patient. Now you look at this PARTNER 3 five years, we hope -- we certainly hope, that we're referring network of cardiologists will send more patients because they have options, safe options, effective options. So we feel good about all of this

Vijay Kumar:

That's helpful guys. And Bernard, just one more for you. There were some headlines on investigation in Europe. Any financial implications here, it's just the headlines looked a little, little odd. And I know it's a silly question but I have to ask. Is there any GLP-1 exposure to TAVR or TAVR patients related to based in GLP-1s. Thank you.

Larry Wood:

No, I totally agree. I think, as it relates to just general things, obviously people losing weight is a good thing, but we've never seen anything related to even, even coronary disease, but a lot of these things are genetically derived and genetically driven, and I don't think your weight is going to be the determinant of those things. So I don't really see any impact of this.

Operator:

Our next question comes from Josh Jennings with TD Cowen. Please state your question.

Bernard Zovighian:

So let me start, and then I'm sure, Daveen can add his thoughts. It is a good start. We have seen TRILUMINATE so far, correct? And we believe, TRILUMINATE was a good study, good outcome for patients, safe with great quality of life improvement for its patient, who have a miserable life. We need to remember that. With EVOQUE, we are going to talk about it tomorrow. So it is tough for me to talk about it today. We might talk about it more, at the end of the day tomorrow, at our investor conference. But at the end of the day, quality of life improvements are important. Solid safety profile also is important. And all of that, we see that as a great, start for this patient who have no other options today. Daveen, you want to add anything?

Bernard Zovighian:

What we -- in addition of what Daveen said, what we like about where we are today is, in the past, few years, it was only about TEER, it was only about repair. So physicians didn't have a lot of options. And what we are doing is now progressing with our vision to being able to offer to physician a toolbox. So they can decide, what therapy for what patient, for what anatomy. And so that's still a big progress to where we were in a few years ago, even in a few months ago. So a great progress here, and I see more to come.

Bernard Zovighian:

Thank you. So what about, I ask Larry, who's leading that to every day to comment on this.

Daveen Chopra:

I'll add one thing on that. This is Daveen. Even here at TCT, as I talk to physicians, the one thing I consistently hear from physicians is, they so appreciate our comprehensive high-touch model. They love that they're Edwards person who is so deep in the mitral tricuspid space, and that's all they breathe, live and really think about. And so they can offer the best possible advice to the physician, the best possible collaboration to ensure the best possible patient result. And I just love seeing that this week as I talk to physicians.

Operator:

Our next question comes from Travis Steed with Bank of America. Please state your question.

Scott Ullem:

So your math is spot-on at the midpoint of the range that's exactly what it implies. And so, take the midpoint, it ends up at the lower end of that $2.50 to $2.60 range, but still within the range.

Scott Ullem:

All the growth rates we've talked about were underlying constant currency growth rates.

Scott Ullem:

Yeah. It's Scott, let's hold-off on that question about share and the environment, new product introductions and all kind of stuff. There's a lot that we expect to happen in 2024. And we'll look forward to getting into all of those details and forecasts when we get together at our investor conference in December.

Operator:

Our next question comes from Joanne Wuensch with Citibank. Please state your question.

Scott Ullem:

Yeah, I hate to do this to you, Joanne. But again, we're going to have to hold off until we get to December. Really, all we can say right now is that, we think we're going to see some pressure on the top line reported sales dollars won't impact our underlying growth rates. And the reported sales dollars headwind is going to flow right down to earnings per share. Now again, that's not current foreign exchange rate. So when we get to December and we lay out our full year guidance for 2024, and we'll go through all the lines of the P&L and take you through all the details. But at this point we really can't tell you more.

Bernard Zovighian:

Yes. So let me start here, so 11% obviously, we are very pleased, I don't know if you remember, but a few years ago, nobody believed in surgical and we believe in surgical because we have been a pioneer here. We have been a great innovator and our innovation is paying off. What we see in Q3 again, like in 2023, we see a balanced combination between adoption of our RESILIA platform, premium pricing, and also the procedural growth. So altogether, but it is very balanced between procedure growth and our premium technology.

Operator:

Thank you. Our next question comes from Matt Miksic with Barclays. Please state your question.

Bernard Zovighian:

Yeah, maybe, I'm going to ask Larry to comment on that with.

Matt Miksic:

That's helpful. Thank you for that. And then, and then just one follow-up on just maybe a segment of the market that's, like, got to be getting bigger, I guess at this point. But looking forward being the only valve on the market with a valve-in-valve indication. How big is that now and how important is that? We talk a little bit about the expanding indications into, not asymptomatic and moderate AS patients over the intermediate long-term. But, does valve-in-valve become a factor that you can talk more about or maybe help us understand how that factors into your growth or the general growth in the market at this point?

Matt Miksic:

Thanks so much.

Danielle Antalffy:

Hey. Good afternoon guys. Thanks so much for taking the question. I was just wondering if I could follow-up actually on the data, the five year data, we saw yesterday. And Larry, if there's any read that we can make or something that could -- that we saw in the data that could give us more confidence in the upcoming asymptomatic data readout or is that just too difficult to take anything from yesterday and apply it to that trial?

Danielle Antalffy:

Okay. Got it. And then just a quick question on. Bernard, you mentioned there's still a lot of these patients untreated out there. I mean, as far as Edwards' progress on getting those patients off the couch into their physician's office diagnosed and referred for TAVR. I mean, where are we in that process? You guys spent a lot of time at the Analyst Day last December, I imagine we'll get an update too in December, in a few week here. But just curious what you can say about, are you seeing any real traction in some of the direct-to-consumer campaigns, things like that. Thanks so much.

Larry Wood:

Sure. I think it's one thing that I think people are missing a little bit is, it's not like we just started doing patient activation stuff last year or in the last two years. I mean we go all the way back to starting a website with a lot of educational information for patients, even things like how to find a TAVR center and questionnaires and patient information kits. So we've been doing a lot of things over the last several years, and I think, is one of the reasons the market has grown and developed the way it has. So I think a lot of our digital and patient activation efforts are still -- are paying dividends right now. Now, the deeper you go into the prevalence pool, the harder it gets and the more activation you have to do. So it's sort of a -- it's not a light switch. It's a never-ending journey that you're going to do to continue to build on the last program with additional programs to try to get people activated. And I'll tell you, we have a lot of work streams, and we're looking forward to maybe get into a little bit more detail at the investor conference and trying to show you a little bit about other things that we're working on. But we have a number of pilots and we have a lot of very mature programs at the same time that we think help us a lot.

Pito Chickering:

Hey. Good afternoon, guys. Pre-script you mentioned that the TAVR market share is stable. If you look at competitive accounts with hospitals or doctors, that use both SAPIEN and CoreValve? Are you seeing any market changes in those accounts where RESILIA is competing against FX?

Pito Chickering:

Okay. Great. And then a quick follow up for TAVR, I think you said procedure growth was the same as revenue growth. But was there any benefit from positive pricing from RESILIA, I thought that would help to drive revenue growth above the volume growth? Thanks so much.

Pito Chickering:

Great. Thank you.

Bernard Zovighian:

Thank you. So let me close this meeting by saying, I am pleased with our performance in 2023. Beyond the numbers, I am excited with the progress we have made, reinforcing our TAVR leadership position with new clinical evidence, and expanding our mitral and tricuspid patient reach with new approved technologies. As a result, we are confident in our long-term strategy to help even more patients around the world. Thanks for your continued trust in Edwards. The IR team, Scott and I welcome any additional questions, any additional questions by phone. Thank you.

Operator:

Greetings, and welcome to the Edwards Lifesciences Second Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Senior Vice President, Investor Relations and Treasurer. Thank you. You may begin.

Bernard Zovighian:

Thanks, Mark, and hello, everyone. I am pleased to share with you the work that our team did to help more patients than even before with our life-saving therapies. Today, I'm going to talk about the strong second quarter performance across product groups, our progress in advancing our patient-focused innovation strategy, and our confidence in the outlook for Edwards in the years ahead. In the second quarter, we achieved double-digit sales growth, driven by increased adoption of our innovative therapies. Total sales of $1.53 billion grew 12% on a constant currency basis, slightly higher than our expectation. We experienced broad-based growth across all of Edwards portfolio. Given improving healthcare staffing and our first half performance, we continue to expect strong results in 2023. As a result, we have lifted our full year 2023 sales and EPS guidance. Longer-term, we are confident in our focused and differentiated strategy given heart valve failure is largely underdiagnosed and undertreated. We remain committed to increasing our wellness and providing innovative life-saving therapies so even more patients can benefit. Now, I will provide an overview of the second quarter sales performance by product group. In TAVR, we continue to see strong demand for our leading SAPIEN platform with sales of $992 million, up 10% year-over-year on a constant currency basis. Our U.S. and OUS sales growth rate were comparable. Local selling prices were stable. In the U.S., our second quarter TAVR sales were aided by improved hospital staffing levels, and the continued successful launch of SAPIEN 3 Ultra RESILIA. We estimate that total procedure growth was in-line with our sales growth. Additionally, we will be restarting enrollment this quarter in our pivotal trial, ALLIANCE, designed to study of next-generation TAVR technology, SAPIEN X4. Outside of the U.S., we had positive constant currency sales growth from all regions. In Europe, Edwards' sales growth were driven by broad-based adoption of our SAPIEN platform. Our sales in Japan grew sequentially and year-over-year on a constant currency basis, although our results continued to be impacted by lower-than-expected market growth and competitive trialing in the first half of this year. As a result, we estimate overall OUS TAVR procedure growth in Q2 was slightly higher than Edwards' OUS TAVR growth. During the quarter, at the EuroPCR medical congress, data on the Benchmark study were presented on 2,400 patients treated with SAPIEN valves across 28 European centers. It was very encouraging to note that patients experienced a 33% reduction in the median hospital length of stay while maintaining 30-day clinical outcomes. This study showed that by implementing best practices with the SAPIEN platform, centers can be more efficient, without compromising patient outcomes. Turning to TMTT. We remain focused on three key value drivers to unlock this opportunity

Bernard Zovighian:

Thank you, Scott. So, based on our strong first half result, we have increased confidence that 2023 will be an important year for Edwards and we expect to deliver 10% to 15% sales growth while making meaningful progress on our innovations to improve care for many more patients. Longer-term, I have great confidence in our team to further extend our leadership position by bringing our differentiated technologies to patients globally. In closing, we are well positioned for success. With that, I'll pass it back to Mark to open up Q&A.

Operator:

Thank you. [Operator Instructions] Our first question comes from Robbie Marcus with JPMorgan. Please state your question.

Bernard Zovighian:

Yes. Robbie, this is Bernard here. Thank you for the question. We are pleased with our global TAVR result in Q2. 10% constant currency growth, comparable U.S., OUS, basically, and it has been driven by continued strong demand for our leading SAPIEN platform. Also, what we have experienced is that improvement in the hospital staffing level in the U.S. and globally, but I'm going to let Larry add some comments here.

Robbie Marcus:

Great. Thanks for that. And maybe just kind of a similar question. TMTT, you beat in the quarter. That seems like it was even a bit more imperative over the past few years than the whole TAVR complex. Maybe just talk about mitral and tricuspid, particularly the launch of PASCAL in the U.S., how you think adoption is going versus plan, how you're seeing the competitive situation play out, and just your thoughts in TMTT in general relative to TAVR normalization. Thanks a lot.

Daveen Chopra:

Yes, definitely. Thanks, Bernard. I think as Larry and Bernard talked about, in the market, we continue to see recovery from the staffing portion of it and I think you're right that maybe we got hit a little bit more on the staffing side during COVID. But coming out, we're also still seeing recovery, but I still think there is opportunity to keep getting better on that component. With that being said, with such a large number of - such a large number of patients looking for new therapies, we continue to see relatively a strong market growth. That being said, as we dive into it, we continue to open up new centers in both the U.S. and Europe. Specifically in the U.S., I think we're continuing to hear great feedback from physicians about the differentiated features and benefits of the PASCAL system. We're ramping-up the team. We're opening up new centers each week. We're going through kind of the value-add value analysis committees in the contracting processes with each new center in the U.S. week-in and week-out. And we're really focused, as you can imagine, on the largest accounts in the U.S., not -- who do the most here so far. And so, I'm pretty excited about where we go in the U.S. Maybe just to comment, both on Europe, I think, as Bernard said, we've been again opening up new centers in Europe and I want to make a comment that, tricuspid especially in Europe, continued to see very strong growth. It's a newer therapy, smaller obviously in market size, but continue to see very strong growth, where we're seeing that the market is growing and that people are really seeing that PASCAL actually in this situation, the tricuspid space, is really got these differentiated features for atraumatic and tailored-treatment really for tricuspid tier. So, overall, we continue to be excited about where PASCAL is going in it's lunch.

Operator:

Thank you. And our next question comes from Matt Taylor with Jefferies. Please state your question.

Scott Ullem:

Yes, thanks for the questions. I'll start with gross margin. Gross margin, we're seeing some benefit of mix in 2023, but it's more than offset by the impact of foreign exchange, that actually hit us last year in 2022 and is flowing through our income statement in 2023. You asked about phasing. It's going to get more impactful negatively in Q3 and Q4, based upon current exchange rates. Now, if exchange rates change, that may change a little bit as well. But we're expecting gross margins to come down a little bit in Q3 and Q4 relative to the first half. All that said, we expect to end up right where we thought we would, in the range of gross margin guidance for 2023, so really nothing changed. In terms of operating expenses, you're right, we've been putting more investment into especially field based personnel in Europe, in U.S., and even outside, and that's weighing on operating expenses, but that's okay. It's part of a deliberate plan to really drive top-line growth by making sure that we've got the right people in the right places, supporting our clinician partners, and making sure that patients are getting the right kind of care, especially as we're introducing these new products in places like TMTT, and what Daveen talked about earlier. As it relates to operating margin progression over the next couple of years, we continue to see opportunities to expand our operating margin and we're looking for ways that we can do that. We've identified areas where we can make changes, and gradually incrementally expand our operating margin. But really it's a secondary focus. The primary focus is investing for long-term top-line growth. We have some clinical trials wind-down over the next couple of years, but we've got other ones spooling up. You know about what trials Larry is running in TAVR, and Daveen has gone in TMTT, and this is a super important area of investment for us, again to drive top-line sales by contributing to this really robust body of clinical evidence that we have supporting the growth in those two transcatheter businesses.

Operator:

Thank you. And our next question comes from Vijay Kumar with Evercore ISI. Please state your question.

Bernard Zovighian:

Go ahead, you know, Scott.

Vijay Kumar:

Understood. And maybe one sort of related question here. First half, we've seen TAVR grow mid-teens, how much of that is volume versus price? Why are we still seeing SAVR outgrow TAVR - I think I heard Larry mention the macro-environment staffing is improving. I was just -- and that's - so it's hard for us to see SAVR outgrow TAVR. Is this a fundamental change in the market or perhaps new product introductions that's driving SAVR or some color on SAVR versus TAVR, would be helpful.

Larry Wood:

Yes. I think that's right. We sort of have the three components that help contribute. So you can look at the growth rates and turn it all into procedures because for the TAVR side it is overwhelmingly majority procedures, but it's more of a combination of things, on surgery. I will say, as we move through the COVID recovery though we probably saw hospitals prioritize their surgical programs probably most and I think that deal is a little bit with patient acuity and just the need to get those patients treated, probably a little bit sooner. So I think cath lab recovery has maybe lagged a little bit beyond the surgical recovery. But again, we're very happy with where we saw TAVR procedure growth. this last quarter.

Larry Biegelsen:

Yes, good afternoon and thanks for taking my question, two on the pipeline and the TCT updates on this call. Let me start with the TRISCEND II comments, it's big news here. Arguably, EVOQUE is your most important pipeline product, so I guess my question is, Bernard, just a couple here. One, is the trial stopped yet? Second, what would success look like to you, given the TRILUMINATE results showed only a quality-of-life benefit, but no positive trends on hard outcomes? And lastly on TRISCEND II, if positive, I would think approval could come in mid-'24, not late-'24, and I did have one follow-up.

Daveen Chopra:

Also two small points, thanks for the question. If that - this interim analysis was a part of the statistical plan. So, that's already been planned out and was always a part to kind of show these results. So we're excited to share these results with the clinical community. And I'll make a comment that, for us, I'm actually pretty excited by what we've seen actually previously with TRILUMINATE. It helps really confirm outcomes that have come from other studies with Tier Technologies that we have on PASCAL device, that - that Tier in tricuspid delivers great Trikafta reduction with meaningful quality-of-life improvements and we are excited to see randomized data. So to me, these are all great positive tailwinds in tricuspid and we're excited to see what the TRISCEND II interim planned analysis will show.

Larry Wood:

Larry, I can't speak to the - to the data or what's going to be presented. I think what people are going to be looking at is, what the trial was powered for, and what it was designed to do. And we have a composite endpoint of death, or stroke, and rehospitalization and those are the three components. So, I think first and foremost, you look at the primary and then I think people are going to look at the sub-components of that and say what do they see happening in the trends in the trial. And I think, that's what people are going to be looking for. But we're excited that the data is coming forward, and the team is going to continue pulling it in and once it's all adjudicated, the clinicians will obviously take the steering wheel and they'll present the data. But, I think overall every time we have one of these data reports, it just adds to our body of knowledge and adds to the body of evidence and I think that's what we do for the clinical community. So, again, that's - I think primarily we focus on the primary endpoint, just like we did in the trial and we'll see where we are.

Travis Steed:

Hi, thanks for taking the question. I just wanted to follow-up on U.S. TAVR growth. I wanted to understand a little bit better. I think you said price was stable, but it sounds like RESILIA has gone past and expected, so I don't there's any way to kind of parse out that U.S., it sounds like 10% TAVR growth in the U.S., how much of that was actually price versus RESILIA in the quarter.

Travis Steed:

Great. That's helpful. And then I did have a follow-up on the raised TAVR guide for the full year. Is there anything you're seeing in July? Just curious like what's giving you the confidence to raise the full year guide? And when you think about Q3, should we think about this being down sequentially versus Q2 in dollars like it has been historically?

Operator:

And your next question comes from Josh Jennings with Cowen. Please state your question.

Operator:

Excuse me, Josh, you're cutting out. Could you pick up your handset?

Operator:

Yes, much better. Thank you.

Bernard Zovighian:

Thank you, Josh. So in Japan, what we have seen is a positive, like I said, sequential and also year-over-year growth in the quarter. It was below our expectation, but we believe it is transient for a couple of reasons. One, of the market, as you know, the market is still impacted from COVID and is still recovering from COVID. And also, we believe it is transient, because we are very pleased with the early feedback of the launch of SAPIEN 3 Ultra RESILIA in Japan. So, we feel like we grew year-over-year sequentially below our expectation, but we are confident that we are going to improve this in Japan. Maybe, Larry, you want to add anything here?

Operator:

Thank you. Our next question comes from Chris Pasquale with Nephron. Please state your question.

Scott Ullem:

Well, the only thing particularly about Q3 is we pick up the summer seasonality, which hits us on the top line. And generally, the expenses continue to go through and are not as seasonal. That's really what it reflects.

Bernard Zovighian:

No, exactly. You got it. We had a great Q2 after a great Q1, very balanced across all product lines. And we didn't change the guidance even though we changed the guidance in the last quarter, but it is more about a tough year-over-year comparison in the second part of the year. Thanks for the question.

Matt Miksic:

Hi, thanks so much for taking the question. So I wanted to follow-up on this very strong performances in SAVR and good, but not as strong performance in TAVR and as it pertains to staffing. And I know you talked about price a little and volumes. But can you talk a little bit about given that TAVR interventional TAVR resources that sort of grew up during the clinical trials of TAVR across the clinical community in U.S., Europe kind of lost many of those folks who are maybe more proficient and are - good news, replacing them with other folks. But bad news, maybe some of those folks are still coming up the curve. If you could talk about - is that more of an issue on the TAVR side? And because SAVR surgical interventions are a bit more mature, that's less of an issue on - you've heard that from some centers that are sort of - are more productive, more skilled, more mature on one side versus the other, which is kind of one of the factors. But it would be great to get some color and then I have 1 quick follow-up?

Matt Miksic:

Got it. That's helpful. And then just on - it's a question about some of the investments you've made and maybe group Bernard and rest of the team, the investments that we see coming through the clinical programs now like the EVOQUE and PASCAL or investments and innovations that you made some time ago. And I'm just wondering - are you at a stage where you've got what you need to address these TMTT markets and sort of more advanced other valvular disorders? Or are you still out there hunting for sort of better mousetraps or additional technology and IP that we should expect to kind of further flush out those programs going forward? Thanks.

Operator:

Thank you. And our next question comes from Danielle Antalffy with UBS. Please state your question.

Larry Wood:

Yes. Thanks, Danielle. Yes, we think as the front end of the funnel starts to fill back up again with referrals and that I think there is a possibility that we are actually seeing a little bit of a backlog growth as we talk about the last mile still being probably the part that we see the most pressure on staffing. I wouldn't be able to quantify that and it's probably just sort of more of a directional thing. But the fact that we've seen the growth in TAVR for the first couple of quarters of this year, and we've been back into double digits and it's not like our centers are out beating the bushes for patients, we're pretty pleased with our patient flow right now. So I think that, that's obviously really positive. I think in terms of large centers, small centers, we saw a dynamic throughout COVID that when COVID would - with sort of the way it would come through that people - we tend to see the smaller centers growing faster indicating people maybe stayed a little bit more local. When COVID tends to go away, then people tend to go back to the centers, the large centers of excellence and they're willing to travel a little bit more. So I think we saw a little bit more growth in the large centers in this past quarter than we saw in the small centers, but that's something that has varied a lot quarter-by-quarter. But this last quarter would have been more in the large centers than the small ones.

Richard Newitter:

Thanks for taking the questions. Two here. The first one, just on reconciling the raise to the high end of the TAVR range and your Japan commentary relative to expectations. Do you need Japan in a dynamic way to improve in the second half to hit the midpoint of your guidance? Or is that kind of what's embedded to get to the upper end? I'm just trying to reconcile those two pieces.

Richard Newitter:

Okay. And then just secondly - thanks for that. Secondly, just as we think about - especially in the U.S. TAVR, if you're at about 10% now, you've got RESILIA pricing contributing some amount. So I guess if you're 10% with RESILIA, as we just think out, whether it's '24 or just on a normalized basis, should we be thinking of your view that the TAVR market has approached high single-digit volume growth sustainably as we think back to normalized levels. Is that the right way to think about it?

Scott Ullem:

I'd just add to that, Larry, just to reinforce that, our confidence in a $10 billion total addressable market hasn't changed one bit in 2028. And so while COVID interrupted our trajectory to that larger TAM, we still feel a lot of confidence that we've got big growth ahead of us, not just in with current indications in our current product portfolio but added to that, our new technologies and broader indications in the U.S., Europe and beyond.

Pito Chickering:

Hi. Good afternoon. So two quick questions here. For the U.S. markets, are there - is there any geographical spread for these large centers that are growing in markets that were still coming out of COVID versus the ones in the south that were faster coming out of COVID? Or was it broad-based geographically?

Pito Chickering:

Okay. Fair enough. And then like with the competitor talking about lower U.S. growth in mitral and they need to restart the referral network. Can you talk about what you think the overall mitral market grew in the market, how your market share is looking and any changes to your long-term market growth of that market?

Daveen Chopra:

Yes, sure. No, definitely. I think I'll follow up and I say the overall TMTT market with both tricuspid and mitral continues to grow very well on a global basis, right, in that -- close to that maybe 20% kind of mark, globally. In the U.S., though, to specifically we're just in mitral, we do see strong growth. I think, Bernard, were saying something like almost like double-digit growth, which is about the ballpark we kind of see in for U.S. mitral. So we think it's there, but not as strong as it is on the global nature. As you remember, in many countries of the world, these technologies are just coming for the first time in there. We're still launching this technology into many, many countries. We're in very few countries - there are countries in Europe, countries outside of Europe that we haven't even launched into yet. So we continue to see, as we launch in new countries, that will help the market grow as well as the continued adoption of mitral in the U.S.

Adam Maeder:

Hi. Good afternoon, guys. Thank you for squeezing in here. Two TAVR-related questions, I'll ask them both upfront. First on the ALLIANCE study, it sounds like that's going to restart enrollment this quarter. Can you just talk about the effects or improvements to get SAPIEN X4 back in the clinic? And remind us where we are in terms of enrollment with that study. And then the second question is just a clarification on S3 Ultra RESILIA. I know you're launching that, obviously, here in the States. I think that's approved in Japan in launching. What is the status that - of that technology in Europe? Thanks for taking the questions.

Operator:

Thank you. And ladies and gentlemen, we have now reached the end of the question-and-answer session. I will now turn the call over to Bernard Zovighian for closing remarks.

Operator:

Thank you. And that concludes today's conference. All parties may disconnect. Have a good evening.

Operator:

Greetings, and welcome to the Edwards Lifesciences' First Quarter 2023 Earnings Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Senior Vice President, Investor Relations and Treasurer. Thank you. You may begin.

Michael Mussallem:

Thank you, Mark. We're pleased with our first quarter performance, which exceeded our expectations and reflected an improvement in the healthcare staffing along with strong execution of our patient-focused innovation strategy. Sales of $1.46 billion represented 13% growth on a constant-currency basis versus a year-ago period. Strong therapy adoption of transcatheter heart valves drove the majority of growth in the first quarter aided by better-than-expected performance of Surgical Structural Heart and Critical Care. By geography, strong growth in the U.S., Europe and the rest of the world was partially offset by Japan where COVID impacts lingered. First quarter results in the U.S. were also positively impacted in the quarter by some catch-up in procedure volumes following a seasonal slowdown late last year. While staffing remains a concern at many sites globally, we are optimistic that the environment will continue to improve. In TAVR, first quarter global sales were $948 million, an increase of 11% year-over-year on a constant-currency basis. We estimate global TAVR procedure growth was comparable with our growth. Local selling prices were stable. In the U.S., our first quarter TAVR sales grew in the low-double-digits versus the prior year, and we estimate total procedure growth was comparable. As we indicated, we believe that first quarter trends were lifted by improved hospital staffing levels. Results were also lifted by a catch-up in procedure volumes early in the quarter following the holiday season slowdown. We're optimistic about the early results of our SAPIEN 3 Ultra RESILIA launch in the U.S. As you know, the RESILIA tissues anti-calcification technology has demonstrated a strong track-record of performance in Edwards surgical valves. Adoptions of this advanced technology is proceeding well, and we expect it to represent the majority of our U.S. TAVR sales before year-end. TAVR growth in the first quarter was driven by larger volume centers and our SAPIEN valves continue to demonstrate distinguished clinical performance. We're pleased with the continued enrollment of our PROGRESS clinical trials studying patients with moderate AS. Related to this, last month at the ACC Conference data were presented that examined mortality rates in cardiac damage of 600,000 early-stage AS patients in the U.S. This study concluded that all degrees of untreated AS severity were associated with increased mortality risk. Of note, that mean two-year all-cause mortality for moderate AS was approximately 20%, approaching the rate of those with severe AS. Outside the U.S., in the first quarter, our constant-currency TAVR sales grew approximately 10% on a year-over-year basis. Growth reflected positive contributions from all regions, excluding Japan, which was still impacted by COVID and the recent trialing of competitive products. We expect to see higher OUS growth as international adoption of TAVR therapy remains low. In Japan, although growth was below our expectations, we were encouraged that conditions improved as the quarter progressed, and we expect COVID headwinds to diminish substantially over the course of 2023. With the launch of the SAPIEN 3 Ultra RESILIA in Japan late last month, we expect growth rates to improve in this country where aortic stenosis remains significantly undertreated relative to other large developed countries. In Europe, Edwards' sales growth was driven by the continued strong adoption of our SAPIEN platform and was broad-based across all countries. Total TAVR procedures grew over previous quarters despite persistent disruptions related to hospital staffing shortages. It's encouraging that healthcare systems across Europe are prioritizing lifesaving structural heart therapies including TAVR amidst these challenges. Looking ahead to the EuroPCR Medical Congress next month in Paris, we anticipate additional data from the Edwards benchmark study focusing on strategies to optimize TAVR programs across 28 European centers. Data will also be presented on the outcomes of balloon expandable valves for TAVR in TAVR procedures. In summary, given the strength of our first quarter performance, we now expect constant-currency growth of 10% to 12% versus our previous expectation of 9%to 12%. Our outlook assumes that hospital resource constraints continue to improve during the year. We remain confident that this large global opportunity will increase to $10 billion by 2028, which implies a compounded annual growth rate in the low-double-digits. Turning to TMTT. Our confidence continues to grow in the long-term potential to transform care for the many patients with mitral and tricuspid disease who need better solutions. We remain steadfast on our three key value drivers to unlock this opportunity, developing a portfolio of differentiated therapies for the complex mitral and tricuspid anatomies, driving positive pivotal trial results to support approvals and adoption, and prioritizing favorable real-world clinical outcomes. First quarter sales of $42 million grew substantially, driven by overall tier procedure growth, the ongoing launch and growing adoption of PASCAL Precision in Europe and the initial launch in the United States. We're pleased that we continue to have excellent outcomes for patients and clinician feedback on PASCAL Precision has been consistently positive, particularly highlighting the differentiated premium features of the system. We are ramping production to support the launches of Europe and the U.S. In Mitral, we look forward to presenting one year data from the full cohort of CLASP IID pivotal trial later this year. Meanwhile, we continue to enroll the CLASP IIF pivotal trial with PASCAL for patients with functional mitral regurgitation. In mitral replacement, enrollment of ENCIRCLE pivotal trial with SAPIEN M3 is ongoing and we anticipate completing enrollment of the main cohort around the end of 2023. We believe that this replacement therapy will expand options for a broader population of mitral patients. In tricuspid, we've completed enrollment of the TRISCEND II pivotal trial of the EVOQUE Tricuspid Valve Replacement System and remain on-track for a European approval by the end of 2023 and in the U.S., around the end of 2024. The FDA recently approved continued access allowing U.S. hospitals that were involved in the clinical trial to continue to offer EVOQUE as a therapy option. In addition, the CLASP II TR pivotal trial with PASCAL continues enrolling well. In summary, we're pleased with our continued progress toward bringing a portfolio of therapies combined with contemporary clinical data in order to achieve our vision of transforming the lives of patients with mitral and tricuspid valve disease. We now expect full year 2023 sales of $170 million to $200 million versus our previous $160 million to $200 million. In Surgical Structural Heart, better-than-expected first quarter 2023 global sales of $248 million increased a robust 17% on a constant-currency basis over the prior year. Growth was driven by penetration of our premium products across all regions and valve surgery growth was higher than our expectations as hospital staffing levels improved leading to some catch-up in procedures. We continue to see strong momentum of the RESILIA portfolio globally. Surgeons and patients value the features and benefits of this proprietary tissue technology for both aortic and mitral surgical valve replacement procedures. And we've seen adoption of the MITRIS Valve in the US increase in the first quarter. The 7-year data from our COMMENCE clinical trial will be presented at the Annual Meeting of the American Association of Thoracic Surgeons next month. We also began enrollment of our MOMENTIS clinical trial to demonstrate the durability of RESILIA in the mitral position. In summary, based on our first quarter sales, we are raising our full year sales expectation to the high-end of our $870 million to $970 million guidance range. We now expect high-single-digit underlying growth in 2023, driven by the adoption of our most advanced technologies and an increase in the overall heart valve surgeries. In Critical Care, first quarter sales of $222 million increased 9% on a constant-currency basis, driven by balanced contributions from all product lines. Growth was led by our Smart Recovery portfolio and strong adoption of our Acumen IQ sensor and finger cuff featuring our unique Hypotension Prediction Index algorithm. Demand for our Swan-Ganz pulmonary artery catheters and our HemoSphere monitoring platform also remained strong in the first quarter with a healthy pipeline of future opportunities. Based on the strong first quarter performance, we now expect Critical Care full-year 2023 sales of $870 million to $940 million versus our previous $840 million to $940 million. We remain excited about our pipeline of Critical Care innovations as we can to take continue to shift our focus to Smart Recovery technologies designed to help clinicians make better decisions and get patients home to their families faster. And now, I'll turn the call over to Scott.

Michael Mussallem:

Thanks so much, Scott. That means a lot and I've truly valued your trusted partnership over the years. It's also a great segue. As part of the upcoming planned CEO succession, Bernard has been serving as President of Edwards Lifesciences since January 1. Since then, we've invested all our time to successfully transition responsibilities and I feel confident passing the baton. Next month, I expect to transition to my new role as Non-Executive Chairman of the Board and Bernard will assume the CEO role. I'm excited with the Board's selection of Bernard, and I'm confident that the company is in great hands and will prosper under his proven leadership. But before we go to Q&A, I'll ask Bernard to say a few words. Bernard?

Mark Wilterding:

Thank you very much, Bernard. We're 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 reenter the queue, and management will answer as many participants as possible during the remainder of the call. Diego, please go ahead with additional details on accessing the Q&A portion of the call. Thank you.

Larry Biegelsen:

Good afternoon, and thanks for taking the question. Mike, I just want to say I think I've been at almost 70 of your 92 calls, so I just wanted to take this opportunity to congratulate you on what you've accomplished at Edwards and wish you well on retirement. I just wanted to take a minute to say, I think your pursuit of transcatheter valves may seem obvious now, Mike, but we know that it was a big risk when you decided to go down that path and it was clearly the right decision. So, congratulations again, Mike, and I'll move on to my questions now. So I'd love to start just with two on TMTT. Just first on the TMTT results in the quarter, the $42 million. I'd love to hear a little bit about the U.S., OUS trends, how much does the U.S. contribute and just any color on the launch of PASCAL and I have one follow-up.

Bernard Zovighian:

Yes, sure. No thanks, Larry. Good question. You know about your TMTT, we are very pleased with the first quarter results. As you can imagine, we started in Europe way before and we also got approval in Europe for PASCAL Precision before the U.S. So it is going very well in Europe, but we have been in the U.S. now for quarter, quarter plus, and it is going well also, it is at the beginning of it, I don't know, Daveen, if you want to add anything here?

Larry Biegelsen:

That's helpful. And then just to follow-up on TRILUMINATE. The reaction seem to be mixed from some physicians. I'd love to hear you guys, your reaction to the data and put EVOQUE what you've just completed the U.S. pivotal trial for TRISCEND II, the enrollment, I'm sorry. One would expect with replacement, you're going to see better efficacy in terms of TR reduction, but how confident are you that you'll see an improvement in outcomes such as mortality and hospitalization with the reasonable safety profile? Thank you for taking the questions.

Larry Biegelsen:

All right. Thanks for taking the questions.

Robbie Marcus:

Okay. Thanks for taking the question. And Mike, I'll add my congratulations as well. Maybe to start, I want to spend a minute on TAVR trends U.S. and OUS, and you said there was some pent-up demand at the beginning of the quarter, but then also it sounds like staffing continues to improve around the world. And if you get a little pricing benefit on SAPIEN 3 Ultra RESILIA that might help sales throughout the year. So just love to get your thoughts on what you're seeing, do you think there was a bolus in January and a diet offer, or are these trends that can continue to improve and accelerate throughout the year?

Larry Wood:

Yes, thanks Robbie. If I look at the quarter, we typically see a lot of seasonality in January as we come out of the holiday, just kind of refilling up the pipeline we're screening, and we saw a much stronger January than we historically have seen. I mean, we just saw less seasonality. I'd say, February and March, played out pretty much in-line with our expectations. We've anticipated that staffing was going to gradually improve, and I think we see that and I think that's evidenced in the Q1 results, but we expect it to also continue improve throughout the rest of the year. So in terms of trying to judge your backlog, I'm not really, it's hard for us to do that, but we do think there were certainly some catch-up in January.

Scott Ullem:

Yes, so we did end up with higher spending in the first quarter than we had originally budgeted. Our plans for spending for the rest of the year really unchanged. And for the full year, our guidance for SG&A and R&D as a percentage of sales are unchanged. In the first quarter, we came in a little bit higher for several reasons. We had some performance-based compensation. It's highly sensitive to sales by design. And so, we'd like to reward people when the topline is performing well. We also had some little things, some onetime one-off expenses for projects we're working on. We had a little bit higher tax rate as a result of income mix that came in U.S. and OUS. So those were some of the special things that you saw flow through in Q1.

Operator:

Our next question comes from Vijay Kumar with Evercore. Please state your question.

Michael Mussallem:

Yes, thanks for your comments, Vijay. I appreciate that, and I'll give it to Larry. Although, I think he already gave it his best shot, but wanted to see if you have anything to add Larry, right?

Vijay Kumar:

Maybe I'll try to ask this a different way, Larry. Let's see if we can pin this down. The SAVR, this is the second straight quarter SAVR is outgrowing TVAR. Is that 17%, what percentage of that 17% is what is volume versus price? And do you have any thoughts on why is SAVR continuing to outgrow TAVR? Shouldn't TAVR be growing faster than SAVR?

Vijay Kumar:

Sorry, volume versus price, Larry, can you comment whether majority of this growth was volume versus price on TAVR?

Vijay Kumar:

Fantastic. Thanks guys and congrats again.

Joanne Wuensch:

Good evening, and Mike, you will be missed, but nice quarter to do your 92nd quarter four. I just want to spend a little bit of time on Japan and China, and particularly in Japan, if you had a tough beginning of the quarter with COVID overhang, what is your run-rate looking like right now and just down there what's happening in the region?

Bernard Zovighian:

Yes, so Japan has been and still largely impacted by COVID headwinds. When we believe it is going to diminish over the course of 2023. We are also bringing our latest technology in Japan, S3 Ultra RESILIA and we are starting to see some positive reaction from our customers here. So together with the recovery from COVID and us bringing our latest technologies, we are very hopeful for the year.

Joanne Wuensch:

Thank you very much.

Travis Steed:

Hey, thanks a lot and congrats Mike you'll be next as well. Couple of questions here, I guess the first just did you normalized January. I don't know, if you could say, the U.S. still grew double-digits, if you just normalize the January in Q1? But then the real question is like how to think about Q2 from here, both U.S. and worldwide TAVR, how much of a step-up we should expect in Q2 total - TAVR sales or growth rates or just any color on what to expect for Q2 in TAVR?

Travis Steed:

Yes, of course, so January, if you normalize the January catch-up if you will, January looks more normal did the U.S. TAVR still grow double-digits or it's high single-digits?

Scott Ullem:

Yes so Travis, it's Scott. I'll just add to that, our guidance at the midpoint for Q1 was around 9% growth. That was the $1.41 billion. We beat that by $50 million, almost half of that was Surgical, and so we probably were rounded to low double-digits, something like that, if we were to normalize January, but we're getting pretty precise at this point trying to isolate every single month of the quarter.

Michael Mussallem:

Yes, we're very pleased with how the S3 UR rollout has gone. We're really following on in the footsteps of our surgical franchise, and RESILIA, which is on in INSPIRIS and now on MITRIS has become extremely popular with surgeons. And so, we get to follow the legacy that they've really started for us. And we've seen really positive impact from S3 UR. And we expect by the end of the year that that's going to be our leading platform in both the U.S. and Europe. And remember we went for a list price increase with that which is never easy to do and we've been pretty pleased with how that's gone so far and I think that just shows that positions respect and appreciate the value that RESILIA brings to the platform. So we're very encouraged with how the launch has gone to-date. We'll continue to roll it out through the rest of the year, but we do expect it to be our leading platform. I think you had a follow-up question on competitive launches, is that correct?

Michael Mussallem:

I mean, competitive launches have been going on for a long time, if we look at Europe, there's a whole complement of products out there. And outside of number one and number two, all of the competitors command about probably around 15% of the market and that's been fairly stable. So I think it's for us it's more about us continuing to innovate and rolling out our leading platforms than it is about anything else.

Operator:

Our next question comes from Danielle Antalffy with UBS. Please state your question.

Michael Mussallem:

Yes, thanks so much for your nice comments, Danielle, it has been a pleasure for me. Why don't I turn this over to Scott to go through your question.

Danielle Antalffy:

Okay. That's fair. And I think historically, you guys don't tend to release guidance very aggressively after the first quarter. So that's fair. And quick question for - on the TMTT side of things, I know it's very early in the U.S. on PASCAL launching, but Bernard just curious what you're seeing as it relates to market growth there and how much you're seeing that market recover, again, I know you guys are so early? So, not sure what you can say, but usually second entry comes to market and markets accelerate in a net tax, but just wondering if we're getting any signs on what market growth could look like going-forward there? Thanks so much.

Danielle Antalffy:

Thank you.

Richard Newitter:

Hi, thanks for taking the questions. So two from me I guess, just the first, I know we've talked about hospital staffing. Is that just a catch all phrase? I know in the past you said it's the whole worked up and everything for getting the patient diagnosed to the entire kind of worked up to referrals to getting the patient there. So with respect to the improvement that we saw from late last year, just trying to get a sense for - what specifically kind of are you referring to when you say hospital staffing is improving? And kind of the second question on that just I think you talked about in the past a very varied kind of level of recovery across your installed base. Any comments you can provide as to the - or characterize kind of where and which types of implanting centers are recovering and at what rates or was it just more uniform across the entire installed-base at this point? Thanks.

Daveen Chopra:

Yes I mean. I think it's a similar kind of comment that you made there, probably not the differences where there's a lot of people, a lot of different steps that go into a TMTT case. And again, as Bernard said, we're still a minority player here. But we continue to be optimistic that all those different parts of the fall patient pathway are continuing to get a little bit better in staffing.

Matt Miksic:

Hi. Thanks so much. Thanks for fitting me in. So a couple of just quick follow-ups here, so one on the color that you gave on RESILIA, I appreciate the target of kind of getting that to the majority of U.S. revenues by the end of the year on the TAVR platform, if I understood that correctly. But just broadly, I know you've had a policy of maintaining this kind of set price across your TAVR platform - even as you sort of moved it up to the generations of products, and that is a little bit unusual? Most companies in med devices do tend to sort of contract and rebate and make adjustments to pricing across like particularly in the U.S, given the way DRG's work and different hospitals non-teaching hospitals get different payments than urban hospitals or hospitals here in New York. I'm just wondering if this having RESILIA in a portfolio at a premium, having S3 call it standard or whatever - however you're referring to it in the portfolio? If you're giving any thought to, it's sort of joining the rest of the group to sort of to help some of the smaller centers maybe be able to afford to do TAVR when paying for $30,000 or $32,000 for a round just might be have reached given especially given the way staffing costs have gone up. Love to get your thoughts on that and then I have one quick follow-up?

Matt Miksic:

That's fair. And then I guess as centers have done more active and staffing does, and pressure starts to ease a little bit, one of the pressure points has been around the extensive imaging and sort of additional sort of staffing -- specialized staffing that's required for some of these mitral procedures, tier procedures. Any thoughts on along the same lines of facilitating broader utilization and adoption through partnering with hospitals, anything that you can see yourself doing to sort of help facilitate those procedures given sort of the specialized staffing needs behind them?

Matt Miksic:

That's fair. And Mike, I have to say it's been something to behold the culture, the accomplishments of the company. Congrats, and you will be missed. Thanks so much.

Operator:

Our next question comes from Cecilia Furlong with Morgan Stanley. Please state your question.

Michael Mussallem:

Cecilia, this is Mike here, can you just zero-in a little bit on the first part of that question again, I want to make sure that I understand it.

Michael Mussallem:

Yes, so we had two other competitors in Japan, both rolled-out new products. And so, it's not uncommon when new products rollout that we see physicians trying those products and understanding how they work and what the features and benefits are and I think we've seen this throughout our history, and usually that ends up being largely transient. And we're excited because we're just getting to our biggest launch that we've done in Japan since our initial launch, which is S3 UR. And so, we're excited about that. I think broader on what's in the guidance for Japan is we're expecting a broader COVID recovery, COVID was still pretty big in Q1 and we're looking for a broader COVID recovery and continued uptake, it got better during the quarter, but we're looking-forward to continue to improve throughout the year and that's what's in our guidance.

Operator:

Thank you. And ladies and gentlemen, we have time for one final question before turning it over to management for some closing remarks. And that question comes from Josh Jennings with TD Cowen. Please state your question.

Larry Wood:

Yes, no, it's a good question. I don't know that I can quantify it for you today, but we do TAVR and TAVR, but we also do TAVR and SAVR for patients that have gotten tissue valves, but I think one of the things that TAVR enabled with its development was the opportunity for more patients to get tissue valves. So even on the Surgical side of our business, younger patients can get tissue valves now because physicians and patients now payout let their valves that there is a catheter-based option for them down the road. So certainly, in time TAVR and SAVR will continue to grow and TAVR and TAVR will become a bigger part. TAVR valves now are just probably starting to get to the customer reaching that age that that will start to be more meaningful, but it will be something that grows in time, certainly as we look at the period that you discussed, which is through 2028.

Michael Mussallem:

Okay. Well, this is Mike, I'll make some closing comments. First of all, thank you so much for many of your warm remarks. It's been a special honor and a privilege to lead our team at Edwards Lifesciences for more than 20 years. And I really want to thank our employees who have made immense contributions to advancing care and helping millions of patients around the world. I'm particularly proud of our patients-first culture and our commitment to innovation and excellence. Our success is really a testament to the talented and passionate executive leadership team and our employees worldwide. And I believe we are well-positioned for an even brighter future. It's truly been my greatest honor to be Edwards CEO, and I look forward to supporting Edwards as I transition to my new role with the Board of Directors. So thanks a lot for your continued interest in Edwards and the team will welcome any additional questions after the call.

Operator:

Greetings, and welcome to the Edwards Lifesciences Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions]Please note, this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Senior Vice President of Investor Relations and Treasurer. Thank you. You may begin.

Michael Mussallem:

Thank you, Mark. During 2022, our company stayed focused on the long term, making meaningful progress on strategic milestones with the potential of transforming patient care. While the challenging environment negatively impacted sales, we still grew 8%. Looking forward, we remain optimistic that the health care environment will gradually improve and we expect 9% to 12% sales growth in 2023. We didn't pull back on investing in innovation because of the pandemic, and we didn't pull back because sales fell a little short. We continue to aggressively invest during this challenging period, which positions the company for sustained leadership in a new era of structural heart and critical care innovation. Looking back at 2022, in TAVR, we made important strides in executing our long-term strategy. We received approval and launched the innovative SAPIEN 3 Ultra RESILIA valve. In TMTT, each of our platforms demonstrated promising clinical performance, and we received approval for PASCAL Precision in the U.S. and Europe. In Surgical Structural Heart, we extended our leadership position through the launch of MITRIS in the U.S. And in Critical Care, we continue to drive adoption of our transformative smart recovery technologies. Although our initial sales expectations for 2022 anticipated a better environment, we delivered balanced contributions across each of our product groups and regions. We achieved 12% growth in adjusted earnings per share while maintaining R&D at more than 17% of sales, which reflects our commitment to driving durable organic sales growth. Consistent with our cash deployment strategy, we opportunistically repurchased stock at an accelerated level in 2022. We continue to invest in our production capacity in anticipation of future growth. and we made a series of external investments in promising early-stage technologies. Turning to our fourth quarter financial results. Consistent with our guidance, total company sales grew 7% on a constant currency basis to $1.3 billion. Our broad portfolio of innovative therapies drove this growth despite the health care disruptions in a number of our key geographies. In TAVR, full year 2022 global TAVR sales of $3.5 billion increased 7% on a constant currency basis, building on nearly 20% growth in the year ago period. Sales were below our original guidance of $3.7 billion to $4.0 billion due to foreign exchange headwinds and Covet induced health care challenges in key countries. In 2022, we announced the approval of SAPIEN 3 Ultra RESILIA in the U.S. Separately, we continue to advance enrollment in our PROGRESS pivotal trial for moderate AS patients and gained significant learnings from our alliance pivotal trial to study the next-generation TAVR technology, SAPIEN X4. These transformative developments reinforce our long-term confidence in the strong growth of transcatheter-based aortic valve interventions. In the fourth quarter, our global TAVR procedures were comparable with Edwards growth. Our global -- I should say, global TAVR procedures were comparable with Edwards growth. Our global TAVR sales of $868 million increased 5% year-over-year on a constant currency basis, consistent with our expectations. Sales were up slightly over Q3 in dollars and on a constant currency basis and local selling prices were stable. In the U.S., Edwards fourth quarter TAVR procedures grew in the mid-single-digit range. As expected, our fourth quarter U.S. TAVR procedure volumes were impacted by the U.S. hospital staffing constraints and the holiday season slowdown. We estimate that our share of procedures was stable. Growth in the U.S. was higher in larger volume centers and in states with fewer COVID restrictions as measured by the Daxferns Containment and Health Index. We're encouraged by recent hiring trends, which suggests that hospital employment is rebounding. As we mentioned, we began the introduction of SAPIEN 3 Ultra RESILIA in the U.S. the Resilient issues anti-calcification technology addresses one of the primary causes of reintervention following heart valve replacement and is demonstrating a strong track record of performance in Edwards Surgical house. As of now, this newest valve has been introduced in approximately 10% of U.S. TAVR centers and physician feedback has been encouraging. Outside of the U.S., in the fourth quarter, Edwards TAVR procedures also grew in the mid-single digits, and we estimate total procedure growth was comparable. In Q4, geographies outside of Europe and Japan grew even faster in the quarter. Long term, we see excellent opportunities for growth as we believe international adoption of TAVR remains quite low. In Europe, fourth quarter procedures grew in line with the global rate. Market growth continued to be impacted by a bump in the COVID cases and staffing shortages, which reduced hospital capacity, particularly in larger countries such as Germany. And even though there are a broad range of competitors, our leadership position and local selling prices remained stable throughout the year. Importantly, a cost-effectiveness study published earlier this month demonstrated that TAVR with SAPIEN three was economically beneficial when compared to surgical aortic valve replacement in treating German patients with low surgical risk. The data suggests that TAVR enhances quality of life and offers a cost-effective option over the long term. These findings are consistent with the cost-effective outcomes for the use of SAPIEN 3 in France, Italy and Spain. In Japan, fourth quarter procedure growth was much slower than expected due to an extended COVID wave and continued restrictions, which limited hospital staffing and capacity. We expect these factors to diminish substantially over the course of 2023 and look forward to launching SAPIEN 3 Ultra RESILIA in Japan later this year. We remain focused on expanding the availability of TAVR therapy driven by the fact that AS remains a significantly undertreated disease amongst this large elderly population. In summary, our outlook assumes COVID-related challenges improved during 2023 as hospital resource constraints decrease. We remain positive in our outlook for 2023 underlying TAVR sales growth of 9% to 12%, consistent with the range we shared at our December investor conference. We remain confident in this large global opportunity that will double to $10 billion by 2028, which implies a compounded annual growth rate in the low double-digit range. Turning to TMTT. Since launch, we have proudly treated more than 10,000 patients with the PASCAL repair system. We achieved significant milestones in 2022 and made meaningful progress toward achieving our vision to transform care for patients with mitral and tricuspid disease. Following the Class II presentation at TCT and FDA approval in Q3, we initiated the introduction of the PASCAL Precision system in the U.S. Initial feedback from clinicians has been positive, and we're pleased with the patient outcomes to date. Class IID full cohort of 300 patients with 1-year follow-up will be presented in the second half of 2023. In Europe, the PASCAL Precision launch is ongoing with a focus on bringing this latest advancement to our existing centers as well as expanding into new centers. Also aligned with our commitment to generate high-quality scientific evidence we continue to advance enrollment in our Class IIF pivotal trial for patients with functional mitral regurgitation. In mitral replacement, we're making good progress on the enrollment of the ENCIRCLE pivotal trial for SAPIEN M3 and expect to complete enrollment of the main cohort around the end of 2023. The sub French transfemoral valve leverages the SAPIEN 3 platform with a recapturable repositionable dock. Separately, we've completed enrollment in the MISCEND early feasibility study with the Eos valve and are incorporating the learnings from this early experience into our next generation. We believe the Eos platform has the potential to be an excellent option for mitral patients, who have a poor prognosis and limited treatment options. Shifting to tricuspid and our strategy of advancing the body of clinical evidence, we are currently enrolling two pivotal trials studying both tricuspid replacement and repair, TRISCEND II and the Class II TR. We prioritized enrollment in our TRISCEND II study, that study trial that's studying EVOQUE as it addresses the large population of patients who are suffering from debilitating systems and have few treatment options. TRISCEND II is on track for completion of enrollment in the first half of 2023, and we expect Evoke CE mark by the end of this year and U.S. approval around the end of '24. We're very pleased with the recent tricuspid data presented at PCR London Valves meeting which we reported favorable results from both our TRISCEND study of EVOQUE and the TriCLASP post-market clinical follow-up for PASCAL. In Europe, clinicians are very positive about the performance of our differentiated PASCAL Precision system in their tricuspid patients, and we're looking forward to bringing this therapy to patients in the U.S. following the Class II TR trial. Turning to the sales performance of TMTT. Fourth quarter sales of $32 million were consistent with our latest guidance and driven by the continued adoption of PASCAL in Europe supported by the early initiation of PASCAL Precision in the U.S. Full year global sales were $116 million, up nearly 50% on a constant currency basis versus the prior year. In 2023, we expect TMTT sales of $160 million to $200 million. We look forward to advancing our vision to transform the lives of patients with mitral and tricuspid valve disease through the milestones outlined in our recent investor conference. We remain committed to bringing this differentiated portfolio of therapies to patients with these life-threatening diseases and believe our strategy positions us well for leadership. In Surgical Structural Heart, full year global sales were $893 million, up 6% on a constant currency basis versus the prior year. Fourth quarter 2022 global sales of $224 million increased 8% on a constant currency basis over the prior year. We are encouraged to see strong global growth driven by the increased penetration of our premium RESILIA products despite COVID challenges in certain regions. Although hospital staffing shortages continue to be a concern, we believe that heart valve surgery was prioritized. We have seen strong momentum of the RESILIA portfolio globally. We believe that surgeons value the features and benefits of this advanced tissue technology for both aortic and mitral surgical valve replacement procedures. We saw adoption of the MITRIS RESILIA valve in the U.S. increased in the fourth quarter. And built upon previous generations of proven mitral valve technology, MITRIS offers greater ease of use and is designed to facilitate potential future transcatheter interventions. We are growing the large body of RESILIA evidence with our new Momentis clinical study to demonstrate the durability of this tissue in the mitral position. Enrollment in this study was initiated earlier this month. In summary, we remain confident that our full year 2023 underlying sales growth will be in the mid-single digits for Surgical Structural Heart, driven by the adoption of our most advanced technologies and growth of overall heart valve surgeries. Turning to Critical Care. Full year global sales of $855 million increased 7% on a constant currency basis versus the prior year. Fourth quarter Critical Care sales of $225 million increased 13% on a constant currency basis over the prior year. Growth was driven by contributions from all product lines and regions led by HemoSphere and Smart Recovery. In our Smart Recovery portfolio, adoption of FloTrac and ClearSight sensors featuring our unique hypotension prediction index algorithm RECONNECT remains strong. Demand for our pressure monitoring devices used in the ICU due to elevated hospitalizations in the U.S. As discussed at our recent investor conference, sales growth in 2023. We remain enthusiastic about our pipeline of critical care innovations, highlighted by smart recovery technologies designed to help clinicians make better decisions and get patients home to their families faster. And now I'll turn the call over to Scott.

Michael Mussallem:

Thank you, Scott. [indiscernible] informational therapies covering solid financial performance. We expect higher growth and meaningful in 2023 with a gradual improvement in hospital. We believe to serve our patients -- we're confident that our patient-focused innovation strategy can transform care and bring value to patients and health care systems worldwide. With that, I'll turn the call back over to Mark.

Operator:

And at this time, we will conduct our question-and-answer session. [Operator Instructions] Our first question comes from Robbie Marcus with JPMorgan.

Michael Mussallem:

Okay.

Michael Mussallem:

If you like, I'd be happy to give you the conclusion, why don't I give that for a second. Thanks, Robbie, and we'll she'll be first in line here. I just said, in conclusion, we're proud of the significant progress we made in advancing 2022 and the new transformational therapies for patients and delivering solid financial performance. We expect higher growth and meaningful progress in '23 with a gradual improvement in hospital staffing and growth across all major regions. And as the global population ages and cardiovascular disease remains the largest health burden, we believe that the opportunity to serve our patients will nearly double between now and 2028, and we're confident that our patient-focused innovation strategy can transform care and bring value to patients and health care systems worldwide. Thanks, Robbie. You're back up.

Michael Mussallem:

Yes. I'm not going to get really deep into the quarter. As Scott mentioned, we had some really positive times during the quarter, where we saw some weeks were really strong. We had the normal seasonality that we see in a quarter where things get soft around the holidays. But if I just elevate, I think what's on the mind of some of our investors that we had a few quarters of single-digit growth, but that certainly does not dampen our enthusiasm for our strategy. COVID just wasn't kind to structural heart patients. And we know that there are many consequences of COVID affected global growth companies, including Edwards. So if we just replay, 2020, COVID drove pretty much flat sales growth for us. In 2021, it was a big growth year. Edwards grew 18%. And in '22, although we experienced the lingering impact of COVID, tough comparisons and all that we still grew 8% and more importantly, in '23, we remain confident that sales are going to grow 9% to 12%. So we just think the environment is going to improve. We feel strongly that COVID's impact is transient and that treating these structural heart patients is going to again become a priority.

Daveen Chopra:

Yes. Sure, Robbie. This is Daveen. I'll take that question. So far at a high level, feedback from physicians in the Pascal precision launch has been really positive, right? I think people love the ease of use, the navigation improvements of this new system and we know that we received early approval in the U.S. and Europe. So we're ramping the inventory to kind of improve these launches. And I think really in the U.S., our mantra is all about patient outcomes. And so we are really focused on our high-touch model. We're really focused on getting great clinical outcomes, gradual introduction have a really strong training program. So, so far to date, we've been really impressed with that. And finally, I'll say, I think we've got great Class IID data that came out, obviously, at TCT. And we're convinced that they'll have a positive impact in the tier market overall, and we think that more and more physicians would be interested in using the PASCAL Precision system.

Larry Biegelsen:

I wanted to start with a high-level question. Obviously, there's a lot of concerns on the U.S. TAVR market, Mike, as you mentioned earlier, among investors. I wanted to ask about actually next year '24, because it looks like you have three major trials being presented potentially early TAVR for asymptomatic, the unload trial for moderate AS, TRISCEND II with EVOQUE for tricuspid. How do you guys rank these opportunities? And do you expect these three trials to accelerate your growth? And I have one follow-up.

Daveen Chopra:

Yes, I'll just make a comment on TRISCEND. So for the TRISCEND II study, we expect obviously release the information in the second half of the year and release the information in the second half of the year. So we're excited about the data we think to help it. But as you pull up here, I think this all helps us make us feel good about this year and then driving into 2024.

Bernard Zovighian:

Yes. And just to add on to that, we did see, as Mike mentioned, we saw some weeks in Q4 that were really strong. And I think it's just evidence that staffing is gradually improving, maybe not as fast as we want. And we certainly saw some impact, especially around the holiday period, but we still have the SAPIEN 3 UR launch. We have other things that we're really excited about, and we feel very good about next year -- or this year, sorry.

Larry Wood:

Yes. No, we don't have any update there. I think what we said at the investor conference is we expect to be back in clinic this year, and we still anticipate that. But we don't have anything new to add.

Vijay Kumar:

I think for the first question, Mike, on the TAVR trends, I think U.S. was up mid-singles overall TAVR up mid-singles, implies international was mid-single. So maybe talk was there any China impact or would happen in international. And I think on the last call, you noted half the centers in the U.S. were up double digits, half then were flattish. Was that a trend that you saw this quarter as well? Or how are you thinking about TAVR progression here?

Vijay Kumar:

Sorry, half the centers were up double digits, I think, last quarter. Was there a trend that you saw this quarter as well?

Vijay Kumar:

That's helpful, Larry. And Scott, maybe a quick 1 for you. I think Q1 guidance here at the midpoint almost, I think it's hinting at 10% organic, close to high single, low double organic -- what's driving the sequential acceleration from the high singles organic we saw in Q4? Has the visibility improved? Or just talk about assumptions around Q1?

Operator:

Our next question comes from Matt Taylor with Jefferies. We'll move on to the next question. Our next question comes from Matt Miksic with Barclays.

Scott Ullem:

Well, it's a good question. It's tough to isolate all the elements that are going into just the first couple of weeks of the year. But generally speaking, overall, it seems like the trends are favorable. And this is what we expected to happen in 2023 with hospital staffing constraints abating with overall disruptions in the health care system, getting a little bit better in the U.S. and outside of the U.S. And just the multiple different signals that we see and anecdotes that we hear give us confidence that we're on the right track. And again, looking to the 9% to 12% growth rate guidance for 2023. January, it's pretty early to say, but obviously, we wouldn't the signals that we've seen in January are reflected in the guidance that we've given in that $13.70 to $14.50 sales range for the first quarter.

Joanne Wuensch:

I have two quick ones. It looks like you have 81% gross margin in the fourth quarter, your guide for '23 is the reversal of your FX hedges. Can you walk us through sort of -- should we just straight line it down over the next couple of quarters, how we should think about that? And then the second question, it sounds like things are getting better. Are you seeing wait lists cropping up in different places?

Michael Mussallem:

And on the backlog question, Joanne, as we've mentioned before, we don't have great analytics on backlogs. And so a lot of it we just hear anecdotally from customers. But what we do here say, yes, indeed, there is backlog that's spotty and across the U.S. and other countries for that matter.

Chris Pasquale:

Mike, I wanted to go back to the COVID-related headwinds in the U.S. and one hypothesis that I think concerns investors what you guys really haven't talked much about is the idea that excess mortality in your patient population could have depleted your pool and that, that might take longer to normalize than something that's a little bit simpler like hospital staffing. Do you see that as a significant factor? Or do you still view it as a bottom of the funnel issue with capacity?

Chris Pasquale:

Okay. That's helpful. And then just one on mitral. Any line of sight into Class I and T completing enrollment of those studies have been going on for a while and I don't think you guys have provided a time line there.

Operator:

Our next question comes from Cecila Furlong with Morgan Stanley.

Michael Mussallem:

Maybe I'll start out with Japan and then turn it over to Larry for the others that he can sort of complete the thought. Japan had been a real lift to our growth rate for the past few years and even earlier this year. But when that wave of COVID came through in Q3, it really was a setback for that health care system. And the way that the Japanese system deals with it is to implement a lot of restrictions. And so that really had some pretty big impact in Q3, and that continued into Q4. It was even more dramatic in Q4 than we expected. The situation is much better in Japan. And so we see a very solid, substantial improvement during the course of 2023. So we expect Japan to be a real contributor to growth going forward. Larry?

Larry Wood:

Sorry, can you hear me okay now?

Larry Wood:

Okay. So the -- there's a lot of things to be excited about in Japan. In addition to the recovery that Mike talked about more broadly, we do have S3 Ultra RESILIA that's coming probably right before the -- probably in Q2, then we'll begin rolling that out. Low-risk approval is also a big thing. We recently got approval for TAVR-in-TAVR, which is a big thing for Japan. So we're really looking for them to recover and get back to more of the historic growth rates.

Larry Wood:

Sure. Yes. So we're really pleased with how the launch has gone so far. Remember, this approval came earlier than we anticipated. So it felt like we had built up a ton of inventory, and so we had to build up that inventory as we roll it out. So we're pretty much right I think, where we plan to be, and we expect the rollout to continue through the entire year. But we're happy with outcome so far. The physician feedback has been positive. And we think it's good for us. We're also going for a price increase, which is the first price increase that we've done in -- since launch, which has been over 10 years. It's pretty modest. It's less than 5%, but we think it reflects the innovation and the value that we bring with the RESILIA technology.

Travis Steed:

A quick clarification and was on FX. I think the revenue guidance stayed the same, but FX was $100 million better. Just wanted to make sure I understood the moving parts on that? And then the question was also on U.S. TAVR. It's hard to tell exactly, but it looks like U.S. TAVR was down versus Q3. So I don't know if there's anything to call specific headwinds in Q4 that maybe weren't in Q3 and if it was actually down in Q3 versus Q4? And then how to think about Q1 in the U.S., can that still be up sequentially and grow kind of year-over-year in that 9% to 12% range?

Michael Mussallem:

If the rates stays though.

Travis Steed:

Okay. Great. I'll recheck the model on that. And then on SAPIEN 3 RESILIA. You mentioned a little bit of color on the launch. Curious how it's gone like price uplift versus volume discounts, you're actually getting all the price? Because I think the guidance is assuming stable pricing. So I just want to make sure I'm clear on how to think about pricing impact this year and maybe the pricing comes more in 2024?

Operator:

Our next question comes from Josh Jennings with Cowen.

Larry Wood:

Sure. Well, I'll start and then if I have rent trouble on call my buddy to mean to help me out here. But overall, the thing with surgical patients is they don't require the same amount of work up as a TAVR patients. So they can move through the system faster because they don't require things such as the CT for valve sizing where that's been intraprocedural for the surgeon and so there's just much workup that has to be done for those patients. So maybe it's a little less impacted. I think there's also a mindset that when a patient needs open heart surgery, that, that just is more urgency in the system and those patients can move through a little bit quicker. We'll see how that continues over time. But we continue to drive RESILIA on the surgical side as well. We have the MITRIS launch, which is going, and we continue to advance RESILIA on the aortic side as well with INSPIRIS and those continue. I don't know if you have anything to add, Daveen.

Joshua Jennings:

And just a follow-up on the early TAVR results are not in the very near term, but thinking about the asymptomatic severe aortic stenosis bucket and just the percentage of total severe aortic stenosis patients in the United States. You guys have any new kind of estimates in terms of is that a 30% of total, 40% of total or lower? I just wanted to better understand what early TAVR could unlock?

Operator:

Our next question comes from Adam Maeder with Piper Sandler.

Daveen Chopra:

Yes, this is Daveen. I'll hit a little bit on the -- obviously, the tricuspid trial, specifically the TRILUMINATE study. We actually wouldn't be surprised if TRILUMINATE shows positive results and gets approved by ACC or around ACC. To me, this would be an amazing opportunity and great opportunity for patients to continue to get more data and have better patient treatment. But that being said, we see actually in Europe right now that clinicians are actually very positive about the performance of our differentiated PASCAL Precision device there and seem to really like it for tricuspid patients. So we look forward to that to obviously bring that technology to the U.S. in the future. But we think for the therapy overall, obviously, more data is helping patient care.

Adam Maeder:

Okay. And then just for a quick follow-up. One actually on capital. allocation. And clearly, you're going to remain focused within structural heart. But I also think you've talked recently about having interest in a potential new adjacency. And I think referring to heart failure, you have an internal atrial shunt program, and you also have some investments in external assets. So when should we expect to learn more here about these initiatives and just the broader path forward?

Richard Newitter:

And thank you for the color on the quarter-over-quarter growth, U.S. TAVR expectation in 1Q. But I'm hoping to just parse out the expectation around cadence for improvement U.S. versus international in three seems like international, a little bit more kind of COVID surge impacted maybe a little more visibility into the turning of the tide there. U.S. more hospital staffing it feels more gradual. A, is that correct? And do you think it's right for us to be modeling a little bit faster recovery and acceleration perhaps in 1Q and the first part of the year internationally and then maybe a little bit more of an acceleration for the U.S. in the back half and keep it more gradual in the first half? Is that a good way to think about it? And do we have the pieces right around your visibility?

Michael Mussallem:

That's right. I mean if we just look at what's happened here in the recent past, whether it's the U.S. or Europe or Japan, our three biggest regions, they've been lower than what they should be based on the struggles that they've had with the aftermath of COVID, and we expect that to improve throughout 2023.

Michael Mussallem:

Yes. I would say we have similar visibility on all of them. We're very close to our customers, very close to our centers. and we feel like we know what's happening on a center-by-center basis. And we just feel that the environment has and will continue to improve.

Scott Ullem:

Yes. I don't know if I could pin it down exactly to a percentage. But certainly, we see a large portion or a large section of our centers that are still doing double-digit growth. And again, I think it's not so much COVID, but it's the COVID restrictions that happen. And I think the parts of the country where those restrictions have been release sooner. I think we see those centers doing better. But we expect the rest to come along. I mean if you look broadly, those restrictions are easing really across the globe, and I think that's what is one of the things that helps us in 2023.

Larry Wood:

Yes. We had some of the biggest weeks that we've had in our history in Q4. So a week doesn't make a year, but the fact that they were able to do it for several weeks indicates that staffing is getting better and capacity is coming back into the system, and it's one of the things that gives us confidence in our guidance for 2023.

Michael Mussallem:

Okay. Well, thanks all for your continued interest in Edwards. Scott, Mark and I welcome any additional questions by telephone. And with that, thanks for participating.

Operator:

Good afternoon, and welcome to the Edwards Lifesciences Third Quarter 2022 Results Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Senior Vice President, Investor Relations and Treasurer. Thank you. You may begin.

Michael Mussallem:

Thanks, Mark. The third quarter strengthened our conviction in our company's patient-focused innovation strategy. Globally, structural heart procedures grew less than we expected in the third quarter, but that didn't slow us down, as our team accomplished numerous important milestones and made good progress on our multiple clinical trials and next-generation technologies. In August, we received European regulatory approval for PASCAL PRECISION. This unique system is designed for transcatheter-based edge-to-edge leaflet repair in patients suffering from mitral and tricuspid regurgitation. Shortly thereafter, in September, we received early U.S. FDA approval for PASCAL PRECISION for the treatment of patients with degenerative mitral regurgitation, which was welcome news for clinicians who appreciate this differentiated platform. And in TAVR, last month, we announced approval to begin selling the SAPIEN 3 Ultra RESILIA valve in the U.S. our industry-leading SAPIEN 3 Ultra transcatheter aortic heart valve now incorporates Edwards' breakthrough RESILIA technology. Additionally, during the third quarter, enrollment accelerated in our 2 TAVR pivotal trials, progress evaluating patients with moderate AS and Alliance for our next-generation TAVR technology, SAPIEN X4. These transformative developments reinforce our confidence in the continued growth of transcatheter-based structural heart inventive. We will continue to aggressively pursue breakthrough technologies with the potential to help even a broader group of patients and in turn drive significant future value. Now turning to our financial performance. Third quarter total company sales of $1.3 billion increased 7% on a constant currency basis versus the year ago period. Our broad portfolio of innovative technologies drove this growth, although it was at the lower end of our expectations, reflecting persistent U.S. hospital staffing shortages and COVID headwinds in Japan. Adjusted EPS grew 13% even while aggressively investing in R&D and commercial infrastructure to support new therapies. For full year 2022, we expect total Edwards sales will be negatively impacted by foreign exchange and be at the low end of our previous range of $5.35 billion to $5.55 billion. We anticipate hospital staffing challenges and a predictive difficult winter COVID and flu season will continue into next year. In TAVR, third quarter global sales of $862 million increased 6% on a constant currency basis. Sales were below our expectations due primarily to the persistent U.S. hospital staffing shortages and COVID headwinds in Japan, which intensified the typical impact of summer seasonality. In the third quarter, we're pleased that well over 30,000 patients were treated with SAPIEN across our more than 2,000 global TAVR centers. We estimate that global TAVR procedure growth was comparable with Edwards' growth in the third quarter. Local selling prices were stable, although the average global selling price declined due to the weakening euro and yen. In the U.S., our TAVR procedures increased in the mid-single digits versus the prior year. We estimate that our share of procedures was stable. As expected, our third quarter U.S. TAVR procedure volumes continued to be impacted by regional U.S. staffing constraints, which were somewhat worse than we anticipated. There were a high level of variability in growth rates across centers around the country. And while staffing issues limited overall growth during the quarter, nearly half of our TAVR centers grew double digit in Q3. Outside the U.S., in the third quarter, our TAVR sales grew in the low double digits on a constant currency basis, and we estimate total procedure growth was comparable. Our underlying 3-year compounded annual growth rate outside the U.S. remains in the mid-teens. In Q3, geographies outside of Europe and Japan grew even faster in the quarter. Long term, we see excellent opportunities for OUS growth as we believe international adoption of TAVR remains quite low. In Europe, sales were down sequentially as expected, even though we compete with a broad range of competitors, our competitive position remains stable. Scattered staffing shortages slightly exacerbated summer seasonality, and we anticipate some lingering regional impact on that. In Japan, third quarter procedure growth was impacted by a widespread seventh wave of COVID, which created a significant strain on hospital capacity and limited TAVR procedure volumes. As you might expect, procedure volumes in Q3 varied across the country as patients and the providers were incentivized to turn their focus again to the treatment of patients with COVID. We saw TAVR procedure volumes improve as COVID hospitalizations decreased late in the third quarter. We remain focused on expanding the availability of TAVR therapy driven by the fact that AS remains a significantly undertreated disease amongst this large elderly population. In summary, we anticipate the continuation of staffing shortages and a difficult winter, COVID and flu season. We expect Q4 TAVR sales to be around $850 million and full year 2022 TAVR sales to be at the low end of our previous range of $3.5 billion to $3.7 billion. We remain confident about the long-term potential of TAVR as the rapidly evolving evidence recognized by policymakers around the world supports continued adoption of this therapy for the many patients suffering from aortic stenosis. This broad-based, favorable evidence, combined with the undertreatment rate and growing elderly population supports our expectation that this global TAVR opportunity will reach $10 billion by 2028, which implies a low double-digit compounded annual growth rate. Turning now to our transcatheter mitral and tricuspid therapies product group. Recently, we received U.S. FDA and European CE Mark approval of PASCAL PRECISION. This next-generation system designed to facilitate precise navigation and an intuitive user experience will enable us to initiate our commercial presence in the U.S. for the treatment of patients suffering from degenerative mitral regurgitation and also expand PASCAL adoption in Europe for both mitral and tricuspid patients. This exciting news was followed by the presentation of first results from the Class IID pivotal trial at the recent TCT conference. This first-of-a-kind head-to-head randomized pivotal trial further established the safety and efficacy of mitral transcatheter edge-to-edge repair. We were pleased that this data demonstrated that PASCAL is a beneficial therapy expanding transcatheter treatment options for DMR patients. In addition, we continue to advance enrollment of our Class IIF pivotal trial for patients with functional mitral regurgitation. Separately, we continue to treat patients with our 2 transcatheter mitral replacement therapies through the ENCIRCLE pivotal trial for SAPIEN M3 and the MISCEND study for EVOQUE Eos. We are pleased with our progress and believe these sub-30 French transfemoral therapies will help transform treatment for patients and expand the mitral opportunity. Turning to tricuspid. We continue to make progress enrolling the TRISCEND II pivotal trial of the EVOQUE replacement system and the Class IIR pivotal trial with the PASCAL repair system in patients with symptomatic severe tricuspid regurgitation. We no longer anticipate CE Mark approval for EVOQUE tricuspid replacement in Europe this year. As uncertainties remain around the MDR process, we now expect a CE Mark approval late in 2023, with sales contribution in 2024 when we expect to have reimbursement in place. We're excited about this therapy for the many tricuspid patients who have few treatment options today. Looking ahead to PCR London Valves conference in November, we expect numerous late-breaking data presentations across the TMTT portfolio. Especially noteworthy is new 1-year follow-up data on our early experience with the EVOQUE tricuspid valve. We expect these presentations to contribute positively to the growing body of compelling clinical evidence for our comprehensive portfolio of transcatheter mitral and tricuspid therapies. Turning to the sales performance of TMTT. Third quarter sales of $30 million grew sequentially from the second quarter despite summer seasonality. Adoption of the PASCAL system in Europe increased as we initiated a limited introduction of PASCAL PRECISION, and we continue to have excellent outcomes for patients as we progress on a gradual expansion into more centers in Europe. We forecast to increase the number of procedures in Q4, yet expect reported Q4 sales to be similar to Q3 as a result of FX headwinds and a spike in COVID in Germany, our largest region in Europe. We're pleased with our continued progress to our bring portfolio of therapies combined with contemporary clinical data in order to achieve our vision of transforming the lives of patients with mitral and tricuspid valve disease. In Surgical Structural Heart, third quarter global sales of $220 million increased 8% on a constant currency basis over the prior year. We are encouraged to see strong global growth driven by increased penetration of our premium RESILIA products despite staffing challenges in certain regions. And although staffing shortages continue to be a concern, we're observing that cardiac surgeries are being prioritized. We continue to see strong momentum of the RESILIA portfolio globally as we bolster the overall body of evidence, including 4 abstracts recently presented at the European Association for Cardiothoracic Surgery Annual Meeting in Milan. We continue to believe that physicians value the features and benefits of this advanced tissue technology for both aortic and mitral surgical valve replacement procedures. Adoption of the MITRIS valve launched in the U.S. in April now represents the majority of our mitral valve sales in this region. Separately, we've decided to exit our HARPOON surgical mitral repair system and stop enrollment in the related clinical trials. Given our experience to date, we made the difficult decision to focus on developing other innovative therapies to better serve patients and continue to be the partner of choice for cardiac surgeons. In summary, we remain confident that our full year 2022 underlying sales growth will be in the mid-single-digit range for Surgical Structural Heart driven by market adoption of our newest premium technologies and surgical market growth. In Critical Care, third quarter sales of $207 million increased 3% on a constant currency basis over the prior year. The growth rate was impacted by a very strong prior year comparison. Sales growth was driven by increased adoption of our broad portfolio of smart recovery products, including FloTrac and ClearSight sensors with our unique hypotension prediction index algorithm. Additionally, demand for our HemoSphere monitoring platform remains strong. In summary, we continue to expect mid-single-digit underlying sales growth for the full year 2022. We remain enthusiastic about our pipeline of Critical Care innovations, highlighted by smart recovery technologies designed to help clinicians make even more informed decisions for patients. And now I'll turn the call over to Scott.

Michael Mussallem:

Thanks, Scott. Well, despite ongoing procedure headwinds associated with the pandemic, we're pleased with our year-to-date performance, which includes strong progress on strategic milestones. We believe hospital staffing constraints will gradually improve and are committed to aggressively investing in our focused innovation strategy for the broad group of patients still suffering from structural heart disease. We remain confident that the innovative therapies resulting from our investments will allow us to treat more patients and continue to drive strong organic growth in the years to come. And with that, I'll turn it back over to Mark.

Operator:

[Operator Instructions]. Our first question comes from Larry Biegelsen with Wells Fargo Securities.

Scott Ullem:

So Larry, it's Scott. Why don't I start with the financial piece of that and then turn it over to Mike to talk about some of the strategic things that we expect in 2023. Financially, we haven't gotten into the quarter-by-quarter FX impact or growth rates. Typically, we don't give guidance, as you know, for the next year until our investor conference. We'll give you more details then. But just we thought it was helpful because FX has been such an impact this year, and it will continue to fall over the next year that will help quantify what the top line impact will be, which we think is near what is going to be this year. So this year, we're at like 5% of sales and about $270 million. We think maybe it gets near to that at current rates, when we forecast for 2023, but we don't have the quarter-by-quarter breakout yet. Mike, do you want to talk about next years...

Lawrence Biegelsen:

That's helpful. Mike. And actually, I wanted to ask about tricuspid. A lot of excitement around tricuspid. I know you know that you employed a Bayesian design for Class IID. Is it reasonable to assume that you'll employ a similar [indiscernible] design for your tricuspid pivotal trials, the 2 you mentioned? And just how are you thinking about that opportunity? Our check suggested it should be bigger than mitral, maybe somewhere between mitral and aortic.

Bernard Zovighian:

Yes. Just a small thing. Obviously, any study, any trial has different design. Some are comparing devices together, some are comparing a device to medical treatment. So obviously, it is not as easy as taking what we did for IID and applying that to the other studies.

Robert Marcus:

Maybe first, I think it would be helpful. Maybe walk us through some of the differences between why TAVR so much more impacted than the Surgical business? I know it's lots of similarities but also differences. Is it just pure staffing? Is it the imaging? Is it the testing? Is it the patient pipeline? Any ideas there? And how should we think about the impact from the shortfall in Japan? It looks like numbers came in below the Street by about $15-plus million. Is that all Japan?

Daveen Chopra:

Yes, sure, Mike. I appreciate that. Yes, so to follow up what Mike was saying, Robbie, the growth driver of the Surgical business, as Mike had mentioned, was really about driving adoption of the Brazilian portfolio globally as well as the U.S. launch of our new mitral valve MITRIS, which provided a nice uplift. So RESILIA and MITRIS were really our top drivers. But as like I said, we also had a little bit of market growth coming from us -- maybe low single-digit market growth. And we're generally seeing that within the world of surgical operating rooms and surgery beyond cardiac surgery. Cardiac surgery being an area that surgical operating rooms kind of prioritize resources to a surgical operating rooms. So we generally see that led to that slow-low single-digit kind of market growth.

Michael Mussallem:

Yes. And Robbie, just to quickly comment on Japan. Yes, the total impact in the shortfall was only from COVID. COVID hit hard. I don't know how close you were to how hard it hit in Japan, but it is hard. And we are doing great in Japan, and we continue to do great in Japan. But we really felt the impact of that. It was probably worse towards the middle of the quarter, and it started getting better. So it's -- the wave is kind of passing now, if you will. So it's not continuing. But when it hit, it hit in a pretty significant way.

Scott Ullem:

Yes. Thanks for the question, Robbie. Part of this was operating with a healthy sense of discipline about making sure we're running the company efficiently. But a lot of it was just the benefit of expenses that we incur overseas that translate into lower U.S. dollars.

Vijay Kumar:

Maybe my first one is, Mike, for you, specifically on U.S. TAVR. I think that $850 million Q4, what's the underlying implied TAVR? Is that low singles? And I think you mentioned 50% of centers in the U.S. grew double digits. I'm curious, is that a comment just to assure people that this market is still double-digit growing? And perhaps the remaining half of the center, you're seeing some of these staffing challenges. Just give us some context on why we're seeing double-digit growth in some centers and not in perhaps the others?

Larry Wood:

Yes. When we looked across the country, I think anywhere we go and anybody we talk to, they talk about staffing challenges. And I think that's pretty consistent across the country. But clearly, it seems to be impacting certain areas of the country more than others. I mean, just anecdotally, [indiscernible] centers in Texas in the middle of the country that were growing very, very well. And some of our big programs and more of the urban areas, the population density areas. They were a little bit flatter. And so we do see big differences, but it actually -- it encourages me that as these things start to wane, the patients are there. And I think, again, anecdotally, we hear backlogs continue to grow, but I think there's still some challenges in working through these staffing issues.

Scott Ullem:

Well, you're right. We have a lot of cash on the balance sheet. It gives us flexibility to invest for future growth. And so part of that is building additional physical infrastructure, supporting plant production capacity. Part of it is making sure that we're -- ability that we're able to fund external growth. And then yes, we're going to continue to buy back shares. And we've done accelerated share repurchases, including earlier this year. In total this year, it's been our biggest share repurchase year ever at over $800 million. And so the only good thing about the stock price haven't been under pressure this year is it's given us a chance to go buy in shares, and we think that, that's going to be a great long-term investment. We're going to continue to look for opportunities to do that.

Joshua Jennings:

Hoping to just ask about U.S. TAVR growth and potential return to the CAGR that I believe is ingrained in the $10 billion by 2028 TAM calculation. I mean do we -- do you think that U.S. TAVR return to double-digit growth requires indication expansion? Is that essential? Or could we see a return to double-digit growth prior to early TAVR opening up the asymptomatic indication and PROGRESS opening up to symptom moderate?

Larry Wood:

Yes. Thanks, Josh. There's -- just because of the nature of the trials and the 2-year end points that we have on these trials, they're not really big contributors to those numbers. And what drives those numbers is we still have only about 1 out of 10 patients with aortic stenosis that are getting treated in the U.S. And if you look at the penetration rates, outside the U.S., they're much smaller than that. I mean, in a lot of Rest of World places, they're just really just getting started and Japan is very undertreated. So I think it's just a matter of getting through some of this COVID lag that we've had, getting some of the staffing a little bit healthier. And then I think it's going to return back to normal. I sort of see the indication expansion as being things that give us legs beyond the $10 billion.

Larry Wood:

Sure. Well, we're very fortunate that our Surgical business has built a great brand around RESILIA, and we get to follow that all of the brand work that they've been able to do. And so when you look at the Surgical side in [indiscernible], I think the leading heart valve in the world now, and that's largely based on the RESILIA tissue and how receptive people have been to the benefits that it brings. For SAPIEN 3 UR, that approval came a little bit earlier than we expected. We're super excited to add it to our SAPIEN platform. We're really just getting started in the launch. We have to scale up inventory and do some of the other things we need to do. But I think people are excited about it. And we are going for a price premium on that. We've increased our list price by about $1,500. Now people get rebates, and there's different things around the country. So I don't know that I would model that in for everything. But I expect this is going to be a popular platform, but it's going to take us a while to get it all rolled out.

Joanne Wuensch:

So I wanted to spend a little bit of time on hospital staffing because by our due diligence, it's getting better, but not expected to get great anytime soon. So should we think about next year TAVR growth being more high single-digit growth in the U.S. versus double-digit growth? I just want to get my head around how to think about the lingering effects of this.

Larry Wood:

Yes. I think it's important to remember, I mean, the patients are out there and they need to be treated. And the physicians are still very, very motivated to get these patients treated. And so they're frustrated as anybody else is. And I think hospitals are incentivized for doing procedures, not for not treating people. So I think everybody wants to get the situation resolved. I just think as hospitals have added staff, one of the first things they try to do, as Mike mentioned, is use the new staff to replace the traveling nurses to try to help out their own P&Ls. And so that's maybe why we haven't seen as much lift from the staffing, but hospitals are working super hard on this to get this resolved. It's going to take time because you can't just create nurses from scratch quickly, but people are working really hard on getting this into a better place.

Frederick Wise:

A couple of follow-up questions. And I apologize, it's hard to not focus on the U.S. growth numbers. Larry -- it is actually sort of a question for Larry, really, but I'll just [indiscernible], Mike. The -- I was -- expand on your comments on the U.S. referral chain. You talked about one aspect of getting patients treated, the imaging. But has COVID or anything about the current dynamics slowed patients showing up to clinics where they can be diagnosed in some way? Or is there some aspect that we can sort of focus on and imagine that it might get better sort of at the front of the patient gathering change? And related to that, one of the thing I still can't quite understand and wrap my brain around is to I mean, [indiscernible] stenosis are very -- patients are sick. How are they not being treated? And it's so hard to make imagine these people being in backlog. Maybe you could just talk around those points.

Larry Wood:

Sure. Yes. I think referrals are increasing. I mean, what we hear anecdotally is that backlogs are growing at hospitals, which would seem to indicate patients are still getting referred at least from what we hear from the physicians that we talk to. So I think that part of the system is starting to get better. But as I talked about earlier, there's just a multiple set of tests and screening and imaging that patients have to do before they get their TAVR. And I just don't think that system has come back to full health yet. But I think we certainly have heard from centers that have said they kind of have to juggle patients with the more sick patients moving up the waiting list and then pushing the less sick patients down a little bit. But again, hopefully, this improves with time as staffing gets back to normalcy.

Michael Mussallem:

Yes. Thanks, Rick. Yes, we're definitely building up that team, and we're growing the team in Europe as well as the U.S. So we have Bernard right here. So Bernard, why don't you update us where we are?

Operator:

Our next question comes from Pito Chickering with Deutsche Bank.

Michael Mussallem:

Yes. Yes, I can start. It's quite -- it's really a mixed bag, Pito. But Larry, you want to make a few comments and [indiscernible]

Philip Chickering:

Okay. Fair enough. And then looking at the German market, its largest -- most mature market in Europe, and I know that's sort of been COVID throughout the year. But just curious, how is the German market growing in 2022 and any colors or where that grew specifically in the third quarter?

Bernard Zovighian:

Yes, correct, Mike. We have seen a spike in COVID wave in -- specifically in Germany, mainly in October, late September, in October. So we don't know yet how it is going to resolve. Is it going to be an acute, only October? Is it going to get better in November? That's yet to be seen.

Michael Mussallem:

But having said all those things that I know sound it all sounds pretty negative. You also have great big German centers with dedicated KOLs who are really good and really motivated. They're truly global leaders and key opinion leaders. These guys are just cranking. They're just going. We probably see more energy out of them than we've ever seen in the past.

Cecilia Furlong:

I wanted to ask about PASCAL, PASCAL PRECISION in Europe, really what you've seen either from further standard penetration versus expanding new centers? How you're thinking about the growth drivers going forward, the bigger growth drivers? And then just turning to U.S. as well, the 2 PASCAL trials FMR and for TR, just if you could provide an update in terms of how you're thinking about recent progress with then in enrollment as well as kind of time lines to potential approval?

Bernard Zovighian:

Yes. So we began the conversion of center from PASCAL to the PASCAL PRECISION system and initial feedback from physician is very positive. And by the way, we got a great clinical outcome, patient outcome. So the physician appreciated the ease of use, the navigation improvement that the new system is bringing. So this year, we are very excited about it, even though we are at the beginning of it. So we see a lot of promise from this innovation with [indiscernible] devices. So that's [indiscernible]

Bernard Zovighian:

So the two -- we are continuing the [indiscernible] of these 2 pivotal studies with Class IID having completed enrollment. We believe that the sites are going to put more focus on these 2 remaining trials, but we are continuing. It is going well. And I am going to provide you a little bit more update here during the investor conference.

Bernard Zovighian:

Mostly.

Michael Mussallem:

Yes. Thanks. We're very excited about the EVOQUE tricuspid valve replacement system and really think that it has the potential of being a game changer, but Bernard, do you want to comment on MDR?

Operator:

Our next question comes from Travis Steed with Bank of America.

Scott Ullem:

I'll start. Part of what we're experiencing is continuing foreign exchange headwinds. And so the $850 million incorporates sales from outside of the U.S. and in the U.S. And outside of the U.S., you've seen the euro and the yen just get weaker and weaker during the course of the year. And so that's part of what's hitting us in the fourth quarter.

Travis Steed:

Okay. Do you think -- so U.S. TAVR you expect to be up quarter-over-quarter?

Travis Steed:

Okay. That's more a U.S. comment. But -- and I guess follow-up. Yes, you [indiscernible]. Okay. And the follow-up question was on kind of on spending OpEx and margins for next year given some of the FX flow-through. I know the Street's got you at like 6 to 7 earnings growth next year. I just want to make sure big picture, we're accounting for all the puts and takes on the P&L as you consider models for 2023?