Edwards Lifesciences Corporation (EW) Earnings Call Transcript & Summary

Greetings, and welcome to the Edwards Lifesciences Corporation Fourth Quarter 2020 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, Vice President of Investor Relations. Thank you. You may begin.

Thanks, Diego. Good afternoon, and thank you for joining us, everyone. With me on today's call are Mike Mussallem, Chairman and Chief Executive Officer; and Scott Ullem, Chief Financial Officer. Just after the close of regular trading, Edwards Lifesciences released fourth quarter 2020 financial results. During today's call, management will discuss those results included in the press release and accompanying financial schedules, and then use the remaining time for Q&A. Please note that management will be making forward-looking statements that are based on estimates, assumptions and projections. These statements include, but aren't limited to, financial guidance and expectations for longer-term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters and foreign currency fluctuations. These statements speak only as of the date when they were made, and Edwards does not take -- undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties, including, but not limited to, those associated with the pandemic that could cause actual results to differ materially. Information concerning factors that could cause these differences and important safety information may be found in the press release, our 2019 annual report on Form 10-K and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Finally, a quick reminder that when using the terms underlying and adjusted, management is referring to non-GAAP financial measures. Otherwise, they are referring to GAAP results. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today's press release. With that, I'd like to turn the call over to Mike for his comments. Mike?

Thank you, Mark. Before we discuss fourth quarter results and our expectations for 2021 and beyond, I want to spend a minute reflecting on 2020. Structural heart patients were severely impacted beginning in March, experiencing significant difficulties entering the system, which also had a profound impact on second quarter procedures. And even though health care systems adapted to the challenge, the resurgence of COVID that began late in the year continues to impact structural heart patients who need care. Despite unprecedented challenges throughout the year, I'm proud of our team's steadfast dedication to our patient-focused strategy. We continue to invest in developing solutions that extend lives, improve the quality of life and offer greater value for the health care system. Along those lines, we celebrated some exciting milestones in 2020 that directly impacted patients. In TAVR, despite headwinds, more than 100,000 patients benefited from treatment with SAPIEN valves worldwide. In Surgical Structural Heart, we launched our KONECT aortic valve conduit, and INSPIRIS became the leading aortic surgical valve worldwide. We've seen early positive clinical evidence across the TMTT platform. Physician feedback is encouraging, and patient outcomes have been distinguished. And in Critical Care, we met the increased demand for core pressure monitoring products due to the pandemic, and we're proud that we are able to help over 1 million COVID patients globally with our monitoring technology. To support our innovation and growth, we continued to invest in our people and our infrastructure. During a year when job losses impacted many families across the globe, Edwards prioritized protecting our employees, and we grew our team to 15,000 worldwide. We continue to make strategic R&D investments that enabled us to fuel progress. And despite this unique environment and extraordinary prior year growth, underlying sales grew 1% in 2020 to $4.4 billion, which is a reflection of the life-threatening needs of the patients that Edwards serves. Looking into 2021, while we expect the pandemic to continue to impact the global health care system, we remain optimistic about the year ahead. As we indicated at our investor conference, we expect full year sales between $4.9 billion and $5.3 billion, representing mid-teens underlying growth on a year-over-year basis. Based on our year-to-date experience, we expect Q1 sales to be slightly down sequentially, although in line with the first quarter of last year, which was largely unaffected by COVID. Our 2021 guidance continues to assume COVID will stress the global health care system at least through the winter months with procedures ramping later in the year. This expectation assumes that vaccines are effective and widely administered by midyear 2021 and hospitals continue to improve their ability to treat non-COVID patients who need care for conditions such as aortic stenosis. And even though we expect the COVID impact on sales at the start of the year, we are continuing to invest now in our innovations that have the tremendous opportunity to enhance patients' lives and bring significant value to the health care system. We recognize the uncertain impact and time frame for recovery from this unique global challenge, but we remain confident that our patient-focused strategy of continued investment positions us well and even stronger when the world emerges from the pandemic. Now turning to our quarterly results. Consistent with our guidance at our investor conference last month, fourth quarter sales of $1.2 billion were in line with the year ago period when Edwards grew nearly 20% on an underlying basis reflecting the strength even during the ongoing pandemic. Full year 2020 global sales -- global TAVR sales of $2.9 billion increased 4% on an underlying basis over the prior year. 2020 growth reflected increased sales in every region, lifted by greater awareness of the benefits of TAVR therapy and increased adoption of our leading technologies. Based on the strength of the SAPIEN platform, we retained our strong leadership position while also maintaining our disciplined price strategy. In the fourth quarter, global TAVR sales were $776 million, up slightly from the year ago period. We estimate global TAVR procedure growth was comparable with our growth. And globally, average selling prices were stable. Although the rollout was somewhat impacted, SAPIEN 3 Ultra now represents more than 2/3 of our global TAVR sales, and physician feedback on ease-of-use and improved paravalvular leak performance remains outstanding. In the U.S., our Q4 TAVR sales were approximately level with the third quarter and declined in the mid-single-digit range versus last year. We estimate overall Q4 U.S. procedures declined at a comparable rate. Recall that our U.S. TAVR sales in the year ago period increased nearly 40%, driven by the strong PARTNER III evidence that led to a third quarter 2019 indication expansion and improved patient access under an updated TAVR NCD. We expect these factors to resume lifting treatment rates as the pandemic subsides. Growth at smaller TAVR centers, which are providing local access to aortic stenosis patients was more than offset by declines in larger accounts where referrals have been disrupted by the resurgence of COVID. Outside the U.S., in the fourth quarter, we estimated total TAVR procedures grew in the high single digits on a year-over-year basis, and Edwards' growth was comparable. Edwards underlying TAVR growth in Europe versus the prior year was in the mid-single-digit range. Growth was driven by continued strong adoption of our SAPIEN platform and was more pronounced in countries that were more severely impacted by the first wave of COVID in 2020. Outside of the U.S. and Europe, we continue to see very good TAVR adoption in the fourth quarter. Sales growth in Japan, Australia and Korea were strong where therapy adoption is still low. In Japan, we continue to anticipate providing SAPIEN 3 for low-risk patients prior to the end of this year. In China, which was a minor contributor to Q4 sales, we remain focused on growing our dedicated clinical support team to assist leading hospitals as they build their TAVR programs. In addition to geographic expansion of our TAVR therapies, we remain focused on indication expansion. We talked at our recent investor conference about our EARLY-TAVR Trial, which is focused on the treatment of asymptomatic patients. Enrollment is now 2/3 complete, and we remain optimistic that the trial will be fully enrolled in 2021. Separately, we continue to plan to initiate an important pivotal trial for moderate aortic stenosis to determine the optimal time to treat patients who have this progressive disease. We believe that some patients may benefit from earlier treatment when they have moderate AS rather than risking irreversible damage as the disease progresses. We're optimistic about the potential of this trial, and we anticipate FDA approval to begin enrollment this year. In November 2020, we were pleased that the American Heart Association announced the launch of an initiative called Target: Aortic Stenosis, a quality improvement program aimed to develop optimal standards of care. The program features a learning collaborative comprised of experts and volunteers from pilot hospital locations around the nation. AHA noticed that if left untreated, the condition worsens, and patients with severe aortic stenosis have a survival rate as low as 50% at 2 years. Aortic stenosis is also a risk factor for heart failure, a costly disease projected to cost the U.S. health care system $70 billion in 2030. In summary, we continue to anticipate 2021 underlying TAVR sales growth in the 15% to 20% range as we shared at our investor conference. We expect continuing COVID-related challenges early in 2021, turning to a more normalized growth environment in the second half of the year. We remain confident this large global opportunity will exceed $7 billion by 2024, which implies a compounded annual growth rate in the low double-digit range. Turning to transcatheter mitral and tricuspid therapies, or TMTT. We've made meaningful progress moving from early-stage development to clinical use across all of our platforms with over 3,000 patients treated to date. To transform treatment and unlock the significant long-term growth opportunity, we remain focused on 3 key value drivers: a portfolio of differentiated therapies, positive pivotal trial results to support approvals and adoption and favorable real-world clinical outcomes. In Europe, PASCAL leaflet repair continues to deliver excellent results. In Q4, we continued the introduction of PASCAL ACE for mitral and tricuspid patients, and we're pleased with the early real-world results and positive physician feedback regarding its differentiated features and narrower profile. We plan to make both PASCAL ACE and PASCAL available on a single next-generation platform called the PASCAL Precision System. This new system is designed to elevate the user experience with enhanced maneuverability, navigation and stability, enabling improved procedural precision. From a clinical perspective, in this challenging near-term environment, we are experiencing a negative impact to clinical trial enrollment. However, our team and research partners are highly motivated to build on the differentiated data presented in 2020 and expand our body of clinical evidence in this exciting field. We will look forward to presenting meaningful follow-up data across our portfolio at medical meetings later this year. We progressed in the enrollment of our 3 CLASP pivotal studies. We also received approval for use of the Edwards PASCAL Precision System in these pivotal studies. The company still expects U.S. approval of PASCAL for patients with DMR late next year. We continue enrolling SAPIEN M3 pivotal study, ENCIRCLE, designed to demonstrate strong safety and efficacy for transcatheter mitral replacement, and we're on track to initiate our first clinical experience with our next-generation EVOQUE mitral replacement system. The EVOQUE tricuspid replacement study, TRISCEND, continued to enroll in Q4, and we're on track to initiate the TRISCEND II randomized pivotal study based on FDA's breakthrough pathway designation. We look forward to bringing this important treatment option to more patients that are in significant need. Turning to recent news. We commend CMS for ensuring mitral valve disease patients have improved access to therapy options through the updated NCD. This update, which includes coverage with evidence development, achieves the balance of patient access with high-quality outcomes. Fourth quarter global sales were $13 million, representing sequential improvement versus Q3. Full year 2020 sales were $42 million. We expect continuing COVID-related challenges early in 2021, but we anticipate a ramp-up through the rest of the year. We maintain our belief that the total TMTT sales will approximately double in 2021. We continue to estimate the global TMTT opportunity to reach $3 billion by 2025, with significant growth beyond. We remain committed to transforming the treatment of these patients and believe our portfolio strategy positions us well for ultimate leadership. In Surgical Structural Heart, full year 2020 global sales of $762 million decreased 10% on an underlying basis over the prior year, in line of our guidance -- with our guidance of 5% to 15% decline. Fourth quarter sales of $204 million held steady with Q3 and declined 2% year-over-year on an underlying basis, which was below our previous expectation for positive growth. Over the course of the quarter, hospitals experienced an influx of COVID patients limiting surgical procedures. Despite this impact, we are encouraged that the U.S. achieved positive growth in Q4 driven by adoption of our newest premium technologies. We remain very encouraged by the steady global adoption of Edwards premium RESILIA tissue valves, including the INSPIRIS aortic surgical valve and the recently launched KONECT aortic valve conduit. In the fourth quarter, INSPIRIS valve utilization grew in all regions, and we continue to add new centers. Sales in the U.S. are ramping for KONECT, the first preassembled ready-to-implant aortic tissue valve conduit for patients who require replacement of the aortic valve, root and ascending aorta, which is a critical unmet patient need. We continue to focus on comprehensive physician training and robust data collection for the HARPOON beating heart mitral valve repair system. We are seeing favorable patient outcomes, with faster surgery and recovery times with this minimally invasive therapy. The U.S. pivotal trial is now underway, and the first patient was treated in December. In summary, we expect full year 2021 underlying sales growth in the high single-digit range for Surgical Structural Heart, driven by market adoption of our newest technologies. After a challenging start, we expect improving year-over-year comparisons as we progress through the year. We are excited by our ability to provide innovative surgical treatment options for more patients and to extend our global leadership in premium surgical structural heart technologies. We believe the current $1.8 billion Surgical Structural Heart opportunity will grow mid-single digits through 2026. In Critical Care, full year 2020 global sales of $725 million decreased 3% on an underlying basis versus the prior year, in line with our guidance of flat to down 5%. Fourth quarter Critical Care sales of $198 million decreased 2% on an underlying basis, driven by the decline in HemoSphere orders in the U.S. as hospitals limited their capital spending. Sales of our TruWave disposable pressure monitoring devices used in the ICU were lifted by the increased COVID hospitalizations late in the fourth quarter in both the U.S. and Europe. Demand for our products used in more intense surgeries remained strong, but were more than offset by the impact of delayed elective procedures. In summary, we expect full year 2021 underlying sales growth in the high single-digit range for critical care. We remain excited about our pipeline of critical care innovations as we continue to shift our focus to smart recovery technologies designed to help clinicians make better decisions for their patients. Now I'll ask Scott to provide some more detail on the company's financial results.

Hey. Thanks a lot, Mike. Today, I'll provide a wrap-up of 2020 including detailed results from the fourth quarter as well as provide an update on guidance for the first quarter and full year of 2021. Despite the wave of COVID that began during the fourth quarter, we are pleased that we were able to achieve our sales guidance ranges across all product lines. Sales in the fourth quarter were flat year-over-year on an underlying basis, and adjusted earnings per share grew 2% to $0.50 versus the prior year. GAAP earnings per share was similar at $0.49. For the full year 2020, sales increased 1% on an underlying basis to $4.4 billion. Adjusted earnings per share was flat at $1.86, and we generated over $700 million of adjusted free cash flow. During 2020, we achieved cost efficiencies, but we intentionally did not take any actions to significantly impact our employees or reduce investments supporting our long-term strategy. I'll now cover the details of our results and then discuss guidance for 2021. For the fourth quarter, our adjusted gross profit margin was 75.3% compared to 75.8% in the same period last year. This reduction was driven by a negative impact from foreign exchange and incremental costs associated with responding to COVID partially offset by lower performance-based compensation. We continue to expect our 2021 adjusted gross profit margin to be between 76% and 77%. Our rate should be lifted by an improved product mix, partially offset by a negative impact from foreign exchange. Selling, general and administrative expenses in the fourth quarter were $339 million or 28.4% of sales compared to $347 million in the prior year. This decrease was primarily driven by reduced spending resulting from COVID and lower performance-based compensation, partially offset by the impact from foreign exchange. We continue to expect full year 2021 SG&A as a percentage of sales, excluding special items, to be 28% to 29%, which is similar to pre-COVID levels. Research and development expenses in the quarter grew 1% to $196 million or 16.4% of sales. This small increase was primarily the result of higher investments in TMTT and costs associated with discontinuing our SUTRAFIX program, partially offset by reduced performance-based compensation. For the full year 2021, we continue to expect R&D as a percentage of sales to be in the 17% to 18% range, similar to pre-COVID levels, as we invest in developing new technologies and generating evidence to expand indications for TAVR and TMTT including enrolling 7 clinical trials. Turning to taxes. Our reported tax rate this quarter was 13.1% or 13.9%, excluding the impact of special items. This rate included a 350 basis point benefit from the accounting for stock-based compensation. Our full year 2020 tax rate, excluding special items, was 12.5%. We continue to expect our full year rate in 2021, excluding special items, to be between 11% and 15%, including an estimated benefit of 5 percentage points from stock-based compensation accounting. Foreign exchange rates increased fourth quarter reported sales growth by 150 basis points or $18 million compared to the prior year. At current rates, we now expect an approximate $100 million positive impact or about 2% to full year 2021 sales compared to 2020. FX rates negatively impacted our fourth quarter gross profit margin by 150 basis points compared to the prior year. Free cash flow for the fourth quarter was $287 million, defined as cash flow from operating activities of $400 million less capital spending of $113 million. Now turning to the balance sheet. We have a strong balance sheet with approximately $2.2 billion in cash and investments as of the end of the year. In addition, we have an undrawn line of credit of up to $1 billion. We have public bonds outstanding of about $600 million that don't mature until 2028. Average shares outstanding during the fourth quarter were 632 million, relatively consistent with the prior quarter. We now expect average diluted shares outstanding for 2021 to be between 630 million and 635 million. So before turning the call back over to Mike, I'll finish with financial guidance for 2021. We are maintaining all of our previous sales guidance ranges for 2021. For total Edwards, we expect sales of $4.9 billion to $5.3 billion. For TAVR, we expect sales of $3.2 billion to $3.6 billion. For TMTT, we expect sales of approximately $80 million. We expect Surgical Structural Heart sales of $800 million to $900 million and Critical Care sales of $725 million to $800 million. For the full year 2021, we continue to expect adjusted earnings per share of $2 to $2.20. For the first quarter of 2021, we project total sales to be between $1.1 billion and $1.2 billion and adjusted earnings per share of $0.43 to $0.50. And so with that, I'll pass it back to Mike.

Thanks, Scott. While a year like 2020 could threaten to cause persistent disruptions, our strategy of patient-focused innovations remains unwavering. As we look to 2021 and beyond, I'm as excited as ever about the work happening at Edwards and more importantly, what we envision for the future of patient care. I continue to believe we are poised for success and that our innovation and cultural imperative to put patients first will drive strong organic sales growth and create long-term value. . And with that, I'll turn it back over to Mark.

Thanks a lot, Mike. With that, we're ready to take questions. [Operator Instructions] Diego?

[Operator Instructions] Our first question comes from Bob Hopkins with Bank of America.

Mike, I was wondering, since we just met in December, if you can comment on maybe just 2 quick things. First question would be just how different is the environment out there right now -- the selling environment out there right now versus what you were seeing at the time of the Analyst Day? Kind of on the margins, are things getting a little worse, are they getting a little better? Just would love some thoughts on that topic. And then I have one quick follow-up.

Yes. I would say in general, it's been a little worse. It was already trending negative, and we anticipated it was going to be a tough winter, and it certainly has turned out to be that way, but probably trending a little worse since that time.

Okay. And then the other thing I'd love to get your quick comments on is just thinking a little bit long term on the tricuspid opportunity. And the reason I ask is that obviously Abbott has reported some numbers, too, and their tricuspid business is already annualizing at over $50 million, if you just take the results this quarter and multiply times 4. So it looks like some pretty robust interest in tricuspid repair right off the bat. So would love your thoughts on that market and how quickly you think that could develop and what hurdles might be.

Yes. Thanks, Bob. It's interesting. So the tricuspid market size in terms of number of patients, it's very large. It's certainly as big as the mitral opportunity. And we've talked about the fact that, that patient group is greatly underserved. So in terms of people actually getting procedures, you're talking about 1%, 2%, 3%, very low numbers. So if we could actually develop a great solution for them, it's going to be an important deal. They don't have great answers, and so the burden is going to be on us to develop great solutions and to create evidence that we are actually doing that. We have a high level of confidence that we can do it. Of course, mitral is going to be bigger here in the near term. It's got an earlier start, but we think there's a lot of potential in this. The patients themselves are very diverse. And that's why we think when it's all done for tricuspid patients, it's going to require a portfolio.

Our next question comes from David Lewis with Morgan Stanley.

Mike or Scott, just want to follow up here on guidance for a second. So obviously, resurge in trends have probably trended more negatively than when you sort of gave early guidance in December. So while things are trending more negatively, you're still sort of holding the outlook for '21. So I guess what's providing that kind of comfort that even though your near-term things are heading more difficultly, you still feel very good about the '21 numbers? Is that just what you're seeing here in the first quarter? Is that new account recovery? Is that just the pace of the recovery you saw last time, but same confidence, stacks have changed? What's providing that confidence? And a quick follow-up.

Yes. Thanks, David. So we always anticipated it was going to be a slow start to the year. It was going to take a while for vaccines to have any impact. It's probably turned out to be a little worse than we thought, but it really hasn't changed our outlook. We really believe that coming out of the winter, we're going to start gaining ground on this, that you're going to have vaccines widely distributed by the middle of the year and that we're going to be returning to normalization. So when we put that together, it gives us considerable confidence. Yes, is it maybe slightly weaker than it was when we gave the guidance at the investor conference. Yes, maybe, but we're still very much in the range.

Okay. And then just, Mike, just strategically, this comment of clinical trial enrollment is coming up a lot from you, other companies now. And I wonder 2 things. The first is, have you rethought -- you have a significant number of clinical trials sort of ongoing, have you thought at all about change in the clinical trial strategy, slowing some down, emphasizing others as sort of question one. And then related is just figuring it benefits the incumbent for all the companies that are trying to get into this marketplace. They've lost basically 18 months and sort of, competitively, does that start becoming a bigger advantage to those that are already in the market, specifically in structural heart and TAVR with the trial burden is very high?

Yes. Thanks, David. You make a good point. The trial burden is high, and so it is more difficult right now. I can tell you that our team and our researchers are very committed. They're ready to get back at it. And so although there were delays, I don't know if it's fair to characterize it as an 18-month delay, David. I think that's probably overstating it to some extent. I think we talked when we said what happened in 2020, for example, in some of the TMTT trials, it certainly cost us a couple of quarters, and now we're seeing it a little slow again. But our team really feels, through conversations with researchers, that it's going to come back. When you're trying to develop real new opportunities like TMTT or expand indications in TAVR like early TAVR in moderate AS, those are heavy lifts that take long-term commitment, and we're getting really nice participation in cooperation with FDA. So it's going to get done. It just is a bit of a headwind right now.

Our next question comes from Raj Denhoy with Jefferies.

I wanted to ask a little bit on the near term as well. You mentioned that some of the larger centers were maybe seeing slower referrals. Is there anything you can comment really on how that pipeline looks and how quickly can refill if things do start to open up? In a sense, will there be a kind of continued lag effect on your recovery relative to what happens in the broader market because of that referral network?

Yes. Thanks, Raj. So what we were referring to is just reflecting back on the fourth quarter, we had this observation that the larger centers saw less growth than the smaller centers. The exactly why that happened, we can -- we only kind of speculate, Raj. So we obviously have conversations with them, and we have anecdotal information that suggests, hey, those larger centers maybe used to pull from much broader geography, and maybe there's less referrals during this time of COVID than you would expect in a normal environment. So having said that, when these centers slow down, yes, they also slow down qualifying patients. So it takes a while for that pipeline to refill. So that is -- that's legitimate. But then again, when we gave our estimates, we've taken that into account. So when we say, "Hey, we think TAVR is going to grow 15% to 20% in 2021," we've taken into account that, yes, there's this lag at the beginning of the year. So we're still coming on sites to engage with patients, and they're very motivated to do that. But to give you -- you know where we're headed.

Understood. Yes. And then just one quick follow-up on that. So LOTUS, obviously off the market globally. Have you seen much impact in the marketplace? Have you been able to capture some of that share? Any thoughts early on in how that's faring?

Yes. Thanks, Raj. They didn't have a really large share position. And so I'm sure we were the beneficiary to a small extent. If I reflect all the way back to our investor conference in 2019, we estimated that we would probably have some small share loss during 2020, and we don't -- it's kind of tough for us to find that at this point. We're not sure that, that happened. That may have been part of a contributor.

Our next question comes from Larry Biegelsen with Wells Fargo.

One on PASCAL for me, one on a different one separately. So Mike, you expect to launch PASCAL in the U.S. in late '22. Does that assume completing enrollment in 2021 of CLASP IID and presenting the data in early '22? And PASCAL Precision, Mike, what are the benefits of that and the timing? And I had one follow-up.

Yes. Thanks, Larry. So let me be a little bit more precise. So what we said is that we'll get approval by the end of '22 and the next year, and we'll probably be launching in '23. So I wouldn't want to necessarily model sales in 2022. Exactly what the run-up looks like before that, we're not -- we haven't really talked about. We haven't laid it up. Obviously, you're right, there's multiple steps: when do we complete enrollment, when do we complete the follow-up, when do the report show up. And I don't have clear estimates for you at this time of when that's going to happen. As it relates to the PASCAL Precision, we're really proud of that system. It's designed to deliver significant advancements to our stabilizer and our catheter and our handle. It's -- the Precision 1 is now -- we haven't really laid out timing. I think that's going to sort of evolve over the course of 2021, but I can probably come back with more accurate timing at a later date.

And Mike, a few years ago, you were developing a product for aortic insufficiency. What's the status? And what are your thoughts on that market opportunity? Is it just to too small, given all the bigger opportunities that you're pursuing now?

Yes. We really don't have much there, Larry, to say that, that is a pipeline item that's imminent. That goes back quite a way. The one product that we have that sort of helps that group of patients is really in the surgical side. This KONECT product that also replaces the aortic route, that certainly helps those kind of patients. But to suggest that we have a transcatheter one around the corner would be overstating it.

Our next question comes from Robbie Marcus with JPMorgan.

Great. So with a little slowdown here with COVID, what are you seeing in terms of trial enrollment? Is that also getting delayed? And is that assumed in the time lines that you gave us today?

Yes. Thanks, Robbie. So yes, we are feeling it in trial enrollment. This is not an easy time when we're going through what we just saw here at the end of the quarter and the start of this quarter. It is a tough time. It's kind of funny. I mean, the hospitals that -- it's not like all hospitals have been impacted, but the ones that have been impacted are really full up, right? They really struggle to be able to handle new patients, which includes clinical trials. So -- but having said that, all the dates that we gave you anticipated what's going on. We would give you new dates if we didn't think that we could achieve those. So yes, it's at a tough time right now. Yes, it is. But do we think that there's going to be a recovery? There's a lot of interest amongst the clinical researchers to get back at it. And really, they're enthusiastic about it as we are, and so we think that we're going to get after it pretty hard when it opens back up again.

Great. Still a lot of sick patients that need help.

Yes, there are.

Unfortunately. Maybe just a quick follow-up. You're still generating a very healthy amount of cash even in 2021 here. How should we think about the priorities for that use of cash? And are there any areas to the business that might see some M&A potential?

Robbie, it's Scott. Thanks for the question. So our focus and our priorities for use of cash haven't really changed. The first one, of course, is making sure that we've got sufficient cash to invest in internal growth opportunities, and that includes building out our plant infrastructure. So we've got now multiple production facilities around the world. We've recently gotten a lot further along and are almost completed with Costa Rica. We've broken ground on a new facility in Ireland. And as the company continues to grow, we'll continue to in a disciplined fashion, invest capital to support that growth on the production side. As it relates to M&A, we're very active on the business development front, and we are continually looking for external growth opportunities. As you know, most of these are typically small. We usually buy pre-revenue companies or technologies or we'll make investments in companies or buy options to acquire companies based upon how they perform in development efforts. And so those activities will continue. We've got this -- we've got a good problem to have, which is we continue to generate net cash, and that's why we've got over $2 billion now on the balance sheet. And so we think carefully about how to do that, and we think carefully about how to manage the share count. And for the time being and for the foreseeable future, our preferred means of returning capital to shareholders will be through continued share repurchase. And we've got over $600 million of share repurchase authorization left.

Our next question comes from Josh Jennings with Cowen.

Just 2, one, the $7 billion -- reiteration, the $7 billion TAVR market by 2024. The first is you've had that target for a couple little while now in front of the China approval. Does that include an internal assumption for -- within the market for China TAVR? And then the second layer is just thinking about TAVR-in-TAVR and TAVR-in-SAVR, could those 2 indications represent 10% or more of that $7 billion opportunity in 2024?

Yes. Thanks, Josh. Yes. So we feel pretty confident in that plus $7 billion TAVR market opportunity. It does include China. It also includes most of those indication expansions like you just mentioned, like TAVR-in-TAVR and TAVR-in-SAVR. What's not in there really is EARLY TAVR, so these asymptomatic patients. If we got that, it would be very late in the period, so probably hardly an impact. And we're not expecting moderate to read out and really impact that number as well. So maybe that is -- is that sufficient to answer your question?

Yes. I appreciate it.

Our next question comes from Suraj Kalia with Oppenheimer.

Mike, a couple of quick questions. I just wanted to follow up on Raj's question on TAVR, and then I have a TMTT question. Forgive me if I heard it wrong, why would referrals in the largest centers in the U.S. be different than the smaller centers? And if I could throw in my TMTT question, for PASCAL in Europe, Mike, for the centers that are early adopters, what is the -- if a patient comes in, what would be the key rationale for them choosing PASCAL versus, let's say, a G3 MitraClip?

Sure. So going back to the large centers versus small centers. First of all, this was simply an observation on our part. If we looked at our largest centers versus our smaller centers, the smallest centers grew faster in the fourth quarter than the largest centers. So now why is that? Well, now we start speculating to some extent because we really don't have that clear a picture. It's just the fact of how that happened. Part of what we have heard anecdotally is that the large centers will often prove -- a matter of fact, attract patients, let's say, from a multistate area, whereas a small center might only attract patients in their local area. And given COVID being what it is, are these elderly patients willing to travel long distances to a referral center? We wonder and we hear from others, they speculate that that's the reason. So again, you can take that for what it's worth, but that's probably the best answer that we have on that one. The -- in terms of the centers that are adopters, how does it compare? We feel really good about the outcomes. We've been doing a lot of work in Europe trying to help people have outstanding outcomes. And so clinicians have experience with PASCAL, and many of those experiences have -- many of those clinicians also have experience with the MitraClip system. We have both PASCAL and PASCAL ACE, so they have options in terms of what they might use. And I think it's a patient-specific decision that clinicians are making at this point of what they think might be best for their patients. It's still early. Our data by comparison is still relatively light. Although we're proud that we have 3,000 patients that were treated last year, and most of those are with PASCAL. So we're starting to get some pretty good experience. But it's still -- there is some time before this plays out.

Our next question comes from Matt Miksic with Credit Suisse.

So I did want to have a follow-up on MitraClip. It's just -- and on the mitral repair, I should say, and PASCAL in Europe. Wondering if you're seeing any difference in the sort of variability or referral of, say, mitral repair in the small -- relatively smaller footprint that you have there versus TAVR. Just one of your competitors reported, and those numbers were down a little harder maybe then sort TAVR volumes are down. I'm just trying to sort through what that could mean, if anything. And any color you have would be appreciated. I have one follow-up.

Yes. Thanks, Matt. I think I understand your question. Are you saying, "Hey, it looks like the mitral numbers are down more than the aortic numbers?" And is that the question?

That is correct.

Okay. Yes. In fact, that is our observation as well. It appears that, that is indeed the case. Now I'm going to speculate as to why. TAVR has been out there for quite a while. We have really compelling evidence. We have very mature systems, very reproducible results, well-trained infrastructure. By comparison on the mitral side, it's still relatively young. The indications aren't nearly as clear. So it's a less mature market and not a surprise probably that, that's taking place. But I think your observations are correct ones.

Great. And then just a follow-up, and I apologize if it's been asked, but just the sort of maybe confidence in the sort of, I call it, acceleration maybe off of a slightly lower, more sluggish Q1 and then getting to your original range for full year, what gives you that sort of confidence that you'll be able to kind of bounce back in Q2 and still wind up in roughly the same place?

Yes. There was a version of that, that, that was Matt, and that's fine. We really do have confidence that it's going to come back. We think it's going to be ramped during the course of the year. Q1, just based on what we're seeing so far, is going to be a tough quarter, and so we acknowledge that. But we always thought it would be tough. It might be a little tougher than we thought, but we really believe that there's a lot of pent-up demand of patients and that they're very much going to seek treatment. And once the fear of COVID and once hospitals get themselves squared away, we think they really will -- they'll be in much better shape by the time we get into the second half of the year that we're going to realize those kind of growth rates.

Our next question comes from Danielle Antalffy with SVB Leerink.

Mike, if I could just follow up on the referral question. And I'm not sure what level of visibility you guys do have into the referral channel. But just curious what you saw in the sort of June, July, August time frame as far as refilling the funnel and how quickly that happens and whether that could serve as a proxy to what we could see whenever we get past this most recent COVID resurgence. And I don't know if the right way to think about it is diagnostic facilities were operating at x percent of normal levels or what, but any color you could give there would be great.

Yes, your observation is a good one. I think we all remember the trauma that happened when the sort of the bottom fell out in the middle of March last year, and -- but we also remember that things recovered pretty quickly, right? There was a pretty sharp V that we felt. And so this question about how fast does the pipeline fill up and how fast the patients come back, if that's any indication, it didn't take -- though it wasn't quarters. It was a matter of months, when things really started to bounce and pack. So yes, you're right. You could use that as some kind of a proxy to try and estimate what might happen now.

Next question comes from Vijay Kumar with Evercore ISI.

A couple of quick, I guess, guidance questions. Gross margins, I think I heard you, Scott, mention 150 basis points of headwind in Q4. Given your comments on FX, any changes on how FX impact gross margins for fiscal '21 or Q1 perhaps?

Sure. So in '21, we think FX probably hits us another 50 basis points negative on the gross margin line, and so we're coming off of -- in the fourth quarter, we finished at 75.3%, but we're also expecting better mix as TAVR continues to grow. We've also got some operational efficiencies that they're going to continue to benefit on the gross margin line. And so we think we'll be able to largely offset that additional 50 basis points of FX pressure on gross margin and end up in that 76% to 77% range that we guided to.

That's helpful. And then perhaps, Mike, you can chime in on this, but I'm curious, the share count assumption here for Q1 presumes no buybacks. I'm just curious, given the cash position, what would cause, I guess, for you guys to be a little bit more aggressive on the buybacks?

Yes. I'll start, and I'll encourage Scott to jump in because he's very much the leader of this and a good partner. We have a long history of opportunistically buying shares when we think that there's a disconnect, but what we do routinely is to try and offset the dilution that's associated with our equity programs. So we're going to expect to do that. And I think that would be something that's typical. In terms of doing something opportunistic, we basically just look for disconnects.

Yes. So we don't match exactly period-by-period the offsetting of dilution from equity awards, but we do, over time, try to not only offset that dilution but also buy down the total net shares outstanding. You've seen us do that consistently over time. So last year, we bought back about $625 million for the stock, which was in excess of the dilution from employee option exercises and delivery of restricted stock and the like. And so you should expect that we're going to continue to be opportunistic, as Mike said, and be active repurchasers over time.

Yes. I want to say those average shares are around $68 a share. We consider that an opportunity.

Our next question comes from Matt Taylor with UBS.

So I had 2 related questions. So we talked a lot about your clinical pipeline and new product flow. I was just hoping you could give us a couple key guideposts. What are you looking for this year in terms of data at PCR or other places, approvals that we should be watching out for? And then as we're talking about the clinical trial delays in terms of enrollment, has it gotten to a point where you feel like you need to adjust any of your time lines? Or is it just a little bit slower and you're not there yet?

Yes. So I'll start with the second question. We really are not changing our time lines. If we were changing our time lines, we would certainly tell you. And we believe that we're going to hit those, and those are our best estimates. We try and do that as accurately as we can. In terms of what you're going to expect to see this year out of meetings like Euro PCR, I think what you're going to see for the most part is follow-up on the many trials, everything from EFS to CE Mark trials and more. So there'll be more patients. There'll be longer time frames where data will be shared. And so you'll see that we've got quite an extensive portfolio in TMTT. So I think you're going to see a number of reports over the course of the year.

And our last question comes from -- I'm sorry, our next question comes from Pito Chickering with Deutsche Bank.

Two quick ones here. For the U.S. market, like your largest competitor has been pretty aggressive trying to take back market share in the back half of 2020. I'm just curious if you can give us any color on where the market share ended up during sort of the fourth quarter, and how we should think about market share changing one way or the other in 2021?

Yes. So yes, I think what we try to do is to -- I provided a statement in our prepared remarks that said that we felt like the market grew pretty much at the same pace that we did. So we didn't really see appreciable share change in the quarter. So again, having said that, it's pretty hard to determine what exact share positions are, and it's even more difficult during a pandemic. So we're not suggesting that it's exact, but in our estimates, it was pretty flat.

Great. Then a quick follow-up for guidance. The U.S. markets and Europe is obviously weaker than you expected in December. We talked about strength in Japan, Australia and South Korea. Can you walk us through if those markets have accelerated versus the year -- your guidance at the Analyst Day and getting more color on the market?

So we're not suggesting that those 3 countries, for example, were better since the Analyst Day. What we're saying is those are examples of countries where the penetration is low and the growth rate is high. So those were really healthy growth rates, significantly above the rest of the portfolio that's pulling it up. Now some of those are pretty small base by comparison. Like Korea and Australia would be pretty small compared to what's going on in Europe, et cetera. But nonetheless, as those treatment rates increase in those countries, it certainly helps the growth rate.

And we have time for last question and that comes from Joanne Wuensch with Citibank.

I'll make it quick. Doubling TMTT revenues in 2021 is impressive. Do you think you've hit sort of a tipping point? Can we think of this as an accelerant over the next couple of years? Or how do you think, broadly speaking -- and I recognize COVID makes it more difficult -- the TMT market in Europe?

Yes. I think maybe it's just fair to say, Joanne, is this is a really big market opportunity. Remember, when we talk about it, we talk about it in billions. And when you look at where our sales are right now, they're really low. So our opportunity to grow at a pretty significant pace, I don't think it should be that surprising. The doubling is nice, and we're pleased to do that, but we've got a long way to go. We really think it's important. It's a big opportunity for us. The big drivers are going to be our evidence. When we really put strong clinical evidence up there that's compelling in significant clinical trials, those are the kind of things that are really going to drive even more significant inflection points, if you will. Of course, we've got a great team and a nice reputation and nice really differentiated products, but the data is going to be the bigger issue. And again, it's got much more potential than this in the long run.

And that's all the questions we have. I'll turn it back to Mr. Mussallem for closing remarks.

Okay. Well, thanks for all the continued interest in Edwards. And even though COVID is challenging right now, we do see better days ahead, and we're very optimistic about the future of Edwards Lifesciences. So Mark, Scott and I welcome any additional questions by telephone. And with that, back to you, Mark.

I don't think Mark's mic is open now, sir. Thank you. And this concludes today's conference. And you can access the replay by dialing (877) 660-6853. Please use conference ID 13710472. Have a good day. Thank you.