Edwards Lifesciences Corporation (EW) Earnings Call Transcript & Summary

Well, it's difficult to estimate what our penetration is by risk cohort. Overall, we think that in the U.S., for example, something like 10% of the patient population is getting treated for aortic stenosis, which is remarkably low for a disease where there's a pretty severe mortality curve and a therapy alternative or a set of therapy alternatives that is safe and effective. So while we can't quantify specifically what the treatment rate is for low risk patients, we do think it's a significant opportunity to continue to expand the treatment rates over time. And it's going to be a contributor to this overall total addressable market growing to something like $7 plus billion between now and 2024. So I don't know if I that got to your question directly, Anthony, but it gives you a little something there.

That helps. I guess it's a good segue into that notion of the $7 billion, we've tried to certainly size that. We're a little bit richer on our estimates for 2 reasons, in particular, the deeper dive on the opportunity in China, but also a view on asymptomatic. So Scott, when you talk about $7 billion, what is factored in there for China specifically? So when you think about asymptomatic, it strikes us that I believe that, that $7 billion does not factor asymptomatic.

So China is an element of that $7 plus billion that we expect by 2024, but it will still be a very small piece. The China opportunity is one that's longer term. We're just starting to build our foundation in China with establishing some sites, focusing very carefully on patient outcomes and training physicians. So this is going to be a long-term strategic element of our plan. In terms of other items that are not in that $7 billion, certainly, asymptomatic is one because we're still enrolling the early TAVR trial. Our hope is that we get that enrolled by the end of this year. There's a 2-year follow-up. And so if we did get enrolled by the end of this year, then we probably see data in 2024, which is the end of that time period that the $7 billion is associated with. The other bigger opportunity that will come post 2024 is the potential to treat patients with moderate aortic stenosis. And so we've got an approval to launch that IDE, which we expect to do in 2021. We're excited about the longer-term prospect for treating those patients.

One quick topic. When we think about moderate as well as low-risk and even asymptomatic valve durability, it seems to be still that the debate between surgical and TAVR, although, again, it seems that perhaps even on valve durability that the discussion is shifting a bit. So maybe quick views on where the discussion amongst interventionalists is as it relates to TAVR valve durability and maybe what needs to be out there in terms of evidence and maybe even next-gen solutions in order for folks to get more comfortable with that?

Yes. Well, we study durability very, very carefully. We're the leader in TAVR. We're also the leader in surgical aortic valve replacements. And so we know a lot about factors that influence durability. We do extensive, accelerated wear testing in our laboratories. And based upon our experience, we don't have any reason to believe that durability should necessarily be different between the different technologies. There are things that we're doing to try to even enhance durability like the RESILIA technology that is now incorporated into our INSPIRIS surgical valve and we see a place for RESILIA in our product platforms over time, more broadly than that. And so durability has continued to be a focus of ours. We think that it will continue to be a subject of discussion and should be among clinicians as we get more data from these different clinical trials that we're running. One of the things that we've done is committed that we're going to follow these patients who are enrolled in our TAVR trials for 10 years. And so we'll see more and more signals of durability as that data becomes available in the years ahead. Like I say, we don't have any reason to believe that there's a durability issue with TAVR vis-à-vis surgery.

Let's shift here, we were -- we have good moments -- good few moments left, about 10 minutes left, want to shift it to mitral and tricuspid and then round out with some financial questions. Before we get into particulars on mitral and tricuspid, I think it's worth just recapping the differences between TAVR, mitral and tricuspid, just in terms of the difficulty in treating this disease and, Scott, it just brings back memories of being at the Edwards Analyst Day, having the pig heart, being in the lab there at the Analyst Day and just getting a sense of the difficulty even just in the anatomy, mitral and tricuspid versus TAVR. And really with the engineering hurdle that would -- how that presents an engineering hurdle for valve design. So maybe just a quick sort of overview on how you see mitral and tricuspid differing from TAVR because of the factors we discussed on sort of the difficulty in the condition.

Yes. Well, you're right. Aortic stenosis is a relatively straightforward disease in a relatively straightforward part of the anatomy. So when the leaflets get calcified and stop performing as they're meant to, there's one way to address the problem. That's just to repair the valve and the valve can anchor right into the deposits within those disease leaflets. And it's a straightforward procedure that we've now been performing for over 10 years commercially. In the case of mitral regurgitation, tricuspid regurgitation, the anatomies or the anatomical features of those valves are different from one another and different from the aortic valve and the disease that impacts these patients with regurgitation presents itself differently. And so for mitral regurgitation, there's degenerative mitral regurgitation, there's functional mitral regurgitation. Sometimes it's a leaflet problem. Sometimes it's an annulus problem. And other times, there are issues with the diseased left ventricle. And so there's a reason why it's taken us this much time to develop therapies that we really think can help serve these patients safely and effectively. And the good news is we are continuing to learn a lot. And we've learned a lot enough now that we've got a portfolio of therapies that we think can be effective in treating these patients. We've already seen it in areas like PASCAL for both mitral regurgitation and tricuspid regurgitation. And we're seeing some pretty exciting early signals from EVOQUE, our tricuspid and EVOQUE Eos, our mitral replacement technologies. And then we've got our Cardioband therapy that we're continuing to develop as well. So the diseases are heterogeneous. And at the same time, these -- there are patients that are larger number than patients with aortic stenosis with serious and significant needs, and we're really optimistic about the ability to try to address them.

Staying there for a moment, and we'll get into some data in a minute here and a follow-up question, you mentioned higher number -- higher level of disease incidents, even currently prevalence, I would think as well. The company pegs the opportunity of $3 billion in 2025. I guess, a couple in here. One is we haven't gotten a sense of how much of that is mitral versus tricuspid. Is there any sense on that in the 2025 number? And I would imagine that the $3 billion by 2025 is really just a timing element in that if we kind of map out the next 5 years, this could eventually kind of crest to sort of a TAVR-like number, but maybe your views on that next 5 years beyond 2025, where that can trend.

Yes, they're good questions. It's too early to predict what the composition of that $3 billion is going to look like between mitral solutions and tricuspid solutions. Also, too early to predict what the ratio is going to be between repair solutions like PASCAL and replacement solutions like EVOQUE or M3, our other mitral valve replacement platform. And so we know that there's a lot of growth to be added there. We know there are a lot of patients who need to be served. And we also know that, that $3 billion is just to start along the journey to what will be a much larger total addressable market. And for the reasons you said, Anthony, the estimated prevalence of MR and TR is significantly higher than estimated prevalence of aortic stenosis. And so as these therapies develop, as these technologies get more mature, we should be able to treat a greater number of patients and see a very significant total addressable market even after 2025.

A little bit on data, EuroPCR, 2-year CLASP data, certainly positive, 80% sustained survival at 2 years, 84% freedom from hospitalization. Just a little bit on how that data in the early days is being accepted and maybe perhaps what it means for PASCAL in Europe this year. Again, you mentioned we're going to certainly see it doubling. I think the guidance out there for total TMTT is $80 million. So a little bit on 2-year CLASP data how it's being sort of viewed from the physician community in Europe and your thoughts on how it benefits PASCAL this year?

Yes. I think the 2 year outcomes that were released were confirmatory of what physicians have already seen in the real world. This high rate of survival of 80%, 87% clinical events, freedom from heart failure, rehospitalization, 85% reduction in annualized heart failure rehospitalization. It's pretty exciting to see in a clinical environment -- in the clinical trial rather, these results. But then more importantly, seeing very high procedural success rates in the real-world as well. And so clinicians continue to be enthusiastic about PASCAL. And we think it bodes well to help support this doubling in sales that we forecasted for 2021. But even bigger than just 2021 is this opportunity to build out a PASCAL platform based on even more clinical evidence. And so next year, we'll have the results of our CLASP IID trial here in the U.S., which will lead to our expectation of an indication -- the first indication for PASCAL to serve mitral regurgitation patients in the United States.

A quick follow-up there. You mentioned CLASP IID. There's also on the functional side the CLASP functional MR study. I don't know if timing on functional MR in the U.S. has been disclosed. But is there any update on timing for that study?

We have not announced any timing about our CLASP IIF for the functional mitral regurgitation patients. We're enrolling that trial, and we'll give more updates along the way. We're also enrolling our CLASP IITR, which is PASCAL tricuspid clinical trial in the U.S. and as a matter of fact, there were 6 month outcomes from that early feasibility study presented at EuroPCR that were favorable. So both of those other 2 CLASP trials are enrolling in the U.S., and we'll be talking more about those in the days ahead.

And Scott, I would be remiss to not throw a handful of 2 quick financial questions here to close. One would be just your thoughts on spend trajectory this year. Anything notable in terms of ramp? It certainly sounds like mostly on the R&D side. And you're ending last quarter with $2.1 billion in cash, a staggering amount of cash. And so maybe a little bit on capital allocation and how are you thinking about that?

Sure. Yes. Sure. So on spending ramp, yes, our clinical trial enrollment was certainly impacted negatively during the past year as a result of COVID. But we're seeing those enrollment numbers start to come up again across the board. We've got multiple different pivotal trials enrolling right now. And those expenses show up in our R&D line. So you'll see those expenses ramp during the course of 2021. We also think we'll be able to travel more. And so that ends up being a notable expense item for us. And that's all factored into the guidance that we provided, but that's how we think expenses will start trending upward as the year goes on. In terms of capital allocation, our philosophy has not changed. We prioritize the support of organic growth at Edwards, both through R&D and capital investments. We've got 7 production facilities around the world now. We're continuing to build capacity. Beyond that, we fund smaller-sized external investments. So we make small investments. We make small acquisitions. We buy options to buy companies, and we'll continue to do that. We're very active on the business development front, but it's small numbers. And as a result, most of the -- the rest of our capital deployment goes into share repurchase, both to offset the dilution from incentive compensation and also to just reduce the net shares outstanding over time, which we've been able to do effectively.

With that, we are just about out of time. Scott, I want to thank you very much for joining us at the 2021 conference. We wish you well to you and your family and the team. Please stay healthy, and we look forward to our next meeting.

It's our pleasure. Thanks a lot, Anthony. Take care.

Thank you, Scott.