Edwards Lifesciences Corporation (EW) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to the Edwards Lifesciences 2022 Investor Conference. I'm Mark Wilterding, Senior Vice President of Investor Relations and the Treasurer at Edwards. And on behalf of everyone here from the company, we're really glad you could make it. And thank you for taking time out to spend with us here today. I've got a couple of housekeeping items I wanted to mention upfront and get out of the way. One, we issued a couple of press releases this morning. So to the extent you haven't seen them, I would urge you to take a look. They walked through the succession plan that we announced, as well as some of the key messages you'll hear out of today's event. Secondly, for those of you who aren't here in the room today, the slides are available on our website at ir.edwards.com. You're able to access the entirety of the book. You can follow along online. And I think you'll find that helpful. The third point I want to mention is that as you look at the agenda, you'll see that we've allotted some time for Q&A. And so we'll have the management team up on stage together for about an hour. When we get into that portion of the presentation, please just raise your hand. We'll call on you, limit your questions to one, and we'll try to get to as many as possible in the hour that we have. If you wouldn't mind advancing, I don't have a clicker. I apologize. I've got 2 quick slides I want to run by you. One is the forward-looking statements. We'll be making some forward-looking statements as we typically do. They are -- excuse me. Thank you. Familiarize yourself with this slide. They're available on our website as well as on file with the SEC. We'll also be referring to non-GAAP financials. We think this helps make year-over-year comparisons a little bit easier. Again, the reconciliations from GAAP to non-GAAP available on our website to the extent you need them. I love working at Edwards. In fact, one of the best parts about working at Edwards, I think, is our patient-focused culture. It means a lot to me. I know it means a lot to the team. I talked to a lot of you about it. But I think the best way to really show it is by way of a video. So we're going to run this and then we'll get the show started. Thank you. [Presentation]

All right. Welcome, everybody. I share my thoughts and so happy that you're with us. It gives you a nice little view into our company and how we feel about things. I hope you enjoy this environment here. Being in this iconic location is something that's kind of fun and reminds us of the importance of what we do and what a great history that we all got a chance to participate in. So I'm going to get in and I'll talk about the company, and I'll also spend a little bit of time in a few minutes talking about the succession changes we're going through. So stay tuned for that. But we always start with our credo. It kind of defines who we are, kind of the soul of the company, if we will. It's -- it highlights the fact that what we do is serious. And when we do it well, we're a trusted partner. And it's a team sport. We can't change health care by ourselves, but we can be an important part of it. And we need to be one that others can count on along the way. We work with a lot of constituencies. We were born in this multi-stakeholder model and sort of feel like we live that every day. So that's really not new to us. And we're also reminded by the close why we're here, and it's to serve patients. And we know when we serve patients, the rest of it kind of takes care of itself. We take this seriously. We ask our employees to live this every day, and I'm so proud of our leadership team that they take it so seriously. Our company continues to evolve. I don't know that you measure the company by what the sales are or the profits are, but there's lots of ways of measuring it. Just transcatheter procedures themselves over 800,000 so far. So we're going not far closing in on 1 million procedures there. Very proud to say almost everything we sell, over 95%, are in #1 global positions. We have a really strong global supply chain that has not let down the patients that we serve. And so we're very global in nature, and that team has been so dedicated. We have plans to make it even more robust, and we invest on that on a very strategic basis routinely. A lot of smart people in the company, just over 2,000 engineers alone and you know the kind of investment that we make in research and development because innovation is one of our pillars. And we also have a company where our employees are really engaged in charitable efforts. And we have this aspiration that everybody will do something, and over 85% of our employees reported doing something charitable in the last year. So we're up to 17,000 employees at this point. And although we have a lot of real deep experience with the company, we have a lot of new people as well, as 60% of our employees are Millennials and Gen Z. So we've got this cool combination of the deep experience, et cetera, but also the bright new minds, the bright new ideas. And I love the dynamic that's associated with that. So our aspirations talk about who we want to be when we grow up, and we're constantly striving to do that. It really starts with this idea that we want to transform lives with breakthrough medical technologies. That's easy to say. When we get that right, we just create incredible value. It's super hard, and it takes a long time. But we're good with that, right? That's who we are. That's what we try to do. When you think about what Edwards does for a living. Serious things like heart valves, like critical care medicine, there's not a lot of room for mistakes. And so for us to be a truly trusted partner, where people can count on our quality, count on our integrity, count the fact that we're always going to try and tell the truth and be their partner is something that's so important. We have a group of employees that we try and create an environment where they really feel like they belong and they can grow to be their best. And we try to invest in that in a real way to have this inclusive culture, where people really enjoy their work and value their work. We also know that -- we operate in a lot of different communities, and we want to be known as a company that gives back to its communities. Not a taker, but somewhere where you'd say, well, we're glad Edwards is in our community, they make us stronger. And we really approach it with that kind of an attitude. And finally, when we get all those other things right, I don't think we could help but create shareholder value. And that's the way we approach it is, from the top, to create value through the way that we behave. So our strategy is different than other companies' strategy. Often, companies try and grow by diversification and so forth. That's really not who we are. At our core, we're committed to just continue to innovate. As great as health care is today, and particularly for the patients that we serve, we feel like it could be so much better. And so we are committed to innovation, just constantly driving the state-of-the-art to a better place. Now we know that the practice of medicine doesn't change very easily or very quickly, and you can better back it up with big time evidence. And so that means the things that we embark on are going to take time. And we know that when we go and start a journey, we might be at it for a decade or more before it really realizes its potential. And we're good with that, right? So it speaks to that innovation process. And certainly, there's risk associated with it because, as good as we are, everything we start doesn't necessarily work out the way we thought. Sometimes the things we start work out even better than how we thought. So it's innovation at its essence. We also are believers in leadership. We don't mind going first. Actually, it's lower risk to go second or third, but that's not the way we look at it. We say those that go first, they learn faster than anybody else. And they're also at the table with the other pioneers in actually shaping the innovation in terms of how that will work. And that's the chair that we want to be in. And finally, the way that we manage the risk associated with leadership and the risk associated with innovation is by staying focused. And so the idea that we're just going to stay maniacally focused on structural heart disease and critical care medicine and not crowded with other things that are the shiny new object that, that is powerful. We think there's greatly underserved populations right there, and that we don't need to go to other places to have a lot of growth and a very bright future. And that focus, really, I think distinguishes us and allows us to really know this group of patients may be better than anybody else and to continually find ways of giving them better answers than they've ever had before. So when we get that right, we create a lot of value. If you're sort of reflecting on how has it worked out so far? Not so bad. Not so bad. We know that the patient demand is tremendous, so we're going to talk more about that. There's just -- these patients are underserved. And much of it is because, historically, there were no good answers for these patients. But if we do our job right and we create innovations, there's going to be answers in the future like there never have before. We constantly strive for this triple win. And this is -- just a simple idea of just saying if we can extend life, improve the quality of life and save the system money, ding ding ding, right? That's what success looks like. And that's what we continuously try to do is to get those triple wins. And as I mentioned, these are long-term efforts, right? This isn't about -- I know I kind of smile. People are always wondering, well, what's the next quarter going to look like for next year? We're in it for the long run. And that's what it really takes. The success that we're enjoying right now are often seeds that were planted 5 years ago, 10 years ago. And we know that the seeds that we're planting today are the ones that are going to bear fruit in the future. And it's just the way the life works for us. So we're going to go deeper on all these subjects. And so I won't go deep on any of them. We had a challenging environment in 2022, but we did quite a bit of growing and quite a bit of investing in the future during 2022. We expect '23 to be a strong year of growth as well as accomplishing some really important milestones along the way. We think there's a very large addressable market, and we're happy to get deeper with you on that one. And I'm so proud of this team. We got just a highly strategic and experienced management team that enables all of this to happen. And so we'll get deeper on all that. So '22 is a year where we actually had quite a few accomplishments, and we'll go deeper on that, and I won't go through all of it, but -- our teams really delivered. Even during a challenging environment, they made sure that we continue to meet our commitments and advance some of these long-term efforts that make a difference. And even though we fell short of what we wanted to from a sales perspective, we still had some pretty nice growth that we enjoyed during the year, but we never lost sight of why we're here on our strategic aims in the long run. The guidance itself is unchanged for the rest of the year. So we'll talk about that more and Scott will go much deeper in his section. Bigger picture. You guys all know this that followed the company. We feel like COVID really triggered some downstream staffing challenges, right? So probably was born during the age of COVID, but it ended up having a big impact on our customers. They just have had a tough time having all the staff in place that they need to have in place, and there's plenty of written about this. And we have not taken that lightly. That's really important. We have prioritized a number of initiatives to go exactly at this point, and we'll be talking about those during the course of the conference. It's multifaceted. The thing that I'm encouraged by, those folks that are running hospital systems or governments that are in big health care systems, they are equally motivated to solve these problems. They -- in a fee-for-service world, the way that they get paid is to do procedures, and they want to do procedures. And so getting this squared away is something they're very committed to. I get a chance to speak with a number of them, and they're highly committed. And we believe that they're going to make progress on it. And we're going to try and be good partners and do our part in helping them be successful. So '23 is going to be here, which we believe is going to have strong growth and a lot of investment again in our future. And we're going to go through this business by business, and you get a chance to hear from each one with a fair amount of detail about the big milestones that we expect to accomplish during the year. At the same time that it was the year of growth. And when you think about it, '23, we don't know how that's going to shape up for the world. Is that -- are we going to have a recession or come -- just come close to it and so forth. We think that we're going to be able to have some pretty solid growth during the year, regardless of what that environment looks like. So let me just speak to the long term. We continue to believe that we have an incredible opportunity, and the patients out there are dramatically underserved. And that our opportunity will essentially double from where we are right now -- between now and 2028. And there's a $20 billion market opportunity for us to go after. And that's what really motivates us to make a difference for these patients, and we'll get a little deeper on all that. And then -- and actually beyond '28, and you know we talk about very long time frames, there are some big movers that won't even be in place, things like treating moderate aortic stenosis patients aren't even in those numbers. And that's a very large opportunity. We think actually replacing valves in the mitral and tricuspid position will still be small by 2028, and the bigger opportunities are going to be well beyond. And that's a very large one in itself. We also believe that there is going to be the opportunity for Edwards to use our kind of expertise, to use interventional therapies to treat heart failure, the #1 expense item, the #1 killer in the world. And so we're excited about things on a long-term basis and continually think about that as we make our investments. Our -- excuse me, our agenda, you may have seen, you're going to hear from a number of our leaders. We've got some management changes going on where people are going to change roles. Our leaders are going to present their current roles, not their future roles. And so you're going to see everybody doing the jobs that they have been doing and doing so well. So just a little bit of a preview for that. The people are going to take new roles and actually take those on at January 1. And speaking of that, this is probably a good place for me to just talk about our team. I'm very proud of our executive leadership team. These people, each individually, are very experienced, very committed and experts at what they do. But more than that, they're a real team. We really do help each other. We really do work together as a team, and it allows us to be successful. You know that I announced that I'm going to be making a transition moving from the role that I'm in today as CEO and Chairman, that next May that I'll transition to hopefully, the Chairman's role, I'll stand for election for that. And that Bernard Zovighian will be the new CEO of Edwards Lifesciences starting in May. He'll be in the President's role, and he and I will work together very closely over the next 6 months to ensure a smooth transition. This is not something that's come very quickly or without a lot of thought. Our board takes very seriously the succession process. We've talked about it a lot. We routinely go through and have a number of successors for all the top jobs, including the one that I was in, and had a very rigorous process, which included people both inside and outside the company. And I'm really pleased to announce Bernard, and I think the company is going to be in very good hands with him. And those of you who don't know him, I look forward to you getting a chance to know him even better because he's got an incredible track record of success. He's been leading our TMTT business, which is all the right stuff and creating something that's very exciting and taking a dream and turning it into reality, which is really best of Edwards. We also have new responsibilities for Larry Wood. You guys know Larry. Larry has been this incredible leader that has helped create the transcatheter aortic valve replacement business from scratch. And I'm talking about from zero, dedicated 20 years of his career to create probably one of the greatest innovations in cardiovascular medicine, if not more broadly, that any of us have seen. And we're so proud of his leadership. He's going to take on expanded responsibility, also have responsibility for our surgical structural heart business and some other responsibilities inside the company. And so we're very pleased to be able to expand his responsibility. And then when Bernard moves in to his new role, Daveen Chopra, who's been running our Surgical Structural Heart business, is going to move into the TMTT job running transcatheter tricuspid and mitral therapies. Daveen has a great track record, he's very passionate guy, very smart guy and is very well prepared for this responsibility moving ahead. So I'm proud of this team, and one of the things that gives me a lot of comfort to sort of go on to the next stages to know that we have this incredible team that really leads the company. And we are a tight team and anybody that sort of things that it's all around one person has never seen the way that Edward really works. You'll get a chance to hear more about this as time goes on. And so with that, I'd like to introduce Larry Wood to talk about transcatheter heart valve replacements. As a matter of fact, let's roll the video. [Presentation]

Thanks, Mike. It's always great to see everybody, and it's always such an honor and privilege to talk about our transcatheter valve business. So I know there's been a lot of challenges of late, but we see those really as transient. The fundamentals of our transcatheter valve business remain incredibly strong. I think there's 3 pillars to our strategy that we really focus on: Increasing therapy adoption; expanding indications; and delivering a strong portfolio that's highly differentiated. Now if we look back at the last 6 years, we know the last couple of quarters have been a bit tough. But if you look at the dotted line, we can see that the growth of TAVR has been really, really impressive, and that line represents about a 14% CAGR. But we've never just been linear and stayed on that line. I remember back in 2016, many of you wrote notes talking about the demise of TAVR. And many of you wrote those same notes in 2018. But we always saw the return and we always saw the acceleration again because the fundamentals are very strong, and there's a huge patient population, as Mike said, that's underserved. One of the questions that we've gotten a lot is, why does TAVR seem to be disproportionately affected by staffing issues when compared to other procedures? Well, one of the things that happens if a patient with aortic stenosis or any valve disease is referred to surgery, they can be immediately scheduled for surgery because most of the assessments are done actually inter-procedurally, things like valve sizing the surgeon does during the procedure. But for TAVR patients, there's additional steps that they have to go through. They often get a confirmatory echo. They need a CT scan so that we can assess their sizing and access. They often have to be screened for coronary disease. And at the end, they have to be seen by a surgeon and a cardiologist and they go through a shared decision-making process. So there's just more steps that require more resources to process a TAVR patient through the pre-procedure aspects of it. We've done a tremendous amount to try to optimize the procedure. We've reduced length of stay. Many hospitals in the country now are down to 1 day length of stay. The procedure time has come down from more than 3 hours to about 1 hour in most institutions. And there's a lot of things that we can share on best practices to reduce the number of people in the room and reduce that administrative burden. And there's a lot of hospitals that are optimized, but there's many, many, many more hospitals that still are in that early phase of optimizing their staffing and optimizing their procedure. Now one of the things that we do to try to help the staffing challenges is we provide a lot of training and a lot of education. In an average year, we would train or educate about 200 valve clinic coordinators. Now valve clinic coordinators are sort of the point person for the structural heart program. They're sort of the guide that moves the patient through the process and make sure they have all of their tests scheduled and tests performed and -- that they see all the appropriate doctors around the journey. In a typical year, we run programs that touch about 200 valve clinic coordinators. This year, we're going to do well over 800. We might actually get close to 900, which just reflects -- I only have 850 hospitals or so in the country. So it tells you how much staffing churn there has been, and it's critical that we get the valve clinic coordinators up to speed. So these educational programs are largely peer-to-peer, where we match up experienced valve clinic coordinators with new people to show them what it takes to be a valve clinic coordinator. And then we run advanced programs for centers that want to optimize their care and want to take on things like benchmark and other things. We also continue to train fellows, and we train additional heart teams. Because as hospitals reach their capacity limit, they oftentimes have to get a second TAVR team up and running. And so we provide all the training for that, and you can see the numbers here. But we do a lot of training to try to address some of these staffing challenges. Now last year, we talked a lot about our portfolio, and these are things that really impact us near term and long term. We talked about getting Alterra approved for Pulmonic patients, and I'm very happy to report that did happen on time, on schedule. There was a product that we didn't talk about a year ago, which is our SAPIEN 3 Ultra with the RESILIA tissue technology. And we're very excited that's approved now in the U.S. as well as Japan. We have our SAPIEN X4 system, which is now in a clinical trial. We have our EARLY TAVR trial, which we completed the enrollment and all those people are on their journey to the endpoint. And we have the PROGRESS trial, which is actively enrolling for moderate aortic stenosis patients. So tremendous progress on both near-term and long-term activities. Now increasing therapy adoption is one of our prime strategy that we focus on a lot. And we used to talk to surgeons, the people that actually provided the care, they told us that there was no other treatment. That everybody that was referred to them got therapy, there was really very few inoperable patients if any, and there was no other treatment of the disease. But as we've gone really deep on this, we've learned that back -- pre-TAVR, only about 6 -- and as evidence of the under treatment, you can see during this period of time, the number of people getting the aortic valve replacement has virtually doubled, which speaks to the end of treatment. But even with that, we've only moved to about 12 out of 100 people. And even when you look forward and you look at a lot of our projections, that number goes to like 16 to 18. We never get up into those really high treatment ranges that patients probably deserve. Undertreatment is also a much bigger problem in the elderly. We see, as patients get older, the utilization of valve replacement goes down as a percentage significantly. We also see that the time to treatment, from diagnosis to treatment, goes up significantly as people get older. And this really speaks to an issue around ageism. Now rather than just hear about this from me, we've got a couple of our key clinicians here, and they're going to talk about their own experience with this and their own practice with us. So please queue the video. [Presentation]

I think one of the most sobering things from that video is at an elite cardiac program, such as Mass General, half of the patients who have a guideline indication for valve replacement go without therapy. And if that's the situation at Mass General, I can almost assure you it's worse probably most other places. So it just really speaks to the undertreatment. So you want to dig into the why, why are people reluctant to treat 80-year-olds? Well, the first question may be, hey, maybe because they're advanced age, maybe we can't deliver good outcomes in 80-year-olds with things like TAVR. Well, we look at the data and basically the outcomes we can deliver on 80-year olds are indistinguishable from 70-year olds. So we know we can deliver spectacular outcomes from all of the clinical measurements that we have. So maybe you say, yes, that's fine. But maybe these patients aren't going to get the quality of life benefits because they have so many comorbidities. So we went and dug into it. And you look at very sophisticated quality of life measures like KCCQ, and again, the results are indistinguishable. You look at NYHA score, they're virtually the same. So clearly, these patients get the same quality of life benefits and survival benefits. So maybe you say, okay, but if a patient's 80, their life expectancy is so short. So why should we bother putting them through this procedure and utilizing this technology? Well, the reality is, if you reach the age of 80, chances are you're going to live another 9 years. So not only do they need an intervention, they need a high-quality intervention. They need a durable intervention. So we know that we can do these things, but part of it is just our perception and bias of what an 80-year-old is today. And this is Harrison Ford. He's 80 and he just recently filmed a new Indiana Jones movie. If Indiana Jones got aortic stenosis, he deserves a TAVR. And I think that's just something that we have to think about, and we have to change the way we approach what it means to be 80 now in terms of life expectancy and in terms of ability to improve their -- not only their survival, but also their quality of life. So what are we doing about it? Well, we have a number of work streams actively moving on this. We have television commercials we run in the United States as well as outside the United States to try to raise awareness. And not just awareness with patients, but also their caregivers and in some cases, their physicians. We have resources online to help patients find a TAVR center or educate them about the therapies that are available to them. And we partner with Healthgrades to make sure that they can actually contact a doctor on the heart team rather than have to go through a more complicated referral pathway. We've also -- the issue of ageism is probably one of our newer findings. We sort of, in our journey, we started with inoperable and high-risk patients. And a lot of our focus has been on the lower risk in younger patients. But when we dig into the data, one of the things we discovered is it's still really the older patients that are most often denied care or move slowly through the system. So we've really tried to partner with key clinicians to attack this issue of ageism. And even at the most recent TCT meeting, there were symposia on this. They were key thought leaders who were speaking about it and really trying to educate people on the data and the projections and the life expectancy of elderly populations to try to change this curve. The other thing is the AHA has started a quality initiative to really try to address the issues with the treatment for patients with aortic stenosis. This is a program that we support. But what it's really focused on is what happens to a patient before treatment. Their time to therapy. We feel that -- and AHA feels actually that most patients from time of diagnosis to treatment should be 90 days or less, but that actually rarely happens today in clinical practice. So they're working with key centers. They're working to understand the data. But the goal of this is really to create guidelines and quality metrics from the time of diagnosis rather than just focusing on the clinical outcomes of the patient receiving treatment. And the AHA is the perfect entity to lead this charge because they have demonstrated expertise. They led the door-to-balloon initiative, which pretty much revolutionized how patients with heart attacks were treated. And they've also done incredible work to address stroke to try to improve care, and a lot of it is based on timely identification and timely treatment. So we're very excited about this initiative. There's no silver bullet here. There's no one thing, but we have so many different work streams targeted in so many different areas to try to address hospital systems, to try to reach patients directly and to try to focus on the HCPs. And it's going to take a combination of all these things, but we continue to invest heavily in this, and we're excited with the progress we're making. So expanding indications is also another key pillar of our strategy. We've talked about the undertreatment of patients with severe aortic stenosis. And part of the challenge there is right now, the guidelines often relate to symptoms as being the trigger point for patients being treated. But because this is a disease of the elderly and the symptoms are often shortness of breath or lightheadedness or exercise tolerance, oftentimes those just get confused with the aging process and not attributed to the valvular disease. Now we don't think there's a lot of logic in waiting for the patient to actually have symptoms rather than just treating the disease when it presents. We don't really treat other diseases that way. And so if we could get people and improve the treating them when they're diagnosed with the disease, the trip point rather than symptoms, it would really revolutionize how patients move through the system with aortic stenosis. So we have the EARLY TAVR trial, which is completely enrolled. It has a 2-year endpoint and for those patients to meet their endpoint so we can open up this data. But it's going to tell us, for the first time ever, definitively, what percentage of patients are truly asymptomatic when subjected to a protocolized stress test? And how fast do they progress? And is there dangers in waiting to treat these patients. And we'll be able to answer these questions through a high-quality, randomized trial. And that evidence can help us define how these patients should be treated. Beyond severe aortic stenosis in this issue of symptoms, we have moderate disease. Again, most diseases, you try to treat them as soon as possible when they're initially identified. But with aortic stenosis, patients with moderate aortic stenosis are just told to wait, and they're told to wait until it gets severe. And several studies have shown that irreversible damage is being done to the heart during this period of time. So we believe treating these patients earlier could have significant benefits for these patients. So we have the PROGRESS trial. Again, another very rigorous randomized trial, large sample size, where patients are going to either be randomized to getting therapy or clinical surveillance. And the primary endpoint, very similar to EARLY TAVR, again it has a 2-year endpoint, and it has a 10-year long-term follow-up. But this is the sort of evidence that we're going to have to generate if we want to change the patient journey and change how patients move through the system with aortic stenosis. One of the reasons we're confident that this trial is going to show to be successful are recent studies that have come out, that have shown that patients with moderate disease have almost the same trajectory as patients with severe disease. So maybe the trip point for treatment should be moderate rather than waiting until it's severe. But if this trial is successful, it basically doubles the size of the TAVR opportunity because, for every severe patient, there's 2 moderate patients. So the last thing is delivering on a really strong portfolio. We've enjoyed a highly differentiated portfolio during this entire TAVR journey, and you can see we've had a number of meaningful innovations over time. Our latest innovation is SAPIEN 3 Ultra with the RESILIA tissue technology. We have SAPIEN X4 in the ALLIANCE trial, and then we have future platforms beyond that. We're just never going to stop innovating and we're incredibly focused on making sure we always stay ahead and we continue to deliver critical innovations for patients. Now Alterra RESILIA, this is the first time that any transcatheter heart valve has had dry tissue. The RESILIA tissue technology is on our leading surgical heart valves. I don't want to steal his thunder, but my good friend, Daveen, is going to talk a lot more about RESILIA during his presentation. But having this on our platform, we think, is a real game changer for physicians. And we also added the Alterra skirt to the 29 millimeter. So now we have a full complement of sizes with our Alterra platform. So we're very excited about this, we're excited enough that for the first time in our history, we're actually raising the list price of about $1,500. And so we feel very strongly that this is going to be developments and innovations that are going to be valued by our customers, and we're excited about the opportunity. The other platform that we have that's in our clinical trial is our X4. This is really a revolutionary platform. One of the major changes to it is we introduced variable sizing. So right now, our valves come in 3-millimeter increments, but patients don't. And so we always have to adapt the patient to our valve size. But with SAPIEN X4, we designed a valve that can operate over a wider size range. So if a patient comes in and their annulus is 24.5, we can take a 26-millimeter valve and deploy it to 24.5, so we can have a valve that's very personal for that patient. The other thing that we're able to do is we're able to align the commissurals. So we can align the commissurals on the prosthetic valve to the commissurals in the native anatomy. And why that's important is for future valve and valve procedures. The demands on a transcatheter heart valve now are much bigger than they were when we started. When we started, it was just about treating aortic stenosis. But now the valve has to be a great valve for fixing aortic stenosis, but it also has to be a great host for that next intervention. But then it also has to be a great guest that can go in that host because we're now thinking about lifetime management, how does the patient get 2 or perhaps even 3 procedures staged over the course of their lifetime. And that's what we think about when we develop these new platforms is preparing not only for this procedure, but for future procedures. Now we did pause the enrollment in our ALLIANCE trial. This is completely unrelated to the valve, but we found an opportunity with the delivery system where we think we can really enhance the user experience. So we paused it because the bar that we have with our SAPIEN 3 Ultra platform is super high. We need to make sure that if we're going to bring a platform into display SAPIEN 3 Ultra, that it hits all the marks and it's a 10 on a 10 scale. And we just see that there's an opportunity here really improve and change the physician experience with the platform. So we expect to go back into clinical trial next year, but it's really critical that we get this platform right. And so we're really excited about it. Again, -- it's unrelated to the valve, it's unrelated to the delivery of the valve. It just has to do with how we introduce the valve into the body. So we're excited to get that trial back underway. So again, we have our transient challenges with staffing and some of the hangover from COVID, but our fundamentals are so strong with the aging population and with the undertreatment of this disease. And we just think there's so many opportunities to reinvigorate the growth and go back to where we were pre-COVID. When we look at the opportunity, we again, still see this as being a $10 billion opportunity by 2028, which is very exciting. But I think even more exciting is beyond 2028. It's not like 2028 is the end of the journey. We have things like moderate aortic stenosis to progress trial. Those probably don't really contribute before 2028. Those probably come later. We also have further global expansion into emerging markets. And those things are going to continue to contribute over time. But a lot of those things are going to happen after the 2028 time period. So we see this as having really, really a long runway to continue to grow very, very robustly. So as we look towards 2023, we have the headwinds with the hospital staffing and COVID uncertainties. But we also have the tailwinds of trying to drive this therapy adoption. And we do hear anecdotally there may be a little bit of a patient backlog that's been growing, why some of these staffing problems have occurred. And so if that's the case, and that's also going to be a patient group that could help us in 2023. So we factored all of that into our guidance, and our guidance is 9% to 12% growth in 2023, and we're excited to be back in that arena. So with that, I'd like to turn it over to my good friend, Bernard. He's always been my good friend, but now he's my really good friend. And he's going to talk about our TMTT opportunity. So thank you very much. [Presentation]

Thanks, Larry. Hello, everyone. I'm very pleased to be here with you today. Over the next 20 minutes or so, I'm going to share the progress, meaningful progress we made, the exciting plan we have toward achieving our vision of transforming care for so many patient in needs. So I will start with the patient needs, get into the mitral then tricuspid and then a wrap up. So let me start with the patient, the patient need. Let me tell you that what these patients are experiencing is very tough. The mortality for this patient, both mitral [indiscernible] is very high. They have a very tough quality of life. And as physician have very few options. They -- I can't see the slide here, sorry. They have very few options. They have drugs. So most of these patients are treated medically. And we know that it is somehow effective, very costly. Patients have a lot of rehospitalization, so tough on the patient, tough on the health care system. When they get an intervention, it is mostly surgery, so very invasive. The recovery is long enough of the patients. So if you think about what we believe, we believe that transcatheter innovation can change this, can change the adoption. So today, the adoption for both surgery and transcatheter is about 2%, very low. We believe that with the transcatheter innovation, the adoption can go to 4%. So 4% in my mind, is bringing on 2 things. One, it is realistic, correct, with 2% to 4%. It is still a low number of adoption. And we believe, therefore, that there is great growth beyond 2028. How we are going to do that with a proven strategy, what we have been doing in TAVR, for a long time, having best innovation, great clinical evidence, being able to support physician -- partnering with physicians to achieve a great outcome. We believe that the adoption going from 2% to 4% in the transcatheter segment will basically grow from what it is EUR 1 billion today to EUR 5 billion by 2028. So great opportunity ahead of us in transforming care for these many patients. Here, I have a technical challenge. I don't see the slides. So let me start with my concessions. In the past, physicians have only 1 innovation, 1 TEER device. The clinical evidence were limited and mixed, and many patients were discharged from the hospital with only being able to achieve a moderate MR, which we know today is not sufficient. I am confident that the new era is starting. If you look at what we have today, there are 2 devices available. The innovation is way stronger. Many innovation has happened in the last few years. Clinical evidence also has made great advances. But devices are easier to use, more operators can learn how to use these devices. Tomorrow, we see this trend continuing with more innovation in TEER and the addition of mitral replacement, more clinical evidence. So we are, for sure, very excited about today what's happening, but also we're very excited about what lies ahead for patient and physician. Let me start with the innovation because at the end of the day, it is all about having great innovation. And we introduced PASCAL Precision in Europe earlier in the year, in the U.S. earlier in the year, and we are hearing great feedback from physician. What we see is still early word of caution, but we like what we see [indiscernible] procedure, enhancing patient outcome. So we are very committed here to bring a number of innovations in the years to come. We are very pleased about PASCAL Precision today. Let's listen now to what physicians are seeing about PASCAL Precision. [Presentation]

So it is great to see this kind of impact that we are making on patients and what PASCAL Precision is bringing to physician. So now let's look at the clinical evidence [indiscernible] again, in a more deeper manner here. So in the past, in the last few years at discharge, half of the patients were left with mild MR, which we know today is not sufficient. What we have seen lately is that the latest evidence like you have a CLASP IID randomized study, but overall also is that today, our reality is that physicians can achieve 80-plus percent of a patient being discharged with mild MR. And we know that this is having a big impact on patient mortality, patient quality of life. So we are very excited about that, and we see that being the new era for TEER, for obviously mitral patient. What we have seen also, and you have seen that TCT, even though it is very early, even though it was the first cohort of patients that were presented at TCT that PASCAL at 6 months seems very durable. And so we feel very good about that. Obviously, we are going to follow this patient out to 5 years. We want to bring in a world-class evidence. And next year, what you are going to see is the full cohort of patients from CLASP IID at 1 year. So important data set that we are going to share with the medical community next year. Now let's look at -- listen from the CLASP IID PI and what they believe CLASP IID is going to do to patients, to physicians and to the referring community. [Presentation]

So we are confident that we have the right platform today. It is a leading platform. Confident that CLASP IID is bringing meaningful evidence for physicians to treat their patients. And so now let's go into what are we going to do in the U.S. And we got a slightly early approval in the U.S. We were very pleased with that. We launched at TCT. We have started building a team dedicated TMTT team about a year ago. We hired people, trained people, scaled this organization for them to deploy our high-touch model. So what do we mean when we say high-touch model, we mean -- we want them to train physicians even though PASCAL is a TEER device, it is a very different device than the current -- than the formal device in the marketplace. We want our high-touch team to support physician scoring patient. We want them to be in every case to make sure that every patient is well taken care of. So throughout 2023, what you can expect is us expanding our presence in large experience center in the U.S., further hiring and scaling our high-touch team and delivering exceptional results for every patient. We are implementing a price premium strategy like we were doing and like we are doing in Europe. It is a modest price premium, nevertheless, a price premium, which is in our mind, aligned with the platform and what we bring to -- the value we bring to healthcare system, to patients and physicians. So we are very excited about where we are still. It is important. It is an important segment. We have the right technology, evidence is coming and strong. At the same time, we know that this patient population is very complex, very diverse. And we need to complement here with a mitral replacement therapy. Replacement can eliminate MR in a consistent manner and physicians will be able to treat even more patients. We also know that not all transcatheter replacements are safe. And we learned that from TAVR. Transfemoral is less invasive than transapical. Transapical is a surgical platform. So with transfemoral what do you get, less bleeding, less complication, faster recovery. What we also know is not all transfemoral are equal. The smaller they are, the better. You have less complication. So in a nutshell, we strongly believe that transcatheter -- transfemoral smaller French size, it is what will be key to success here, having effective therapy and very safe therapy. So the next question that everybody is asking us and me is, so why are you currently developing 2 platforms? And I think the answer is very simple. One is we are committed to leadership. We know that if we want to unlock this large market potential and treat this underserved patient population, TEER is not going to be sufficient. Replacement is necessary. So we are committed to bring a game changer here to complement TEER. We also know developing a mitral replacement is not easy. As a company, we have done [indiscernible] 60 years. So having 2 platforms give us the insurance of leadership. And the good news is we have 2 platforms doing very well. EVOQUE is running -- we are running a single arm study in the U.S. And then we have SAPIEN 3, which is leveraging basically the SAPIEN 3, most proven, valve is -- we are running a pivotal studies with free arm. And we -- basically we expect completing enrollment of the main cohort around the end of next year. So in a nutshell here, we are very excited about our progress. We are committed to significant mitral milestone in 2023 across our 3 key value drivers: bringing best innovation, world-class evidence and being able to achieve real world great outcome for every patient. Super excited about what we are going to do for mitral patients. Now let me shift the gear to tricuspid. In the past, it was ‘forgotten valve. It was highly underrecognized, undertreated and therapy option were very limited. What we see today is -- in our clinical study is a rapid trial adornment. I'm sure when you look at medical convention, there is an increase in clinical research where people are talking more and more about it as early as TCT. They are dedicated tricuspid sessions. In Europe, we are -- we see a growing commercial adoption of our PASCAL for tricuspid patients. So clearly, transcatheter therapy have fueled interest. What we see tomorrow is that with strong evidence like CLASP II TR [indiscernible] EVOQUE. All of these have a potential to change the practice of medicine here. And the ones forgotten valve can emerge as the unforgettable valve, so it is truly exciting to see that. I see the promise. It's still early, but I see the promise. Now as I think about this evolution, I am confident in our ability to lead and transform and address this large unmet patient need. Let me start with PASCAL first, and then I will talk about EVOQUE. PASCAL Precision here is also very impactful in tricuspid patient. The tricuspid valve is very fragile. It has thinly flat, dense chordea, large coaptation gaps. And what we see is we are very pleased what we see from PASCAL. Great in real world, great also from the few study we presented at London Valve. At London Valve as a matter of fact, we presented 8 study across mitral and tricuspid speed, 3 on tricuspids, PASCAL -- with PASCAL. All of that we saw that positive early -- we need to be very cautious all the time, early but very positive. So for instance, TriCLASP, which is our steady real-world post-market in Europe, almost 200 patients. We're able to show them a great outcome, high procedural success, low complication rates and patients felt better -- way better. So super exciting here for these patients. Now let me jump into EVOQUE. We also presented at PCR London Valves 1-year TRISCEND single arm with EVOQUE. More than 100 patients and 1 year follow-up is meaningful for valve. We know that as a valve company. What I want you to look at 2 metrics. The first 1 is mortality. When tricuspid is left untreated, the mortality rate is between 30% and 45% in one year, big number. EVOQUE 1 year with this study again preliminary, 10%, that's a big difference. The second metric I want you to look at is the reduction in TR. One year after treatment 98% of this patient are down to mild, they feel way better. So we are very excited about the potential of what this platform can do to these patients. Obviously, we need more data, and we are very committed to world-class evidence. We are running a pivotal study, a randomized study for symptomatic severe TR. It is randomized, basically EVOQUE against OMT, optimal medical therapy. And we expect -- the enrollment is going very well. We expect enrollment to be completed by mid next year. So we have, as you can imagine, a lot of confidence in this platform. We leverage all of our know-how as a company, how to design a valve, technology, the delivery system, it is sub 30-French, and we are committed to bring even more innovation. So in terms of impact to patients, we are aiming to achieve a CE mark approval by the end of next year and a U.S. approval by the end of the year after 2024. Let me [indiscernible] tricuspid here. Here also very committed about big impactful milestone in 2023 across innovations, clinical evidence, achieving in a real world outcome. Now let's go into revenue for next year. So yes, like mainly in a medtech company, we see the potential headwinds, the regulatory environment in Europe, especially for businesses like ourselves where we bring in a novel therapy to market. Also, all of the staffing, COVID uncertainty happening in the U.S. and Europe. So we see that as potential headwinds. We also see the potential tailwinds with all of the evidence we are bringing. Again, the beginning was a TCT pivotal study CLASP IID, 8 presentations at PCR London Valves, many more to come. Can we accelerate adoption? Can we also accelerate the Mitral growth in the market? So we took all of that into consideration, and this is how we think about next year, having this range between $160 million and $200 million. What I want to do is wrap up this TMTT story, and you to remember basically 2 things. I am confident that the combination of best technology, a portfolio of technology to be able to treat this very complex and diverse patient population, world-class evidence and partnering with clinicians like we know how to do as a company. We have the potential to transform care for the many patients in need long term. I am also confident that 2023 will be another high impact year on this remarkable journey. Thank you. With that, I want to introduce you Daveen Chopra, who is great to talk about our surgical businesses. We are going to do another transition, Daveen and I, 5 years ago, we transitioned the surgical business when he joined our company, did an amazing job, and now he's going to take TMTT to the next level. Thank you. [Presentation]

Thanks so much, Bernard. I appreciate the introduction. It's going to be fun to transition over to TMTT, and I appreciate all your leadership in the transition to come. But today, I'm excited to talk to you a little bit about the Surgical Structural Heart business. And I think as you heard from both Bernard and Larry, structural heart disease therapies are growing. They're growing across the world. And as a result, we see that surgical structural heart market will continue to grow in the mid-single digits, where we believe that this market will exceed $2 billion by 2028. If you look at what's driving the overall surgical structural heart market, we see that these macro trends, as Larry talked about, there's obviously an aging global population. There's also growing access and wealth in emerging markets. And we see that new structural heart innovations, especially transcatheter technologies are helping increase overall awareness for structural heart disease. And we think that overall awareness is going to drive more diagnosis of patients and eventually more referrals to heart teams. And when you get to heart teams, there's always going to be a group of patients that are best treated surgically. And that's what we see growing the overall structural -- surgical structural heart market. If you look at the legacy of Edwards Lifesciences for over 60 years now, we've been partnering with leading cardiac surgeons to understand patient unmet needs, to invent amazing new technologies and then bring them to market. And we've seen this innovation cycle lead to not only many amazing innovations, but if you look today at our business, over 50% of our revenue come from products that were just launched in the last 5 years. And so we have a vision as a business to continue to work with these cardiac surgeon leaders and meet other unmet needs for patients in leading transformative innovations. If you look at the unmet needs of surgical patients today, you see that patients today are still looking for extended durability and lifetime management with their valves. They're looking for great solutions to complex and concomitant cases. And they're also looking for best-in-class innovations globally, not just in the U.S. And with that in mind, we, quite a few years ago now, invented what we believe is the leading RESILIA tissue that we believe will really provide the greatest durability. If you look at tissue valves over time, the greatest way that they fail over time is through calcification. What RESILIA does is that it effectively stops those calcification formation pathways, allowing a valve to have greater durability over time. And what you see with the RESILIA tissue is that patients are able to have an active life, to have a life where they don't have to have a mechanical valve and the anticoagulation and lifestyle trade-offs that come with that. They're free to have the confidence to live the life that they want. We've got and now built an amazing amount of clinical data around the RESILIA tissue. We see now that through 2 premarket studies of over 800 patients, we've had 0 structural valve deterioration at 5 years of follow-up. We're continuing to follow many, many more patients in the post-market. We have over 14 different post-market studies now, enrolling over 6,400 patients with RESILIA tissue that provide a great foundation on how RESILIA works in patients. And as we look into 2023, we've actually got a couple of important clinical milestones. The first 1 is that in mid-2023, we're going to present pivotal data, pivotal 7-year data on the RESILIA tissue. So this is now with 7 years of follow-up. If you do with many kind of tissue valves, when you get past the 5-year mark, you start to see kind of linear significant deterioration. In our bench-top testing, we've really seen that RESILIA seems to last a lot longer than previous generations of tissues. And we believe now that this clinical data will help prove that out at 7 years of follow-up. We'll also see that in early 2023, we'll start enrolling in our Momentis study. This is for our MITRIS mitral valve, and it will be a very large multi-country, multicenter, core lab adjudicated study to get a great set of data under newest MITRIS mitral valve. If you look at what we've done with RESILIA tissue, we've down the surgical business in addition to now the TAVR business, put it on 3 different surgical platforms. The first platform or first product is our INSPIRIS, our flagship surgical aortic valve. And this obviously has the extended durability treatment, but also beyond RESILIA tissue, it also has this VFit expandability. What this means is that over time, if you need to go back in and reintervene on the surgical valve, you can actually enlarge the valve, make it bigger so that you can get a larger TAVR valve in there, which will lead to better clinical outcomes over time. What we've seen in 2023 or where we believe in 2023 is that the continuous kind of INSPIRIS adoption is what's going to keep -- global adoption is going to grow the business in 2023. Our second RESILIA platform is actually our connect aortic valve conduit. Now this is a product for very complex patients, patients where you have to not only replace the valve, but the root as well as the ascending aorta. And what this product does is that it really helps streamline procedures for physicians as well as for patients with a preassembled design. So it makes it so much easier. And if you look at this market, the market of these complex aortic valve replacements, we think in the U.S. is actually growing high single digits. So the market for these complex procedures is growing high single digits. And we believe in 2023 that connect will easily outpace this market growth. Now switching gears over to mitral valve replacement, an area of a lot of opportunity for Edwards. We see that valves need to be replaced sometimes when you can't repair the valves because of tissue quality, it's a reoperation, rheumatic disease, endocarditis, et cetera. And we see that patients are looking for better options. Overall, this market globally is about 200,000 patients growing in the mid-single digits. And around the world, on a global basis, the vast majority of these valves now are actually mechanical valves with the trade-offs with the anticoagulation and lifestyle. However, in the U.S. specifically, actually porcine valves are the most used valves in the U.S. And we see here that actually patients are looking for a more durable solution in porcine valves, and this is where our MITRIS mitral valve comes into play, not only featuring RESILIA tissue, as I talked about previously, includes other kind of lifetime management features as well as ease-of-use kind of features. We actually believe that with this valve, which we launched in the U.S. in mid-2022, that in 2023, Edwards will then become the mitral valve replacement leader in the U.S. I'm excited to share a little bit more about 1 of our patients who really benefited from the MITRIS product, Rick, and his physician, Michael Chu. [Presentation]

It was awesome to see Rick returned to his life that he loved to lead with the MITRIS valve. Moving for a minute over to mitral regurgitation. I think as you saw Bernard say, of all the people of mitral regurgitation in the U.S., only 3% of patients who have mitral regurgitation actually get treated. And if you look specifically at the low-risk degenerative MR patient, surgical mitral repair, surgical mitral repair is indicated for the low-risk degenerative patient. If you see it going forward in the future, we obviously see that many, many more mitral patients are going to be treated with the advent of transcatheter technology, but we continue to see that for the low-risk degenerative MR patients, we believe surgery will continue to be indicated for this group of growing patients. However, when you look at this group of surgical mitral repair patients, getting a consistent high-quality surgical repair is tough to do. We've seen recently from core lab adjudicated multicenter data as high as 16% of patients at 2 years of follow-up don't have an optimal surgical repair. So we think this is an opportunity to improve upon this 16%. And that's where we're working on a product called the mitral adjustable repair system. This is a product that -- a surgical product under development right now that will enable beating heart adjustability of the implant. You can change the implant size during the procedure to really eliminate any regurgitation and hopefully, it will lead to more consistent great outcomes for surgeons and for patients. So if you move forward to 2023, we see with the surgical business that our estimated revenue range is between $870 million and $970 million or approximately a mid-single-digit growth rate on an underlying basis. Some of our headwinds are that there could be additional TAVR conversion that would happen in some other developed markets around the world. And there's obviously always going to be overall health care spending pressures. But we can see that perhaps that we can get additional tailwinds of increased RESILIA penetration that could come along from maybe more tissue to mechanical valve conversion on a global basis. So in summary, we see that the surgical market is actually continuing to grow, especially those who have these complex concomitant procedures. We look at Edwards Surgical continuing to outpace market growth coming from our RESILIA innovations out there. But beyond just RESILIA, there's a lot of other unmet needs. There's a lot of opportunity for Edwards to continue to identify those unmet needs in these surgical patients and event amazing innovations for them. Thanks so much. I'm very excited now to introduce a good friend of mine, Katie Szyman to come on and talk a little bit about the Critical Care business. [Presentation]

Hey, good afternoon, everyone, and thank you all for giving us a reason to come to New York during the holiday season. I'm personally super happy to get some shopping done after today. So it's just great to see everybody live here and have a chance to be together. So what a great day. So I'm here to give you an update about the Critical Care business and wanted to just, first of all, share with you our strategy for growth. So our goal is to grow critical care really through 3 major areas; the focus, first of all, on improving the quality of care for millions of patients throughout the world. We're super proud that this past year, we hit a milestone of improving care for approximately 16 million patients, and we're really doing that in 3 key ways. One is through bringing out new technology. The second is through bringing out clinical evidence and the third is driving adoption. So let me walk you through a little bit more about that. But before we get started, I first want to share with you an amazing patient video sharing a little bit about a story of someone who is very close to our heart, one of our sales reps mother. [Presentation]

So that's really the reason why we all get out of bed every day to make a difference in patient lives. So first, let me talk a little bit about the hemodynamic monitoring market. So if you think about hemodynamic monitoring, there's really 2 kind of ways to think about it. First is core monitoring, which still remains the majority of our business today. And in core monitoring, we're providing basic blood pressure information on a continuous basis about patients. When it comes to smart recovery and smart monitoring, what we're doing is taking our basic blood pressure information waveform and coming up with additional parameters like cardiac output, stroke volume and really giving advanced monitoring information to clinicians so they can better care for their patients. So today, the market is about $1.2 billion, where we have -- you can see about 1/3 of our disposable revenue comes from the smart monitoring category. And now we see in the future, it going to about $1.8 billion, where we're continuing to see the higher growth aspect is smart monitoring, growing those smart sensors and smart technologies. And what that means is smart monitoring, plus faster recovery, getting patients home to their families faster equals smart recovery, and that's what we're all about. So let's talk about the 3 components of that. One is technology, second evidence, third is adoption. So Smart Recovery really begins with technology, and I love this pyramid because it kind of encapsulates everything that we do all in 1 slide. So at the foundation, we have our Smart Monitoring platform. HemoSphere builds that foundation, its artificial intelligence enabled. It then has on top of it our algorithms. And every year, we come out with more smart algorithms that enable our Smart Recovery technology. And then finally, we have our sensors. And we have what we would call our classic sensors of FloTrac and ClearSight in the Smart Recovery category, and we're systematically going through and coming out with an IQ sensor, an IQ cuff in each of those categories. And you need to have 1 of the IQ sensors in order to unlock our hypotension prediction algorithm. These sensors create more value and they are at a higher selling price overall. So what we're doing, as we call it, we're smartifying our entire portfolio, taking our basic sensors and shifting them to be smarter IQ sensors. So what is the difference in the algorithm? So first, our monitors always will describe to you how your patient is doing right now this moment. With the hypotension prediction indicator, we're actually able to predict and tell clinicians what's going to happen for their patient 15 minutes from now. And then finally, what's coming out his next year is our prescriptive algorithm, which is basically saying that fluid is like a drug to our patients, and we're able to make fluid recommendations or prescriptive recommendations to clinicians, again, in order to improve the patient outcomes. So the foundation of all of that is our HemoSphere platform. Similar to the iPhone -- I kind of making this argument that it's similar to the iPhone, but we actually came out with the original HemoSphere in 2017, 2018 time frame, and we are already on the seventh generation of that technology. Each year, we've come out with a new HemoSphere that either adds a sensor or adds a new algorithm. So you see now that we are in this process of rolling out the HemoSphere into our installed base. And in 2023, by the end of next year, we'll be just over 50% of the rollout of the HemoSphere technology. And by 2028, we would be fully rolled out with HemoSphere. And now we're starting to shift and continue always to shift our focus to also expand. So not just replace the existing installed base, but then to expand into new hospitals with our Smart Recovery technology. And you can see all of the sensors that are used with our HemoSphere and you can also see the new thing that's coming out with HemoSphere, this next generation is our connectivity solution, where actually clinicians can see the patient's data, whether they're in a different room or whether they're supervising some of the nurses, they can actually see on the iPhone how their patient is doing today. So what does that mean? So as we shift towards Smart Recovery today about 15% of our sensors are the IQ version of the sensors. And as we look to the next -- to the future, we see that becoming more than 50% of our sensors. And so that's really going to drive the growth in Smart Recovery is this conversion to using the more advanced sensors. On HemoSphere 7, as I mentioned, we have multi-tech monitoring, the ability to have 2 sensors on at 1 time for 1 patient. We have an advancement in the hypotension prediction. And then finally, we're launching assisted fluid management, that predictive area of our algorithms. So I could talk all day long about how amazing I think Smart Recovery is, but I think you'd like to hear a little bit from 1 of our clinicians, Dr. Ashish Khanna. So let's roll that video. [Presentation]

So beyond just the smart technologies, one of the challenges that we have is how do we convince clinicians that they should actually adopt and use our advanced algorithms. It's a bit like your iPhone when they come out with a software change, "you're like really, this is frustrating, I don't want to have to deal with any changes." So as we've come out with hypotension prediction that represents a change to fundamentally how clinicians are used to treating low blood pressure events for their patients. And so we first did an original study that I showed you last year where we were able to show that we can reduce the average duration of the amount of time of patient is in a hypotensive state from -- by 58% from 28 minutes down to 12 minutes. You can see on the other side of the page, the number of studies, large studies that are trying to say, if you reduce the duration, can we also improve the outcomes specifically AKI, reducing acute kidney injury is a big impact if you can reduce hypotension during the procedures. So let me show you 1 of the specific multicenter hospital quality projects that we did and that we published this past year. So this is 3 centers here in the United States using hypotension prediction in their cardiac centers. They had 1,400 cardiac patients, and they were able to show versus their baseline that they were able to reduce the mean ICU length of stay by 7 hours and 34% reduction in total ventilation time. And as I'm sure you know, that's very impactful to the patient's recovery and their ability to get back home to their families faster. So we are really proud that was presented at the AATS this past May to all of the cardiac surgeons that were attending. So now let's talk a little bit about awareness. So in the awareness area, what we're trying to do is just raise awareness of the importance of hypotension and that hypotension matters. So first of all, this past year, the OIG, The Office of Inspector General, published a report that said that hypotension during surgery is 1 of the top 5 potential causes of harm to patients, which really raised awareness significantly. The second is that we did a partnership with US Anesthesia Partners and NorthStar Anesthesia, representing north of 50% of the total anesthesiologists here in the United States. And they just published last month at the ASA they presented their findings that over 150,000 of their patients, they found that roughly 28% of these patients had a mean arterial pressure below 65 for more than 15 minutes, which was really significant, and this was all range of patients, high and low-risk patients. And then finally, as you probably know, CMS came out with a quality measure where they are actually reimbursing clinicians, anesthesiologists if they can demonstrate that they're keeping their patients above that mean arterial pressure of 65. So really kind of making it important to them in terms of how they're actually reimbursed as well. So we're making progress, but of course, awareness and adoption are so important. Really, it's going to take some time. As Mike mentioned at the opening, clinicians and in fact, all of us resist change and it's hard to kind of get adoption. So we've got to keep coming out with evidence and keep raising awareness on how important that is. So as we look to the next year, we're very optimistic about this next year. We have estimated again, mid-single digits in our growth rate. One of the biggest factors for us is how the recession is going to impact capital budgets. We've seen kind of a big catch-up in 2021. It stayed up there in 2022. And so as we look at next year, it's always uncertain how the recession will impact the hospital capital budgets. But on the flip side, the adoption of our IQ technologies is going quite well, and we really see this real-world data continuing to drive adoption. So in summary, I'd just like to say thank you for listening. It's just a great time here in the Critical Care business. We're leading the smart recovery with our artificial intelligence-enabled technology. We are truly reaching more patients, 16 million. We have a vision to hit 20 million by the year 2025. And we are gaining adoption most importantly, to be able to get patients home to their families faster. So, I think in Critical Care, as we always say, we believe the best is yet to come. So now I'm happy to be able to turn all of you over to your first break of the day. Thanks, everybody. [Break]

All right. Look at that at the room quieted all on its own. Thank you. Well, there's no walk-up music or video for the finance presentation. We'll try to make it interesting anyway. So you've heard a lot this afternoon about the path that we're on for Edwards to become a leader in this new era of structural heart innovation. And we're especially excited about the opportunity Edwards has to make a difference by introducing new therapies to more patients around the world. We're also enthusiastic about the prospect of creating impressive value for shareholders. And so it's timely and topical, that we're sitting here at the New York Stock Exchange. At the end of a year that's been tough in the stock market and especially tough for Edwards stock. But I'm really excited to be here and talk to you about how we're executing our plan and the value opportunity that we think it presents. So our financial objectives are centered around the opportunity to generate sustainable, organic sales growth that fuels healthy profit margins and enables strong cash flow that we can use to make smart, strategic capital allocation decisions. It's integrated with our strategic plan. And so when we think about how the strategy matches up with our financial objectives, there is a holistic linkage in decisions we make about resource allocation for things like research and development programs, investments in our global supply chain to help continue to support the growth in our business, business development and the types of resources and where we put resources for our field-based personnel, who are highly trained and sit shoulder-to-shoulder with the physicians who are treating patients around the world every day. So regarding sales, you are in the privileged position of being able to address large patient populations and to have sales growth that's fueled by successful long-term investments in research and development programs, that's what's really generating this organic growth. And ultimately, it puts us in a position where we can have a leadership role that's supported by an evidence-based value for patients and clinicians and health care systems and regulators and all the other stakeholders that are impacted by the work that we do at Edwards. So in terms of sales, we've had this long run of at least 10 years of double-digit organic topline growth that paused in 2022, and you've heard a lot of the reasons around it, driven by hospital staffing complications and the other interruptions and disruptions that are originated with COVID, but we're still working through those headwinds today. We're excited that in 2023, we see a path back to 9% to 12% growth on a consolidated basis. So at this conference, we always do the say-did. So what we said a year ago was we expected low double-digit sales growth of $5.5 billion to $6 billion with $120 million of negative impact from FX, margins of 78% to 79% and EPS of $2.50 to $2.65. What it turns out -- we think now we'll be at the low end of the new range of $5.35 billion to $5.55 billion with a $270 million negative impact from FX. So if you break it down, we've got about $150 million more in negative drag from FX or about 1/3 of the miss from the midpoint of our original range of $5.75 billion to $5.35 billion. The other 2/3 was shortfall in revenue from -- especially TAVR and some of the other business units as well. Our gross -- our adjusted gross profit margin was around 80%. It was lifted by FX. It was not lifted, especially by any changes we made in the way we're operating the company. But due to the hedging program that we have in place, both with financial hedges and natural hedges, we got this lift in gross profit margin that will largely go away in 2023. I'll talk more about that in a minute. So here's what's underlying our 2023 expectations. We're assuming a gradual recovery -- gradual recovery in hospital staffing and resulting improvement in procedural volumes, we're expecting growth across all of our major regions, U.S., Europe, Japan and the rest of the world. At current rates, we're now expecting about a $100 million headwind to sales in 2023. So using 2022 rates applied to our sales forecast in 2023, we think it reduces sales by about $100 million. This is less than what we said 6 weeks ago on our third quarter earnings call. At the time, we said it's going to be about the same as what we're forecasting in 2022. But FX rates have changed dramatically in the last 6 weeks, and that's the reason why we're now expecting just a $100 million headwind. We are expecting an accelerating growth rate during the course of 2023. So I think lower sales growth year-over-year at the beginning of next year than in the latter part of next year. This largely has to do with just the year-over-year comparables. So the first quarter of 2022 ended up being a pretty strong growth quarter and it makes the bar a little bit higher for demonstrating year-over-year growth rates in the first quarter of 2023. Overall, 9% to 12% growth or $5.6 billion to $6 billion in sales. For modeling purposes, we'd point you to $5.8 billion on consolidated sales at today's exchange rates. Longer term, in TAVR, we're talking about low double-digit growth rates, fueled by the continuing march that we see towards this $10 billion total addressable market in 2028. So in TAVR, we're expecting similarly growth across all major regions in 2023. The launch of SAPIEN 3 Ultra RESILIA is going to be a big factor in our growth in the U.S., in particular, in 2023. So we're excited about that. And we're anticipating stable average selling prices on a global basis and share positions on a global basis. So in transcatheter mitral and tricuspid therapies, you heard Bernard talk about our focus on excellent patient outcomes. So we think that there's going to be a healthy lift to sales in Europe and in the U.S. as we introduced PASCAL here. But we're really focused most importantly on building this solid foundation and confidence building experience for physicians by getting great patient outcomes. We're expecting EVOQUE tricuspid in Europe to be approved late next year. We're disappointed that it was not improved this year. We talked a little bit earlier about MDR and the impact and uncertainty that's created around that approval time line. But we're really excited about EVOQUE and the experience that we've seen so far and the impact that we think it will have on patients. We expect to complete enrollment in the ENCIRCLE trial for SAPIEN M3 in 2023 and we're going to continue to advance these pivotal trials that we laid out earlier this afternoon. Overall, we're expecting $160 million to $200 million in sales at today's exchange rates, I think $180 million for modeling purposes. In Surgical Structural Heart, we talked about RESILIA and the importance that has in helping to grow this business, both for aortic valves and for mitral valves. We're expecting another year in 2023 of mid-single-digit rate growth or $870 million to $970 million. Similarly, in Critical Care, we're expecting mid-single-digit growth fueled by this continuing improvement in Smart Recovery with this leading predictive technology. It's unusual in Critical Care -- in the Critical Care field for there to be much data generated. And Katie and the Critical Care team have been doing just that. And we think it's really going to help seed growth in the years to come as new clinical data gets introduced for physicians and their patients. So the second element of our financial focus and expectations is around profitability and continued healthy gross profit margins despite the fact that we've got this FX benefit from 2022 rolling off in 2023. So strong growth profit margins. We're going to continue to be funding our field-based organization. So that hits us on the SG&A line. We're investing aggressively in R&D, both in clinical trials and the actual research that goes on before we launch clinical trials. And at the bottom line or towards the bottom line, we're going to continue to maintain a smart and efficient legal entity structure and tax structure when we make changes to the companies. Our gross margin is going to be unfavorably impacted, as I mentioned before, to the tune of about 300 basis points in 2023. So last third quarter earnings call, 6 weeks ago, I said 250 basis points. That's increased based upon what's happened to rates to where we think now it's a 300 basis point deduct from FX -- from gross margin at today's rates. Obviously, rates have been moving around a lot. We're trying to give you an updated information and that's how we -- that's what it looks like today. Overall, we're expecting 76% to 78% gross margins. We'll get some lift from product mix and the faster growth of our higher profitability products as well as some of the operational efficiencies that we're continuing to see as we expand and grow the business across our current 7 production facilities, and we're continuing to add capacity in the years ahead. Negatives in addition to FX are just wage and materials inflation. For Edwards, it's not a big number, but it's a factor that we're watching and we're managing very carefully. We're really proud of our global supply chain, both within Edwards and the partners that we have outside of Edwards and not just managing inflation, but keeping our supply chain intact and making sure that we can have finished goods on the shelves available for physicians and their patients around the world despite all the disruptions to other supply chains, we've fared pretty well. In terms of operating expenses, SG&A and R&D in 2023, we're going to continue to see benefit from just leveraging our scale. As the company grows globally, we get benefits from being able to spread the investments we make and what it takes to run the company across the board. We are seeing the same FX impact that's going to be a negative to our operating margin in 2023. Again, think about 300 basis points. That will take our operating margin to about 30% for 2023. We're also going to continue to make investments in clinical trials. We expect R&D as a percentage of sales to be 17% to 18% in 2023, similar to 2022 and we're excited about the initiatives that we have underway to inspire more therapy adoption. So we're investing in going direct to patients, direct to caregivers, direct to physicians. There's not huge numbers in terms of percentage of sales, but it's an important and growing source of investment that we're making in the business, especially to help drive TAVR adoption. So here's just a walk in our earnings per share from 2021 where we had $2.22 to this year, we're expecting $2.40 to $2.50, same guidance we provided on the third quarter earnings call. You can see next year, the walk goes from $2.40 to $2.50 to just low single-digit growth to $2.45 to $2.60 think low $2.50s at the midpoint of the range. A lot of this is FX almost entirely offsetting all the profit from growth. A lot of the FX is a carryover from 2022. So 2022 profit was boosted by having our hedge program in place, and we're going to feel the FX in 2023. This is exactly how the program is designed to work. We have not figured out a way to outthink, outstate the global FX markets. All we do is try to lock in and protect the guidance that we provide every year at this investor conference. And that's the reason why you see this big headwind hitting us in 2023. So third financial objective is capital allocation. And we're really focused on continuing to generate robust cash flow. It supports our global capacity expansion, so investments that we put into our plant and facility network around the globe. It helps us fund acquisitions. It helps us fund external growth, and we'll talk more about that in a minute. And ultimately, we're really passionate about returning capital to shareholders through share repurchase, which we've been doing very aggressively in 2022. So for adjusted cash -- free cash flow, we're projecting $1 billion to $1.4 billion in 2023. This year, we have -- we're not providing an update on our free cash flow for 2022. But year-to-date through the third quarter, it was about $800 million. So share buyback. So we've done 2 accelerated share repurchases in 2022. We've also been doing other repurchase activities that got us up to about $1.7 billion in total share repurchase. You can see in the last 10 years, we've taken on a split-adjusted basis, our shares outstanding from over 700 million to now over 600 million. So we've taken about 100 million shares out of the market through ongoing consistent share repurchase activity. And we think it's been a real value creator and we're going to continue to be active in share repurchase over time and opportunistically, and we're really focused on 2 things. One is offsetting the dilution from our pay-for-performance philosophy and the stock grants that are issued to employees; and two, we want to keep bringing in the net shares outstanding. We think it creates real value for shareholders, and so we're going to be doing that on an ongoing basis. So we're also investing capital for the future. Our capital expenditure forecast for 2023 right now is about $300 million. And it really falls into a couple of buckets. More than half of it is for manufacturing redundancy, manufacturing resiliency and capacity expansion. We also invest significantly in our infrastructure. For those of you who have been to our Irvine headquarters campus, you've seen we've invested in a lot of new laboratory space where our research and development engineers continue to do their magic. And so we're going to continue to fund our capacity to be able to innovate and design new technologies for the years ahead. So that's a little bit of just a snapshot of where we're pushing capital into the business. We are very active in portfolio management and business development. We don't talk about a lot of the acquisitions we do because they're generally small and there are competitive sensitivity. So we don't really want to advertise all of our actions that we're taking. Usually, we're looking for companies that, number one, fit our strategy just because we have cash on the balance sheet does not mean that we're changing our focus on structural heart and critical care medicine. And so that's where we really focus our attention in terms of our external growth supplements. We look for generally smaller tuck-in acquisitions. Most of the types of businesses that we can buy are small, early-stage, pre-revenue, pre-approval, sometimes pre-final product design, and it fits well as a complement to what we do internally in R&D. We're also continuing to look at our portfolio of products. And when we see products that either have become non-strategic or where the profitability profile and potential is more limited, then we'll look for a way to try to reduce that element and take products and codes out of our business. We also look carefully about our R&D programs and think carefully about where the real growth opportunities are for new initiatives we underway and we're pretty disciplined about making sure that we are managing that on an ongoing basis. So just a summary of guidance, I won't go through this, but it's in your books. If you're interested, it captures what was in the press release today and the other slides that you've seen so far. Before I wrap up, I just want to summarize some of our long-term expectations and how we're running the company. First and foremost, we're expecting the opportunity in the markets we serve to double from $10 billion to $20 billion. I want to pause there for a second because one of the questions we've gotten is, hey, with the shortfall in sales in 2022, does that change the trajectory of your sales growth between now and 2028. And the short answer is not really. So we missed sales, excluding foreign exchange by about $250 million in 2022 relative to the midpoint of our original guidance. $250 million in one year doesn't really change the overall picture and opportunity between now and 2028. The second area where we're focused longer term is on operating efficiency. We have the opportunity to expand our margins. And we think about this carefully because if we wanted to, we could boost our margins pretty quickly by cutting down on R&D, slowing down the investments we're making in our field-based personnel to support the growth of the company. And we've just chosen not to do that. We think the opportunities are so important ahead of us that we should keep investing and keep funding these programs, we think they're going to pay off over the long term. But we do have an opportunity to toggle margins, and we're continuing to look for ways that we can do that when it's appropriate. Finally, in terms of earnings, we're going to see a tax rate this year that is comparable at the midpoint to the tax rate we're seeing in 2022. So next year tax rate similar to this year tax rate, but at probably the best case, it's neutral. There's probably going to be upward pressure on that over time based upon some of the legislation that's being discussed right now. Earnings per share, again, repurchase activities combined with all the other actions we're taking, we think, earnings per share has an opportunity to continue to grow and grow faster than the topline, at least that's the model. So, to wrap up, you've heard about the linkage between our financial objectives and our strategy. And overall, I can say, Edwards is a purpose-driven company, we're on a mission to change the way medicine is practiced and to help patients in need. And we think we have a bright future ahead of us that's going to benefit patients and all the other stakeholders and shareholders that we serve. With that, Mike, I'll turn it back over to you to wrap up.

Thank you. All right. We're running a little bit behind, so I'll catch us up because I want to make sure that we have time for a good, robust Q&A and typical Edwards fashion, we like to deliver on our commitments and stick to our schedule. So we'll do exactly that. Hopefully, you enjoyed all the presentations that came in front to give you more visibility into our businesses and also our financials. Big picture for us. Our strategy is unchanged. It's not because we don't take a hard look at it because we do that every year. I mean we really turn it upside down. We work it hard with our Board of Directors say, is this still right? It's -- it feels good, but should we change this? And we just come away as committed as ever and say, you know what, this is the right strategy. Let's innovate, let's lead, let's stay focused and so we're totally committed to that principle. We think it's differentiated, and we think it's a success formula. We really believe in that. '23 is going to be a year of strong growth. We think that's going to be a really nice year. I won't go through it more. Scott took you through the details, and you saw what was in each of the businesses. I could certainly lay that out in more detail, but '23 will be a good year. But we don't just look at the next year ahead, as we talked about before. We're out there on a pretty significant horizon, but always stay mindful that we should be delivering in the short term as well as the long term. This isn't, hey, you have to wait until someday to see results. You'll see results now. Our Board is pretty special. I'm really proud of our Board. They are highly engaged. These are super experienced people that are committed to our success. And they do everything that you would want from a Board from support us when we need support, to challenge us when we need challenging and really engaging with us. They know our leaders, they know our strategy. They go deep, they bring all their experience. And they also stay on top of the leading practices and make sure that we really perform to the expectations of our shareholders and all the other various constituencies that we feel an obligation to. Sustainability is not a separate subject inside Edwards. We don't have a separate over here. We kind of have just integrated into our strategy. As Scott talked to, this is a purposeful company, that's very much the case. And so it's just integrated into everything we do. We get recognized externally for our sustainability practices, but that's not why we do it. It kind of comes natural for us, and we're going to continue to do that. And it will be a normal course of business and my own performance measures and the performance measures the executive team incorporates achieving all of our goals to continue to be a highly sustainable company. So we're fortunate to be a successful company that has nice profitability, and it gives us the ability to be able to give back. And that's really important to all of us. Our employees love a matter of the fact, the fact that we give back. When we get meetings together, often we'll have a charitable theme to the meeting, and we'll do something with that as the team building activity that we'll do. We have a signature program that we call Every Heartbeat Matters. It has a goal of improving the lives of 2.5 million additional underserved structural heart and critically ill patients by 2025. It got harder with COVID to accomplish this, where we've got over 50 partnerships to do this, but we're going to do it. We're going to achieve this goal. Very excited about that. We also have a simple message to employees. Wouldn't it be great if every single person in the company did one thing charitable each year, something that you care about, not something that the company cares about, your own charity and they embrace that and go for it. The last time we surveyed, over 85%. So it's sort of in the DNA of the company. So I'll just close by saying I think that the company is poised for a very bright future. Why? Big population needs us, right? These patients that are suffering from structural heart disease, they're critically ill and beyond, they don't have great solutions yet. We can make a difference. If we can design procedures that you can do in a short period of time, an hour or 2 and get people home in a day or 2 and change their -- the course of their lives and do it cost effectively for the system, we create a tremendous amount of value, and we focus on those large populations. We're fortunate to have built credibility and trust that it gives us the privilege of being able to innovate and have people take us seriously. We've got this incredible culture where people come because they say, yes, I like the pay and the benefits are nice. The facilities are nice, but what makes me feel good about my job is that I know I'm helping patients around the world. And that just is a real blue for the folks that work at Edwards Lifesciences. We got a pretty special R&D team. Not only are they very bright people but they're innovators. They go for it. They dream big, they reach high, you have to learn to deal with failure along the way because that's part of it when you reach high, but we've got this nice culture that really puts us in a position to be able to accomplish some things that might have been unthinkable not long ago. And our formula for growth doesn't count on doing some kind of a brilliant acquisition. It's still organically create opportunities and turn that into real growth for the business on a long-term basis. And when I look ahead, I feel like the best players are in front of us. We're sort of entering a new era of structural heart innovation. I mean, when I look ahead, I say, wow, this is good. We're in sort of this golden age where it was -- what we did in the past, we're going to almost look at as primitive compared to what we're able to do in the future. And so I'm super excited about what's in front of us. So with that, we're going to take a short break, set up for some Q&A, so the break won't be long, and then we'll jump right in and we'll have a matter of fact, the whole team of speakers here to join me. Thanks. [Break]

All right, everybody. Welcome back. I hope you enjoyed the afternoon. A lot of good information. We've got an hour now for Q&A. So it is a little after 3:20, we'll run to about 4:20. I mentioned earlier, we've got [indiscernible] on this side with the microphone, Linda right on this a microphone. We'll do our best to get to everyone's question. To the extent you could limit it to one question and one follow-up, I think we'll have a good chance to do that. So who wants to kick us off? Robbie Marcus.

Robbie Marcus, JPMorgan. First, Mike, congratulations on retiring. Excellent career, well done and Bernard and everybody else moving around, congratulations. Maybe I could start on the guidance with TAVR, and it's been a tougher second half. It's still growing, but not as well as expected. We're seeing an acceleration in the guidance throughout 2023. What gives you confidence that you will see an acceleration return to double-digit growth into [indiscernible]...

Yes. Well, why don't I start and then Larry, you can talk more about just the big drivers. But just in terms of the guidance itself, we feel like -- if you look over the last 2-year CAGR, 3-year CAGR, 4-year CAGR, it's consistently 9% to 12%. The last couple of quarters in 2022 are not indicative of what we think the growth is going to look like as we model out 2023. The first quarter is kind of a high bar, as I mentioned before, because of the first quarter of 2022 being a high-growth quarter, but we've got a lot of confidence that we're going to return to that 2- and 3- and 4-year CAGR as we get into next year. Larry, do you want to talk a little bit more about some of the drivers for that?

Yes. I think as I talk about, patients are -- we're seeing echoes going up. We're seeing a lot of the diagnosis starting to increase in the system. And we do believe that those patients are going to have to start flowing through the system. I think there could be a little -- maybe a little bit of a backlog. It's hard to quantify. But we also are going to have really a full year of the S3 UR launch in the U.S. We're also going to be launching it in Japan. And we just feel like some of these COVID headwinds are going to be largely behind us in staffing. We are seeing that improve over time. And I think it's a combination of all those things that give us confidence that we're going to be in that 9% to 12% range globally.

Okay. Maybe just a quick follow-up. I forgot to ask, any differences geographically we should be considering. And as we think about the TMT guidance, that also assumes a pretty big pickup. How much of that is the launch of PASCAL in the U.S. versus continued European performance?

So obviously, we are present in Europe for quite some time now. So we are -- the majority of the growth will come from Europe, but also in the U.S. is going to be a good and important growth driver next year. We are going to expand. We are just starting. We are still training the team, training physicians, we have great aspirations for the U.S. So think about more Europe than the U.S., but U.S. will be important.

Larry Biegelsen.

Thank you, Larry Biegelsen, Wells Fargo. And I'll echo the congratulations to Mike and Bernard and the whole team. Mike really, truly amazing 20-plus years. So my question, Larry, I guess I'll ask on the TAVR share question. It does look like Medtronic took some share in the third quarter. What are you assuming for 2023 per share? And what do you think happened in the third quarter regarding share?

Yes. I think it's important to remember, our quarters don't line up exactly. And I think we see slight fluctuations quarter-by-quarter, but I don't believe there's been any real share shift that's happened over time. And I think as new competitors come in over the longer period of time, we do model a little bit of share erosion. But overall, if you look at our history, we've been pretty solid about holding on to our share and we're really excited about our portfolio and our product launches, and I think we feel great about our share position, and I don't think it's going to move significantly -- so it's not a big concern of mine.

And just one follow-up for Bernard. Just [indiscernible] is probably going to present the pivotal TRILUMINATE data in the first half of next year. They said they're going to file. How does that impact your ability to -- if it's positive to enroll your tricuspid trial for TRISCEND II and CLASP II TR. I didn't see anything on that on enrollment.

Yes, thanks for your question. So hopefully, the data that we present will be positive. As you know, there is all the time gap between when you present and when you get that approval, especially when it is the first device for this disease state. So this is what we are assuming here. So if it is positive, it will increase the enrollment of our CLASP II TR study, which is a positive for the field, positive for patients. The TRISCEND II study with EVOQUE is probably one of the fastest enrolling study ever, ever in the company and probably ever in the field. So we are aiming to complete the study mid-next year. And the 2 devices are not necessarily treating the same patient population. So I don't see any issue here, more of a positive than anything else.

Vijay Kumar.

Vijay Kumar from Evercore. Congrats to all of you. Maybe my first question here on the management transition. Mike, Larry and Bernard for all 3 of you. The transition is happening at a time when people are questioning on TAVR outlook, is the market penetrates -- that's where you -- historically, when we've seen this for other companies, there have been more transitions in the leadership team. So Larry, Bernard, I know you guys worked all together. Going forward, what can you say to give comfort investors that there won't be any more transitions, any impact to the business here?

I don't know. For me personally, I'm in the job that I want. And as you get older -- when you're younger, you just kind of chase titles and you chase those sorts of things and as you get older, you have to start thinking about what do you really enjoy doing and what do you love doing with your life. And I love being with the teams. I love being in the cath lab. I love being with our clinicians and working on trials and doing all those things, these 2 smarts never get an opportunity to do any of that stuff because they're out doing other stuff. And so I think I kind of have the best job in the company in terms of what I get to do, and I'm super excited about having my responsibilities expanded and Mike and Bernard and I spent a lot of time together talking about it. And I don't think I can add any more value to the company that I can and my current share. And I mean you're 37 years, and you're probably not done seeing at these things every year.

So let me tell you how do I feel about it? I feel you are very confident for many reasons. First, Mike and I, we are going to work in tandem for quite some time here until May next year. And that Mike is not going anywhere. He will be the Executive Chairman. But that's one. I think it is super important for me to have someone like Mike helping me with this transition. Two is we have a great company. And when I came -- when I joined the company 8 years ago, I was amazed and I am still today. We have great people. Amazing culture. The way we are innovating is pretty unique. The ELT, I have seen many leadership team in my career. That's probably one of the best that I have seen. So I look at all of that, we have a great foundation. We have an amazing transition. And when I think about -- let's talk about Larry again which is very important to me. Larry is an amazing innovator, the TAVR story is a unique story. Nobody has done what we have done with TAVR. And Larry was at the beginning of it. So I think Larry, leading in 2 businesses, that's a great win for me. I love that. He loves that. I love it. So we need that. So I think it is a great solution for everybody.

Yes. And so just to the broader point of transitions and companies, and I know it means a lot of different things in different companies. But anybody even for a second thinks that I stopped carrying as much tomorrow, January 1, may we got it all wrong. I mean I'm all the way and I love this place. I love our team, what we do, what we stand for. I think we have an incredible executive team. And I really count on the fact that we're going to show that, right? We're going to show just how strong our team is as time goes forward. And when we're talking about the new era. I'm serious about that is new era come.

That's a helpful answer. I think Bernard, Larry just gave you a compliment. He said younger people chase title. So here you go. One on finance please, Scott. Free cash flow has been flat for fiscal '21 levels. And when I look at your margin rate, FX is 300 basis points impact, but 30% of margins in place. There's no leverage here in the operating model. With 800 TAVR centers, there should be some SG&A leverage. So where are those investments going in SG&A?

So a couple of things. You're right, the operating margins in 2023, we think will look similar to 2022, which is similar to the way it's been for the last handful of years. This is intentional. We've just seen such big opportunities in TAVR and in TMTT in particular, that we feel like we need to fund them and fund them comes in the form of funding R&D clinical trials and the 8 clinical trials we talked about but also funding the growth with people in the field who can really help train physicians, support physicians and make sure that patients are getting the outcomes that we all desire. So we don't have to run the company that way, but we think it's the right way to run the company because our goal is not annual margin expansion every single year. Our goal is organic, sustainable topline growth. With that, we do believe over time, we are going to see expansion in the operating margins. You mentioned cash flow. So part of this is you don't have expansion in the operating margin, you're not going to have a lot of expansion in cash flow. But we've got another headwind, which is the Section 174, we now have to capitalize our R&D expenses and get the benefit of those tax deductions over years rather than all at once, which is the way it worst -- it used to work. It may be the 174 gets addressed by this Congress, we don't know yet, but that's one of the reasons why we're a couple of hundred million dollars shorter in cash flow than we would otherwise be.

Joanne.

Thank you very much. Joanne Wuensch. There's something you said earlier that said it's a big population that needs us. What's happening to these patients today? Are they passing away or are they a backlog? And I'm having really hard time trying to understand if physicians are seeing this big population, why they're not motivated or why they're not moving or what are hospitals doing to address this?

Yes, it's a great question. It's probably one that frustrates us more than anything. We know the patients with aortic stenosis, we're all the way back to the PARTNER I trial, which were very sick patients but there was a 50% mortality rate at 1 year if you had a severe aortic stenosis that went untreated and you could argue in lower-risk patients, maybe that's 2 years, but patients don't live well with severe aortic stenosis, and we know that, and it's clear in the literature. But I think a lot of it is this assertation of symptoms and going all the way back to the guidelines, there you have these people with the severe disease, but then they're doing this mental gymnastics about whether they have symptoms or whether they're symptoms or attributable to the valve disease and all of these other things. And the patient pathway, it's not like you go see the interventional cardiologist and he manages your cycle of care. You're at the GP and then you go get an echo and then maybe you get referred to a GC and that doctor watches you for a while and before they ever refer you to a heart team. And one of the things that Brian said in the video that's really critical is once a patient gets any intervention, we have all the metrics in the world about what happens to them, how long they live, what the [indiscernible] curve looks like. But from diagnosis to treatment, we have literally nothing. And that's really what we're trying to accomplish with the AHA initiative is creating metrics that hospitals are measured to, that says from the time a patient gets a definitive diagnosis, how long does it take for them to get appropriate guideline indicated intervention. And if we could get that as a quality metric that hospitals had to report on, and that was a 90-day metric, it would be an absolutely fundamental game changer of how patients move through the system.

Let me just add a little bit to -- would just say, I mean, when you think about the different parts of the health care system, there's flaws along the way. The primary care physician often -- because what Larry said, this assertation of symptoms. If the physician sees this as old age as opposed to aortic stenosis, they don't act on that. They do well, of course, you aren't able to walk as far or breathe as well as you used to do. That's just old age. And they misdiagnosed, not through any fault of theirs. It's just it's not obvious to them. In general cardiology, it's amazing the difference between general cardiologists. We see general cardiologists that routinely refer to a heart team as soon as they see aortic stenosis. We have others that say, "You know what, let's keep an eye when you come back next year, we'll take another look", right? And then when you get to the treaters, they actually don't have a great understanding of what's upstream. The treaters themselves, the interventional care, much like the surgeons that we dealt with 2 decades ago when we asked them, hey, are you treating all the years? Oh, yes, I never turn anybody away. They just don't have a good idea who never makes it to their door. And so it's a combination, but through our market expanding clinical trials, through the education efforts, et cetera, we're going to make a real difference in that and we'll gradually improve.

Our first indication is for inoperable patients, which was a population that didn't exist and it turned into about $1 billion opportunity for patients that didn't exist. I think the one last thing about that -- and sorry, I'm so passionate about it, but early TAVR is the other thing, and we got to get to the endpoint and all that. But if we could take symptoms out of the equation for the treatment of the disease, it will completely change how patients flow through the system because we'd just be treating the disease rather than doing all these other level...

So, you just look for an echo that says that the valve is closed. And you don't try and...

It turns into track and field [indiscernible] Olympic figure skating.

Just a quick follow-up for Scott. 30% operating margins, but you're going to invest, but you're going to expand, help me reconcile those expanding operating margins over what time period? And what do you think you can get to?

So I mean a lot of this is just when these investments that we're making right now in clinical trials turn into products and therapies that become commercialized. Longer term, we expect our topline to be growing faster than our expenses, and that's of course, how we're going to get margin expansion. What we don't want to do is curtail the opportunities we see right now for investing in long-term growth in order to demonstrate margin expansion in 2023. So we're going to keep the pedal to the metal on R&D. We're going to keep going aggressively at it. But we do believe that over time, as revenues, the topline grows faster than the expenses that we're going to see margin expansion. And it's probably going to come more at the operating margin than it does at the gross margin, sitting here in high 70%. So that's pretty high for a medtech company. Operating margin is also high, but we think that's probably more where it will show up over time.

And there's real opportunity, and I'll just pile on a little bit. So for example, our supply chain is very strategic and very long-term focused. And so they've got a lot of ideas about automation, in-sourcing and goes on that potentially have margin-improving opportunities. Now at the same time, we're always introducing brand-new products that are very novel that maybe don't have the margin profile. So there's some natural attention there, but we've got some helpers along the way.

Pito Chickering?

Pito Chickering, Deutsche Bank. [indiscernible] question was on to slight twist here. You talked about ages as an issue for patients not getting treated. I just make sure I understand that, these patients are diagnosed with AS and our doctors are refusing to treat them because of their age or they moderate or simply aren't being diagnosed because of their age.

No, I think what we're largely talking about our people that are in the system because what we track is from diagnosis to how long it takes to receive therapy. So I think the diagnosis happens. I think people order the echoes for the patients to understand it. I just think there's a bias in the system. And we see it -- we probably see it even more in Europe sometimes where they literally say, this patient is 80 should we really put them through this procedure and deploy this expensive technology when they're only going to live another year or 2. And that's what's people's -- in people's minds about how long an 80-year-old is going to live because they look at average life expectancy. But it's a very different equation if you take a look at what's the life expectancy is for someone who reaches the age of 80, and that's where you get to that 90-year point. And so I think there's just a tremendous amount of education that has to be done on this. But they're very clearly to me is a bias against treating elderly patients as aggressively whereas I think of a 65-year-old comes in or a 60-year old comes in with that same disease, there's a real drive to get that patient treated very quickly, and we see that in the data.

Okay. And then the follow-up there is, as you think about growth accelerating into 2023, just being driven primarily by cost of staffing issues getting fixed? Or is it primarily from getting these -- the people have been diagnosed with a certain that are being treated in the treatment?

I think it's a little bit of a lot of things. I think we've got to get patients off the sideline. I think the last couple of years, certainly, there's been more patients probably waiting or reluctant to go seek care. And so we need to get that all working again. I think we are seeing gradual staffing improvements at the hospitals, and we are seeing and build capacity back into the system. It's not like we've gone down from where we were pre-COVID, but we've been growing. So the hospitals have been building capacity just not as fast as what they were doing pre-COVID. So I think we're just going to see -- start seeing some of that return, some of that normalcy coming back and patients moving through the diagnosis and treatment funnel more cleanly. I think what's happened is there's these COVID flare up, so somebody might be halfway through getting screened and then they sort of drop out again and then they have to kind of get back in line and come back through again. And hopefully, some of that stuff starts to dissipate. And we try to factor that all in pretty carefully on a global basis, and that's how we got to our guidance.

And yes, there's no perfect prediction of what's going to happen. But I get the privilege of interacting with CEOs of hospital systems on a pretty routine basis and they're not doing well right now. In the combination of inflation and the fact that the staffing issues that means that they can't do all the procedures that they'd like to do, and we're in a fee-for-service system. And so they're highly motivated to fix those staffing issues so they can do the procedures, so they can get paid and get their system back and balance. And these are smart people are going to make it happen. And so they've built nursing programs. They changed the way that -- they do their benefits and so forth. And I really think it's going to gradually improve over time.

Travis?

You gave -- I guess you reiterated the guidance for 2022, but maybe you can give a bit more color on how Q4 is shaping up. Some of the flu, COVID, staffing trends and U.S. OUS. I'm assuming it's -- the quarter is not just all driven by currency, getting better. There's probably some underlying trends there better. So just any color you can give on Q4 would be great.

I mean, currency has gotten a little bit better, but not enough to really change our guidance that we provided. We gave guidance on October 27. So we're right in the middle of the quarter. We're a few weeks later. We're just not going to get into the week-to-week play-by-play, by country, by business unit. What we will say is our guidance is unchanged. So the guidance that we provided back in the end of October is still the guidance for Q4.

Okay. That's fair. And then for next year, you said pricing was stable. We said there's a $1,500 markup on -- I think it was a safe with the RESILIA. So I wanted to make sure I understood those comments on how you're baking in pricing in for next year. And then also to make sure you had a little more color on the export trial that you stopped?

Yes. So a couple of things. When we say pricing is generally stable, we're talking about that on a global basis and because there's reimbursement changes in certain markets in Europe and other things that happened this sort of offsets that. And we still do the volume discounting that we do, but we are absolutely going for a price increase with SAPIEN 3 Ultra RESILIA. The list price changes, $1,500. And so that is factored into our guidance as well. And we'll be rolling that out throughout the year. When you roll out a product and there's no price increase, it just goes on the shelf immediately. When there's a price change, it has to go back to the recontracting process, so that also takes time to get through. So it's -- we're going to be launching it all throughout the year as hospitals sign the contracts and as hospitals move forward. And so that's, that. On the ALLIANCE trial, I want to be as clear as I can on this. We love the platform. And the valve perform spectacularly and this trial is enrolling extremely well. So we were really pleased with how the trial is going. But the bar that we've set with SAPIEN 3 ULTRA and now SAPIEN 3 Ultra RESILIA is really, really, really high. And we see an opportunity right now to improve the user experience. And when it comes time that we enter the market with X4, it needs to perform at a really high level. And one of the things just to note too is we didn't do an early feasibility trial with X4. We went straight into a pivotal trial with it based on all of our bench testing and based on all of our things. And we just had a learning when we got into clinic. But I'm extremely confident that we're going to be back in trial next year. The changes we make are going to be minor. But it's not something where it's affecting the delivery of the valve or the valve is not performing right. It's just a change that we think we can address relatively quickly. The problem is any time you pause a trial and you have to restart it, you have to go back to the IRB review process again, you have to get FDA IDE approval again. So there's just a time lag there, but we'll be back in clinic next year with this platform.

Yes. And just it's fair to add that the Explorer has a lot of novel features to it. I mean it's really remarkable. And it took some care to jump directly into a pivotal without an early feasibility study, but we said, let's go forward where you have a lot of expertise. But when we learn some things and say, we can make it better. And we said, "you know what, a slide pause?" -- that's absolutely worth it, right? It's going to pay off well in the long run.

Well, and remember, too, we're just launching S3UR now. So it's not like we're in this portfolio wasteland where we have no new products or anything. So we really have the benefit of time that we can take the time and really make sure we get it optimized. Josh?

Josh Jennings from Cowen. So I am hoping to ask about the U.S. TAVR market and just 3 buckets of smaller segments. Maybe you could comment on Larry and maybe for '23, but also throughout the '28 -- through 2028 as well. But just thinking about TAVR in SAVR, TAVR in TAVR and maybe even low-risk bicuspid patients. And those coming off of a smaller base, you should be seeing significant growth contributions from those 3 buckets. And I just have one follow-up?

Yes. I don't know if I can quantify it real directly, but I will say a significant part of our business is non-native aortic TAVR. We do a lot of surgical valve in valve. We do -- increasingly, we're doing more TAV in TAV. But the other thing that we do is people forget, we do mitral valve and surgical valves, so we fix the mitral valves, and that's on the indication for us. We also do rings. So that's another thing that we're able to do, and those are all approved indications for us, and we also have pulmonic, which we're growing with Alterra. So there's a lot of things we can do, but those alternative segments are all growing, and that's something that we benefit from as well.

Just a follow-up on just CLASP IIF. It wasn't emphasized today and just wanted to understand why not? And just as that trial design evolves similar to CLASP IID? Is that a Bayesian design now and [indiscernible]...

So first, let me tackle the second question. Every trial is different. You have a different, obviously, statistical analysis, endpoint, all of that. So you cannot expect that what we did with one trial will be translated to another trial, correct? We are trying to be aggressive, strategic for sure, but we want also to bring in a world-class evidence. So I would not expect this on IIF. With regards to why not talking about it is, look, I talk about the one that we are going to achieve a big milestone in 2023. EVOQUE completing enrollment media next year, CLASP IID in my mind is going to be very meaningful. You have a full cohort in 1 year. So this is -- and M3 SAPIEN. So I try not to focus on what's going to happen next year. IIF is going well. It is an important study, and I'm going to talk more in the next quarters.

Christopher Pasquale?

Christopher Pasquale, Nephron. Bernard, a couple of questions for you. We've talked a lot about the slowdown in the U.S. TAVR market, but the U.S. TEER market has actually been even more sluggish in '22. You're now a participant in that market. Have the causes of the slowdown there been the same as TAVR or different? And what do you think that market grows in '23?

Yes. I will see a little bit the same, and there is also some differences. So the same, obviously, the COVID, the staffing, obviously, it is impacting all of this space. What's different though is the clinical evidence. In TAVR, we have so many evidence, solid evidence for years. And we were one of big leader in that space. For mitral, like I said, very little evidence in the past 10 years. And some of the evidence were mixed. So it is why I'm very excited about CLASP IID, even if it is just for the DMR patient population, but physicians are looking at CLASP IID and they are saying, look, it is contemporary data with both devices and it's working very well. The TEER outcome is better than what it was 5 years ago, 3 years ago. So I am truly hoping that this will give confidence to the physicians, to the community and to patients -- so I think that is changing. And this is what is impacting the mitral space in the U.S. and in Europe, to be fair.

Yes. That's helpful. And then you talked about growing tricuspid adoption in Europe, had some great data in London Valves. Key ballpark for us just how big a part of the European business tricuspid is at this point versus mitral because we tend to think of that as a mitral business, but it sounds like you're making more progress on the other position.

So for sure, it is still smaller business. We don't have the same base in the mitral. Mitral was in Europe for about 10 years -- 8 years or 10 years. But we see a growing interest. The physicians are calling us to be trained to start tricuspid activities. So we are very impressed with the ramp that we see in tricuspid. We are pleased with the kind of outcome physicians can achieve with TEER devices in the tracked disease position. So promise, a lot of promise, and it is exciting.

Rick Wise?

Rick Wise, Stifel. Bernard, during virtual recent doc calls lately, PASCAL has come up again and again very positively. And just a really strong positive physician reaction. Could you talk about your commercial initiatives in the U.S. And it seems to me this is one of the areas that could actually be more at the upper end because of the counter reaction I'm hearing. Is that a reasonable thought?

Yes. Let me start first with the technology itself. Look at what we have done. As a company, we know how to do that. The way we are innovating. We launched with PASCAL Gen1. We came up like a few months later with Ace and then a year later with Precision. This rapid evolution of the technology, being able to respond to physician feedback to make technology better all the time. And we have already ideas about the next generation of PASCAL. So obviously, we have, like you said, a solid platform. PASCAL Precision today is differentiated. In the U.S., we want to be careful. In my mind, it is all about excellent patient outcomes from the beginning. Physicians, they want to go fast also. And we are the ones telling them, look, training is important. It is a TEER category, 2 different devices. Let's take the time for you to be trained, your team to be trained. Imaging is also a good...

We're hearing this all the time. So it's routine. They're saying, "Hey, I do a lot of the other technology. Why don't you just give it to me? I know what I'm doing, right?

Exactly. So yes, so it is like I see the potential in the U.S., amazing platform. We are bringing evidence. We are going to be very careful about training the physician the right way and deliver on this promise.

All right. Great. And by the way, don't demote Larry, for calling your names in public. He's a good guy.

You should hear what we do in private.

A quick follow-up for Katie, if I could. Katie, I apologize for making you the macro person on the panel, but a complicated capital environment, recession, chip surges. Just any sense you could give us are things getting better, worse, stable? Are you feeling more encouraged, less encouraged on any of those fronts?

Thanks, Rick. So first of all, we've really taken a strategy to make sure that we don't go on back order, and we've seen many of the companies going into back order situation. So as Mike mentioned, we have a very strong global supply chain. We don't anticipate seeing any back orders and we see some risk, obviously. But so far, as we look through next year, it looks pretty positive, especially on the chip front, which was a risk this past year. And we just took the strategy like we're going to do everything we can to make sure that our patients are covered. The question about capital and the recession. People have asked me at the break, -- is this -- are you seeing it? Or are you just worried about it? I would say right now, we're not seeing a significant change in our capital ordering patterns because if you recall, like it takes a year, right, between you start the order process till when you actually close. But as you know, hospitals live on their investments, and that's really how they fund their capital budgets. And so we're just seeing that as the recession hits and as the equity markets are down, it may shift. But right now, I think we're in good shape.

Yes. I'll just add to this. Katie and her team have done an amazing job of innovating and they really have a lot of momentum going. And I know she spends time talking about capital, and there is a component of the business that's capital, but it's the small component of the business. Most of it are actually disposables. And especially now that there's more value add within disposables because they are the smart algorithms that are behind them. Most of it is not really so sensitive to capital only. There's a portion of it, but not in a way that some other businesses might be.

Adam Maeder?

Adam Maeder, Piper Sandler. Maybe just one quick follow-up on the TAVR outlook, the 9% to 12% underlying worldwide growth. Can you just maybe talk about the different geographic assumptions between U.S., Europe and Japan?

Well, I'll start. Again, I'll go back to part of this has to do with the baseline comparison. So we've had pretty high OUS growth in 2022. So it will be a higher hurdle to get over that. And our expectation is that there may be pressure on the growth rate outside of the U.S., not because the business is not performing well, but because 2022 showed well. By contrast, in the U.S., a little bit lower bar, especially in the second half of the year 2023.

But having said that, presentation rates outside the U.S. are pretty low for TAVR, still by comparison in the U.S., there's a dramatic difference. So we just see international growth rates continue to be probably overall a bigger driver.

Yes. The other thing I'd say is, and I think the thing that Scott brings up is really right because there's so much quarter-to-quarter variability this year, if you go to different regions. If you look at Q3 in Japan, it got hit pretty hard. But if you look next year in Japan, we're going to launch S3UR in Japan. And we were right in the middle of the low-risk launch or just starting really the low-risk launch in Japan when Covid really hit, which made things difficult. But the other thing is Japan never got S3 Ultra. They never got SAPIEN 3 Ultra. They were selling the SAPIEN 3 platform. So they're going to go straight from SAPIEN 3 to SAPIEN 3 Ultra RESILIA, which is going to be a big jump for them because it has all the benefits rather than just sort of the incremental benefits of the RESILIA. So we're super excited about that launch in Japan, and we think that's going to be a driver too. But we really tried hard to factor all that in, but it's hard to talk about the regions because it changes quarter-over-quarter based on what happened in the previous year.

I'll just add to that. Just when we think we figured out what the model is and crack the code on what the growth rate is going to be by region, we get surprised. And this is happening consistently, but it also gives us confidence in our strategy for TAVR, where having this therapy available now in so many countries across the world really gives us some protections as one region may slow for whatever reason, wave 7 in Japan, tough comps in another one. we've got other fuel that can help propel the overall business performance.

That's really helpful color. And then for the follow-up, maybe for Bernard on PASCAL launch in the United States, just any metrics that you can share today in terms of where we are with procedures or accounts and kind of how you expect that to evolve over time? And if I heard correctly, did you say you've a sales force of 20 for TMTT and how do you expect that to grow kind of over the next 12 months?

Yes. So let me try to first start with TEER. So we started about a year ago with a small team of people. They are all trained, certified. They're ready to go. During 2022, we have hired much more many people. They are in training right now. So by early '23, we will have an expanded team ready to tackle more sites in the U.S. In terms of where are we? We have -- we focus initially on the CLASP IID and CLASP IIF centers, the one who know the device already. Nevertheless, they got training again just to make sure we're going to have an excellent innovation outcome. We are active in a few centers. We have done a few cases with great outcome. And we are probably discussing right now is 40, 50, 60 centers. We are talking about contracting all of that. Think about it -- when you came in a second with a premium price, correct, like Larry said, contracting conversations are a little bit more slow and we need to show you the benefit -- innovation, differentiation, what we bring from an evidence standpoint, what our team are bringing to the physicians. So there is conversation happening, it's positive.

Is it fair to say, probably not really a step function in the U.S., but probably thinking of more of a ramp.

Yes, exactly.

Matt Miksic.

Thanks so much. Matt Miksic from Barclays. Mike, we miss you, obviously. Bernard, congratulations and on all the progress in TMTT, and I guess, Larry, for having the best job of the group. So I wanted to follow up on a couple of things that we've talked about. Mike, you mentioned just now that the OUS maybe is going to be a stronger contributor to growth given the penetration rates, opportunities there, product cycles you just talked about. So can you hit that middle point of your TAVR guidance, call it, 10%, 10.5%. if U.S. doesn't return to double-digit growth during the year? And I have one follow-up.

No, I think we need the U.S. to grow. There's no doubt about it. It's the biggest part of our business. And so we need them all to grow. So underperformance in the U.S. is not going to get swamped by overperformance OUS, we really need that to come together. Now of course, on the margin, of course, there could be some compensating. But overall, no, we needed all the work.

Okay. That's great. And then, Scott, following up on margins. So flat 22% to 23%, roughly in the operating margin. One thing that many of the other companies talk about don't -- that you don't talk as much about is sort of inflationary pressures as it pertains to this next coming year. You had a big impact from FX hedges and so on. But labor is obviously a bigger part of gross COGS maybe for you than some of the other folks that we cover. But can you talk a little bit about if that's a part of why you don't talk so much about it as you move into 23?

Yes, sure. So first, just a clarification on margin. Absent FX, margins at the operating level will be close to the same with 2022. But we're going to see a several hundred basis point decline based on current rates from our forecast for 2022, all due to FX. Longer term -- your second part of your question was about?

Inflation.

Inflation. Longer term, we think we're going to see more evidence of wage inflation. Short term, we're seeing probably 0.5 point to gross profit margin. So 0.5 percentage point hit as a result of inflation. The reason we probably don't talk about it as much as some other companies is because it may not be affecting us as much. We do buy materials and supplies, but it's not as big a component of your overall cost of sales. And so it's an issue. We've got dozens of people managing it actively, but it's not something that's really changing our...

It's fair to say probably some of the efficiencies that we had in the supply chain end up covering up some of those inflationary matters as well.

Anthony?

Anthony Petrone. Congratulations, Mike, great career building the company. Congratulations, Bernard, John, everyone on the new roles. Maybe I just want to jump back to TAVR pricing in 2023. It looks like just on the base price, that's about a 4% to 5% increase. I think we typically use a $32,000 base price. So is that accurate? And then I think the data out there suggests that the competitors out there with a slightly lower price. And so when you think of hospitals being a little bit price sensitive, how much risk is built into that assumption? And then I'll have one follow-up.

Sure. Well, yes, we take the list price of $1,500. So it would go from $32,000 to $34,000, but then everybody has volume rebates in place. And so those will continue. So for modeling purposes, the number is obviously lower than that. But we're not obsoleting SAPIEN 3 Ultra. So if a hospital doesn't want to move to the RESILIA platform, they don't want to pay the premium. They can continue on the platform they're on of SAPIEN 3 Ultra. So we're not -- unlike other launches where we just took everybody. We knew when we did the price increase, we were going to have to stay with the dual portfolio platform. So everybody may not come, but the people who come can do at a premium. And we've also had some hospitals that says, hey, maybe we're going to use both platforms and figure out how we do it. But for me, I think it's a hard valve. And do you really want to say, "I don't know if I want to give $1,500 for the better valve." I mean, I think at the end of the day, people are going to value the innovation. And frankly, Daveen has gone from much larger price increases on a percentage basis on Inspiris and it's the #1 implanted surgical heart valve in the world. So clearly, people recognize the value of RESILIA. This is a really unique opportunity for us because we get to partner and draft off of everything that he's built in the last 6, 7 years of the RESILIA brand and all the other things. And the surgical community has already bought off on it. They've already huge supporters of it.

Yes. As you see that we're starting to show more and more of the data that I started talking a little bit about today. People really say, yes, this may be something a little bit different. So maybe it's worth paying a little bit more for and so that premium, it's never easy, but it becomes a little bit more appetitable. And to Larry's point, when you're talking about heart valves and the savings of one's life, people are willing to kind of say, okay, let's have the best technology out there for that person because we really think that extra year or 2 years or whatever that ends up being is important to their life.

But if you don't want to make the journey, you can stay on SAPIEN 3 Ultra.

And a follow-up would just be on the work proof. So starting from Echo, CT and then to an extent [indiscernible], EKG, chest x-ray, cardiac MRI and then catheterization. A lot can happen in there. We're seeing that now. And so when you think about at the TAVR center, what's being discussed there to maybe streamline that process a little bit? And is there anything potentially in the way of maybe guidelines that can change to -- say maybe one step can be taken out of there and then streamline as a process?

We talked about a lot with the national coverage decision. And remember when you started, 2 surgeons had to review every patient because the indication was inoperable patients. So who can determine if a patient is operable or not, it can only be the surgeon. And the heart team has been really powerful and half the procedures we did were transapical procedures. And so there was almost this 50-50 involvement. And so it was really a true team. If we look at how the procedures evolved, the overwhelming majority of the procedures we do now are transfemoral and even the alternative access now isn't predominantly TA -- people do some flavian or transported or other approaches. So a lot of -- and we know we have low-risk indications, which it doesn't take a surgeon to say whether somebody is low risk or not. But a lot of these things are just holdovers because they've been written in the NCD for a long period of time. So I think there's certainly things we could do to make it more efficient for patients. I think one of the things we're trying to do with the variable sizing aspect of X4 is maybe we can reduce some of the precision required about some of the prepatient screening. Clearly, when we take profile down, you don't have to be as precise with the access screening. We've taken transesophageal echo out of the procedure largely, which also can take general anesthesia out of the procedure and just to use conscious sedation. And that's one of the ways we've driven the length of stay down and closure devices, all of those things, they all contribute significantly.

And you can even add to that in addition to those kind of fundamental changes that Larry's team is trying to drive, just everybody talked about in terms of educating the valve clinic coordinators. I mean their job is to move people through that system. And we see experienced valve clinic coordinators that have well-oiled machines, they're able to move people through the system very efficiently. And so when we put on these programs, and we allow people to share best practices with each other. They're sponges, right? And they come right up the curve. And then the same potential exists with the TargetAS initiative by the American Heart Association. They're actually going out there, working directly with hospitals and developing measurements, to say, okay, how well are you performing? And those kind of things will ultimately make a difference.

Yes. And it's -- it's not that there's not a capability to do it. We have one of our centers a few weeks ago. They had a patient show up in the morning and they were kind of urgent. They did the inter work up and did the procedure that day. So it can be done. It just requires a lot of planning and a lot of handoffs and being done really precisely. And frankly, it's just not the way the health care system is built now. It's not the way they get paid so people schedule their different office visits and do their things, but the opportunity is there to improve the efficiencies in the system more broadly.

Rich?

Rich Newitter from Truist Securities. So first question, I think one of the things people are trying to get a better sense of what the RESILIA pricing is with respect to the 9% to 12% underlying growth rate, just how significant of a contribution factor is that a pricing aspect? Are we talking hundreds of basis points? Is it minimal? Can you give us any sense, we're all trying to figure out what in kind of growth trajectory for the business?

It's in our guidance, but it's a small part compared to the overall unit growth that we have to get. And so -- it certainly is a contributor to what we have planned, but it's not the lion's share of where our focus is. And remember, like I said, we're going to be rolling it out through the course of the year. It's not something that is going to be fully rolled out at the end of Q1. We anticipate that we'll be rolling it out all the way through the year next year. So we're really focused on getting patients off the sideline and seeing the unit growth. That's our primary focus.

Okay. That's helpful. And then just, Scott, thanks for the geographic comments. I guess if I just think through it. So really, U.S. is going to be more of a back half acceleration. OUS is tough comps in the first half. So if I think of kind of the trajectory, is it fair to think from a guidance standpoint as we build our models for the quarterly cadence. Is it realistic to say that the double-digit potential is in the back half, really not in the first half, and we shouldn't really expect double digits until the back half?

That's a fair modeling assumption for now. I mean, obviously, we're trying to crystal ball this. We're just going into the holiday season, trying to forecast what happens as we get into Q1 with the tough comps from Q1 2022. So yes, from a modeling perspective, that's a fair assumption. We're in the first half, growing year-over-year growth rates as you get further into the year.

Bill?

Bill Plovanic, Canaccord. For Larry, just a follow-up on the RESILIA. Let's say Q3, what percentage of the market or percentage of valves do you think in the U.S. will eventually be RESILIA? It sounds like you expect that transition to be complete as you're exiting '23. Is it 50% ultimate penetration?

I think it's going to be the predominant valve. I don't think...

You know, it might be interesting is, Daveen, why don't you comment on where do we stand right now in terms of RESILIA penetration on surgical heart valves. I think as Larry correctly noted. The premium was much higher.

Yes. As Larry said, we had a much higher percentage premium and higher dollar value premium actually than that. And we took it -- when we launched the product actually in 2017 and early 2018, we didn't have all the data we had today. But over the years, we just had a great linear growth where today, it's the vast majority of our product. The majority of the product in the U.S. is the RESILIA tissue. So it does actually just grow and people take it on time. And it did take a little bit for, hey, when you see a contract in the first time and you have a contract and they look at it and say, "Well, wait, that's quite a premium. That's a lot higher than my competitors." It takes some time to show the value and explain their features and show the data, but then they've been coming online. So it is a little bit of a process. But, Larry?

I think it's going to be the primary valve. I think it will become the leading valve in our in the U.S. So I think that's going to happen. But again, it's going to take time. The other thing, too, I'll say is the approval came earlier than we had anticipated. And so we're still scaling up our supply and our manufacturing and some of those other things. So that's something that paces our launch a little bit as well.

It's fair to think that, that transition will be complete as we're exiting '23 or is this something that will...

Well, I mean I look at -- you launched in 2017 and there's still sites you're converting. So I think we'll get the bulk of it probably converted by the end of next year. But then I think we'll have the trickling effect that could go on for a couple of years. And there may be some people that never made the journey. So I can't tell you exactly what it is, but I have both platforms available. And so it's -- it's not like that's the only platform where I take everybody there. And if you want to make the journey, then you got, then you have...

One of the things at NICE is, it's the same platform that we use in surgical valves. And at the same time that's going on, and it's being launched in TAVR, we've got a lot of follow-up in patients with RESILIA. And so you're going to be able to probably speak to what -- are we going to see 7-year data.

Yes, that's I talked about earlier. I think when we have the 7-year data, I hope that helps the TAVR business a lot when people say, "Wow, we have 7 years of RESILIA."

It may not mean much to you all, but if you're in the valve business, we've seen other valves that sort of start topping off around 7 years. So -- it's a pretty meaningful data.

Yes, I think there's a lot of valves, as I mentioned a little bit, like each year after kind of 5 years, you start to really see that deterioration occur. And with our benchtop testing so far, we think it's meaningfully different at 7 years. And so then I think if the clinical data helps support that, we will feel really good saying, wow, this tissue at 7 years maybe better than previous generations, which I think will help Larry's group a lot and help the tower business out as well.

And then my follow-up is just are you seeing in terms of staffing issues, procedure volumes a difference in the benchmark such that you have versus other sites? And if you kind of use that as your measuring stick, how do we think about that in kind of helping?

Yes. The benchmark program for people who embrace it and really adopt it and take on the whole program. They go from being able to do 2 cases a day and their systems being able to do 5 cases a day. And that just makes a huge difference in terms of their capacity because it's a lot easier to do more cases in 1 day than it is to add necessarily a second day. So getting the capacity and it's also easier on us to send our people there and do 5 cases rather than do 2. So it helps the whole system, and it's just a much more efficient way to do it. But what we're really doing is just pulling unnecessary things that aren't needed anymore. And a lot of these things are hold over from the early days, but it's -- when something's working, people are reluctant to change it. And they're like, sure, we have the full scrub nurses here from the surgical center, but they never heard anybody. So why not just keep them here just in case something happens. And it's just not a very efficient way to run a system. And that's why it's so important we do it on a peer-to-peer basis where it's other physicians saying, I've implemented it, here's how we did it, get administration involved, but it's not a light switch. You have to walk everybody through the journey.

But that's one area where we partnered too because if you can get to a minimally invasive or noninvasive anesthesia, you can turn the room so much quicker. So...

Cecilia and Matt, I see you over there, my eyes aren't as good as they used to be. I'm sorry, it's taken me so long to get that far away, but maybe the 2 of you and then we'll wrap it up with one other after that.

Cecilia Furlong, Morgan Stanley. I wanted to ask just, Larry, your comments around where you are today, 850 or so centers in the U.S. and the thought of expanding TAVR teams going forward? And can you just speak to capacity in the system if you had full staffing today versus how you think about just the growth and need to continue to expand TAVR team capacity?

Yes. I think we'll continue to add centers, but it's not going to be at the same rate we have historically. So as new centers want to get added, I'm sure we'll see -- I don't know, make up a number, 10 or 15 a year, maybe that might come on. So the overwhelming majority of our growth is going to come from existing centers rather than adding new centers. But centers have shown the capabilities of being able to add capacity throughout this entire journey. If you look at some of our volume we were doing even a few years ago, we were doing it in 400 centers. So we have a lot more centers now than we ever used to have, and they've shown the ability to add that capacity. And benchmarks are fully deployed. We have a lot of hospitals about a second day or in some cases, they've added a second team. So the capacity is there. I think it's just a matter of connecting all the dots for them. It's getting -- the patient referrals flowing, making sure they understand the need for adding an additional day or adding an additional team and just work them through that process. But I don't have any question the capacity is there in the system to handle more patients.

Okay. And I just wanted to follow up on the patient side. You talked about initially last year, direct patient outreach. You talked about it today again. How much of an impact do you think that's having on investment that you're anticipating going forward? And then just we would love your comment and maybe 2, just the discussion around the risk that physicians are having with patients, how that's evolved from low risk was approved in 2019? And benefits, drawbacks of TAVR versus surgical?

That's the best one question I've ever gotten. The -- in terms of our outreach efforts, it's -- there's a lot of outreach efforts where we do that we can connect and say, we reach out to these patients and we reach out to these refers, and we saw a pickup in referrals from that general cardiologist. So we know that, that program is working. When you do things like television or you do things like some of our digital media, it's harder to say people anecdotally say, yes, I saw the TV commercial, or they anecdotally say I saw this on social media. Once they connect up through our digital platforms or through [indiscernible] TAVR and they give us their e-mail address and want to be caught up, then we can find them in the system and we can find later if they were actually treated. And we do see a lift from our therapy development efforts. So we think they are working. It's just probably the hardest time right now to run analytics because the last 2 years have been so choppy with COVID and variants and all those sorts of things. And so don't really have that steady state. And remember, it takes patients on average 4 to 6 months to move through the system, and it can be longer for the older patients. So the work that we're doing today to energize somebody, those patients may not show up for several months into the system. And so we got to factor that all into our analytics. But we're committed to the outreach programs that we're doing. We know they give us a lift, but it's not super easy to necessarily quantify exactly which program has the greatest lift, but we're continuing to run the analytics, and we're always fine-tuning our investments for the things that we get early reads that say, this is working better than something else. In terms of the physician discussion with the patients, it certainly has evolved over time, but it lags. When we go out and do survey work even for general cardiologists, there's a shockingly high percentage that don't even realize TAVR is approved for low risk even though that approval came some time ago. And so once we find that information out, we can fine-tune our education. But you still have surgeons when they talk to patients and they say, "You're a perfectly good surgical candidate. It's a tried and true." We've done this. And so there's still some of that goes on. But that to me is still less of the issue. What's the issue that I'm more passionate about. If somebody comes through the system and they are low risk and they end up getting surgery instead of getting TAVR, so be it. That's not really -- I don't care that much about it. The fact that in an elite institution, 50% of the people with a guideline indication for ABR are not moving through the system. And that's just where like there's just all this gold buried there, and we have to figure out how to address it, and that's why it's become a huge area of focus for us.

Yes, because the TAVR-in-SAVR thing is now the minority. That's like the edges, right? If you look at surgical patients, the majority in the U.S. are aortic regurgitation or concomitant cases or something else that's on label that's indicated for surgery, but probably doesn't make sense, that doesn't make sense for TAVR. And if we just get more of those 50% higher, that's really what's going to drive the system versus, "Hey, we get a little bit of TAVR-in-SAVR ratio shifting." I think that's the minority of the growth.

We've had -- I mean, it's been a little choppy the last couple of years, but we've had a number of times when we get a new indication, we see TAVR spike, but surgery grows faster than what had been growing before because patients come off the sideline and not every patient is a TAVR candidate, we see surgery growth. So it is really about getting those patients energized and getting them off the sideline. And some of that is getting the GCs energized. Some of it is getting the patients themselves and their care givers energized.

Matt Taylor from Jefferies. So two questions to add to these core base, please. So one is, I was hoping you could address the idea that some investors have brought up that excess mortality in the eligible TAVR-in-SAVR population has led to this kind of air pocket because of COVID over the past few years. Do you have any data or thoughts you could share on that as to whether that's a big enough factor to have changed your growth rates?

So the excess mortality, we do know that elderly patients were disproportionated affected by COVID. And so when you look at the people that die the over the age of 80, I think it was around 150,000 people or something like that, that had died that were over 80. And if you look at prevalence rates of TAVR, you'd probably say 5% of them could have been potential aortic stenosis patients. And so you can do the math on that. And certainly, there are some patients lost there. But that was sort of a 1-year phenomenon. And even when you do that math and you compare 10,000 people or 15,000 people, if that's in the loop compared to the treatment rates and the overall group of people that's saying out there, it's a really small number in the big scheme of the under treatment. And so there certainly were some patients lost, but I don't think that was like a big headwind to what we saw.

Great. And one follow-up where I like your slide on the BCCs and I guess there's some good news and bad news there trading a lot, but a lot of churn. So my big picture question is, in the current environment, there's all these staffing issues that are bottlenecks. How much of it is just macro and how much of it can you actually influence and control? If you could give us 2 decimal places, that will be great.

18%, I don't know. It's -- every hospital we talk to complains about staffing. There's not a hospital that we talk to that doesn't say we can't hire enough nurses or we can't get enough staff here or -- and it's not just nurses and hospital staff. It's sometimes the people that help turn over the room and auxiliary staff and those sorts of things. So that's clearly a problem. But we also -- we have a number of hospitals that are sort of back at their pre-COVID capacity. And those hospitals complain just as much about staffing as the hospitals that aren't growing at the same rate. So I think staffing is a headwind, but I think hospitals are overcoming and they're afraid not to get their patients treated. And the thing that Mike said is absolutely true. Hospitals are hurting right now economically, some of the costs, some of the other structures. They're not going to get a radical margin improvement. The only way out of it for them is growing procedures. And you look at the cardiac procedures that are pretty profitable for hospitals and TAVR procedures at most hospitals are pretty profitable procedures. So the way out of their economic challenge is to get their procedure volumes back up and to grow again.

Okay. We've got time for one more question, and then I'll turn it back over to Mike, who's going to introduce a special patient video. To the extent I wasn't able to get to your questions, I apologize, we're going to have a reception right after this, where we'll have the management team available for another hour. And so before the last question, I also want to thank [indiscernible], Linda Wright and Oliver Moravcevic. I really appreciate your help making this event possible. You guys are great. Last question to the analysts who travel defer this, I think, Ed early day, all the way from London and then we'll go to the patient video.

But a quick follow-up on PASCAL. We talked a lot about the U.S. opportunity. Let's look at Europe. You've got great success you're well established now. Can you update us roughly what you think our market share now is in Europe? And related to that, also, the duration of sustained effect, that's obviously important data. Have you seen already a benefit in Europe from that data with the physicians you're speaking to?

So I'm sure you remember, we started in Europe in Germany, from the beginning. It is where we made a lot of investment. The team, physician training, opening accounts. We are very pleased about our share position in Germany. I'm not ready to give you a number, but very pleased about our share position in Germany. I'm not ready even to give you a number, but very pleased about our share position in Germany where PASCAL is well adopted by the larger German centers, they have great outcome after London Valve. To answer your second question, some of the physician in multicenters were presenting PASCAL, and they were doing a propensity match against MitraClip with great outcome. So what we see Europe is Germany. We have a great footprint. France, which is the second largest market in Europe, we are not yet present. We are going to use the CLASP IID data to get an approval and reimbursement in France. So in other countries in Europe, we are expanding. And there is still a lot more to do. We need to -- in the next couple of years, we need to open new centers across Europe and also in Germany. So we are pleased where we are here and more to do, basically.

I have a very quick follow-up for Katie. To turn around the capital discussion, before you're doing a smart recovery, frankly, you're helping hospitals saving time, reduce costs. So is that actually something that they want to cut right now?

Is it true that hospitals want to save time and reduce costs, is that the question?

Well, they do, certainly. So I would suggest HemoSphere offers a nice solution for them.

Yes. I mean I think it's very much similar to what we've been talking about here today, like if they could get patients out of the ICU faster, then they can bring in more procedures and take more risk on all of these cardiac procedures that we're talking about. And so the more that we own baseline data to show them that they can actually get patients home faster, they can actually get the throughput, then it helps everything. I mean it helps the system and it helps nursing, it helps everything. And so we have seen the hospitals that adopt smart recovery getting that efficiency, and that's why you see kind of this correlation of the benchmark program that Larry was talking about. Thanks for the question.

Okay. So thanks so much for all your interest in Edwards. We never like to close one of these sessions without reminding ourselves why we're all here. And as we mentioned before, what we do is kind of a team support. And of course, the company is committed, but the physicians that we serve, the regulators that we work with, the communities that we're in and frankly, the investors in our company are all part of this, and it leads to some pretty fun stories that we've got one to share with you now. [Presentation]

So pretty fun, right, then it's really a privilege to be able to do what we do. But I'm honored to say that we've got Dr. Dorothy Cantor who is here today, and she's going to be willing to hand around a little bit. Thanks for being here, Dorothy. You give us inspiration. So thanks, everybody, for your interest in Edwards Lifesciences. Me and the rest of the presenters are going to be around and Dr. Cantor.

The one who proves it works. If you have any questions, talk to me.

Thanks, all.