Edwards Lifesciences Corporation (EW) Earnings Call Transcript & Summary

Travis steed, the medical device analyst and continuing our medical device conversations today. Next up, we have Edwards Lifesciences, Bernard Zovighian to the right, CEO. And we got Scott Ullem, CFO. So great. Thanks for coming. Looking forward to a good discussion.

Pleasure to be here.

Thank you. So I want to open up with kind of a big picture question. And you've laid out commitments at the Analyst Day back last December. Just lots kind of changed since then. And now you've been CEO for a couple of years. Just like trying to think about your willingness to talk about the commitments you laid out and how those have kind of unfolded and kind of the path forward here?

No, thank you. It is a good first question. So good morning, everybody. Great to be here. Very pleased about the way we ended the year last year. We had a strong Q4, the way we started the year, a strong Q1, also what we said about the full year 2025. I think this top line guidance, 8% to 10%, we have confidence given the way we started the year, the EPS, $2.40 to $2.50 for the year that we gave in December last year at the investor conference. And what we told basically everybody at the end of Q1 is we are able to maintain it while also offsetting the upcoming potential dilution from the deal with JenaValve together with the cost of tariff. So all of that, in my mind, is strong financial for the year, very confident about it. But what excites me beyond the number is all of the catalysts that we have in the business, the early TAVR approval for TAVR, which is going to give an amazing multiyear growth opportunity in TAVR. The NCD for EVOQUE. So in the U.S., so many patients will be able to benefit from this amazing technology. The CE Mark approval of the first ever transcatheter mitral replacement in Europe. You have the 8-year data presented on RESILIA, which is our leading tissue technology. And then you have a number of emerging opportunity. And we don't talk often about it. For instance, the AR opportunity with the acquisition that we have done of JC Medical last year. And now we started a pivotal study. It's going very well. We are enrolling well. There are many patients. And then in heart failure, we have 2 technologies, IHFM, the Endotronix acquisition that we did last year. The integration is doing very well, building the team, building capabilities. Together within shunt, we have an internal shunt program, and we are also enrolling in a study. So you look at all of this, we have so many catalysts ahead of us. Financials are solid strong. But what I think everybody should be very excited about is what's going to happen next year, the year after in the next 5 years. So 2 years as a CEO, I feel good about the way we are running the company, how the team is executing together with the many growth opportunity that we are having in front of us.

And just like the last couple of quarters, execution has been really good, like TAVR is coming in well ahead where you've guided, hitting the guidance. And even on the P&L side, like you've been faced with headwinds and you've done a really good job of managing the P&L and offsetting some of the headwinds. I'm just like trying to think about like is this kind of like the new Edwards like we're hitting and beating and managing expenses and growing earnings and stuff like that? Has there kind of been some change internally about how to manage the business?

So let me start, and I'm sure Scott you can add some insights here. I would say, yes, we are very committed. We told you during investor conference, we said, look, what you can expect going forward, starting in 2026, what we are aiming for is us growing double digit 10% with some variability year-over-year, but this is what we are aiming for with top line growing 10% and EPS growing faster than the top line. So we are very committed to that. We have plan to be able to execute that in 2025. We are able to deliver on our original guidance while offsetting the tariff impact, the one that we know because it is a fluid situation, but also the dilution from [indiscernible] when we close the deal. But Scott...

Well said, that's a nice summary.

How does the China trade news over the weekend impact I guess it was $0.05 of tariff impact, I don't know, in '25 or on an annualized basis?

I would say, obviously, for the med tech sector, it is a positive one for us. From the beginning, China, tariff was not a big deal for us. As a company, we don't have any plants in China, nor in Mexico. Our business as a percentage of global revenue in China is very small. So when I think about all of the tariff news, we were and we are still protected -- mostly protected as a company. I also love the way our foot -- global supply chain footprint is, we have plant in every regions, Europe, Asia, U.S., in most of the cases, the plant in region and fulfilling the demand of the regions. So it's like not necessarily at risk from a tariff standpoint, it is a good news for the med tech industry for sure. Also, we are going to see some positive but very tiny for us.

China as Bernard said, China is a smaller piece for us, relatively speaking. Our biggest exposures are in product coming from Singapore and Costa Rica [indiscernible] previously, and so we think the impact of those absent any additional changes in announced tariffs of 10%, there is something like a nickel per share in EPS this year. Now it's a piece of it. As you know, this tariff expense gets rolled into inventory and then we recognized it on the P&L as that inventory turns. And so we'll have a more significant impact without any further changes In 2026.

Okay, that's helpful.

I'm very glad, just to close on this one that all of the investments we made, but not only in R&D in the past years, but in supply chain. We have a very solid supply chain, a resilient supply chain. We have seen that during COVID with almost no disruption. And we see that again during all of this tariff volatility here, we feel good about the way we are organized and all of the investment we made over the year.

Then your ability to kind of offset the valve dilution and just kind of shows the flexibility of your P&L here. How are you thinking about what you're offsetting it with? How do you are managing the P&L from taking on the dilution like what things you needed to cut internally to do that?

In a very simple manner, it is about all priorities. We look at what are the biggest priorities where we need to invest to realize the growing opportunity in the years to come. And this is always the priority. So innovation, science, high-touch model, funding, the emerging opportunities to make sure that we can deliver on what we said, aiming for growing 10% with EPS leverage. And so we look at that on a regular basis as a team, but we have a very strong leadership team. We know the goal, we know the priorities, and we had -- this is another example in my mind, you commented about the execution that we have done in the last year quarter. It's a good illustration about how amazing is the leadership team, being able to manage a new issue and deliver on it.

Anything from the [indiscernible] managing the dilution from...

Well, you said flexible income statement. Yes, but it takes a lot of work. And there's a careful prioritization that goes into what we're going to fund and then being able to be nimble enough to decide where we're going to reprioritize that funding when you get curveballs like the tariffs that have impacted everybody this year. Now we're -- I mean I think it reflects to your earlier point, Travis, the fact that we are laser focused first on organic top line growth, but also protecting the P&L. For us, earnings growth, margin protection, margin expansion is an important part of the picture.

That's helpful and very, very good point. I want to switch gears to TAVR a little bit. First, I guess, maybe we talked about in the earnings call a little bit, the ability to kind of reopen the NCD. How would that process happen? Would they wait for moderate data to reopen it? Do they want to reopen it now? Could they -- just trying to think through like in the past experience, when you've seen these NCDs reopen? And any kind of thinking on how this would happen at this point?

So in short, I think today, we have enough information and CMS has enough information to reopen the NCD. But before I go into this one a little bit deeper, let me bring some context into this one. So think about TCC last year when the PI presented the early TAVR results, standing ovation. So in medical conference, I know all of you attend many of them. Now how often do you see standing ovation, not often. And this is clearly showing the importance of this trial and the solidity of the data we presented, high level of science, FDA studies. So that's the best of the best in terms of science. And then a good indicator also about the importance of this trial is how fast the FDA was able to process the submission and provide an approval, so these 2 things clearly an indication that there is a need, patient need, clinician need, there is a need to change something here. And if you think about now more about your question about the NCD. The TAVR NCD was last changed a few years ago, many things changed. TAVR became today the standard of care. It's a very established, safe, high efficient procedures across 850 centers. And with this early TAVR data, solid data we believe it is -- it is a time now to do that. So obviously, it is up to the CMS to do it. We know they are aware, they follow the news. The FDA and CMS are talking, so we are very helpful that it is going to be reopened and establish in the right manner.

Would we need to wait for moderate data to reopen it or they can just -- they probably could do it and moderate would be can be added in later?

I don't think so. I don't think they are going to wait for moderate. The way you need to think about the TAVR opportunity is that we got the FDA approval. I believe we believe that CMS will reopen the NCD, and we are going to have a new NCD. But also you need to think about policy changes, guidelines changes across the different regions, U.S., Europe and Japan. And all of that together in my mind, in the next 1 year, 1.5 years. The beauty of that is we are going to see a multiyear growth opportunity in TAVR. And all of this is based upon the best TAVR technology out there. The beauty of that also is right after all of that is done, we are going to see end of next year, end of 2026, the moderate data. And so again, another cycle of growth in TAVR with the moderated data if the data are positive.

And the NCD probably has like a few operating requirements, I would assume, more centers and all that. So that's probably loosing the friction, if you will, in the TAVR growth to some extent?

Obviously, it's tough to predict what the NCDs are going to look like. I can give you a couple of things to think about is, when the NCD was established a long time ago in TAVR at the time, the standard of care was surgery. And so TAVR was this new technology that nobody knew about and it was important to protect your patients. It's why all the things were put in place. And so if you look at the latest NCD, for instance, the EVOQUE NCD last year -- or this year, I should say, you have no site requirements, you have no operator requirement. It is up to the company to ensure patient safety. We are going to do -- we are going to follow patients with a post-market study, all these kind of things. But that's all the way CMS report about the NCD in 2025 for a very novel technology. So clearly, with all what we know about TAVR and SAPIEN, more than 1 million patients treated with SAPIEN with amazing results. There is potential to, for sure, add centers, look at the -- look at the operator requirements, all of this. But CMS is in charge and we decide.

And on the asymptomatic, maybe just talk about like now that the data is out there for just now 6, 9 months and symptomatic where -- what are you seeing kind of referrals? Like are you expecting a little bit better TAVR growth in the second half as the label comes on online and into next year?

Everybody is asking this question, Travis. So what you need to realize, first is before the FDA approval, we were not allowed to talk about it. And so our team can now talk about it for 10 days, we have a very comprehensive plan, 90 days plan about making sure that, step 1, every physician on the heart team in the U.S. understand the data, step one. Step 2 is understanding of the implication of the data in their own practice. And step 3 is what are they going to do to adjust their practice, referring, processes and all of that. So this is really -- we are going to learn a lot. We are at the beginning of the process. We got approval like 10 days ago or something like that. But we are ready. The team is ready, and we are starting to talk to all of these sites. If you think about 2 to 3, 2 to 4 physicians by sites, x 850 is close to 3,000 physicians to train. And -- but the team is ready, I'm very confident that we are going to impact patient care. And is it going to change overnight? No, it is as always, you are going to add the early adopters, the one who are ready, the one who already know the data, who are going to adopt more quickly the changes and the one -- and some are going to be slower than over obviously. But where we are going to support that, it is an important word to impart on patient care in the most in the highest quality manner. At the end of the day, what we do here, it is not just a business, we are taking care of patients, and that's very important to us.

It sounds like the FDA approval 10 days ago was a pretty pivotal moment in the growth for symptomatic, if you will?

Yes. It is -- I would say if you think about all of the key milestones, One was having positive data, which we got, having an FDA approval, which we got. Now you have -- NCD in process, policy changes, guideline changes in process. But yes, these two first were pivotal in being able to basically enable the changes in patient care.

Is the awareness within the referring doctors to cardiologists, high enough? Are there any things you can do to kind of drive the referrals more to the interventional us to do the procedures?

I think it depends -- think about -- there are about 30,000 or so GC in the U.S. So some of them are aware, many are not, but it will be also our job to making sure the heart team is well trained and educated on the study, so they can educate their referring network. We will do that also, but we are going to start to equip heart team to do that.

Maybe a guideline too.

Yes. And the guidelines is going to be very important because the GC they are following guidelines. So it's why all of these are important. Yes. No, thank you, Scott.

And on moderate, first of all, you've talked about TCT 2026. Is there potential for that to come earlier? Or is that not possible? And anything that kind of gives you confidence that the trial is going to be positive and there's always the crossover stuff with that been talked about in your current trials that you just presented this past year. And then two, like on the moderate, any sense for how real that opportunity is versus like a symptomatic and the severe that you're in today?

These are a good questions, so let me start with -- you know us as a company. We don't start steady lightly. We do high-quality science. We don't do marketing studies. We don't do these kind of things. So we have -- obviously, when we start the study, we have belief based on our 65 years of leadership in structural heart disease. So when we started the asymptomatic trial, for instance, 8 years ago, we had a belief that waiting for symptom was not a good idea, a steady wearable to prove that. When we start a moderate trial, we have the same belief and we still have, we need to prove it. And it's important to lead the space as a leader like us with high-quality science. So we have belief, we have a hope here. We need to wait to have a study. TCT 2026 is what you need to think about not earlier than that. How big is the opportunity, I would say -- there are many patients -- many, many moderate patients, but it will depend on how solid [ progression ] will be. If it is an amazing result, it is going to be a huge opportunity, and it is all about that. It's all about the science you produce here. We are confident and let's wait TCT 2026.

Switching gears to TMTT. This quarter, I think revenue grew $42 million year-over-year if I'm doing the math correctly. How much of this TMT momentum, there's been a kind of an acceleration of the business. How much of that is coming from like PASCAL versus EVOQUE at this point?

So the beauty of TMTT in my mind is our vision is truly coming to life. 8 years ago, you remember I was talking about it at the time. We said there are so many patients, very diverse, very complex. One technology will not be sufficient. And we were the only one having this belief at the time, and we committed long term with heavy investments. Heavy investment in R&D, in clinical. And today, we have this unique portfolio that nobody has. And so you see that it is coming from basically PASCAL and EVOQUE in U.S. and Europe. And everything is producing high growth, a great contribution. And it is now just the beginning of M3. We see Mark. We are still on track to get an approval with M3 in the U.S. So think about the number of catalysts here happening in TMTT. It is -- this year, we are on track to deliver a little bit more than $0.5 billion, growing 50%. Pretty amazing. If you step back and you look at this one $0.5 billion business, growing 50%, 60%. And what we told you in December is the vision is more -- more than a vision, it is an expectation that TMTT will reach $2 billion in 2030. So it is not just this year or next year, it is truly a long vision here and to have a big impact on the so many patients and to have a very successful business contributing to Edwards growth.

It's been few weeks since the EVOQUE NCD has been finalized and you're seeing anything now that kind of coverage is in place?

I would say, great news, on the EVOQUE NCD. It is great for being able to create a category, build a category and lead the category for the many years to come. But short term, the NCD is not going necessarily to help us a little bit, but right now -- if you think about there are about 850 TAVR centers, all of them want it. All of them want -- when we go into 1 city, whatever, city, we opened 1 EVOQUE center, all the centers around it want EVOQUE. So our biggest opportunity -- it is an opportunity not a challenge, is to be able to grow, activate, train as many centers as possible. When the center right now -- when we talk to a center right now and they want to start, there is a waitlist. And we tell them, hey, the earliest that we can give you a training is probably September right now. We are in early May, September, early October. So that's being able to hire more people internally, train our people, train physicians, so we can open more EVOQUE centers like we did in the last 10 years, 15 years in TAVR. So think about we are going to add EVOQUE centers every year for the -- probably over 3 to 5 years to come.

Maybe talk about -- let's dig into that a little bit more in terms of how many EVOQUE centers are today how many plan on adding over time? What's the process of getting 1 trained? And how long does that take? Do you get 1 center trained in kind of doing efficient fleet procedures?

So we try not to provide too many information about how many centers, what centers for obvious reasons here. But I can give you a sense how we are training them. So first, tricuspid disease in the U.S. It's kind of a new disease for the heart team, but you don't have any technology available a year ago. So they didn't see this patient. These patients were kept at the GC level. So we do a lot of tricuspid disease training, one. And then imaging is very important of TR. So we do a lot of imaging training. So when we -- when a center is ready to start with EVOQUE, we bring them to one of the training center and they come with already some potential patients. So we have a live training on this potential patient with imaging, echo, CT, and we have them think about, is it a good patient? Is it not a good patient? Where is the complexity of the anatomy, all of this together. And then they leave and we try over a week after or 2 weeks after for them to start having multiple patient in a short period of time. So they increase their experiencing fast. Our team is there with them all the time, and it is why we see this impeccable patient outcome and the kind of ramp we are having in the U.S. and New York.

I wanted to ask about M3, too. I think that's maybe a product that doesn't get rough attention. You got the approval in Europe. When are we going to see that in U.S. and how big of a product do you think replacement in the mitral valve is going to be?

A little bit like the same. I would say the same, but at the same time, we need to look no more in tricuspid repair and replacement. Physicians are still learning about what patient for what technology and is very important there. And we are not pushing -- we have both. So we tell them, look, it's not about which one you prefer it is, which one is best for your patient. When you have only one technology, you tell your physician with this technology, you can do anything, maybe true or not. For us, it's like, hey, select the best for your patient, here it is going to be exactly the same, and we are at the beginning of a learning. So this patient segmentation is going to be very important. And three, we are on track for an approval in the next year in the U.S. so which is going to be very exciting. I believe it is going to be very important to unlock a further of a mitral opportunity. What I love about this story, the EVOQUE story of -- the M3 story is telling about precisely who we are as a company. For the last 15 years, everybody talked about mitral valve replacement, transcatheter mitral valve replacement, including ourself. This is very complex. Every one of us failed because it is complex. We remain committed investing, having our team behind it, going to the next generation, applying the learning for the end, having the first transcatheter mitral valve replacement. That's really who we are as a company. We care about deal of the space. We are long-term committed. We have a best brain in structural heart disease, and we bring in this kind of innovation that nobody can, to be fair. And at the end, you see the return with EVOQUE the first competitor behind us, probably 4, 5 years behind, transcatheter mitral valve replacement, who knows.

And I wanted to ask kind of an any question on some of the acquisitions that you did last year was Endotronix, [ Innovalve ], JC Medical, JenaValve like there were several investments that you made. Just trying to think about when are we going to start to see more on the growth side of that? Any kind of updates on the portfolio that you kind of acquired last year?

So I would say, first, we have been an active investors in structural heart disease in the last 10-plus years, we have made early-stage investment. And usually, we don't talk about it. So last year, we made this JenaValve so mitral replacement because we believe mitral replacement is going to be very important. And we want to make sure we are able tweet all mitral patients. As [indiscernible] going to be very important, and [indiscernible] is going to be important. And we believe with JenaValve, we will be able to treat more patients, so all this technology, they are not competing to each other. They are complementing each other to unlock mitral potential. The AR and GC Medical, Today, the only technology available are surgical technologies. And we believe that with the transcatheter technology, we can do something here. We started already a pivotal study. We went very fast. The team did an amazing job at integration, and we already are in a pivotal study in the U.S. And with Endotronix, which is our first step into a heart failure where there are so many patients, and we are fully integrating this technology. We said a minimal impact this year. We are going to see some small impact on the next year. But think about heart failure as a natural progression for us. Endotronix our first step, and you are going to see more coming here. And the JenaValve one is still under review with our regulatory body as we see and we are going to hear more hopefully.

Also, thank you. I appreciate you coming to Vegas.

Thank you so much, everyone. Thank you Travis.