Edwards Lifesciences Corporation (EW) Earnings Call Transcript & Summary

Thank you everybody who's come to the Unplugged Conference, and Scott Ullem, thank you so much for trecking across the country in this lovely weather to join us here today. Appreciate it.

It's our pleasure. And I do want to introduce my colleague, Gerianne Sarte, who is going to be taking over as Head of Investor Relations in April. So we're delighted to have Gerianne in this role. She's a long-time veteran in med tech and health care, and she's really looking forward to getting to know all of you.

Well, I'm excited to spend some time with you. Anyway so -- chair makes noise, sorry about that in advance. One of the things that has come up as I talk to investors is the TAVR market. All right. And we went through this period middle of 2024 where it was slowing and I understood why it was slowing. And now we're in a period where it's accelerating. And I am -- I'd love your view on why did it slow, why did it accelerate to 11% of core revenue for you, market is probably closer to 7% or 8% according to Department of [ Health ]? And how do we think about the sustainability of Edwards' growth and the market growth?

Yes. I think there's -- on the surface, it might look like it's slowing and accelerating more than maybe the underlying factors really would suggest. In 2024, we had this convergence of competing therapies that all hit the cath lab at the same time. Now part of this was due to Edwards introducing things like EVOQUE. Hospitals got a little bit further behind in capacity development than hospitals typically are. There's always going to be a little bit of a gap between capacity and labor and brick-and-mortar space and what the future needs look like, but it became especially pronounced in that period. That's behind us. Hospitals, I think, are -- it's more back to status quo, continually tweaking and expanding to accommodate these new therapies. In the fourth quarter and the third quarter of 2025, the business performed well, and we saw a pronounced refocus on TAVR, granted, in the fourth quarter, we had an easier year-over-year comparison, we only had 6% growth in TAVR in Q4 of 2024. So it was easier to turn double-digit growth in Q4 2025. But put the math aside, we saw this pronounced focus and actual sequential growth in Q3 last year over Q2, which is highly unusual. And it reflects positive clinical trial results from the early TAVR trial presented at TCT in late 2024. This was studying patients who have severe aortic stenosis, but do not demonstrate symptoms, plus FDA approval of SAPIEN 3 Ultra RESILIA for use in asymptomatic patients. So the combination of those 2 influences, we think, really inspired that higher sequential growth than just renewed enthusiasm and focus on TAVR. We also have coming up this year, a new NCD guideline evolution in the U.S. We already saw guidelines evolve in Europe in 2025. And just general, a lot more attention on what's coming with TAVR.

So not to get too specific, but is what has happen is doctors have sort of shaken out their schedule? Like when we talk to doctors, spoke with them 5 years ago, it was like TAVR, TAVR, TAVR all day long, 2 years ago, it was like, "Well, I try to do mitral, I try to do tricuspid." Is it more just a matter that they have their days figured out and how they're allocating their times? Or is it they actually opened up more cath laps, and therefore, there're more people doing more surgeries?

It's a really good question. And the answer is both, and it depends on the hospital. In some hospitals, there is a situation where you actually need more physical space. Oftentimes though, it's more driven by standing up heart teams and making sure that the schedules can work between procedures, some of which take longer than others, and operators. So one of the things -- just as an example, one of the things that will be considered when CMS determines the new NCD is the operator requirement. Because right now, getting the schedule of a cardiac surgeon to match up with the schedule of an interventional cardiologist, different departments, different wings of the hospital, it adds kind of unnatural friction in running an efficient cath lab, and it's one of the things that we hope CMS will address in the new NCD.

So -- lots of questions. What has the feedback been as you've gone through the NCD process? And how do you think about that taking place?

Very limited feedback at this point. The NCD was reopened at the end of last year. Edwards and lots of other respondents submitted letters to CMS expressing points of view about what the new NCD should look like. We'll see a first draft of the new NCD this summer. I think June, July time frame is when we hear from CMS. There will be another comment period, and then we expect the final NCD to come sometime late this year, early next year or whenever CMS actually publishes it. It's their process, not ours, obviously.

Is there anything we can learn about the last time the NCD was opened? I think that was in 2019.

It's tough to say. I mean the most recent relevant NCD that we've experienced is with the new EVOQUE NCD, which was the beginning of last year. And it's actually a pretty good reference point because there are no hospital requirements, no site limitations, no operator requirements. And that's for a first-generation device treating a disease that is really untreated. So we'll see. But at this point, there's nothing that we can really take away other than expressing a lot of perspective to CMS that we've developed over the -- over 10 years since we've been performing TAVR procedures in the U.S.

So we did a call recently with a cardiac surgeon, who was like, I think we should still be there. And I understand their sentiment, but how much of the voice do they bring to the table and creating this decision?

Surgeons have an important voice. And the surgeons have been treating aortic stenosis for decades and treating it very successfully. And as Edwards is the leader in surgical valves and in transcatheter valves, we've had a chance to see the role that these technologies and these physicians play in patients' lives. And so I think surgeons will weigh in, they'll have a point of view, interventional cardiologists, obviously, and CMS will take all of those things into consideration when determining the new NCD.

Okay. When we built our TAVR market model recently, Edwards took share in the quarter. And why do you think that is? And do you think it's sustainable?

I think probably the most noteworthy share shift that we experienced in the fourth quarter was in Europe, where one of our competitors exited the region. And their position basically got reallocated across all the different competitors, including Edwards. And so that was a notable share shift in that region. Overall, globally, we've seen pretty level share positions for Edwards.

Okay. And how sustainable are things such as pricing, patient flow, physician training?

Yes. Well, those are all very different elements, but let me try to take them. So...

In any particular...

In any particular, so pricing has been pretty level for quite a long time. It changes by region, but globally, we've seen pretty level average selling prices. We model in our long-range plan ASP compression over time as hospitals reach higher volume levels that then earn rebates and incentives. So we plan and model lower average selling prices, but we haven't seen that recently. It's been pretty level. In terms of physician behavior and performance, like I say, I think there's a lot of enthusiasm among physicians. There's renewed focus on TAVR. TAVR is on the podium on the -- just on the speakers list at major medical meetings. And with all of the clinical trial data that has come out recently, and the forthcoming NCD, we expect this to continue to be a focus of physicians. There's another piece, too. Do you want me to comment on another element?

All of it. It was -- I can't even remember my own question. It has to do with patient volume.

Yes. So patient volumes, certainly, we've seen an uptick in patient volumes. And we talked about...

Is that with the demographics or what do you think that is?

I think it's across the board. One of the things that we've been trying to do is make sure that we've got a lifetime management approach to helping patients suffering from this disease. And what I mean by that is, whether a patient comes in and presents with the disease as an 80-year old or as someone a decade or 2 younger, we want to make sure that Edwards is supporting those cases with relevant clinical trial data and technology. So we now have our surgical valves meant to accommodate future valve and valve procedures and our transcatheter valve meant to accommodate future TAVR and TAVR procedures. So we have across our size ranges. These devices are designed to support future TAVR and TAVR for younger patients who end up with valves that reach end of life and need to be replaced.

And what percentage of the procedures do you think are now valve and valve?

Small percentage of the procedures today, but we do believe it will increase over time.

Okay. And then we are getting additional data at TCT this year on moderate AS. And people haven't started to talk about it yet, but I expect them to shortly. How should we think about the clinical trial design for that and what to expect from it?

Yes. Well, we're optimistic about seeing this data. And we don't know what the data are going to say, but we're looking forward to seeing the data. When we first started this trial, we did it because we developed a belief largely informed by physicians that patients with moderate aortic stenosis can benefit from TAVRs and alternative. And with that, we launched this trial. Obviously, we had a view that it was important, and if there [ wasn't ] an opportunity here, we would not have started the trial. The trial actually enrolled about 2 years earlier than we expected. And oftentimes, that's a leading indicator of whether or not there's some benefit of this therapy for patients. But since we enrolled it 2 years early, we don't have any more information. We don't know what the patient demographics or profiles look like. We don't have any leading indicators, but what the data may suggest. And so we're looking forward to the trial reading out in December, but there's some speculation on our fourth quarter earnings call about, "Geez, is Edwards talking more or less favorably about [indiscernible]", there's no new information. And we talked about it at our investor conference in December. We don't know anything more, and we will not know anything more by the end of the first -- in our first quarter call either.

So can we at least conclude that because it enrolled 2 years faster that there is a viable population out there, and it's not hard to identify and find these patients?

That is a -- that seems like a realistic observation.

Okay. Because there's some conversation like moderate AS is not either identifiable or isn't worth treating this early. And I'm not -- what you're saying 2 years earlier would not support that dismissal?

This is one where we have to defer to the data, and we just don't have any data yet. So we're looking forward to seeing it at TCT later this year. And a lot of these questions will get addressed, I think, when it gets unveiled.

Okay. I'll stop there then. TMTT, I think, is a good place to go to next. And I can spend, I think, the next 1.5 hours on that. One of the things I try to think about is how much of TMTT these days is mitral versus tricuspid? And Gerianne, maybe this is a project for you, how to think about the different products you have going through? And if you can't divide it up, what can you sort of say what the lead contributor is? Is PASCAL the biggest piece of the revenue at this stage, for example?

Well, obviously, we know exactly what the split is between repair and replacement and geography, all that kind of stuff, but we have not shared that publicly. And what I can say is our first entree into transcatheter mitral and tricuspid therapies was with mitral TEER, so repair -- transcatheter edge to edge repair for patients with mitral regurgitation. And as a result, that's a bigger business, but rapidly our other therapies are catching up. So TEER for tricuspid patients in Europe. We are still waiting for, and we'll have data presented at TCT on TEER for tricuspid patients in the U.S. Right now, we have just a DMR indication for PASCAL -- degenerative mitral regurgitation indication for PASCAL in the U.S., and we've enrolled our FMR trial. So we expect that we'll have FMR results to produce and hopefully lead to approval in the future. We haven't published a time line yet.

So that's not also TCT, or you don't know yet?

We have not published a timetable for that. So back to your question, though, the split between, so we got repair and replacement, but both are evolving and growing. So we've got repair indication expansion and geographic expansion. And in replacement, we're still pretty early on in the introduction of EVOQUE and very early on in the introduction of SAPIEN M3, both in Europe and the U.S. SAPIEN M3, of course is our mitral -- transcatheter mitral valve replacement with the SAPIEN 3 valve inside. So I know I didn't answer your question, Joanne, about what the split is, but that gives you a little bit of a sense of the framework that we're bringing to with TMTT.

Right. But you did share that TEER mitral is a larger piece and the others are catching up rapidly. And that helps at least frame it somewhat. And reminded me of all the bits and pieces and the data rolling out. Do you think that there's a stage where replacement exceeds repair?

We talk about this regularly and physicians talk about it as well. And the short answer is, we don't know. There are debates and speculations, but one of the important learnings that we have developed over the last decade or so that we've been working on developing this TMTT group is having a portfolio is very important. Patients with mitral regurgitation present with different facets and different characteristics of the disease. It can be DMR FMR, it can be chordal problems, leaflet problems, left ventricular disease. And so each patient is different and having different solutions to offer to physicians when determining how to treat their patients is really valuable. If we just came with a TEER device, it would be a different conversation than when we come with a portfolio of alternatives. And so we're excited that the vision we had a decade ago has now become a reality, and we have repair and replacement for both mitral and tricuspid.

Excellent. M3 was just approved earlier in the year. What has been the feedback?

Well, positive so far. I mean I think there's a lot of optimism about having this therapeutic alternative. Remember, for a long time, 10 years ago, everyone was focused just on transcatheter mitral replacement. This was before TEER had really taken off or before we had tricuspid replacement. And so this has been a long time coming and a long time awaiting. And we're enthusiastic now that we can bring it to market and get it into the hands of physicians who have it as an option. I think time will tell what that growth ramp looks like, and we'll talk more about that in the quarters ahead.

Okay. And versus some of the competitor products for TEER -- I'm flipping back and forth the way you guys flipped back and forth on this topic. But going back to thinking about clipping devices, what are you seeing on the competitive landscape?

Well, I mean, obviously, we're not the largest competitor. There's an incumbent. And I think that where we're really focused is not so much on the competitive landscape, but on how do we grow the market? How do we grow the number of patients who are coming into the system to be treated with these technologies? Because the undertreatment rate -- the treatment rate for mitral and tricuspid disease is lower than the treatment rate for aortic stenosis. Aortic stenosis is already treated at a much lower rate than other deadly diseases like different forms of cancer, and mitral and tricuspid are even lower. So for us, it's not about how do we go battle the competition, it's about how do we facilitate more patients getting to the point of treatment so that they can get their disease treated. And Edwards will be a part of that.

And what is the answer to that? And this may actually tie all the way back to the TAVR NCD, where if you have more centers and you have more people who are trained, there're more types of procedures they can do.

Yes. I guess, procedural rates and access to treatment is probably different across the different diseases, but suffice it to say, for mitral and tricuspid, which are both pretty early on in their journey, a lot of this is about awareness, awareness of the diseases and awareness of the therapeutic alternatives. For example, tricuspid regurgitation has been dramatically underreported like hundreds of cases in the U.S. per year, not tens of thousands. And for a long time, the tricuspid valve was referred to as the forgotten valve. And yet, here we are with many, many patients suffering from tricuspid regurgitation with rare intervention by surgery. And so all off a sudden we find out it's a much more common disease than people thought. It's a very debilitating disease. The mortality, but even more notably, the quality of life of this disease is awful for these patients. And so having a minimally invasive replacement alternative or minimally invasive repair alternative has just brought new life and a new pathway for these patients. And we're just trying to make sure that physicians and referring general cardiologists and patients themselves know about the disease and the fact that there are options now.

Yes. And -- but some of it is patient education as well as physician education. And how do you get to those patients? I feel like I've asked you this question 40 times, like is it a direct consumer campaign? Late at night, am I not going to hear like -- see an Edwards program of some type?

Yes. Sometimes, I mean a lot of it -- there are multiple different channels that we use to reach patients. And remember, for a lot of the patients, for example, aortic stenosis patients are older. And so sometimes you're not only talking to the patients, you're talking to the patients' children and you're talking to the patients' caregivers, adult children. And so we have different communications strategies. We have different avenues for getting information and material to caregivers and patients alike so they understand the diseases, the different ways the diseases manifest themselves and how to get to a heart team to get consultation about the best form of treatment, whether that's surgical or transcatheter, whether it's repair or replacement. Our hope and objective and efforts are aimed at getting patients to the point where they can get diagnosed and, if appropriate, referred to a heart team for a decision about where to go from there.

Okay. Surgical remains part of the core portfolio. I mean Critical Care was [indiscernible], you kept surgical. Growing mid-single digits, is that -- should I just sort of put mid-single digits and drag it across in my Excel spreadsheet? What is driving that? And what sustains it?

Yes. Mid-single digits is a good long-term assumption or expectation for both 2026 and beyond. And what's driving it is, we're still innovating in surgical. So transcatheter mitral and tricuspid and aortic and some of the new structural heart failure therapies that we're introducing get a lot of the limelight. Surgical is still a $1 billion-plus business for Edwards and a remarkable and important category for patients who need surgical treatment. I think what's really going to continue to propel surgical is innovation, not just in the device, but also in the tissue treatment. So we're getting ready at the American Association of Thoracic Surgeons Conference in May to present the 10-year results from our COMMENCE trial, which is studying our RESILIA tissue in surgical patients, and we're really enthusiastic about seeing that as well. Keep in mind, RESILIA tissue is the same tissue we use in our aortic valves. So this will be an important lens into durability, which is probably the most important consideration for Edwards and physicians and patients.

Are we still talking about durability for TAVR? Did the 7-year data set put that to rest?

Well, we hope so. It was compelling data. I mean we were pleased with it. I'd say we weren't surprised by it, but we were pleased with the data, and it's yet another element of a large body of clinical evidence supporting the safety and efficacy and durability of the SAPIEN family of valves. And I say the SAPIEN family of all because it's a very different platform than other TAVR and TAVI technologies, and we're really pleased with the results.

Good. Just to swing back to surgical procedures. We're hearing more and more about robotic cardiac surgery. How do you think about that evolving the landscape of cardiac surgery? And where does Edwards get to play in that?

So it's unclear to us where robotic surgery ends up playing the biggest role in cardiac procedures. But whatever role it plays, we're enthusiastic and encouraging. We think it's beneficial to have more focus on it. We think, obviously, Intuitive Surgical is a great company and their added focus on cardiac care can only add to the spotlight that we would love to put on cardiac care more generally. So under any scenario, we welcome the additional focus and the additional attention and tools that could be provided. And we think that benefits patients and obviously, Edwards will be there as well as the provider of the therapy.

Okay. Do you see that taking off?

I think it's early to say. I think that's probably a question better for Intuitive. But like I say, we think that surgical robotics, we think that imaging technologies, whether it's professional imaging or wearables technology, anything that brings more limelight and visibility into these diseases and to the therapies that could be provided is a good thing for patients.

All right. In '24, you made, I think you announced 3, but actually was able to complete 2 acquisitions. I don't think they get a lot of attention, so maybe remind us of what they are and why they are important?

So what you're -- do you want to talk about JC Medical? Maybe that's a good place to start?

I think it's a great place to start.

Okay. So -- and we can talk about Endotronix as well. So JC Medical is a technology that is used to treat patients with aortic regurgitation. Think of it -- aortic regurgitation is a leaky valve in contrast to aortic stenosis, which is a clogged valve. It requires a different valvular solution, totally different platform, different technology. And so we're -- we closed that acquisition. We've been working on it now internally for a while, and we've learned enough to realize a couple of things. One, aortic regurgitation is a serious disease that needs to be treated. Two, it's vastly undertreated right now, partly because the only alternatives are surgical, and there are a lot of patients who are not eligible for surgery or would prefer a transcatheter solution. Three, we really like the technology that we're working on right now. And we believe that, with time, it can be trialed and ultimately commercialized for the benefit of patients. So that's where we are in AR. We still think it's a big opportunity. We're excited about it, but -- and we'll talk more about the time line in the quarters and years ahead. The other acquisition that we made is of a device trade name is Cordella, and this is an implantable heart failure management technology that provides patients suffering from heart failure and their physicians with visibility into how their heart is performing and how the pharmaceutical regimen they're on is impacting their day-to-day heart failure and how they manage it. So it's been a really impressive addition to the alternatives for patients who are suffering from heart failure, and we're excited about continuing to invest in this technology and to continue to grow the footprint that we have in this technology for patients.

But where can your footprint in heart failure go? I mean, it seems like it's a toe in the water to me.

Seems like it's what?

A toe in the water.

At this point, it is a toe in the water. And at this point, our real objective is we're learning more about the technology and the disease ourselves. And at the same time, we're helping physicians and hospitals and hospital sites introduce a new technology to patients who need it and can benefit from it.

And how do you think about capital allocation and future M&A now?

So our capital allocation priorities are very consistent with where they've been historically. Priority #1 is to make sure that we've got the infrastructure and capacity to support the growth of our therapies across Edwards. So making sure our production facilities are keeping up with demand. Priority #2 is investing in external growth. So making acquisitions generally smaller in size, focus on structural heart. We'll make minority investments. We'd provide seed capital to early-stage companies, and we buy other companies or options to buy other companies based upon how they perform against milestones and benchmarks that we set out. So that hasn't really changed, and it will continue to be an important part of Edwards' strategy, although not a required part of Edwards' strategy. And the acquisitions that we make and the external investments that we make are generally smaller in size relative to our market cap. The biggest allocation of capital is the final priority, which is buying back shares. And we think it's created real value for the company. We think it represents a good opportunity to give back capital to shareholders and to set up the company for value creation in the years ahead. Last year, we bought back a little less than $900 million of stock. And in both of the prior years, we repurchased over $1 billion in stock. And so it exceeds the amount of dilution that we need to cover each year, and we're going to continue to look for opportunistic times to buy back stock.

And what is the formula for where you hit that lever, pull the lever hit the button?

Yes. Well, we don't announce it in advance, obviously, but we'll talk about it once we've done it. We've got about $2 billion left of share repurchase authorization today.

Okay. When you put together the guidance for the December Analyst Meeting, and then you reiterated it in early January, and then again 2 weeks ago, is there anything that's changed now that we're in mid-February from, call it, December? Or what has changed?

I'd say there's -- nothing has changed since our earnings call a couple of weeks ago. On the earnings call, we said that we had increased confidence in our sales growth guidance, 8% to 10% for the company, 6% to 8% for TAVR. And that was the one update since our investor conference. But overall, we like the setup for the year. We had a very strong 2025. And we've got a number of different influences that we think will benefit the company both in 2026 and in 2027 and beyond. So we're feeling positive about the business both from a TAVR perspective as well as in TMTT and surgical.

Was there ever a year, and I'm sure I can look this up, but where you raised guidance on the fourth quarter call early? Because you did say a couple of times on the call, we increased confidence.

Yes. I don't -- I'm tempted to say yes, back in the 20 teens, but I'm not sure of that. So it's -- I will say, it's not a common precedent. And so obviously, it indicated that we do have increased confidence and a lot of it is because of the way 2025 ended and the focus we're seeing in 2026 on these new technologies and this new clinical trial data.

Is there anything you're seeing in the broader landscape that sort of you think investors may be missing or you might be worried about? Or -- I mean, very frankly, what I'm thinking of is, a couple of months ago, everyone thought med tech was fine. And now we're all worried about med tech, and we're worried about everything from impact of the ACA to snow days, to pricing, to, I don't know. But I'd love because you're closer to all of that, your opinion?

Well, obviously, from a stock market perspective, med tech got off to a rocky start in 2026.

Noticed.

And I know you all know that. But from a company perspective, that doesn't reflect the outlook that we have for this business in 2026 and beyond. So I know that doesn't do you a lot of good if you're getting measured quarterly for your investment prowess. But -- and I think that, at Edwards, we feel optimistic and confident about the growth trajectory that we're on, about the number of patients who are still going untreated today and about the role Edwards can play in bringing scientific evidence and new technology for physicians to be able to use to treat their patients.

So I always end by asking, when we're together this time next year, what will we be talking about, but I know you're going off to do something much more much more better. Much more better isn't grammatically correct. I don't even know what the phrase is, but the person who will be sitting there, what will we be talking about?

It's a good question. I think it will be similar themes actually. I think we'll be talking about what happened with the NCD? How does the NCD look? Right now, we don't know what the new NCD is going to look like for TAVR. And by next year at this point, I hope we will. We'll be talking about how the guidelines in the U.S. evolved? Right now, the guidelines in the U.S. still support -- or still don't reflect the data and FDA approval of asymptomatic. And so we'll see how those guidelines have evolved. I think we'll be talking a lot more about the penetration of PASCAL and EVOQUE and SAPIEN M3 into the patient population suffering from mitral and tricuspid diseases. And -- but there's a lot that's going to happen in the next 12 months. I think it's an exciting -- a lot of times [indiscernible] said, long years and years and years from now, it's going to be exciting. We're at a point now where we're pretty excited about the next 6, 12, 24, 36 months because there are so many different catalysts and influences on our business.

Excellent. Thank you so much, Scott. Gerianne, welcome.

Thank you all.