Edwards Lifesciences Corporation (EW) Earnings Call Transcript & Summary

We're going to get started here as we're moving down the medical devices company presentation, fireside chat track at the 46th Annual TD Cowen Healthcare Conference. I'm Josh Jennings from the TD Cowen Medical Devices team, and we are honored to have Edwards' CFO, Scott Ullem, joining us making the track out from the West Coast. Scott, thanks so much for being here.

That's our pleasure, and I'm here with my colleague, Gerianne Sarte, who's going to be taking over as Head of Investor Relations in April.

Thank you for introducing her. I'm sorry, I didn't introduce you, myself. I've got mixed emotions here at this -- you've been the regular attendee and your team of the TD Cowen Healthcare Conference. And this may be the last time we get to have a chat up here on stage.

Well, I haven't been here for all 46 of your annual investor conferences, but it's always a pleasure to be here. Thanks, Josh.

Thanks, Scott. And maybe to start, just maybe the succession path and the process, any updates there? I mean it seems like there has been some restructuring in the -- some of the big executives at Edwards over the past couple of years with Mike Mussallem leaving, Larry Wood leaving and now you're departing as well. But I think in each instance, the executive's departure was -- the basis was you're leaving the company in a good position and you have a strong team behind you, but maybe just talk about where the succession plan is and how you feel about leaving Edwards and being well positioned?

Yes, sure. Thanks for asking. So like we mentioned earlier, we're running an external search process and just working through the different stages of evaluating candidates and ultimately, Bernard, our CEO, will select the next CFO. And as soon as that happens, we'll certainly announce it, of course, and then orchestrate a smooth transition. That's always been the plan, still is the plan, and it's my intention. And I think you're hitting on something important, which is over the last couple of years as we've had natural transitions at different positions on our executive team. One of the encouraging things for me about Edwards is we have a deep bench. We have a lot of people who can step in. For example, our new Head of THV or transcatheter aortic valve replacement, Dan Lippis had been in the THV world, both in the U.S., Europe and Japan, Asia Pacific before succeeding his predecessor and taking over as THV. And so it's an example of we have a deep bench of people, both at the senior level that you'll see and multiple levels below that. So I'm feeling positive about our team. I'm feeling positive about all the good things will come with having a new CFO.

Absolutely. And then Bernard has taken the baton over the last couple of years and is hitting his full stride along with your team as a whole. Maybe to start, we can talk about the TAVR franchise and the market recovery and just review how well positioned Edwards is. You continue to have dominant share in the United States. There have been some controversial debates around low-risk durability data that were -- those debates were answered or questions were answered last year at TCT with a 7-year data. But maybe to start, just how big of a deal has that been for the Edwards TAVR franchise, the SAPIEN platforms, recent success, market growth and also maybe supporting some asymptomatic adoption. A lot in that question, but I think you can handle anything I throw at you.

No, there are a number of questions there. But let me just try to give a little bit of an overview of what's happening in TAVR in the U.S. What's certain to us is that there is a renewed focus on TAVR, renewed focus by operators, by referring physicians and by patients. There's a renewed focus on the deadliness and severity of aortic stenosis, and on the treatment alternative, surgical and, of course, transcatheter valve replacement. And we've seen that in the growth in 2025. If you just look at the different data presentations and podium presentations at major medical meetings during the course of 2025, whether it's ACC, New York Valves, TCT, there were important data presentations from Edwards that reinforced the safety and efficacy and importance of getting patients diagnosed with severe aortic stenosis to the point of treatment as quickly as possible. I think that the clinical trial data, in particular, that has been released, including the 10-year data on durability of SAPIEN 3. It was presented at New York valves last summer. And most recently, the 7-year data on PARTNER III that was presented at TCT in the fall reinforce the fact, the scientific evidence that this therapy, the SAPIEN family of TAVR valves is really valuable for patients. And so we're doubling down. We're continuing to invest heavily in expanding the reach of our SAPIEN platform, and we can talk more about what that looks like.

Excellent. And some of the concerns were on just hemodynamic outcomes translating to clinical outcomes that may have been unfavorable for the SAPIEN platform. Again, that did not play out. But maybe just talk about the evolution of the SAPIEN platform, particularly on the hemodynamic front, SAPIEN 3 Ultra RESILIA or UR is -- has better hemodynamics results to date. And how do you see that -- this debate on hemodynamics playing out going forward?

Yes. One of the things that we've learned during progression of introduction of new valve technologies over the years is that picking one particular element and focusing on it is not as telling and valuable in reaching conclusions as looking at the composite endpoints and the most important elements, which include all-cause mortality, rehospitalization, stroke, pacemaker rates. But looking at in total, we saw from the transition from SAPIEN to SAPIEN XT, SAPIEN XT to SAPIEN 3, SAPIEN 3 to SAPIEN Ultra. And finally, now our flagship current technology, SAPIEN 3 Ultra RESILIA, really phenomenal performance across all of those different measures. So whether hemodynamics or anything else, I think the really important thing is to look at in totality, the body of clinical evidence supporting these different therapies and what they can mean for patients. We're really pleased with what we've seen. And we're really pleased with the investments that we've made in innovating on our own technologies to make our therapies even better, and we're going to continue to do that. SAPIEN 3 Ultra RESILIA is still getting rolled out globally. And we think that's going to be -- continue to be a fabulous therapy for patients for the foreseeable future. We do have next-gen products, including SAPIEN X4 and the successor to SAPIEN X4, as we always do. But for now, we're really excited about SAPIEN 3 Ultra RESILIA and the clinical trial results that we're seeing.

And just when you issued guidance for the Edwards TAVR franchise, I believe you expected stable share globally and so to grow relatively at the market pace. That was in front of the Evolut 6-year data being published and being made public. Were there any share shift assumptions just to review in that initial guidance? And some of our recent checks suggest that there could be a share mix or share shift benefit for 2 SAPIEN platform as these Evolut low risk 6-year results are digested by the interventional and cardiac surgery communities.

Well, our most recent guidance of having increased confidence in our TAVR full year growth rate of 6% to 8% was prior to the other data that was presented. It's too soon to say. I mean it's -- we obviously watch carefully what other participants in this field are doing. And I think there's focus on that most recent clinical evidence, of course. But frankly, we're more concerned about how do we get more patients into the system. Market share is important, but we think that the value is even greater if we can increase the number of patients who can get access to and treatment with SAPIEN technology. And that's really where our heads are focused right now. Over time, we'll see what the reaction is among physicians to that 6-year data.

Understood. And just on that point you just raised about getting more patients access to TAVR intervention and benefiting from it, you would say, in the asymptomatic population is now in play. Any just maybe qualitative or quantitative, if you can, just sharing of data points in terms of how the adoption in that asymptomatic indication has played out in 2025, and it should progress favor positively in 2026 is our assumption. But maybe just talk about that. And is Edwards SAPIEN platform seems to be best positioned because the only TAVR data studied SAPIEN and not any competitors' valves. But do you see a big advantage in that segment, which is relatively large as it starts to become a bigger contributor to overall market growth?

Yes. We do, and thanks for the question. Maybe we should just step back and talk about how the asymptomatic effort has unfolded. So we ran this trial, of course, looking at patients who were diagnosed with severe aortic stenosis, but did not have identifiable symptoms. And when those data were presented at the TCT conference in the fall of 2024, it was impressive. And I think it made a real impact on physicians' view of this disease, and we're in the middle of this transition of going from the former precedent of watchful waiting where it didn't matter if a patient had -- the belief was it didn't matter if the patient had severe AS, if they were not yet showing symptoms. To now understanding that symptoms are irrelevant. And the data presented through this EARLY TAVR trial demonstrated and proved that symptoms are not relevant to the importance of getting diseased valves treated. When in 2025, we got approval for asymptomatic on the label from FDA last summer. And that caused even more focus on this therapy and the importance of -- for all patients with severe aortic stenosis that was also in 2025, we saw guidelines evolve with the European Society of Cardiology and EACTS which are now are promoting earlier treatment of patients to make sure that there's not this watchful waiting approach. And those guidelines, we expect to also be addressed in the U.S. along with the NCD that is currently under evaluation by CMS. And so it's really an important time and juncture in the journey that we've had with TAVR. And this is one of the last barriers to fall. For a while the barrier was only patients who are so at risk of an adverse outcome from surgery were allowed to get TAVR. And those different blockades have come down with the progression of different partner trial releases. But this asymptomatic one is kind of the last big barrier to fall in the field of severe aortic stenosis. And as soon as we get the new NCD in place in the U.S., the U.S. guidelines adjusted, it will really be beneficial for patients. I'll offer one other observation about the asymptomatic data. While the label is important, we have not seen any demonstrable signs of asymptomatic patients being treated in the U.S., which is not surprising because there's not an NCD to cover that indication on the label. We are seeing, we think, more focus that's leading to more symptomatic patients coming into the system. And we're also seeing in the CMS data more echocardiograms, more referrals, more stress testing, which is all favorable in terms of treatment rates for patients suffering from this disease.

So maybe baked into some of those metrics you were sharing, those trends could be just asymptomatic patients rolling in as symptomatic. So maybe there's -- I mean, there's some kind of penetration of what historically has been thought to be the asymptomatic population? Or is that not the right way to think about it?

Well, the data that we have is, of course, on a trailing basis, we just haven't seen it. Certainly, as I mentioned before, what we have seen is physicians being more thoughtful about evaluating patients and being aware of symptoms. And because there's not an NCD, there's still a lot of focus on the asymptomatic versus symptomatic, but a lot of times for these elderly patients, who are supposedly asymptomatic. When a physician really explores that, it turns out they may have symptoms, and that can be evaluated by a simple stress test, and we've seen more stress tests being performed. But we're also looking forward to a point where that kind of artificial barricade to treatment falls away and that the treatment practice and paradigm turns to just looking at the disease. And like other diseases with a high mortality rate symptoms are not relevant. If you have a diseased, severe case of aortic stenosis, if you have a diseased valve and it's severe, then you need to get the valve replaced regardless of symptoms. And that's what we're really trying to advance as a practice in medicine.

Just in terms of all these trends and how just the evaluation of severe aortic stenosis patient is that evolution and workup and evaluation, getting them into the queue. I think the PARTNER III 7-year data, I mean, it's intuitive that that's going to help just penetration of this asymptomatic opportunity once coverage is in place and guidelines evolve. But maybe there's more a statement in the question, but anything to just discuss along those lines. I mean, how big of a deal the PARTNER III update was and then checking of the durability box has been to opening up this asymptomatic channel?

It's a huge deal, and thanks for the question. There are actually two long-term data sets that support SAPIEN durability. One was the PARTNER II 10-year data that was presented at New York Valves last year. The most recent one is the PARTNER III 7-year data that was presented at TCT. Both clinical trial sets demonstrated durability of SAPIEN long term. This is something that Edwards cares deeply about. We're the leader in surgical valves. We're the leader in transcatheter valves and durability is exceptionally important. And it's one of the reasons why we have invested so aggressively in durability innovation. For example, the RESILIA tissue that is now on our surgical valves and on our transcatheter valves has been tested, and we're going to be presenting the results of the 10-year COMMENCE trial at this year's American Association of Thoracic Surgeons Conference. And we're looking forward to seeing what that looks like. But for all the other data that we've seen, SAPIEN valves are exceptionally durable. And it's something that we think is a really critical consideration for physicians and their patients.

Great. And the national coverage decision finalization will also probably be a tailwind for TAVR volumes, particularly in this asymptomatic indication. I think the assumption our team have are that asymptomatic coverage will be in play, you could potentially see the restrictions on smaller volume centers open or be eliminated. I think our biggest question, maybe you could just talk about those two buckets and then our assumptions. And then the third one, we're not so sure about is whether or not the mandate to have a surgeon and an interventionalist in the procedure room during a TAVR procedure, maybe where that could be reduced down to just one operator. Maybe walk us through those three assumptions. We're not clear on that third one, but any updates in terms of how Edwards is thinking about this national coverage decision and the importance of it for sustaining or driving stronger TAVR volumes?

Yes. It's very important in the U.S. to have a new NCD. And Edwards and many other companies and interested parties submitted letters to CMS during the first comment period. Those letters and input are being considered by CMS, and we'll see what the impact of the new NCD looks like this summer when it's published by CMS. But the position that we proposed and submitted to CMS was that the new NCD, first and foremost, attaches coverage to label so that asymptomatic patients who are already on indication with the FDA also have those procedures covered nationally with this new coverage determination. And then the second piece that you touched on has a number of elements, which is taking out the friction and the impediments to hospitals and physicians being able to treat more patients, whether it's hospital site requirements or operator requirements or other issues that really provide limitations on growing these practices that we think should be considered by CMS. One of the relevant NCDs that we look to is the NCD that was put out for EVOQUE, which is Edwards tricuspid replacement valve, where there are no site requirements, there are no operating requirements. That it's really left up to the hospital and the heart teams to determine the best way for patients to be cared for. And so we're looking forward to seeing what CMS comes out with this summer.

Great. As you're winding down your tenure as CFO of Edwards, you issued guidance for some nice P&L leverage in 2026 and the profitability of the business is coming into focus. Maybe talk about why now is the right time to maybe deliver on that leverage at a higher clip. And is this a multiyear framework that's in play.

Yes. Well, I'd say we've always had a focus on profitability, like a very acute focus on profitability...

Sure, I didn't mean to discount that...

No, that's okay. That's all right. But it's a fair question because our guidance does include now operating margin expansion. And it's an important part of how we're running the company and how we expect to create shareholder value. But just looking back, we invested aggressively in building our transcatheter mitral and tricuspid therapies business. I'm sure you want to talk more about that as well. When we did that, which is now over 10 years ago, we made an intentional strategic decision, which is that we were not going to take resources away from growing TAVR, in order to grow TMTT and that we would do both simultaneously. It impacted our margins. And our research and development, for example, as a percentage of sales went up to as high as over 19% back in the fourth quarter of 2024. Now that TMTT is hitting its stride, generated $545 million of sales in 2025, we expect $740 million to $780 million of sales in 2026. We're seeing leverage on the research and development line, and that ratio as a percentage of sales is drifting down to around 17% we expect in 2026. And that's one of the reasons why we expect that operating margins will continue to expand 50 to 100 basis points on average annually in the years ahead. Now it's not going to be exactly the same number every year. But even as we continue to grow our investments in research and development and in the field force supporting these different therapies in TAVR, TMTT and surgical, we do expect that expenses and are planning expenses to grow lower than the top line, which will yield that operating margin expansion.

And should we be thinking in days past when TAVR was growing in the double digits and outperformance would lead to a nice flow-through. Is that the same setup for 2026? Or because you have such strong operating margin expansion as outperformance benefit likely to kind of be reinvested as we look at '26 and out into '27?

Well, a little bit of both. We're going to continue to invest in growth of all of our different platforms. And again, as I mentioned, we will grow expenses at a lower rate than sales on average annually, which will lead to that operating margin expansion. I do want to catch one thing that you mentioned though, the double-digit TAVR. Yes, we had double-digit TAVR growth in Q3 and Q4 of last year. That is not a new normal that we're expecting. So our guidance for this year is 6% to 8%, and long-term TAVR guidance is mid- to high single-digit top line constant currency growth rate.

I wanted to -- as you referenced, touch on TMTT, not leaving enough time for that important business unit. But you guys have reiterated a long-range target of $2 billion for that franchise. Maybe talk about just the assumptions there. Anything you can share just in terms of the contribution from the transcatheter mitral and transcatheter tricuspid portfolios? And will one outpace the other? Is there any mix you can share in that $2 billion assumption? Maybe to start there.

Yes. It's a good question. We speculate about this even internally. And we don't know. And the fact that we don't know what the mix of therapies is going to be in 2030 is a reflection of the importance of the strategy we have in place, which is we believe it's critical for treating physicians to have different tools in their toolkit to treat the different forms of these diseases, mitral regurgitation and tricuspid regurgitation. For some patients, they'll benefit from our PASCAL transcatheter edge-to-edge repair system. Other patients will benefit from a full valve replacement, whether it's EVOQUE for tricuspid regurgitation or SAPIEN M3 for mitral regurgitation. And of course, we've got parallel surgical valves as well. But in TMTT, really having multiple different therapies to address custom personal patient needs is going to be a really valuable element of this growth to $2 billion in 2030 and growing beyond that as well.

And maybe review the toolbox approach. I mean we think about 2027 in the United States and internationally, Edwards will have replacement and repair solutions for both mitral, which is already in play now and tricuspid. How big a deal is that in terms of helping you guys secure the CAGR that gets you to that $2 billion in 2030.

Yes. It's important. And in fact, even with transcatheter edge-to-edge repair, our PASCAL device does not have a full label indication at this point. So we have enrolled our CLASP IIF trial studying PASCAL in patients with mitral functional regurgitation. And we'll be presenting the results of the CLASP II TR trial at TCT later this year. And so adding those indications and presenting supporting clinical trial data is going to be really valuable in growing that PASCAL franchise. And so will new product introductions and additional clinical trial information from EVOQUE and SAPIEN M3. So across the board, just continuing to innovate across these different therapeutic alternatives is going to be critical to growing TMTT. And we're confident we're going to be able to do it. We've got Gen 2 of PASCAL and EVOQUE ramped up and getting closer to introducing those. And that will be the first of multiple next steps in bolstering those product lines.

Those are two healthy markets, Edwards is best positioned. Are you surprised that some of the other players, big players in the structural heart sector have not either invested or I guess, maybe they haven't -- just haven't had success building out technologies that can be competitive in mitral and tricuspid, but it seems like a 2-horse race right now, and do you expect more competition to come in. Is that one of the assumptions that baked into your ramp to $2 billion in TMTT sales by 2030?

Yes. So the $2 billion in sales is Edwards sales. Certainly, the total sales will be higher than that. But I think one of the reasons why we've had the privilege of being the leader in these spaces is we are exclusively focused on structural heart care. So other companies have multiple lines of business in health care. We really think structural heart is critical, and that's where we've chosen to focus our attention. One of the reasons that's given us confidence to do that is because there are so many patients who can benefit from the treatments that we are providing and will provide in future generations. And so yes, there will be competition, and there always has been competition in our space. We're comfortable with that. We'd take competition seriously. But we think about competition more as Edwards competing against these diseases than Edwards competing against other companies.

Maybe we can spend the last couple of minutes on EVOQUE, a big product. A lot of investor focus over the past 18 months, the data and the launch. Two questions. One, has the EVOQUE launch kind of met the internal bar that was set by your team? There was some real-world data presented at TCT last year that was big. And maybe just talk about the ramp and any qualitative and hopefully quantitative metrics you can share?

Yes. So we're really pleased with the EVOQUE introduction and rollout. And we're still in relatively early days of doing that. The rollout has a couple of components, of course. One is training new sites and expanding the availability of the EVOQUE therapy across different hospitals. The other is increasing referrals of patients who have tricuspid regurgitation from their general cardiologist to their interventional cardiologists to the heart team. And so we're supporting hospitals as they do both of those things. I think we've been really pleased with the procedural success rates for EVOQUE across the board on a number of different elements, the types of which we talked about earlier, EVOQUE has performed very well, and we're still talking about a first-generation therapy with its early on in its development. So we're pleased with the start. We're very enthusiastic about the potential for EVOQUE to play a meaningful role for physicians and patients who are suffering from this tricuspid regurgitation disease. One of the cool things, I'll just tell a quick story, Josh, is when patients with TR, tricuspid regurgitation, get treated by their physician. The results are very evident very soon. So most TR patients have a lot of swelling in their lower extremities and they're in pain and they're in and out of hospitals all the time. Sometimes they have heart failure. And once their tricuspid valve gets replaced, it's really almost miraculous. Patients come back and see their physicians a couple of weeks later, and they may be 30 pounds lighter with plans to go dancing that coming weekend. And so it's one of the things that gives physicians a lot of confidence and interest in treating even more patients.

And not the best question to wrap up with, but just with the events over the weekend and the conflict that's ongoing in the Middle East, any -- just help thinking about Edwards' exposure to that region. Very, very early days, so maybe hard to comment on, but any thoughts would be appreciated.

Yes. Well, we're obviously watching the situation carefully as it unfolds. We do have people and patients in the region. And so we'll continue to watch carefully and safeguard our employees and also secure to every extent possible, the availability of the therapies we provide to patients in the region.

Well, I'd leave it there. Scott, thanks so much. This is maybe our last fireside chat, but hopefully, not our last interaction in-person going forward. So great to see you and appreciate it.

For sure. Thanks, Josh.