愛德華生命科學 (EW) 2024 Q2 法說會逐字稿

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Greetings and welcome to the Edwards Lifesciences second quarter 2024 result. (Operator Instructions) As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host, Mark Wilterding, Senior Vice President, Investor Relations. Thank you. You may begin.

Thank you very much, Kevin, and good afternoon and thank you all for joining us. With me on today's call is our CEO, Bernard's Zovighian, our CFO, Scott Ullem. Also joining us for the Q&A portion of the call will be Larry Wood, our Global President of tower and Surgical Structural Heart, Daveen Chopra, our global leader of TMTT Wayne Markowitz, it's our global leader of surgical structural heart and kidneys, Katie M. Szyman, our global leader of critical care, just after the close of regular trading Edwards Lifesciences release second quarter 2024 financial results.

During today's call, management will discuss those results included in the press release and accompanying financial schedules and then use the remaining time for Q&A. Please note that management will be making forward-looking statements that are based on estimates, assumptions and projections. These statements include, but are not limited to financial guidance and expectations for growth opportunities, strategy, leverage and integration of acquisitions, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters, and foreign currency fluctuations.

These statements speak only as of the date on which they are made, and Edwards does not undertake any obligation to update them after today. Additionally, these statements involve risks and uncertainties that could cause actual results to differ materially. Information concerning factors that could cause these differences and import and safety information can be found in the press release, our 2023 Annual Report on Form 10-K and Edwards other SEC filings, all of which are available on the company's website at Edwards.com. Unless otherwise noted, our commentary on sales growth refers to constant currency sales growth, which is defined in the quarterly press release issued earlier today. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are also included in the company's press release.

With that, I'd like to turn the call over to Bernard for his comments.

Thank you, Mark, and thank you all for joining us. This afternoon, we issued two press releases. We should have a team in either outlining our Q2 results and the second, highlighting our acquisition of the innovative and pioneering the transcatheter treatment of aortic regurgitation or a real and electronics immediately in-house video management solutions.

I will start with our second quarter performance. Total company sales of $1.6 billion increased 8% on a constant currency basis versus the year-ago period. In addition, we made important advancements in our clinical research, new product introductions and a full by it was employees to address the unmet needs of many more patients around the world.

TAVR growth in the second quarter was lower than expected? Yes. We are pleased with the increasingly significant contribution from TMTT. Our vision for TMTT is becoming a reality, and our strategic commitment has developed into a growth portfolio of differentiated technology. Overall, it was very well positioned to deliver strong, sustainable growth. We also announced this afternoon to all acquisitions JenaValve and Endotronix. We have known this company for many years. Discussions with the company's has been ongoing for some time and the timing of these acquisitions co-incided with earnings. We are pleased to expand into used to new structural heart therapeutic areas, AR in heart failure and where we leverage our innovation capabilities with a world-class science and clinical evidence to ensure accelerated access to life-saving technologies for patients around the world.

Now I will provide some additional detail on Q2 results by product group TAVR second quarter global sales of $104 billion increased 6% year-over-year, lower than we planned. It was competitive position did not meaningfully changed globally. Although we experienced some regional pressure and we maintain pricing, we are confident in our differentiated value. We continued to demonstrate to patient clinicians and their health care system. We remain focused on continuing our deep commitment to advancing evidence for AS patients. The New York valve meeting in June, we presented additional analyses from the power of trials, which demonstrated excellent clinical outcomes up to five years in women and patient with small annualized adding to the global body of evidence on the platform.

We also anticipate additional data from their regular study to be presented at the upcoming ESC meeting in London. RHEIA is a prospective randomized study in more than for the patient across 35 sites in Europe. comparing the safety and efficacy of TAVR versus surgery in women with severe symptomatic aortic stenosis.

We are actively pursuing significant opportunity to grow TAVR globally over the long term and are proud to continue our deep commitment to advancing science for aortic stenosis patients through the progress and early type of trials, which could fundamentally change how AS patient treated early TAVR trial results will be presented at TCT this year. And we believe even data compelling could have a meaningful impact on the timing for patient treatment while also streamlining our referral and inpatient care for all severe AS patients.

In the US, our yield of the year second quarter of TAVR sales growth was slightly below our global constant currency growth rate. We believe our US competitive position was largely unchanged. Second quarter, US study of sales grew slower than expected. The continued growth and expansion of structural heart therapy, including newly approved tricuspid therapies and other fast-growing structural heart therapy is put pressure on hospital workflows, which impacted TAVR. These pressures also observe in the recent spike in emergent TAVR cases as reflected in claims data as center adopt these new therapies and they become part of a standard processes, we expect this will stimulate a higher level historically demonstrated the ability to scale to support transcatheter Presidium growth over time.

We believe significant and the treatment of severe AS persists evidence demonstrate that a large number of in system patients currently go untreated. We are accelerating our efforts to improve, have travels and Switzerland rate for patient already in the hospital system was suffering from severe symptomatic aortic stenosis.

We recently launched the Edwards ENACT patient activation program, which leverage a comprehensive cardiovascular AI platform and world class support to bring real-time insights to TAVR program and improve quality of care for patients. This first of this scale program is focused on streamlining the identification and evaluation and treatment of severe aortic stenosis patients within the hospital system. I'm sort of the US in the second quarter, up a constant currency.

TAVR sales growth was slightly above global GDP growth. In Japan, we generated double digit sales growth, driven by SAPIEN 3 Ultra resilience. We continue to focus on expanding the ability of this therapy and believe AS remain a significant undertreated disease among the substantial elderly population in Japan. In Europe, while share is down slightly on an annualized basis, where we are pleased with the momentum driven by the launch of SAPIEN 3 overtime resilience, we are pleased with high procedural success rate and exceptional patient outcome. We expect the momentum to continue to build as more center sales of experience with the First Choice valves for lifetime management.

In closing, we now anticipate second half TAVR sales growth similar to the first half year-over-year growth rate of 5% to 7%. Full-year growth rate versus previously guidance of 8% to 10%. That doesn't this equate to full year global TAVR sales of $4 billion to $4.2 billion.

We believe hospitals are motivated to continue scaling to accommodate increasing volume of transcatheter procedures, which will bring tremendous value to patients and the talent for this position for healthy and sustainable growth, driven by our differentiated Italia portfolio of deep commitment to advancing patient care for high quality, clear clinical evidence and new indications and our investment in patient activation initiative.

Turning to TMTT our deep structural heart expertise has enabled us to significantly advance our portfolio of differentiated technology, including the PASCAL repair system, the EVOQUE tricuspid replacement system and the SAPIEN M3 mitral replacement system. Our exciting pipeline of innovations is addressing a large unmet needs for patients with mitral and tricuspid disease. In Q2, we achieved positive results with sales of $83 million, representing a 75% increase versus prior year. Q2 sales were led by PASCAL globally and early commercial introduction of evoke in the US and Europe. PASCAL adoption is growing, reflecting its premium differentiation and value it brings to physician and patients.

We believe the [Mitel] tier markets continues to grow double digit in both the US and Europe. We are excited to bring this therapy to more geographies, more physicians and more patients. The EVOQUE commercial launch continues to progress. Well, our disciplined strategy is focused on outstanding patient outcome incentives, investing resources required to grow a successful tricuspid program.

We are not opening new centers, both in Europe in the US after having started with our clinical trial sites, we continue to see strong interest in the therapy, which reflects the significant unmet need in this population of patients who have few options for treatment.

Our early real world. Commercial experience has demonstrated excellent clinical results consistent with vote from the trace into trial. We look forward to presenting the full cohort of plays into data at the TCT conference in October and now opening of a national coverage analysis for transcatheter tricuspid valve replacement. Since evoke was granted FDA Breakthrough status and is utilizing the CMS parallel review process. We believe CMS can move quickly to finalize national coverage. [Separate and free] remains on track to be our first transcatheter mitral valve replacement therapy to get regulatory approval and launch around the world.

We are also pleased to have received breakthrough designation from the FDA, and we completed enrolment in the mitral annulus calcification of MAC arm of our encircle study. We now expect Sapient and fleet to receive [CE Mark] early earlier than previously expected acted by mid 2025 with FDA approval in the US to follow in 2026. Earlier this month, we announced the acquisition of RESILIA valve. Early stage technology will add to our growing pipeline of innovative therapies or TMTT, and we expect to close the acquisition later this year.

We further expect that innovation technology, combined with Edwards expertise in mitral disease, will enhance the company [TMVR] technologies to address large unmet structural heart patient needs and support sustainable long-term growth. Based on the first half 2024 momentum and the ongoing global adoption of our differentiated technology that's going to EVOQUE. We are increasing full-year sales guidance for TMTT. to the higher end of our previous $320 million to EUR340 million range.

We remain confident that our unique portfolio strategy with repair and replacement therapies for both mitral and tricuspid disease, with all of our tradition for broader set of options needed to treat these complex and the AS patient. The advancement of our long term TMTT strategy has positioned us for strong sustainable growth over many years, driven by a growing portfolio of innovative therapies. In Surgical Structural Heart second quarter for $264 million increase 5% over prior year. Growth was driven by strong global adoption of Edwards’ premium surgical technologies, INSPIRIS, MITRIS and KONECT.

We continue to see positive positive growth globally for the many patients' best to surgically, including vols undergoing complex for cereals. We continue to expand the overall body of Brazilian evidence and have completed enrollment in the US and Canada from momentous critical trial studying resilient performance in the mitral position might place. Adoption in Europe is ramping up, and we are pleased to have been granted reimbursements for the day device in France earlier than expected. In summary, we remain confident that our full year 2024 surgical sales will be 6% to 8%, driven by continued adoption of our RESILIA portfolio and growth in overall heart valve surgery in critical care, second quarter sales were $246 million, which increased 7% versus the prior year.

Growth was led by a pressure monitoring devices using the ICU with strong contribution from our smart recovery technologies, including the Acumen IQ sensor. Swan-Ganz catheter. Critical Care remains focused on driving growth through SMART Recovery and SMART Expansion, which are designed to help clinicians make more informed decision and get patients home to their family faster. Since announcing the sales of Critical Care to Becton Dickinson in June, our team has made significant progress and we plan to close by late Q3. I want to thank all of them for their hard work and dedication.

Turning now to the strategic acquisition of JenaValve and Endotronix. These acquisitions provide an expanded opportunity in new therapeutic areas to address the unmet needs of AR and heart failure patients around the world. Furthermore, the acquisition reflects our deep commitment to advancing patient care through our unique strategy and reinforce our confidence in Edwards sustainable long-term growth. Starting with JenaValve, a pioneer in the transcatheter treatment of AR, a deadly disease that impacts more than 100,000 patients in the US alone and is largely untreated today.

Edwards anticipate US FDA approval of the JenaValve Trilogy Heart Valve System in late 2025, which will represent the first approved therapy for patient suffering from AR. Edwards will invest to accelerate development of this novel technology to enable earlier patient access. As the pioneers in valve innovation, we believe we are best positioned to lead this next frontier of aortic valve disease treatment. We expect this to be the beginning of a long-term iterative strategy similar to TAVR.

Turning to Endotronix. Edwards made its first investment in the company in 2016. So we are very familiar with the technology, the opportunity and the employees. Many structural heart patients Edwards serves today also suffer from heart failure with limited options. This acquisition will expand Edwards structural heart portfolio into a new therapeutic area to address the large unmet needs of patients suffering from heart failure, which we believe has a significant long-term growth opportunity. Last month, Endotronix received FDA approval for Cordella, an implantable preliminary artillery pressure sensor that directly measure the leading indicator of congestion following the publication of a successful US pivotal trial.

We are pleased to enter the structural heart therapeutic area with innovation, worldclass science, and clinical evidence to provide access to life-saving technologies for patients around the world. We anticipate this investment will strengthen its leadership in structural heart innovation and represent long-term growth opportunity. Minimal revenue contribution from JenaValve and Endotronix is expected to begin late in 2025. As you can tell, we have a lot of positive momentum and many catalysts across our core businesses, TAVR, TMTT and Surgical combined with opportunities to reach new patient population.

And now, I will turn the call over to Scott.

(inaudible)quarter total company sales performance, where TAVR sales growth came in below our expectations. However, it's important to understand broader context, we are pleased that TMTT continues to outperform our expectations. And overall underlying sales growth, including Critical Care was nearly 8%, adjusted EPS was $0.70. GAAP earnings per share of $0.61 included one-time separation expenses related to the sale of Critical Care. A full reconciliation between our GAAP and adjusted earnings per share is included with today's release.

So, now I'll cover additional details of our P&L, which reflect total company results, including Critical Care. Note that Critical Care will be presented as a discontinued operation in the 10-Q we will file next week. As we noted in the press release, we'll provide Q4 2024 information reflecting the sale of Critical Care and the acquisitions announced this month when we report third quarter results.

For the second quarter, our adjusted gross profit margin was 77.1% compared to 77.7% in the same period last year. Last year's second quarter gross profit margin benefited from a more favorable impact from foreign exchange rates. We expect Edwards Q3 adjusted gross profit margin, including Critical Care to be in line with Q2, driven by high-value technologies that yield strong gross profit margins.

Adjusted, selling general and administrative expenses in the quarter were $509 million or 31.2% of sales compared to $469 million in the prior year. This increase was driven by an expansion of field-based personnel to support growth of our transcatheter therapies, including the launch and rollout of PASCAL and EVOQUE. Adjusted research and development expenses in the second quarter grew 12% over the prior year to $303 million or 18.6% of sales. This increase was primarily the result of continued investments in our transcatheter valve innovations, including increased clinical trial activity.

Turning to taxes. Our reported tax rate this quarter was 5.2% or adjusted 8.4%. Our unusually favourable non-GAAP rate in the second quarter reflects several positive one-time items that were recorded during the quarter. This unexpected favourability in our tax rate benefited earnings per share by $0.04 in the second quarter. Foreign exchange rates decreased second quarter adjusted sales growth by 120 basis points or $17.6 million compared to the prior year. FX rates negatively impacted our second quarter adjusted gross profit margin by 60 basis points compared to last year's second quarter.

Free cash flow for the second quarter was reduced $47 million for payments associated with special activities relating to the separation of Critical Care. Excluding the impact of these items, adjusted free cash flow was $333 million. First half adjusted free cash flow was $539 million. We expect to receive cash from the sale of Critical Care in the third quarter.

Turning to the balance sheet. We continue to maintain a strong and flexible balance sheet with approximately $2 billion in cash, cash equivalents and short-term investments as of June 30. Now I'll finish this update with comments about our previously announced sale of Critical Care, as well as guidance relating to our acquisition announcements. We announced on June 3 that Edwards entered into an agreement to sell Critical Care to BD, and we are planning to close the sale late in the third quarter. During the second quarter, we recorded $80 million of one-time costs associated with the sale. Additional one-time costs will be incurred throughout 2024.

We expect Q3 sales, including the assumption that we own Critical Care for the full quarter of $1.56 billion to $1.64 billion and Q3 earnings per share of $0.67 to $0.71. We do not expect the recently announced acquisitions to contribute to Edwards sales in 2024. We intend to provide fourth quarter guidance reflecting the sale of Critical Care and the acquisitions announced this month when third quarter results are reported in October. We will also provide 2025 guidance at our Investor Conference in New York on December 4.

In the meantime, I'll share a few early expectations for 2025. Next year. We expect minimal revenue from acquisitions. While we are planning on incremental operating expenses from these early-stage companies, partially offset by operational efficiencies we plan to realize following the sale of Critical Care, we do not expect increased operating efficiencies to completely offset the loss of profits from the sale of critical care in 2025. Full year planning healthy long-term profit growth. In addition, we plan to maintain a strong balance sheet to support continued internal and external investments as well as opportunistic share repurchase.

Most importantly, we are confident in the moves we have made to reshape our portfolio of technologies to focus specifically on structural heart. The sale of Critical Care provides extra management bandwidth, as well as additional liquidity to fund external growth investments. And at the same time, our original vision for TMTT is becoming a reality and the early-stage investments we made in companies like JenaValve and Endotronix position us to acquire high-quality and high potential businesses with talented employees. We have other jewels in our portfolio of internal and external investments that will benefit Edwards in the years ahead. Over the long-term, we see an exciting future with expanded opportunities in large and growing market, which we believe will result in sustainable double-digit revenue and earnings per share growth.

So with that, I'll pass it back to Bernard.

Thank you, Scott. So let me share a few closing thoughts. In TAVR we have significant opportunities, and we are committed to growing globally by advancing science as our long-term progress at early TAVR trials could fundamentally change. Our AS patients are treated in TMTT. Our deep expertise of enable us to significantly advance our exciting portfolio of innovation.

And our long-term TMTT strategy has positioned us for strong sustainable growth over many years. In Surgical Structural Heart, we continue to see strong adoption of our premium surgical technologies. Our JenaValve and Endotronix acquisitions provide an expanded opportunity in new therapeutic areas. The bulk represents significant long-term of opportunities. We remain confident that our innovative therapy will allow at all to treat more patients around the world and continue to drive strong organic growth in the years to come as patients and clinicians increasingly recognize the significant benefits of France catheter-based technology. We remain we remain as optimistic as ever about the long-term growth opportunity.

With that, I will turn it back to Mark.

Thank you, Bernard. Ready to take questions now in order to allow for broad participation and ask that you please limit the number of questions to one plus one follow-up. If you have additional questions, please re-enter the queue. Management will answer as many participants as possible during the remainder of the call. Kevin, please go ahead with additional details on accessing the Q&A portion of the call.

(Operator Instructions)

Larry Biegelsen from Wells Fargo.

Hey, guys, good afternoon and thanks for taking the question in a Two for me. Let me start with early TAVR, and then I had a follow up for Scott on 2025. So what would be -- for early TAVR, what would be compelling to you? Do you need to show a mortality benefit to be more compelling? And how should we think about the impact on your TAVR growth if the study is positive, do you expect it to accelerate the TAVR growth in 2025 above the 5% to 7% you expect this year? And I had one follow up.

Sure. Hey, Larry. This is Larry. Thanks for your question. I think at a very high level there needs to be a compelling story for why early intervention is better and basically make the case against watchful waiting. And we've done a lot of work when we were powering the trial, and we obviously had a lot of belief in it. The primary endpoint is death, stroke and rehospitalization. And so, it's really the composite of all those. And winning that trial and obviously, the more you would win it by makes the more compelling case.

In terms of the individual components will have to look at both. But when you think about it from a patient journey and a better rating and bad things are happening to us, one of their rating is resulting in a complementary hospitalization, North resulting in stroke or it's resulted in mortality. All those are very meaningful things, and that's whether our composite primary endpoint. So we'll have to wait and see if the data, we'll have to see the story. But death, stroke and rehospitalization has kind of become almost a standard now for most of these trials because the clinical community believe these are all important considerations and endpoints.

Maybe let me add something to what Larry said. For sure asymptomatic is very important to us and to the community and to patients. But it is one thing of one of the many things we are doing, and we are confident in growing this TAVR opportunity. So asymptomatic is one, patient activation, we see some impact already, but also moderate. So if you think about over the next few years, we see many catalysts. It is why we are confident in this TAVR opportunity. Granted, we know that Q2 was lower than expected, and I guess we are going to talk about it, but in front of us, we see that this opportunity as a big one, like we saw it few years ago, still we see it, still we are confident, and we are doing all the things to realize this opportunity.

That's helpful. And Scott, thanks for the initial color on 2025. I'm sure you know that's important. Everyone on this call right now to try to understand try to as best as we can to model that. So a couple of pieces, follow ups on that. The press release says strong sustainable growth. It doesn't say 10% operational growth for the remaining business in 2025. I just want to confirm that that 10% from the analyst meeting last year in December is not you're not reiterating that today.

And second on the dilution, we estimate, I think most of us estimated at about $0.40 of dilution from critical care spin. Any reaction to that and the incremental spending you talked about from the acquisitions. Any additional color on that? And just lastly, the use of proceeds, should we just assume share buyback or additional M&A? Thank you.

All right. That's a multi-part follow up question. Let me try to hit a couple of the things you asked about, Larry. First of all, on the 10% long-term top line growth, we're just not commenting on guidance at this point, it doesn't mean we're increasing it or decreasing it or changing it. It's just the kind of thing where we don't update that during the course of the year, so we're not providing an update today. We will definitely provide an update as we always do at our December investor conference.

For on dilution from critical care. Yes, you know, a lot of this depends upon how we and are prioritizing investments in the company as we separate critical care. And as you can have imagine, there are a lot of different moving pieces as we do that. So we're not going to be will either a specific figure on I'll call it remain co, ex-Critical Care at this point. And it does tie to your question about incremental operating expenses that were absorbing with these acquisitions and those dependent upon a couple of things. one is when we actually closed the acquisitions and start to realize that spending to how we end up integrator spin out today. So those plans are not completely developed.

Finally in terms of use of proceeds from critical care of? Yes, as you know, we're always we're always interested in buying back stock. We're always looking for buying opportunities. But the first call on cash hasn't changed one bit, which is we're going to continue to invest in the company. We're going to continue to invest in the capacity that we need to support the growth of the company. We will certainly be looking at other external investments. And then finally, we'll look at capital and allocating capital to share buyback. So there's a little bit of color, and we'll obviously give you a lot more as we get towards the end of the year.

Maybe my logic Medix something, but Larry here, are you going to the guidance?

Larry, on the guidance, I agree with what Scott said about. We are not planning to communicate the guidance on 2025. But if you look at the quarter, TAVR grew about 6%, the company about 8%. So you see a big contribution from TMTT, and we see that contribution to get bigger as we go because right now we are just at the beginning of PASCAL expansion. Just at the beginning of the EVOQUE expansion. We have M3 coming, in TAVR, we have asymptomatic end of the year, so are we confident about sustainable growth over the long-term? Yes. We are going to talk about guidance in December.

Thank you.

Robbie Marcus, JPMorgan.

Great. Thanks for taking the questions. Two from me. Maybe first, you talked about it in the script, but I was hoping you could give a little more, TAVR has clearly come in below your initial expectations for the year. The guidance has moved down. The US is slowing. OUS is facing pressure. We saw two of your smaller competitors, but still competitors see pretty nice growth sequentially and year-over-year. So the TAVRS taking more in Europe and outside the US, Japan. How are you thinking just about the underlying growth rate of the TAVR market? And I appreciate it's a huge opportunity and it's still a lot to conquer in the future, but in, let's call it the short to medium term, how are you thinking about the overall market growth? And is there anything you can do to help accelerate it?

Yes. Thanks, Robbie. Well, obviously we expected growth rate to be higher in Q2 than it was. We had a slow start in Q1, but we were exiting March and we felt good about where we were. So this did come as a surprise. I think when we reflect back on it, and we look more deeply at it, you have to think about all the things that have shown up that are going to the same structural heart team at all of these hospitals. We're seeing rapid growth in mitral repair. We're seeing a lot of growth in other procedures, and we had two new therapy approvals recently in the tricuspid space, and I think a little bit we looked at the procedure volumes and the hospitals have shown a pretty good job of being able to handle these things. We probably underestimated the burden of even starting these new programs, even preparing to start these new programs, because you have to screen the patients early on. There's a lot of learning, screen failures, all of those things, and I think it's just tackling the teams.

Now, in terms of things we can do to help, there are certainly things we can do to help. We can do a lot of imaging workups and take some of the load off the team. We can do device prep. We can come in with our benchmark program and teach them efficiencies and do those things. But once a program has been optimized that it really does come down to the hospital to add another team or add additional days and do those sorts of things. So there are some things we can do, but we can't do everything.

I think the other thing is, I think highlighting this for the clinicians and we're very confident, this isn't some slowdown because there's a lack of patients. We didn't see any of the fundamentals change in terms of new data that was concerning or any of these things, I think it's just a matter of the workflow right now. And we need to be able to engage with hospitals. But two important things we saw is we saw an increase in time from CT to procedure, which indicates patients are waiting longer and the other thing that we saw was a sharp increase in the number of cases being quoted as emergent versus routine. And I think that speaks to these patients waiting in the queue as these workflow issues sort out. So I think hospitals will certainly do that in time. These patients don't wait well, and we know that there's a lot of them, but we're going to have to continue to work through that with the hospitals.

Yes. So let me add on what Larry said. To be fair, we are contributing a little bit on this pressure. At the same time we are benefiting. If you look at the TMTT growth in the quarter. So we are contributing and benefiting at the same time. Now, big picture, we have seen this picture in the past, don't you think we have seen hospital facing like more to do, more technology to adopt, to be trying on new technologies, and we are very good at scaling. We are very good at learning. We are very good at adapting their workflows in the cath lab, so we believe it is temporary. And we are the real still with this team are, with Larry are partnering on this one. So we are fully focusing on this one helping in real hospital. But we have faith the hospital are going to do that like they did it in the last 10 years. Thanks.

Great. And maybe a follow-up to that guidance implies roughly stable TAVR first half into second half. I appreciate the need to be conservative, but it sounds like some of the learnings you saw in second quarter could possibly help in the back half of the year. Maybe just walk through the thought process of the 5% to 7% TAVR guide and kind of what you're baking into that? Thanks a lot.

Yes. I mean, it's pretty straightforward which is we're baking into it similar market conditions. The year-over-year calculation is pretty similar. Fourth quarter comp gets a little bit tougher. But we think that all things considered, that 5% of the low end, 7% on the high end captures the likely scenario for the second half combined with the first half that we've already reported.

Thanks

We believe, to add on that one, we believe early TAVR, TCT, it will be already almost the end of a quarter, Robbie. So TCT is in late October. So we believe it will have a very minimal impact in Q4. So it is why we didn't want to take too much risk here.

David Roman, Goldman Sachs.

Thank you and good afternoon. I wanted just to come back actually until Larry's comments regarding I maybe you're characterizing it as as capacity. And as you think about the myriad of therapies going into structural heart right now, whether that is some of the new valve therapies, whether it's Watchman, to what extent do you think hospital economics factor into that decision and prioritization making here? And how does that to if it does in any way impact your kind of pricing decision around TAVR or EVOQUE?

Yes, it's a good question. And I'll defer to Daveen on EVOQUE, but I'll start with the TAVR side of it. It doesn't really change the pricing, and we don't think this is an economically driven thing. I think when new therapies come forward, hospitals are competitive. They want to be able to offer all of the therapies. And that means they want to aggressively start these newer programs and make sure that they can offer all of the options for their patients. And so, I think that's what's driving some of this more than other things. And I think all companies before they're willing to bring a new technology in, they want to the center has to demonstrate competence, right? They have to demonstrate they have the ability to screen, they have to have patients in queue and all those things. And I think it becomes a big thing, but I don't think this is an economically driven thing. I think it is just the result of all the new things that are coming into the cath lab and again, I think that does get corrected with time.

Yes, this is Daveen, and I'll just jump in for a second here. We're seeing as we bring in new therapy like EVOQUE, right, while procedure times are relatively efficient, and they are, they're an hour-long procedures. It takes up a lot of energy, effort, thoughts, processes to start a new therapy, right? It takes a lot of bandwidth for people in terms of trying to find the patients, where are the referrals coming from? How does it kind of work through the system? How we pre-case plan? And these are often the same groups of people, valve clinic coordinators, interventional cardiologists, etc. that are working on TAVR. So as you bring in just a new therapy and start building it up, it takes a while, a lot of bandwidth and a lot of energy to get it going. But then over time, like we've seen for every other therapy, you create efficiency. It gets faster, and we're going to help them do that. But hospital then figure out, okay, now this is how the therapy is going to work its way through the system, and it becomes more efficient and becomes better so that there is more capacity to do more procedures overall.

That's that's very helpful. And maybe just on a related follow-up to that, can you maybe unpack the $83 million in the TMTT line for us in a little bit more detail? It sounds like a minimal EVOQUE contribution with PASCAL accelerating. But maybe if you could sort of delineate a little bit different product drivers within there and then maybe some of the different geographic drivers. And I may if I could sneak a follow-up into the response there. How long do you think, Larry, it takes to dislodge them sort of capacity constraint or sort of digestion of multiple therapies going through the system?

This is Daveen. I'll start off a little bit with TMTT. I mean, first, just at a higher level, we were actually super excited to see that in Q2, our vision of becoming more and more reality, we've made a strategic commitment that we had a portfolio of repair and replacement technologies for the many different mitral and tricuspid patients. And it was nice to see that step forward in Q2. I'm ultimately you break it down on a level of Q2. Sales were led by led by PASCAL, right, PASCAL's, larger pool. It continues to grow in adoption.

We believe this differentiated premium technology, and it was our low early introduction in the US and Europe have EVOQUE, right? I've got approved in Europe late last year in the US earlier this year. So we're beginning that important process of training centers, getting up to speed being to train our own internal people and start that kind of case cadence. So those were kind of have to and in terms of size and scale, just because in Europe, we've been in Europe since 2019. Now that's a much larger base since when you have a larger base, you have kind of a stronger growth. Coming off of that for the US is our is grown up quickly now and we're continuing to expand our technologies around the world beyond just the US and Europe.

Yes. And just to follow up, Allard would take to dislodge and it's hard for us to be exact. And we are I think we tried to account for that in our guidance, but it's not a light switch. But the best analogy I can say is when we brought TAVR and all these hospitals, we heard repeatedly that there was impact our coronary procedures and other things that we're going on in the cath lab. And we were going to take it up a little with that mind share and a little bit of that workflow space. But it wasn't sustainable and you can't just Parker coronary patients forever and you can't park aspirations forever. So I think one centers have certainty of the added work loaded certainty of the volume. I think they add resource and they do the things necessary. But nobody's going to go hire a bunch of people in advance of the new therapy show up. They always are kind of recovery as the workload your time, I think territory, that's just our hospital systems operate.

Yes, we are confident that my experience of the hospital and we do learn fast adjusting to the I'll walk through our processes, and this is why we are seeing it is, you know, temporary obviously going to be patient when they stay home if you have a tenable quality of life and many of them today. So I don't believe it is sustainable to I and everybody is committed, the Aussie dollar committed, we are committed. So what do you have you to a full commitment behind it? We know it is going to be resolved.

Got it. Thank you for taking the questions.

Josh Jennings, TD Cowen.

Hi, good afternoon. Thanks for taking the questions. I wanted to just start off with the from whatever outlook and kind of longer term, you guys have put a $10 billion kind of TAM forecast by putting 28 in the past. Is that so we took measures to be thinking about that, TAM and an opportunity being in place, but maybe pushed out a little bit or maybe the aortic regurgitation indication gets you there by 2028. But you may not be reiterating today, but it sounds like you're confident in the TAVR market in that $10 billion TAM, but not sure if you're reiterating it now.

Yes, I think you said it in your question. We are confident we are not updating the guidance for next year for 2028 here on the market, but we are confident. We will do so in December at the investor conference in New York.

Thank you.

Travis Steed, Bank of America.

Thanks for taking the question. I wanted to go back and circle back on Robbie's question on TAVR. It feels like there's a little bit more of a change here. Just three months ago, you thought TAVR was going to accelerate over the course of the year. I thought the 8% to 10% at the beginning of the year was supposed to be a conservative guide. So just want to understand like, I hear what you're saying on TMTT, but that's a small number of faction versus the overall TAVR centers, so I don't know if there's anything else that you'd kind of call out or kind of what surprised you on the TAVR line. I know there was some of the European stuff and competition there that you called out last quarter, just understanding kind of the full change and why you got the initial TAVR guide wrong at the start of this year.

Yes. Thanks, Travis. Yes. When we exited Q1, we thought we were on a good ramp, and we thought we were on a good pace, and that's why reiterated guidance and we felt good about it and we just didn't see that play out in Q2 the way that we anticipated and by no means do I mean to say this is all Daveen's fault and it's all EVOQUE because that's not accurate or fair when you look at the number of procedures. I think it's the cumulative impact of all the things that have hit the structural heart teams over the last year, and it's one of those things you can always increase a little capacity, work a little harder, increase a little capacity, work a little bit harder, but then at some point, you reach a breakpoint when it's simply too much. And the heaviest lift for centers is starting a program and it's not just the procedure volume. It's all that screening and all of the case reviews and all the interaction that just consumes a lot of resources and a lot of time and the training, they have to go to training and observe cases, in many cases, and all of those sorts of things.

And so, I think it's just the cumulative impact of those things that happen over time. And we did see the slowdown more acutely in large centers and small centers, which fits a little bit of the model as well in terms of the centers that are most likely to be looking to start these new programs and are competitive about that. And again, I said it earlier, but we did see a spike in emerging cases over routine cases, and I think that fits what we're saying as well. But that's not going to be sustainable for people. Emerging cases have more complications. They don't have as good a patient outcomes and people will have longer length of stay and that's going to adversely impact patients and the hospitals themselves. So I think people will have to adjust it over time. And we're going to have to work closely with them to help them do that.

That's helpful. Any any color on Q3 tower and kind of where that settling out versus before you got I think you guys had extra selling days in Q3. And then on the dilution from the acquisitions, I know there's like a range of outcomes like that's going to be, but we all have a pretty good sense of critical care and the dilution there. But just to give a sense of kind of range of outcomes on on some of the dilution that you've got, like I was thinking $0.10 is kind of ballpark, but I don't know if you do draft about at all.

Yes. Thanks for your question, Travis. You know, on Q3 you're right, we do have a little help from extra selling days in the in the third quarter. So and that's factored into our guidance. It's in the US in the guide that we provided in terms of dilution from acquisitions. Again, we've got a first close the acquisitions then work on integrating them. Obviously, we spent a lot of time with the plan, but it takes some time actually before we actually get businesses in-house and start recording and what kind of financial implications that are before we can report out on those. We'll know a lot more by the end of next quarter when we had actually gotten further down the path and we'll talk about it down. And of course, we'll give full guidance for EPS in 2025 at our investor conference.

Great. Thanks a lot.

Matt Taylor, Jefferies.

Hi, Thanks for taking the question. I guess I wanted to follow up on your tower commentary and the workflow angle, because I'd like to understand better why you think it's showing up so acutely now, I guess, given you're still in a limited rollout of the vote, is it an issue that's been matriculating for a while and we're just seeing it more for now. And could you help us understand in your history there you talked about the impact on coronary. How long do you think it will take for the hospital to adjust? This is a one quarter, three quarter issue would take years for kind of timeframe. Would you put on them and adjusting to accommodate the additional workloads?

Yes. Thanks, Matt. And I think the thing that I would say out of three and you saw demand for your product going up, you can always add a little more hours and you always have a little bit of excess capacity and you can adjust to those things. I think there's just a point in time where you hit a wall and it's harder to do those things. And I think that's a little bit of what we saw here in the cumulative effect of all of the things that have played out over time.

If you look at total cath lab procedures for the structural, our team in the last three years is probably close to doubled on during that period of time, which is a lot of growth. But these things are having to absorb and they're having to adapt to. And I think it will take time. And again, you know, when you're starting these new programs on these new therapies, that's the heaviest with part of it. And again, I think this gets corrected over time and we'll work closely with the hospitals to do that. But we reflected that in our in our guidance and just wanted to be realistic and not be not be timed after what's happened right at the same thing I'll tell you is none of us are happy with the growth rate. None of us are happy adjusting guidance, and we're going to be working as hard as we can do everything we can answer to restore the growth or where we think it should be.

And we are not happy as a company, the patients are not happy, the physician are not happy, the hospital are not happy. So we are fully aligned about it is a problem we need to solve it. So it is why also we are confident here.

Thank you.

Vijay Kumar from Evercore ISI.

Hey, guys. Thanks for taking my questions. I guess one on, um, um, just based on competition, is saying, I know there's been noise on small and light trial is some like how do you respond to? This is not competitive dynamics. What we're seeing in the U.S. market.

So yes, we presented our data in New York valve, and I don't think we've seen are resuming the impact of that in any meaningful way. I know some of the smaller competitors have reported both and you have to take their growth rates for working off of globally.

Understood. And maybe Scott, one fee and the guidance here. EPS, your prior guidance $2.70 to $2.80 inclusive of Critical Care, right? Is that still intact or around what's the new range? We I just want to get an apples to apples sort of EPS at baseline.

Yes, it's a fair question. We are not providing a new update. And the reason is because we know critical here is going to close sometime late in the third quarter. But as a result, fourth quarter will not include critical care. And so we ran obviously, you've looked at a whole bunch of different pro forma scenarios, but it didn't make sense to trying to provide some kind of a bridge to the original to $2.70 to $2.80 guidance. So sorry, but we're not giving an updated number for the full company just because it's not it wouldn't be comparable with Critical Care coming out at the end of the third quarter

Or is there a comparable like, without Critical Care for the full year, what the underlying number is.

Well, the underlying number is actually pretty similar in terms of growth rate with and without Critical Care. And our guidance for the full company is 8% to 10% underlying growth. That's similar, whether it includes Critical Care for the full year or excludes Critical Care for the full year, but we have not translated that down to EPS, with or without.

Understood. Thanks, guys.

Patrick Wood, Morgan Stanley.

Fabulous. Thank you so much. Just two quick ones. I guess, on the EVOQUE side and the initial rollout on the clinical feedback and success that you guys have had. How's that been going? There's been a little bit of volatility in the more database. So I'm just curious how the clinician feedback has been.

Hey, thanks so much, Patrick. This is Daveen. Overall, if you pull back, we've actually been very pleased with the initial rollout of EVOQUE in both the US and Europe. We continue to see really strong physician demand and it really, for us, reinforces the unmet need of these patient group who are looking for better solutions. As I mentioned earlier, we're seeing those predictable outcome times. We're seeing it similar to the clinical trials. And just to look at, we're seeing very similar clinical results to what we saw in the clinical trials, specifically from TRISCEND II, So we've been seeing very similar rates there of kind of clinical outcomes. We've seen so far on the journey, especially in Europe now, where PASCAL is actually approved for EVOQUE. We see that it reinforces the need for both the repair and the replacement technology to really treat the maximum number of EVOQUE patients. So overall, we continue to be very excited and happy with where the EVOQUE launch is going.

Yes. Very helpful. And then maybe just quickly on electronics and always with having an aerial at THT. and like the clinical data on that side looks very interesting. How do you see this fitting into the to the business overall? Because my understanding was that probably this would be initially used to find the chilling medication management, right? Is this more about building the Rolodex of patients so that, you know, some a little bit better further downstream when it comes to the transcatheter approach? How do you see as strategically fitting?

Thanks for the question. So let me start big picture with first the patients. We decided to get into this field because we see very largely the patient population needs. Heart failure is one-off, if not the largest driver of healthcare spending in the US. We have known the company for a long time. We were an investor in the company. We believe that they have very unique technology, differentiated technology. As a matter of fact, they received a broad label from FDA last month.

There is an NCD ongoing right now, so we see that as a big opportunity, a natural progression for us. If you're asking about a very clear strategy about what we are going to do, where we are going to start all of this. It is a little bit early. Again, we expect the closing of the transaction in the third quarter, correct, Scott here. And in December, we will have a full deep dive on the strategy for Endotronix. We believe that many of these patients, are failure patient are patient we are serving and treating today with our valve technologies. So it is in our space. So we are super-excited about it. We see this one as a great opportunity, a great long-term opportunity to expand our reach as a company.

Thank you.

Thank you know, we have reached the end of our question and answer session. I'd like to turn the floor back over to Bernard for any further closing comments.

Thank you, everyone, for your continued interest in Edwards. Scott, Mark, and I welcome any additional question by telephone. Thank you so much. Have a great rest of your day.

Thank you. This does conclude today' teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.