EW - NYSE

Greetings, and welcome to the Edwards Lifesciences Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Wilterding, Investor Relations and Treasurer. Thank you. You may begin.

Thank you very much, Diego, and good afternoon, everyone. Thank you all for joining us. With me on today's call is our CEO, Bernard

Thank you, Mark, and welcome, everyone. At our recent Investor Conference, I introduced our exciting vision of a new era of structural heart innovation to address significant unmet patient needs. Today, I will build on that theme and share key highlights of our team's strong performance in 2023 as well as our confidence in 2024. We are pleased with our strong 2023 financial performance, with full year sales up 12% to $6 billion, including strong growth across each of our four product groups. We invested more than $1 billion in research and development, and we achieved key strategic milestones, including the introduction of new technologies and indication expansion to ensure sustainable healthy growth in the near, mid, and long term. We exited the year with strong momentum, with Q4 growth of 13% and TAVR growth of 12%. These results were better than expected, driven by our broad portfolio of innovative therapies. In 2024, we are well-positioned to enter a new era of structural heart innovation. In TAVR, we are strengthening our leadership. We are experiencing strong adoption of our flagship SAPIEN 3 Ultra RESILIA and continuing enrollment in our ALLIANCE pivotal trial for next-gen TAVR technology SAPIEN X4. In January, we achieved very important milestones with the completion of enrollment in PROGRESS, a pivotal trial studying the treatment of moderate aortic stenosis patients, a population estimated to be twice as large as severe aortic stenosis. This randomized trial enrolled approximately 750 patients two years ahead of schedule. At TCT, later this year, we plan to present data from EARLY TAVR, a pivotal trial studying the treatment of patient with severe aortic stenosis, but without symptoms. We believe that all of these initiatives position us for healthy, sustainable TAVR growth well into the future. In TMTT, we achieved significant milestones with continued PASCAL global expansion and the introduction of EVOQUE in Europe. In Germany, EVOQUE was recently granted NUB Reimbursement Status 1, a very important step in therapy adoption. I am also pleased to announce that EVOQUE recently became the first transcatheter therapy to receive US FDA approval for the treatment of TR patients. This is an exciting development for a wide range of US patients. It will enable access to a groundbreaking treatment option that not only has the potential to significantly improve their quality of life, but also shows favorable clinical trends in all-cause mortality, reintervention, and heart failure hospitalization. With the ongoing introduction of EVOQUE, we are now offering a unique and broad portfolio of transcatheter repair and replacement solution for mitral and tricuspid patients. In addition, the completion of enrollment in the pivotal trial studying SAPIEN M3 puts us on track to further enhance our portfolio. I am confident that we are reaching an inflection point as the only company with a commercially approved portfolio of catheter-based technologies to treat the millions of patients suffering from mitral and tricuspid disease. In addition to the meaningful progress of TAVR and TMTT, we are pleased with the company innovative RESILIA tissue, which was pioneered by our surgical business. We are on track to treat half a million patients with RESILIA-based heart valve by the end of 2024, supported by seven years of clinical evidence. The previously announced spin-off of Critical Care is progressing as planned and will enable a sharpened focus on structural heart. As a result, Edwards' 2025 organic sales growth rate will be even more distinguished. In addition, this will give us more agility, increase our pace of innovation, and provide an expanded opportunity to serve a large and growing patient population. Because we are solely focused on structural heart disease, we are uniquely positioned to deliver sustainable growth and extend our leadership. Now, I will provide some additional details by product group. In TAVR, our full year 2023 global sales of $3.9 billion increased 10.6% year-over-year. Our US and OUS sales growth rates were similar. In the fourth quarter, our global TAVR sales of $979 million increased 12% year-over-year. Performance was driven by double-digit growth in the US, Europe, and Japan. The company competitive position was stable globally, and local selling price were also stable. In the US, we remain pleased with the continued expansion and adoption of a SAPIEN 3 Ultra RESILIA platform. This technology builds on Edwards' longstanding leadership in tissue technology and durability by combining advancements in tissue science with the industry-leading SAPIEN 3 Ultra RESILIA -- Ultra valve. Developing safe, effective, and durable heart valve requires significant long-term commitment, and we are proud to build on 65 years on valve innovation while leveraging the expertise and know-how of more than 2,000 engineers and R&D specialists across the company. We are proud of uninterrupted leadership in structural heart and will continue to invest vigorously in these platforms. In addition, our scaling of patient activation initiative along with next-gen TAVR and additional evidence on asymptomatic and moderate AS patients, position us for healthy, sustainable TAVR growth well into the future. Outside of the US, in the fourth quarter, our double-digit growth was comparable with our global TAVR growth, driven by Europe and Japan. Long term, we continue to anticipate excellent opportunities for growth, as international adoption of TAVR therapy remain quite low in many regions. In Europe, Edwards' sales growth was driven by the broad-based adoption of our SAPIEN platform. It is encouraging that the growth in Q4 was widespread across all major countries. Looking ahead, we are pleased with the recently announced CE Mark approval for SAPIEN 3 Ultra RESILIA, and we are planning for a disciplined launch. We were pleased with our sales growth in Japan, and as expected, we grew faster than overall procedural growth. After more than 20 years of rigorous clinical experience and over 1 million patients treated with SAPIEN valve around the world, our TAVR platform is positioned for continued global leadership and strong sustainable growth. Given the under-treatment rates, we are confident in the future of TAVR, driven by greater awareness, patient activation, a platform that delivers lifetime management for AS patients, advances in new technologies. such as RESILIA, as well as indication expansion and increased global adoption. Turning to TMTT now. In 2023, we remained focused on our key value drivers to unlock the significant long-term opportunity for patients, a portfolio of differentiated therapies, positive clinical trial results to support approvals and adoption, and favorable real-world clinical outcomes. Based on the deep learnings we have achieved from our clinical trial and real-world experiences, we have carefully constructed a strategic portfolio of leading transcatheter technologies to provide both repair and replacement solutions for mitral and tricuspid patients. PASCAL Precision, EVOQUE, and SAPIEN M3 will provide best-in-class therapies to treat the broadest range of patients. Full year global sales of $198 million increased 67% versus the prior year. TMTT's fourth quarter sales of $56 million increased 71% versus the prior year. Q4 sales were driven by the accelerating adoption of our differentiated PASCAL Precision platform and activation of more centers across the US and Europe. We were encouraged by the ongoing double-digit growth of overall transcatheter edge-to-edge repair procedure, which highlights the large unmet patient need. We continue to expand global access of PASCAL Precision in new countries, including Japan, where we recently completed our first cases. Since launch, we have proudly treated more than 20,000 patients around the globe with PASCAL repair system. In mitral replacement, we have received FDA approval for SAPIEN 3 continued access program. Physicians are continuing to treat patients with this novel therapy. In tricuspid replacement, we initiated the launch of EVOQUE in Europe, with a focus on outstanding outcomes and the goal of eliminating tricuspid regulation in patients. And in the US, following the recent early FDA approval, we are initiating the introduction of its novel therapy and building the foundation for long-term expansion. As we did for TAVR, we are focusing on best-in-class physician training, generating more evidence, and achieving excellent patient outcomes. We are grateful for the strong ongoing collaboration with clinicians all over the world to provide the treatment options to many patients suffering from tricuspid valve disease. In tricuspid repair, the CLASP II TR pivotal trial with PASCAL continues to enroll well and remains on track to complete enrollment by the end of this year. As a summary for TMTT, we are reaching an inflection point with the only portfolio of approved catheter-based mitral and tricuspid technologies. We remain committed to bringing our differentiated therapy to patients with this live threatening disease and believe our strategy positions us well for leadership. In our surgical product group, full year global sales of $999 million increased 13% versus the prior year. Fourth quarter global sales of $248 million increased 10%. Growth was driven by strong global adoption of Edwards' premium RESILIA technology and overall procedural volumes. We are confident about the future of its tissue technology and its role in improving patient lifetime management. We continue to see positive momentum in our innovation globally with continued adoption for patients best treated surgically, including those with complex and concomitant procedures. We continue to expand the overall body of RESILIA evidence, including ongoing patient enrollment of our MOMENTIS clinical study, we received CE Mark approval of our MITRIS RESILIA valve in the fourth quarter and have begun to launch in several European countries with favorable physician feedback. Turning to Critical Care. Full year global sales of $928 million increased 10% versus the prior year. Fourth quarter Critical Care sales of $250 million increased 11%. Growth was driven by contribution from all product lines, led by HemoSphere and Smart Recovery with strong adoption of our Acumen IQ sensor equipped with the Hypotension Prediction Index algorithm. Critical Care strategy is to drive growth through Smart Recovery and Smart Expansion, which are designed to help clinicians make more informed decisions and get patients home to their family faster. And with that, I will turn the call over to Scott.

Okay. Thanks a lot, Bernard. So today, I'll provide a wrap-up of 2023, including detailed results of our fourth quarter as well as provide guidance for the first quarter and full year 2024. As Bernard mentioned, we were pleased with our better-than-expected Q4 sales performance with strength across all product groups. We achieved total sales of $1.53 billion, which represents 13% year-over-year growth. We achieved adjusted earnings per share of $0.64. Our GAAP earnings per share of $0.61 included one-time expenses associated with our planned spin-off of Critical Care. A full reconciliation between our GAAP and adjusted EPS for this and other items is included with today's release. We are maintaining all of our previous sales guidance ranges for 2024 with the exception of TMTT. Absent big moves in foreign exchange, we expect total company sales of $6.3 billion to $6.6 billion; TAVR sales of $4.0 billion to $4.3 billion; Surgical Structural Heart sales of $1.0 billion to $1.1 billion; and Critical Care sales of $900 million to $1 billion. Given the early FDA approval for EVOQUE, we now expect full year TMTT sales to be at the higher end of our previous $280 million to $320 million guidance range. For the first quarter, we're projecting sales of $1.53 billion to $1.61 billion, and adjusted earnings per share of $0.62 to $0.66. And now, I'll cover the additional details from our P&L. For the fourth quarter, our adjusted gross profit margin was 76.8% compared to 81% in the same period last year. This expected year-over-year reduction was driven by impacts from foreign exchange. Last year, Edwards' gross profit margin was lifted by a significant impact from FX. We continue to expect our full year 2024 adjusted gross profit margin to be between 76% and 78%, driven by high-value technologies that yield strong gross profit margins. Selling, general and administrative expenses in the quarter were $480 million or 31.3% of sales compared to $411 million in the prior year. This increase was driven by investments in transcatheter field-based personnel in support of our growth strategy and patient activation initiatives. We continue to expect full year 2024 SG&A as a percent of sales to be 29% to 30% as we invest in field-based personnel and patient activation initiatives and increase our focus on efficient G&A leverage. Research and development expenses in the fourth quarter grew 16% over the prior year to $270 million or 17.6% of sales. This increase was primarily the result of continued investments in our transcatheter valve innovations, including increased clinical trial activity. For the full year 2024, we continue to expect research and development to be 17% to 18% of sales as we invest in developing new technologies and generating evidence to support TAVR and TMTT growth with the goal of treating even more patients. During the fourth quarter, we incurred approximately $17 million of one-time costs associated with our previously announced spin-off of Critical Care. Additional one-time costs will be incurred throughout 2024 prior to the expected separation at year-end. Turning to taxes. Our reported tax rate this quarter was 12.3%, or 13.4% excluding the impact of special items. For the full year 2023, our reported tax rate was 12.4% or 15.0% excluding the impact of special items. Our lower-than-expected non-GAAP rate in the fourth quarter benefited primarily from US tax credits on foreign remittances and income tax. We continue to expect our 2024 tax rate, excluding special items, to be between 14% and 17%. Foreign exchange rates decreased fourth quarter reported sales growth by 80 basis points or $9 million compared to the prior year. FX rates negatively impacted our fourth quarter gross profit margin by 320 basis points compared to the prior year. Relative to our October guidance, FX rates had a nominal impact on fourth quarter earnings per share. Free cash flow for the fourth quarter was $48 million, defined as cash flow from operating activities of $136 million less capital spending of $88 million. Adjusted free cash flow for the full year 2023 was $943 million, defined as cash flow from operating activities of $896 million less capital spending of $253 million. Adjusted free cash flow excludes the $300 million payment related to the Medtronic intellectual property agreement. We continue to expect full year 2024 adjusted free cash flow will grow to be between $1.1 billion and $1.4 billion. Before turning the call back over to Bernard, I'll finish with an update on our balance sheet and share repurchase activities. We continue to maintain a strong and flexible balance sheet with approximately $1.6 billion in cash, cash equivalents and short-term investments as of December 31, 2023. During the fourth quarter, we repurchased 6.0 million shares through an accelerated repurchase agreement and a pre-established 10b5-1 plan. As a result, average diluted shares outstanding during the quarter declined to 607 million. We continue to expect average diluted shares outstanding for 2024 to be between 600 million and 610 million. We have approximately $1 billion remaining under our current share repurchase authorization. And with that, back to you, Bernard.

Thank you, Scott. In conclusion, we are proud of the significant progress we made in 2023, advancing new breakthrough therapies for patients and delivering solid financial performance and healthy profitability. We are even more excited about 2024. This year, we anticipate launching groundbreaking technologies and advancing multiple important clinical trials. These breakthroughs, along with significant unmet patient needs, give us confidence in our ability to accelerate growth in 2025 and beyond. In TAVR, we will continue to drive global adoption of SAPIEN 3 Ultra RESILIA, present pivotal trial data from EARLY TAVR, studying asymptomatic AS patients, and enroll in ALLIANCE, a pivotal trial studying the next-generation SAPIEN X4. We also look forward to a number of key developments in TMTT, including the US and European introduction of EVOQUE, the expanded global adoption of PASCAL Precision, CLASP II TR enrollment completion, and SAPIEN M3 approval in Europe by the end of 2025. And in Surgical and Critical Care, we remain committed to healthy growth and expanded leadership. In closing, longer term for Edwards, we are confident in our plan to expand the structural heart opportunity, which reflects our sharpened focus on valvular and non-valvular patients and our commitment to innovation. We believe that executing our strategy will create value for all of our stakeholders. With that, back to you, Mark.

Thank you very much, Bernard. With that, we're ready to take everyone's questions. As a reminder, please limit the number of questions to one plus one follow-up to allow for broad participation. If you have additional questions, please re-enter the queue and management will answer as many participants as possible during the remainder of the call. Diego?

Thank you. [Operator Instructions] Our first question comes from Larry Biegelsen with Wells Fargo. Please state your question.

Good afternoon. Thanks for taking the question, and congratulations on the early approval of EVOQUE in the US. I feel like I need to start there. So, I'd love to hear you guys talk about your commercialization plan for EVOQUE. Are you ready to launch now? Should we expect a price premium? And talk about the reimbursement pathway? Should we expect you to file an NCD? And I had one follow-up.

Thank you, Larry. I hope you are doing well. Let me start and then I will ask Daveen to add some color here. So, first, the way we are thinking about this one is like we did in TAVR, we want to make sure that we are going to introduce this very novel therapy, having in mind, building foundation for long-term expansion. So, we're going to be focusing on physician training, generating more evidence, excellent patient outcome, making sure we have coverage, payment, reimbursement, established in the US and in Europe. So, we are having here a long-term view, the same way we did in TAVR in last 20 years. But again, Daveen, I'm sure you want to share some of your plan.

No, definitely. Thanks, Bernard. I'll start by saying, of course, we are very excited by this approval coming through the FDA breakthrough pathway. This innovation is obviously the first transcatheter technology in the US to change the life of the many patients suffering from tricuspid regurgitation. As we look at kind of our rollout model, as Bernard said, we are really planning a controlled rollout of this technology, focused on great clinical outcomes. And we're really going to start with those centers that -- who are in a clinical trial, and then over time, will grow it to new centers. We're going to have a dedicated team of clinical case support who has been training on the over 1,000 EVOQUE cases that now have been done to-date. And this team will continue to scale as we move forward. Specifically, on your question on -- I think I heard a question about NCD in there and the kind of timing. Obviously, with EVOQUE, it's a parallel review technology. So, CMS is working on the national coverage kind of on their own process, and we are continuing to work with them to kind of provide information to help support their process. So, as we all hear more about that, you guys will definitely [indiscernible] that.

Super helpful.

Thank you, Daveen. So, what you can see, Larry, here, we have a long-term view on this one. We want to shape the space in a way that we like, in a way that everybody is going to be very proud of, like we did for TAVR.

That's helpful. And Daveen, just one follow-up for you. What are your thoughts on the likelihood of seeing a statistically significant mortality benefit at one year or 18 months when the full TRISCEND II data is presented at TCT? And how important is that for adoption and reimbursement? Thanks.

Well, I think right now, as we've talked about, we've obviously shown very favorable trends in all-cause mortality, heart failure hospitalizations and tricuspid regurgitation. And those were some of the key trends that'll help us lead to our approval. Obviously, our full data set will come at TCT in the fall with one-year follow-up, and it's hard to speculate on what that data will show.

All right. Thanks so much.

Our next question comes from Robbie Marcus with JPMorgan. Please state your question.

Great. Thanks for taking the questions, and congrats on a very nice data. Maybe just to follow up on that. We've seen just TMTT, in general, whether it's mitral or tricuspid maybe ramp over the past few years a little slower than expected. Obviously, COVID really disrupted that, that upward trajectory. Maybe just speak to some of the bottlenecks that you see in the system, especially with tricuspid replacement, it's a totally new therapy. There will be some education, I imagine. But maybe just speak to what you see as the bottlenecks and what Edwards can do to help ramp adoption in a pretty sick patient population?

Thank you, Robbie. So let me start on your earlier comment about a little slower than expected in the past years. And then, Daveen can talk about a bottleneck in the system. So, if you think about it, since the beginning, since six years ago, when we put together this vision, we did study this patient population, mitral and tricuspid, and we knew that they were very complex and diverse. And we knew from the beginning that one device, one therapy, a repair technology only will not be sufficient. Repair technology, and we are very pleased about PASCAL, but can only treat some -- a small proportion of patients. So it is why we have this vision of having a portfolio. So right now, what we have is this portfolio on the tricuspid side, we are on track to get also a mitral replacement. And what we are going to see, what we are going to see altogether is an acceleration. Clinicians will be able to treat more patients. So, the dynamic in the next 10 years is going to be very different than the dynamic in the last 10 years. But again, Daveen...

Yeah, I'll make a couple of quick comments. First, we're really excited, because we see that the replacement technology really has the potential to treat a large number of patients. Because especially in tricuspid regurgitation, note one patient is alike. There's really a huge heterogeneity and replacement will really see as the core of treating the largest number of patients, and then we see other technologies like [TEER] (ph) as well as other modalities that are still in trials potentially to add new patient groups on top of that. We've seen in Europe where tricuspid as a therapy has been approved longer that centers are starting to continue to build up and grow the tricuspid practice. As you bring in technology to market, you start seeing the awareness of the disease to grow and you see more referrals and you see more patients getting to the heart team. And some of that becomes from how we imaging people correctly and we're referring them correctly at centers. And we can see that, that's exactly what we see potentially that will happen out with the new therapy of tricuspid in the US. We'll be able to start building up diagnosis referral to heart teams. And also, we see that there's an opportunity, as Larry talked about in the investor conference, in the TAVR group, we're doing so much with patient activation. And we see that all those learnings from patient activations in the future will be able to be leveraged over to the TMTT space, both for mitral and tricuspid to continue to grow the market.

Great. I appreciate that. Maybe one on the TAVR market. We have the exciting data from EARLY TAVR coming later this year at TCT. How do you think about what that does to the TAVR market growth going forward? Do you put up double-digit growth in the fourth quarter? That's what guidance includes over the next few years for the most part. How do you think about what's coming from low intermediate and high risk and severe? And then, how do you think about what asymptomatic adds? Is that just what helps keep you at double digit, or can that help accelerate growth? Thanks.

Yeah. Thanks. This is Larry. That's a great question. I think the first thing is we're just going to learn a lot from this trial. There's a lot of unknown questions out there in terms of what percentage of patients are truly asymptomatic when subjected to a stress test. I think how fast do people progress and what happens to people while they're waiting. I think the biggest thing about it is, as we've talked about, and I spent a lot of time at the investor conference, the time from a patient to get diagnosed or treated is just really long. And a lot of that is the interpretation of the guidelines and this overlay of symptoms. And it's all really stand in the gears preventing the patients from moving through. And unfortunately, given the deadliness of the disease, a lot of people never actually make it to therapy. I think with the EARLY TAVR trial, assuming that it's successful, it will just streamline that process where we can just apply guideline criteria to aortic stenosis, and it won't require this additional evaluation of symptoms and people can just move through. But remember, only about 13% of patients right now with severe aortic stenosis actually get treated. So there's a huge under-treatment right now. We think asymptomatic just adds to that.

In addition, Robbie, what I like is our commitment to -- after 20 years of TAVR, we are still super committed to bring big evidence. Look at these two trials, PROGRESS and EARLY TAVR, this is a potential, for sure, to learn more, but also to expand indication to change the guidelines. So, as a leader in the space, for sure, we like it, we are committed. But I believe that in the next 10 years, here in TAVR, we are going to see some very exciting things happening.

Yeah, I think that's right. And I think it's sort of returned to a little bit of the earlier days in TAVR, where I think we're planning on having a steady cadence of new trials and new data and new evidence that continues to not only raise awareness about the therapy, but also open up new opportunities for patients to get treated that don't currently get treated today.

Appreciate it. Thank you.

Our next question comes from Travis Steed with Bank of America. Please state your question.

Hey, thanks for taking the question. Maybe talking about EVOQUE over a multiyear period, just curious how you think that market develops compared to the mitral market, if you think that goes faster or slower? And when you think about the data that we have so far, it seems like replacement is doing better than clipping. So, I don't know if you think about the mechanism of action why replacement would be better than clipping and kind of where you see a place for clipping in the market in tricuspid?

Go ahead?

Yeah. So, I guess I'll start off with the latter part of your question about the technology. As I kind of mentioned, we see that in replacement where you're able to really eliminate tricuspid regurgitation, we see an awesome opportunity to help patients and really improve their quality of life. And we see kind of replacement with its broad applicability really being able to treat a large chunk of those tricuspid regurgitations, the vast majority of tricuspid regurgitation patients. But there's still -- but again, based on the disease state and the heterogeneity of tricuspid regurgitation, there's still going to be many patients where replacement may not make sense for anatomical or other considerations, where whether it's a clasping technology or other modality may make sense. Back to your first question about how the market develops related to mitral, I think we see continued strength in this. We think the mitral market had some early strength in kind of slowdown during COVID. We think that the tricuspid market, as referrals and awareness of the disease continues, we'll continue to kind of grow at a very strong rate at rates that we think they can kind of probably exceed kind of mitral, especially with the two modalities entering the market in a very similar time, you now have an opportunity to treat a larger proportion of patients.

Helpful. And a follow-up, curious on the SMART trial. If the data there is good? If you think there's an impact on the market? And then also, there was news last week, when last competitor comes to the market in 2024. Does that change your view on 2025? I'm just curious what kind of competition you had kind of baked into your long-term guidance. Thanks a lot.

Sure. With regard to this [market] (ph) trial, I think we'll just have to wait and see the trial, and we don't know what it's going to show. But I think the key thing is thinking about how physicians select TAVR valves for their patients. And that's really a multi-factorial decision. I think you have to look at mortality rates, stroke, future interventions, all those things. And hemodynamics is certainly, you know, one consideration, but I don't think it's even a driving consideration compared to some of the other factors that are probably higher on the hierarchy for patients. In terms of the competitive space, we didn't have a lot in 2024 because it was expected the approval was going to come late. We know it takes time to ramp a new therapy. We'll have to see what the impact on 2025 is and what the revised approval timing is. And there's no real value in me speculating on that.

Yeah. And in addition, as me being in my first year as CEO, I'd like to reflect a little bit about where we are as a company. And when I think about valve, making heart valve, it is not easy. Given the nature of patient needs, this is not luck. We are committed and focused for more than 60 years and we bring experience, a very deep knowledge. What we have seen, even in the past few years, many platforms, many companies coming in and leaving the market after a year, two years or three years. So, we are leading the space with a very significant long-term commitment, more than 2,000 engineers, R&D, R&D specialists. We are proud of our uninterrupted leadership in the space. And we are going to continue investing. So, look, for sure, we take all the competitors very seriously, but we are very confident about our leadership, about our technologies, and about our evidence.

Great. And congrats again on the EVOQUE approval.

Thank you. Our next question comes from Patrick Wood with Morgan Stanley. Please state your question.

Amazing. Thank you for taking the questions. I guess maybe for the first one on TAVR in Japan, in general, do you think you've been taking back some share post-trialing? It sounded like you feel very good about the market, and you have taken back some share on that side. Just any color you could give there would be great.

Sure. I think what happens when new technology comes into Japan, just because of the way the certification process works and people having to move through that process, that certainly had an impact for us. I think in Q4, we grew faster than the market. And I think that really relates to some of the trialing ending and people kind of moving back to our platform. But this is sort of something that goes on, but we're very pleased with how we grew in Japan in Q4 and continue to look forward to that market growing because it's a very -- it's a much lower penetrated market than places like the US and Europe. So we continue to see that as a long-term growth driver for us.

That's very helpful. And then just quickly as a follow-up, I get this might be difficult to comment on, but the faster-than-expected approval of EVOQUE, what in your discussions with the FDA? And what do you think they placed a great weight on in getting it comfortable with it into market faster than expected? Do you think there was like one area of data or sense of the products because that's obviously not been the experience for everyone? So just curious to get any thoughts there.

Yeah. No, sure. This is Daveen again. I'll kind of jump in this one. Obviously, we received an approval through this FDA breakthrough pathway. And this was a really innovative pathway where the basis of approval was the breakthrough cohort of the 150 patients we presented at TCT. But at the same time, as we were working with the FDAs and answering their questions, we presented and gave them other data from our larger cohort, other descriptive statistics. And as we mentioned, it's that larger cohort where the results really showed those favorable trends in all-cause mortality, heart failure hospitalizations, tricuspid reinterventions. It was those kinds of trends that I think that we believe probably have the FDA come back to us and say, oh, yeah, this kind of makes sense. We probably don't need an advisory panel that led to our approval. And so, we're very excited that the full cohort of data, the full one-year cohort on the 400 patients will be presented at TCT, so we can kind of see all the data, not just kind of the breakthrough cohort plus the initial kind of look at the other data. And that going forward, right, for us, as we launch out this therapy, we're going to continue to have a great deal of evidence. We're going to continue to have trials and more data that help show how great this therapy really could be for patients. We're planning to build this therapy with really careful physician training, great clinical outcomes, and supporting this therapy just like we as an organization did for TAVR not that long ago. And so, I'm excited really for that long-term opportunity and what this means for helping patients.

Looking forward to it. Thanks again for taking the questions.

Our next question comes from Vijay Kumar with Evercore. Please state your question.

Hi, guys. Thanks for taking my question, and congratulations on a nice print here. Maybe on the last question on EVOQUE, Daveen, you made some comments here about the totality of data. But I'm curious on -- when you think about the market development, is there like a bar, like do we need to see a stat significance in mortality? Like, there's a reason this valve was called forgotten valve. So I'm curious what wakes up physicians to take this valve seriously, maybe compare in contrast on how this adoption curve could look like versus I don't know if TAVR is a good example, but I would love your comments.

Yeah. No, I'll start off a little bit first on the totality of data. Now with EVOQUE, we've implanted and tracked data in clinical trials on over 1,000 patients in various studies. And what we've consistently seen is that these patients are patients who don't have an option. There are patients who are looking for options out there and don't feel great and can't do the things that they want to do every day in their life, and that -- the EVOQUE technology really makes a huge difference in their life. This concept, the quality of life really does matter for patients to be able to pick up -- play with your grandkids, walk up the stairs. It really does matter. And I'm not trying to discount that these other statistics matter, right, mortality, heart failure hospitalization. Those all matter as well. But we've, I think, shown in the breakthrough cohort that we at the starting point have this amazing quality of life improvement. And that's why our indications about improvement in health status. We've got the favorable trend in the other data points, all cohorts mortality, heart failure hospitalization, tricuspid intervention. And those favorable trends, we'll continue to see more data as we go in the future. But as I mentioned before, we're going to continue beyond just this study, the tricuspid [indiscernible]. We're going to continue to gather data on patients. We're going to continue to gather large data on large numbers of patients to help show how EVOQUE can really help patients. And I think it's that kind of data, along with kind of all the other key things we talked about, careful physician training, controlled rollout, excellent outcomes, that will really help create this market and really do the market development. And so, it's hard for me to speculate how will this compare maybe the technologies like TAVR, same question about mitral, but I'm excited for what it can do. I think there's so much opportunity to grow this market.

Yeah. Thank you, Daveen. Well said. And we are very excited. Think about TAVR, 20 years later, we are still generating evidence. We are still innovating with Ultra RESILIA X4. We still believe that there is a way for TAVR to grow healthy double digit in the many years to come globally. So here, for TMTT EVOQUE, it's probably thinking the same. It is not the next five years, it's like 10 or 20 years here that we are thinking of.

Yeah. Just, just to pile on that, having spent so much time in the TAVR space, when we deal with regulators and with payers and stuff, there's a lot of focus on mortality and people get really almost singularly focused on it. But spending the time with the patient groups that I spend, living longer, but living poorly is not a feature to them. If you told them they had this exact same life expectancy, but their quality of life would dramatically improve, that's far more valuable to them. And I think when you can get that quality of life improvement and you can get the mortality benefit, that's where you really have the home run therapy like what we've seen with TAVR. And so that's really what we're trying to build on. But I wouldn't discount the quality of life benefits. They're really significant for patients.

Understood. That's helpful. And maybe, Scott, one quick one for you on this Q1 EPS guide. I think at the midpoint, it's slightly below Street. I'm curious on what's driving that. Is that a step up in OpEx? Or is that a gross margin or below-the-line sort of issue that's impacting Q1 EPS?

Yeah. It's a couple of things, but largely it relates to just the lumpiness of SG&A and R&D and in what period we record those expenses. Q1, the increase in OpEx will outpace revenue according to our current forecast. And that's the reason why we end up with the midpoint of the range of $0.64 level with the EPS from the fourth quarter. But overall, it's important to remember that for the full year, we're expecting bottom-line growth to exceed top-line growth once you get through the different quarter-to-quarter cadence.

Thanks, guys.

Our next question comes from Matt Taylor with Jefferies. Please state your question.

Hi, thanks for taking the question. I wanted to ask you if you thought that the delays that your competitors having in the US would have any impact on international markets. Does it provide you an opportunity to gain any share? Does it change anything?

We'll have to see what the impact is. Certainly, we've seen cases where US data has impacted international share in international markets. I think it just depends on what the data is. But I think the reality is there's been no data released. All those data just simply a signal that they're delaying their approval and waiting for additional data. So, I don't know that how much people are going to react to that. The other thing is there's more that goes into to the purchasing decision oftentimes, especially in Europe than clinical data. And for the people that are purchasing on price because there's favorable pricing and it's a significant discount, I don't know how much that will get impacted.

Got you. And can I ask one follow-up on -- you mentioned the activation of patients a few times. I know you're doing a lot there. Are you doing anything new and different there, or is it kind of more of the same? I just was noticing the call-outs on this call?

I think we continue to do a lot of new things. We're running a number of programs. I think one of the things that I talked about at the investor conference is I know there's a lot of speculation on -- and skepticism, frankly, on the under-treatment rates and are all those patients really there. I can tell you we've done enough work in major health systems where we've applied things like AI to the echo reports, and we can absolutely definitively say the patients are there. They're just not moving through the system for a variety of reasons. So, the first thing you have to do is validate. The second thing you have to do is get people to understand what to do about it, and then you have to move them through the process and get treated. And we have multiple things that we're working on to drive those patients through, but we are literally continually evolving these programs to try to optimize them to activate patients off the sidelines and move them through the system in a streamlined fashion.

Thanks a lot, Larry.

Our next question comes from Matt Miksic with Barclays. Please state your question.

Hi, thanks so much for taking the question. So, I had one on EVOQUE and one follow-up on margins if I could. So, not to put too fine a point on it, but moving from the middle of your TMTT range to the high end is like $10 million to $20 million. And so, if we think about EVOQUE came about five, six months early. Does that tell us what we need to know about your sort of expectations for the run rate this year knowing what we know now, I guess, in EVOQUE as we just get started in the US? And then I have one follow-up.

No, Matt. Thanks so much for the question. It's Daveen again. Yeah, if you first look at the timing of it, right, we kind of said midyear was kind of our initial estimation, and midyear has got a couple of months kind of window. So this definitely was up by a couple of months earlier than we kind of expected. And so, based on what we know now, we continue to be confident in what we think EVOQUE can do. And obviously, we'll see as we get through adoption and we start moving through centers, training how fast the rate is, but that help us bring this up just a little bit. I think the other comment I'll make is things like new technology add-on payments, right, which are helpful for hospitals to help ensure that they're adequately kind of profitable and doing a good job comes online October 1, and that date doesn't really change whether you get earlier approval or late approval. So, there are some factors like that. But we'll continue to look at as we adapt over the course of the year and how it grows and give updates as -- if needed.

That's great. And then the follow-up on the margins in Matt's question just now on the activities that you're getting after in the field. So, you hired these folks in -- I guess, in the fourth quarter, which is part of the step up in spending there. Just wondering, first, does that have an impact in Q4? Can you talk a little bit about the benefits that you're seeing so far from those investments in that? Second, are you continuing those investments? Or to your point earlier, Scott, about like leverage against those investments, are you kind of done and now it's about achieving leverage against sort of a set additional spend that you put into the field? Thanks.

Yeah. Thanks for the question, Matt. Yeah, we're just getting started with building out our field force both for EVOQUE, but as well as we continue to expand the presence of our overall TMTT portfolio. And so this is the beginning of an investment in building a foundation of a team in the field, not the end. You should expect that we're going to continue to grow our resources, invest in the field team. And by the way, that's not limited just to TMTT. TAVR continues to grow aggressively, and we're investing more resources to support that growth as well. One of the things we're doing, though, is looking carefully at general and administrative expenses globally. And as Edwards has put down a broader global footprint, it gives us an opportunity to get some leverage from scale. And so, we're going to be continuing to look closely at that and making sure that we're being as efficient as we can be on the P&L.

Okay. And then, the TAVR side, did you see any results you feel from these field activations and patient activation efforts in Q4? Or is that something that's still to come? Thanks.

Yeah. Matt, I think we saw some benefit from patient activation initiatives that we have in place. It's tough to isolate those from the other efforts that we have underway to continue to support the growth of TAVR. But no, that's certainly helping drive growth in the fourth quarter and beyond.

Just to add on to this, I mean, I think it'd be incorrect to say our patient activation efforts are just starting to pay dividends now. We've been doing patient activation for the last, I don't know, five or six years through our digital campaigns through some of our website stuff, some of our patient resources, some of the general cardiology awareness events we do and a number of other things that have been driving this. So, I think patient activation has been contributing all the way along the way. I think what we're talking about now, though, is a much more sophisticated approach and program to really tapping into these untreated patients that are in the system, but hospitals don't really realize that they're there, and how do we bridge those gaps. And that's really where our activation now is because we know the patients are there. We know they're diagnosed with an echo, but they're not moving. And so, it's just a matter of tapping into those patients in the right way and getting the accelerated through the system.

What's fair to say though is, in the past few years, we have done many pilots, many initiatives. We have extracted so many learnings. What we are doing right now is scaling. We are scaling and spending. We are spending resources in Q4 last year, this year, and the next few years. So, you are going to see more and more because we believe there are so many patients in need not receiving a treatment.

Super helpful. Thank you.

Thank you. And our next question comes from Chris Pasquale with Nephron Research. Please state your question.

Thanks. I think I heard you mention patient activation, not just with regard to TAVR, but also as an important part of the EVOQUE rollout. I was encouraged to hear from a lot of physicians back at TCT, they're actually seeing many more of these tricuspid patients in their practice. So, as you think about the initial launch here, do you expect to have to do a lot of work establishing referral channels? Or do you think there are already a large number of these patients identified and waiting for treatment?

Yeah. Hey, Chris. This is Daveen. No, I appreciate it. I think at least my reference toward in patient activation and how we think about in TMTT is more over the longer term, right? And we think about there's so much learning that TAVR is happening where, yeah, we're doing some things right now, we're testing small things, but it's really about over the midterm, how do we kind of help scale patient activation in a way that kind of TAVR has been doing and really helps drive kind of organic growth and a number of patients being diagnosed and being referred to our teams. Well, the other point I'll kind of make is that, right now, I think that most of our time or a lot of our energy is really about building capabilities for getting centers up and running. So, there are a lot of patients in the center. If you look at how our trials enrolled, especially the TRISCEND II trial, it enrolled really fast and enrolled very quickly. So, we know there's definitely groups of patients who now are looking for options. They've been diagnosed and looking for options. But as we grow over time, we're going to continue to try to build off that and leverage a lot of those kind of TAVR kind of patient activation efforts.

That's helpful. Thanks. And then a lot of focus, I think, rightly so on the new US products. But you've got a couple in Europe, SAPIEN 3 Ultra RESILIA and MITRIS RESILIA both rolling out there. Are the price premiums for those products in Europe the same as what we see in the US? And do you think you can get similar adoption in what is a more price sensitive market? Thanks.

Yeah. I'll start, and then if Wayne has anything to add, he can. The price premiums are different in the different markets because it all depends on kind of where the starting price was. So, we went for larger premiums in Europe than what we did in the US. And so, a more price sensitive market, obviously, that's more of an issue. So, we've seen more rapid adoption of our RESILIA-based therapies in the US. But we continue to see this growing in Europe. And I think we're really gaining momentum on our RESILIA platforms in total. I don't know, Wayne, did you have anything to add?

Maybe just a couple of things I'd add was just if you think about our global adoption of the RESILIA premium technologies, we're also seeing tremendous growth out of the emerging markets. And a lot of those emerging markets are finding and identifying patients that can be best treated surgically with RESILIA portfolio. So it's been certainly a global effort, but strong growth out of the emerging markets even with premium technology, which is encouraging to see too.

Great. Thanks.

Thank you. And our final question for today comes from Danielle Antalffy with UBS. Please state your question.

Great. Thanks so much, guys. Thanks for taking the question. Larry, just a quick question for you on the PROGRESS trial in moderate aortic stenosis. I mean, I know this isn't the first time we're hearing about the speed of enrollment in that trial that it's certainly a positive signal. And I guess my question for you is, is there anything to read into the potential opportunity there based on the speed of enrollment? Was there anything unique about the trial that allowed us to enroll so much faster than you guys expected? And what could this mean for potential approval, number one; but number two, just more broadly, once we see this data uplift across the market?

Yeah. Thanks, Danielle. I think clinical trial enrollment, I think, is always an important marker for the opportunity. And I think having rapid clinical trial enrollment, I think, does certainly speak to that opportunity. I think it also speaks to the fact that everything we've done in the PARTNER series of trial has still been just isolated to severe aortic stenosis. And most of that work is, is it better to do surgeries or better to do TAVR. What I think there's a lot of enthusiasm and excitement about now is actually attacking the disease in a different way and saying, should we be waiting until patients are literally at the end stage before we even consider doing anything, or should we be evaluating those patients sooner. And I think that could have two benefits. The first is, if we showed that treating moderate patients is important and has real advantages for those patients, then I think it could provide a real accelerant for those severe patients that aren't moving today. And I think we've seen that when we went from high risk to intermediate risk, we have the intermediate risk approvals, one of the biggest accelerations we saw was in the high-risk space. Because people are like, for having to debate in the intermediate, then high risk are automatic at this point. But I think the other thing about it is if we can show a benefit in these moderate patients, there's literally twice as many moderate patients as there are severe patients. And so, when we think about long-term and just continual opportunities to drive the market, I think that steady cadence of data with early TAVR coming later this year at TCT, and then we're talking about a couple of years, two and a half years later, we get the PROGRESS trial, that steady cadence of data, we think is going to be important for informing patients and improving treatment rates.

That makes sense. I'll leave it at that. Thanks so much, guys.

So, in closing, I am very proud about what we did last year. 2023 was a great year. Strong performance across our four product groups globally. When I think about this year 2024, I'm super excited. We are going to have multiple breakthrough technologies, clinical trial in TAVR, TMTT and surgical. Here, we have a chance. The same way we did it in TAVR 20 years ago to shape the TMTT space with EVOQUE and providing basically a toolbox to physician to treat so many patients. So, that's a very unique opportunity that we are taking very seriously. The speed of critical care, we are executing on this one also in 2024. So I'm super confident that this year is going to be a super exciting year and we are going to be very well positioned to accelerate growth in 2025 and beyond. So with that, thanks for your continued interest in Edwards. Scott, Mark and I welcome any additional questions by telephone. Thank you, everyone.