Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015
`Results - Earnings Call Transcript
`Apr. 23, 2015 10:09 PM ET
`by: SA Transcripts
`
`Edwards Lifesciences Corp. (NYSE:EW)
`
`Q1 2015 Earnings Call
`
`April 23, 2015 5:00 pm ET
`
`Executives
`
`David K. Erickson - Vice President-Investor Relations
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Scott B. Ullem - Corporate Vice President, Chief Financial Officer
`
`Analysts
`
`Jason R. Mills - Canaccord Genuity, Inc.
`
`David Harrison Roman - Goldman Sachs & Co.
`
`Larry Biegelsen - Wells Fargo Securities LLC
`
`Raj S. Denhoy - Jefferies LLC
`
`Bruce M. Nudell - Credit Suisse Securities (NYSE:USA) LLC (Broker)
`
`Danielle J. Antalffy - Leerink Partners LLC
`
`Benjamin Andrew - William Blair & Co. LLC
`
`James Francescone - Morgan Stanley & Co. LLC
`
`Michael J. Weinstein - JPMorgan Securities LLC
`
`Brittany Henderson - Deutsche Bank Securities, Inc.
`
`Kevin T. Strange - Bank of America Merrill Lynch
`
`Glenn J. Novarro - RBC Capital Markets LLC
`
`Matt C. Taylor - Barclays Capital, Inc.
`
`Operator
`
`Greetings, ladies and gentlemen, and welcome to the Edwards Lifesciences Corporation First Quarter 2015 Earnings Conference Call.
`At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder,
`this conference is being recorded.
`
`It is now my pleasure to introduce your host, David Erickson, Vice President of Investor Relations. Thank you, Mr. Erickson. You may
`begin.
`
`1 of 16
`
`8/2/2016 1:38 PM
`
`Page 01 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`David K. Erickson - Vice President-Investor Relations
`
`Welcome and thank you for joining us today. Just after the close of regular trading, we released our first quarter 2015 financial results.
`During today's call, we'll discuss the results included in the press release and accompanying financial schedules, and then use the
`remaining time for Q&A. Our presenters on today's call are Mike Mussallem, Chairman and CEO; and Scott Ullem, CFO.
`
`Before we begin, I'd like to remind you that during today's call, we will be making forward-looking statements that are based on
`estimates, assumptions and projections. These statements include but aren't limited to financial guidance and current expectations for
`clinical, regulatory and commercial matters. These statements speak only as of the date on which they are made and we do not
`undertake any obligation to update them after today.
`
`Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially. Information concerning
`factors that could cause these differences may be found in our press release, our 2014 Annual Report on Form 10-K and our other SEC
`filings, which are available on our website at edwards.com.
`
`Also, a quick reminder that when we use the terms underlying and excluding special items, we are referring to non-GAAP financial
`measures. Otherwise, we are referring to our GAAP results. Additional information about our use of non-GAAP measures is included in
`today's press release and on our website.
`
`Now I'll turn the call over to Mike Mussallem. Mike?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Thank you, David.
`
`We're pleased to report a robust start to 2015 with first quarter results of $590 million in total sales, representing an underlying growth
`rate of 21%. This reflects strong performance across all product lines and regions. Significant Transcatheter Heart Valve sales once
`again drove the majority of this quarter's growth with notable contributions from our minimally invasive INTUITY valve and enhanced
`surgical recovery platforms. And most importantly, even more patients are benefiting from our lifesaving technologies than ever before.
`
`In THV, we continue to see strong therapy adoption. Underlying global sales grew 51%. This was driven by continuing strong
`procedural growth in all major geographies and sales of our innovative new products. Globally, average selling prices remained stable.
`Outside the U.S., THV sales grew 38% on an underlying basis during the quarter, once again driven by strong procedure growth in
`Europe and the ongoing launch in Japan.
`
`I want to take you through the growth drivers by region. Starting with Europe, we estimate overall therapy adoption grew approximately
`30%. Although transcatheter valves have been commercial for eight years, we believe demand remains strong for several reasons.
`First, general practitioners and general cardiologists are referring more patients to TAVR. We believe this is being driven by growing
`awareness, favorable clinical outcomes, and stable reimbursement. Second, advanced technologies like SAPIEN 3 are improving
`outcomes and stimulating procedural growth. And finally, high risk patients in Europe are being treated based on their EuroSCORE as
`well as physician judgment, which takes into account a combination of age, frailty and comorbidities that support the use of TAVR.
`
`With this as a backdrop, our competitive position in Europe strengthened during the first quarter, driven by the introduction of SAPIEN 3
`last year. Clinician feedback on this platform has been very positive and sales of this product in the quarter represented more than 90%
`of our THV sales in Europe. In total, we estimate newer competitors' products were used in approximately 10% of procedures this last
`quarter. We anticipate growing competition during the remainder of the year from large competitors with newer product offerings.
`
`In Japan, our sales grew sequentially. We recently received regulatory approval for our 20-millimeter and 29-millimeter valve sizes, and
`reimbursement is expected to take effect in the near future. This will help broaden the population of patients who could benefit from this
`technology. We continue to believe that Japan represents an attractive opportunity for TAVR and will contribute to our growth even as
`competition increases.
`
`Turning to the U.S., reported THV sales for the quarter were $131 million. Although sequential growth was modest, underlying growth,
`including $10 million of royalties, was 67% versus the prior year. We believe U.S. TAVR overall therapy adoption grew even faster,
`driven by several factors. First, awareness and adoption are still growing rapidly since the introduction of this therapy in late 2011. This
`confirms the large previously untreated patient population with severe aortic stenosis.
`
`Second, newer technologies, like SAPIEN XT and clinical experience are driving improved outcomes. And finally, hospital economics
`are improving, in part because of shorter length of stay and improved reimbursement. Providing more clarification on the U.S. THV
`results, clinical sales from our SAPIEN 3 continued access program were a modest contributor in the quarter, as required
`
`2 of 16
`
`8/2/2016 1:38 PM
`
`Page 02 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`documentation took longer than expected. Stocking and consignment had a minimal impact this quarter.
`
`Late in the quarter, at the ACC conference, 30-day SAPIEN 3 data for high and intermediate risk patients were presented, which
`included almost 1,600 patients from 51 U.S. centers. These data demonstrated the lowest all-cause mortality and stroke rates of any of
`our PARTNER studies as well as excellent results on other key metrics. And while this was only 30-day data, the outcomes are
`encouraging for the future of the therapy and eventual expansion of the approved indication.
`
`Also presented were the five-year PARTNER data for high-risk patients treated with the first-generation SAPIEN valve, which
`demonstrated equivalent outcomes to traditional open heart surgery and durable valve performance. These results continue to validate
`the benefits of our SAPIEN technology and should help support the long-term growth of TAVR.
`
`Based on the strength of the SAPIEN 3 data presented at ACC, the very positive clinician feedback about the valve's performance and
`the encouraging discussions with the FDA, we believe it's becoming more likely that we will obtain U.S. approval of our latest-
`generation valve this year. For modeling purposes, our updated guidance assumes sales beginning in the fourth quarter.
`
`Turning to our product pipeline, as we look ahead to the Euro PCR meeting next month, clinicians will present data on their experience
`with SAPIEN 3 in the commercial setting. And our self-expanding CENTERA valve platform featuring an enhanced motorized delivery
`system continues to make progress. We began enrollment in our pivotal trial in Europe and continue to expect commercial launch of
`this new platform in 2016.
`
`In summary, we're pleased with the strength of our global THV sales performance. We believe overall TAVR therapy adoption growth
`rates will moderate due to the strong uptick in the second half of 2014. Additionally, we expect competitive activity will continue to
`increase. However, in light of the strong start to 2015, we now expect our underlying sales growth in 2015 to be at the high end of our
`previous 15% to 25% range.
`
`Turning to Surgical Heart Valve Therapy group, total sales this quarter were $197 million, up 5% on an underlying basis. Unit gains
`across most geographies drove the majority of this growth, while a favorable product mix also contributed to a slightly higher overall
`ASP. The growth rate of this product group was impacted by the previously discussed exit of certain non-strategic products and this
`impact will continue throughout the year.
`
`Globally, underlying surgical valve unit growth was led by sales of our premium valves across all major regions. Strong sales of
`INTUITY Elite helped drive growth in Europe, and continued adoption of our PERIMOUNT valves lifted sales in China. In the U.S., we
`experienced solid growth in both aortic and mitral units, driven by our premium Magna family. Our activities in support of the Edwards
`INTUITY Elite U.S. approval remain on track and we continue to expect to file the PMA in 2015 and launch in 2016.
`
`In summary, we're pleased with the continued strength of our premium products in our surgical valve product line, we're continuing to
`exit non-strategic products as planned, and we are reiterating our underlying sales growth guidance of 1% to 3% for 2015.
`
`Turning to the Critical Care product group, total sales for the quarter grew 3% on an underlying basis, as expected, to $125 million.
`Usage of Enhanced Surgical Recovery products, or ESR, including FloTrac and ClearSight, grew approximately 20%. Critical Care
`sales outside the U.S. were lifted by continued adoption in China. Our ESR program, which is focused on reducing patient
`complications and hospital lengths of stay, plays to our strength as the leader in hemodynamic monitoring.
`
`As clinical support for ESR continues to gain momentum, it should enable us to capitalize on the global under-penetrated opportunity.
`We remain on track with our plan to expand the reach of our non-invasive ClearSight system with our upcoming launch in Japan. So to
`summarize our Critical Care product line, we're pleased with the continuing adoption of our ESR products and we are reiterating our
`underlying sales growth guidance of 2% to 4%.
`
`Before I turn it over to Scott, I'll close with a brief statement about our transcatheter mitral valve replacement program, where we're
`pleased with the continuing progress. To-date, we've treated more than 20 patients globally with the FORTIS valve, all of whom had
`symptomatic mitral regurgitation and who were either compassionate cases or in one of our high-risk surgical registries. And while it's
`still very early in the program and the road to commercialization is challenging, we are encouraged by what we are learning. As we
`have said previously, our clinical partners will provide outcomes information at major medical meetings.
`
`And with that, let me turn the call over to Scott.
`
`Scott B. Ullem - Corporate Vice President, Chief Financial Officer
`
`Thank you, Mike. This quarter our sales were $590 million, including $10 million of royalties, representing an increase of 13% over
`2014. The strengthening of the U.S. dollar continues to have a significant impact. Excluding last year's sales return reserve and the
`
`3 of 16
`
`8/2/2016 1:38 PM
`
`Page 03 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`impact of foreign currency, growth in the first quarter was 21%. Non-GAAP earnings per share grew 47% to $1.12, primarily driven by
`our THV sales performance. This earnings per share was higher than our expected range, primarily because of strong sales and some
`anticipated selling, general and administrative expenses and research and development spending that was delayed until the second
`quarter.
`
`The stronger U.S. dollar will have an even more significant impact to sales results during 2015 than we forecasted in our last earnings
`call. Based on current exchange rates, we now expect 2015 sales to be reduced by $190 million compared to prior-year rates. Like
`many other global companies, Edwards' earnings are subject to significant impact as a result of the large movements in currencies.
`However, unlike some other companies in our sector, our 2015 earnings will be largely insulated as a result of our foreign currency
`hedging strategy.
`
`Recall that we enter into foreign exchange hedging contracts that generate income at the gross profit line when the U.S. dollar
`strengthens relative to other currencies. This quarter, our gross profit margin was significantly boosted by these contracts. Additionally,
`our reported expenses from outside the United States were reduced by these exchange rates. Therefore, our operating margin
`benefited from the influence of FX rates. If rates remain at current levels, it is important to understand that our company will ultimately
`realize a significant negative FX impact on earnings in 2016.
`
`I'll now cover the details behind our Q1 results, including guidance for the remainder of the year. For the quarter, our gross profit margin
`was 77%, compared to 72% in the same period last year. This increase was driven by a nearly 250-basis point positive impact from FX,
`an approximate 200-basis point impact from last year's THV product exchange and a 100-basis point improvement from a more
`profitable product mix. These increases were partially offset by higher spending in our operations.
`
`If foreign exchange rates remain at current levels, we expect our full-year gross profit rate to be approximately 77%, driven by the same
`factors that impacted this quarter. For 2016, at current rates, as favorable hedge positions roll off, we expect the foreign exchange
`impact to gross profits to reverse next year.
`
`First quarter selling, general and administrative expenses increased 3% to $202 million or 34.3% of sales over the prior year. This
`increase was driven primarily by personnel-related expenses, largely offset by the favorable FX impact on our expenses outside the
`U.S. We expect a step-up in SG&A expenses next quarter as we incur expenses originally anticipated in the first quarter. We continue
`to expect SG&A, excluding special items, to be between 35% and 36% of sales for the full year.
`
`Research and development investments in the quarter were $86 million or 14.6% of sales. Although we continued to invest heavily in
`transcatheter valve programs, expenses were lower than anticipated as certain THV clinical expenses expected in the first quarter are
`now expected to occur in the second. We continue to expect our R&D investments to be between 15% and 16% of sales for the full
`year.
`
`Net interest expense for the quarter was $2 million, down from $4 million in the prior year. This reduction was driven by lower debt
`levels and increased interest income from higher investment balances. For the full year, we continue to expect net interest expense to
`be approximately $10 million.
`
`Our reported tax rate for the quarter was 24%. We continue to expect our full year tax rate, excluding special items, to be between 21%
`and 23%. The tax rate for the first three quarters should be higher than the fourth quarter based on our assumption of a fourth quarter
`renewal of the federal research and development tax credit.
`
`Foreign exchange rates decreased first quarter sales by $41 million compared to the prior year. Compared to our February guidance,
`FX rates had less than a $0.01 impact on earnings per share. As I mentioned earlier, at current rates, we now estimate a $190 million
`negative impact to full year 2015 sales, which is $30 million more than the impact we estimated last quarter. The resulting impact to
`2015 earnings should be mitigated by our foreign exchange hedges.
`
`Free cash flow generated during the quarter was $52 million. We define this as cash flow from operating activities of $73 million, less
`capital spending of $21 million. At the end of the quarter we had cash, cash equivalents and short-term investments of $1.4 billion,
`approximately 55% of which is outside of the U.S. Total debt was approximately $600 million. During the quarter, we repurchased
`approximately 700,000 shares for $100 million. We now estimate diluted shares outstanding for the full year to be at the high end of our
`previous range of 109 million to 111 million shares.
`
`Now turning to our 2015 guidance. I'll start by commenting on the potential impact of a 2015 approval for SAPIEN 3, which assumes
`sales beginning in the fourth quarter. We expect the SAPIEN 3 launch in the U.S. to contribute approximately $10 million in incremental
`sales in the first couple of months. However, due to the required accounting and one-time expenses associated with this product
`introduction, like our new product introductions in 2014, we are unlikely to record significant incremental net sales or earnings per share
`in the first quarter of launch. In other words, if we receive approval in the fourth quarter, we would not expect to see any upward lift from
`
`4 of 16
`
`8/2/2016 1:38 PM
`
`Page 04 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`SAPIEN 3 until 2016.
`
`Due to the strong first quarter performance in transcatheter valves and despite additional negative impact expected from foreign
`exchange, we expect full year total sales to be within our original guidance of $2.3 billion to $2.5 billion. For Transcatheter Heart Valve
`Therapy, we expect sales to be within our original guidance of $1.0 billion to $1.1 billion. Given the foreign exchange currency drag, we
`continue to expect sales for Surgical Heart Valves at the lower end of $780 million to $820 million range, and in Critical Care, at the
`lower end of our $520 million to $570 million range.
`
`For full year 2015, we continue to expect free cash flow, excluding special items, to be between $375 million and $425 million. Given
`the momentum of transcatheter heart valve sales coming out of the first quarter and the mitigating effect of our FX hedging program, we
`are narrowing our diluted earnings per share guidance to $4.10 to $4.30, excluding special items. For the second quarter 2015, at
`current foreign exchange rates we project total sales to be between $580 million and $620 million and diluted earnings per share,
`excluding special items, to be between $1 and $1.10.
`
`And with that, I'll hand it back to Mike.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Thanks, Scott.
`
`We're very pleased with the strong start to the year and we – as we continue to focus on driving growth with our leading innovative
`technologies. Our foundation of leadership coupled with our robust product pipeline positions us well for continued long-term success
`and greater shareholder value. We are confident in our outlook for continued strong sales growth and we remain passionate about
`helping more patients around the world.
`
`And with that, I'll turn it over to David.
`
`David K. Erickson - Vice President-Investor Relations
`
`Thank you, Mike. In order to allow broad participation in the Q&A, we ask that you please limit the number of questions. If you have
`additional questions, please reenter the queue, and we'll answer as many as we can during the remainder of the hour.
`
`Operator, we're ready for questions, please.
`
`Question-and-Answer Session
`
`Operator
`
`Our first question comes from the line of Jason Mills with Canaccord Genuity. Please proceed with your question.
`
`Jason R. Mills - Canaccord Genuity, Inc.
`
`Hi, Mike. Thanks for taking the question. Can you hear me okay?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`I hear you great, Jason.
`
`Jason R. Mills - Canaccord Genuity, Inc.
`
`Great. And I apologize if you went over some of this. I hopped on the call late; several calls this afternoon. But starting with the TAVI
`business, I heard Scott say obviously perhaps some impact from SAPIEN 3 in the fourth quarter. Could you give us a sense for the first
`12 months after SAPIEN 3 launch and sort of what – obviously given that the competitor is still ramping, what sort of share thoughts you
`have with respect to your U.S. TAVI business sort of in the first 12 months after the SAPIEN 3 finds its way to the U.S. market?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. We're – thanks for that, Jason. We're pleased with our position today. We already have a very strong competitive position, and
`we're looking forward to actually have SAPIEN 3 add to that strength. Having said that, the only guidance that we're providing at this
`point is that we think that it's more likely that we get approval this year, and if it were to come in the fourth quarter, we were just
`explaining that they probably not going to have much financial impact on 2015; it'll occur in 2016. We'd be getting ahead of ourselves to
`
`5 of 16
`
`8/2/2016 1:38 PM
`
`Page 05 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`lay out guidance for 2016 at this point, Jason. So, we're going to let that go. I mean, our experience in Europe has been a good one,
`though.
`
`Jason R. Mills - Canaccord Genuity, Inc.
`
`Right. And the experience in Europe, how informative is it for you and for us as we look at SAPIEN 3's competitiveness there over the
`last 15 months? And then secondly, in Europe, I apologize again if you went over this in prepared remarks and I missed it, but our due
`diligence would suggest you've been getting a nice price premium with SAPIEN 3. I'm wondering if that's held in Europe and what your
`thoughts are with respect to pricing SAPIEN 3 in the U.S. And I'll get back in queue. Thanks.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Thanks, Jason. Yeah, we have to be careful of not too many questions. But let me go after these. In terms of SAPIEN 3 in Europe,
`again we're pleased with the way that's doing. You know, it's tough to call out a perfect predictor of what's going to happen in the U.S. A
`lot depends on whether our competitor gets their new product launched and where their timing is versus ours. So that may be a little
`different than what we've seen. We've been launching SAPIEN 3 in Europe against an older generation valve of our competition for the
`most part. In terms of pricing, your point is a good one. We feel like we have commanded a premium price in Europe, and as we
`commented, our global ASPs are very stable. That's been stable by region, and I wouldn't expect that trend to change with the
`introduction of SAPIEN 3.
`
`Jason R. Mills - Canaccord Genuity, Inc.
`
`Thank you, Mike.
`
`Operator
`
`Thank you. Our next question comes from the line of David Roman with Goldman Sachs. Please proceed with your question.
`
`David Harrison Roman - Goldman Sachs & Co.
`
`Thank you, and good evening, everybody. I wanted just to start with a comment, Mike, that was in the press release this time, you
`brought it up on the call about in anticipation that procedure volumes are likely going to slow and competitive activity pick up. I think you
`made the same comment in the third quarter 2014 earnings call and press release as well. Could you maybe just talk about what
`timeline you're thinking of when you make that comment? And has anything changed about either the market or your competitive
`position since you initially made those comments back in October?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. Thanks, David. Yeah, it's a good comment. I mean, for a while last year I think we were surprised at the rate that the market
`growth increased, and we particularly saw that uptick come, I would say, starting in about Q3, because Q3 of last year we had SAPIEN
`XT really kicking in in the U.S. and there seemed to be a real jump in the procedure growth. And at the same time, it seemed as though
`there was a similar phenomena going on in Europe. So our feeling is that the comparisons get significantly different when you get into
`the second half of 2015, and we're just calling that to your attention. And also just the fact that competition is intensifying, both from
`larger competitors as well as more small ones.
`
`David Harrison Roman - Goldman Sachs & Co.
`
`Okay. Understood. And then, Scott, I just want to be very clear on FX, so hopefully just bear with me for a second. So as I think about
`2016 and the P&L conceptually, you're going to have, it sounds like, about a 250-basis point benefit this year from currency hedges, so
`essentially the underlying gross margin is 74.5%. So as we think about 2016 we can make some assumption about what we think is
`going to happen from a mix standpoint, but the building point is kind of 74.5% on the gross margin because the hedges are one-time,
`but then as you go down the P&L, things like SG&A, if you're paying someone €100,000, for example, that – assuming rates stay where
`they are, that's permanently a lower number in U.S. dollars, so the SG&A numbers wouldn't see a reversal like we see in gross profit?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah, I can make a comment, and Scott could clarify. Yeah, I think generally, your math is correct. I think, when we estimated back at
`the investor conference time that we would have around a 75% gross margin, we already anticipated some FX drag, probably of 50
`basis points, so some of that may have already been in our projections when we projected this year. So that's one piece. And your
`comments about the SG&A being lower is correct. Those natural hedges will continue.
`
`6 of 16
`
`8/2/2016 1:38 PM
`
`Page 06 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`Scott B. Ullem - Corporate Vice President, Chief Financial Officer
`
`David, what I would just add is I think directionally, your math is right, just taking 250 basis points off of our expected 77% this year. We
`do expect some mix improvement, but we also expect some ongoing operating expenses to continue onto 2016, and those may grow.
`
`David Harrison Roman - Goldman Sachs & Co.
`
`Okay. Got it. Thank you.
`
`Operator
`
`Thank you. Our next question comes from the line of Larry Biegelsen with Wells Fargo. Please proceed with your question.
`
`Larry Biegelsen - Wells Fargo Securities LLC
`
`Good afternoon. Thanks for taking the question. Let me start with Mitral. Mike, over 20 patients, that's a lot. So I guess my question is,
`are you willing to kind of talk about the timeline at least for CE Mark approval and the design freeze? Thanks. And then I have a
`follow-up.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. Thanks. No, we're very pleased to be gathering this level of experience at this point. And as I said, generally, we're encouraged
`by this. I think, the way you might think about it is we'd like to make the decision before year-end whether we move forward with the
`FORTIS design to a CE Mark or whether we decide to wait for a next generation that incorporates a number of enhancements to move
`to a CE Mark. And we haven't made that determination yet. We'd like to get some more clinical experience. But I do think that we'll
`make that decision yet this year.
`
`Larry Biegelsen - Wells Fargo Securities LLC
`
`Great. And then maybe you can talk about what impact you've seen so far from the data presented at ACC in both the U.S. and
`Europe? And how does the data at ACC affect your long-term market projection of over $3 billion in sales in 2019? Thanks.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. Thanks for that, Larry. Yeah, you know, the ACC meeting actually occurred late in Q1, so it's unlikely that it had any impact really
`on the first quarter. And it's kind of soon even now, Larry, to estimate the immediate impact on sales. The outcomes are encouraging for
`the future of the therapy and the eventual expansion and the eventual approval of the indication. So that's favorable, but I don't know
`that we're ready to offer a formal assessment on what the overall market size will be. That'll be coming in the future.
`
`Larry Biegelsen - Wells Fargo Securities LLC
`
`Thanks for taking the question.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Sure.
`
`Operator
`
`Thank you. Our next question comes from the line of Raj Denhoy with Jefferies & Company. Please proceed with your question.
`
`Raj S. Denhoy - Jefferies LLC
`
`Hi. Good afternoon. I wonder if I could ask about the sequential U.S. growth. I think last quarter was relatively flat and this quarter you
`saw a modest uptick but still relatively flat. Perhaps you could offer a little bit as to what you see happening and is it a question of
`needing to train more centers? Or anything would be helpful.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. I think, your observation is a good one, Raj. We didn't grow sequentially very much from the last quarter, but we think the market
`remains very favorable. Historically, it's kind of tough to know a lot quarter-to-quarter. Things tend to move around, but the overall trend
`
`7 of 16
`
`8/2/2016 1:38 PM
`
`Page 07 of 16
`
`

`

`Edwards Lifesciences (EW) Michael A. Mussallem on Q1 2015 Results ...
`
`http://seekingalpha.com/article/3098076-edwards-lifesciences-ew-michae...
`
`has been – just been for increased market adoption. And remember, the ACC came late enough in the quarter; probably didn't have
`much impact. We were I'm sure impacted by the launch of our competitor, who gained some share in the U.S., probably since the end
`of last year.
`
`Raj S. Denhoy - Jefferies LLC
`
`Okay. Fair enough. And then just a question around centers, what's been the pace there? And in terms of new centers wanting to get
`trained, have you seen any change in that dynamic?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. New centers continue to want to be trained, Raj. I think there's probably something in the neighborhood of around 10 centers that
`were added since the beginning of the year. But remember, they have to clear the hurdles for the NCD and so they're working through
`that. But the preponderance of the volume, that doesn't necessarily come from the new centers. They tend to – tends to come from
`existing centers.
`
`Raj S. Denhoy - Jefferies LLC
`
`Okay. Thank you.
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Sure.
`
`Operator
`
`Thank you. Our next question comes from the line of Bruce Nudell with Credit Suisse. Please proceed with your question.
`
`Bruce M. Nudell - Credit Suisse Securities (USA) LLC (Broker)
`
`Good afternoon. Thanks for taking the question. Mike, just given the success of SAPIEN 3 in Europe, how should we be thinking about
`CENTERA, its key product advantages and whether you have balloon expandable pretty much to yourselves? Will this really be a good
`advantage – a good opportunity to take more – even more share?
`
`Michael A. Mussallem - Chairman & Chief Executive Officer
`
`Yeah. We're going to learn an awful lot about CENTERA as we go through our clinical trials, Bruce. And so that's going to be key for us
`and we're anxious. You know, generally we're so optimistic about SAPIEN 3, we think it's going to be not challenging and unlikely that
`people that are satisfied with SAPIEN 3 are going to switch over to CENTERA. But