Edwards Lifesciences Corp at Sanford C Bernstein Strategic Decisions Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Excellent. Well, thanks Mike, that's a helpful introduction. Maybe starting a high level on strategy. You talk about focus in structural heart therapies as being a key element of your strategy. Got a room full of a lot of generalist investors, but I wonder if you could explain why focus is really a driver of your success at Edwards?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Got it. I wonder maybe on the other side of the coin, if you could talk about some of the costs or trade-offs of that approach. You're going up against a competitor, who is very broad and can go in and sell a bundle of products. In some markets, maybe more price-sensitive markets that can be appealing. What are maybe some of the costs or trade-offs?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Speaking of your performance and your market share, you own about 2/3 of this global market. So the innovation-focused approach is working, but all medtech markets go through cycles of innovation and maturity. Maybe can you -- I think maybe some investors might look at different devices and say, "Wow, this heart valve doesn't look all that different than the coronary stent." Maybe can you just talk about where we are in treating structural heart conditions? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 02, 2022 / 5:30PM, EW.N - Edwards Lifesciences Corp at Sanford C Bernstein Strategic Decisions Conference

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Excellent. Good. Okay. So let's shift to the macro topics that are on people's minds. It's hard to believe we're still talking about COVID. But on your Q1 call 5 weeks ago, it sounded like U.S. hospitals had not fully recovered, still some lingering impact on TAVR procedures from protocols and staffing shortages and labor churn and all those things. Just curious whether you've seen any improvement in those frictions in the U.S.?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Got it. You alluded to backlog a little bit and the backlog that sort of played through around this time last year. I think on your Q1 call, you said you don't see a very large backlog right now, maybe a few months that might have built up during Omicron. Is that still where your thinking is on backlog?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Got it. Supply chain pressures have posed problems across many sectors, including medtech, but your supply chain is fairly simple relative to some other medtech players. I wonder if you can maybe talk a little bit about supply chain risks that you're seeing right now?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Got it. Up the chain a little bit from you. There's a supply chain concern about contrast dye. These lockdowns in China have caused a shortage of this dye, which is used in echocardiograms and other vision procedures. Wonder if you're seeing any impact from that dye shortage?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Thanks, Michael. Recession. A lot of investors are thinking about how various businesses might fare through a recession. Your structural heart therapies are treating very deadly diseases and your payer mix is heavily skewed toward Medicare. Can you just help us think about what kind of impact the recession would have on Edwards?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great Okay. Let's turn to TAVR. So global TAVR penetration in developed markets is still, like I said, only about 10%, and it's lower than that outside the U.S. You've had strong TAVR growth outside the U.S., around 20% for a few quarters in a row now. Maybe could you tell us -- you're clearly investing to go after that big OUS TAVR opportunity. What does that investment look like? And how sustainable is that kind of 20% OUS growth rate?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Right. Great. Makes sense. The U.S. TAVR growth rates have been a good bit slower than OUS growth rates for a few quarters. Sometimes it's difficult to parse out how much of that is COVID impact. Some investors worry that U.S. TAVR growth could slow as your penetration of a low-risk population starts to reach a certain point. What's the right way to think about the U.S. TAVR growth opportunity within the current indication?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Yes. Great. Thanks, Mike. A couple of things I want to pick up on in that answer. The first one is about indication expansion. Obviously, a really important driver for TAVR. When you got the low-risk approval a few years back, you started treating relatively healthier patients, and there were some people who were a little bit concerned about valve durability. And then now as you go into healthier populations who don't have symptoms yet, who are still at the moderate AS diagnosis, wonder how do people think about durability? And how has the data and the thinking evolved on that front?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Makes a lot of sense. So diagnosis and awareness, as you mentioned, is an important issue, very low among patients and many primary care docs, too. A lot of severe AS patients, as you said, often confuse the symptoms with the symptoms of getting old or they'll change their lifestyle to live within their symptoms and many of them just get overlooked. You've just started experimenting with direct-to-consumer ads to start to boost awareness. I'm curious if you have any early feedback on those?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. There's also some new technology that helps aid diagnosis. When you look at the places where there's leakage in the funnel, one of them is just about awareness and getting that referral from a PCP to a cardiologist. There are these new Bluetooth-enabled stethoscopes that can help doctors -- help primary care doctors screen their patient populations more effectively. And then later in the funnel, often when people get echocardiograms, even at that point, the gold standard diagnostic, many of those patients are missed or incorrectly diagnosed. And there's new AI-enabled software that can help improve that echo capture rate. Just curious what your -- how optimistic you are related to those new AI-enabled software?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Yes. Great. So patient outcomes are outstanding for TAVR and the procedures keeps getting better and more efficient. You're working on a next-gen TAVR valve, the X4. Can you maybe just talk a little bit about what is there to do? What's left to do in TAVR? How can it get better? What are the areas that you're focused on? And to what extent can like enabling technologies or better visualization help as well?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Enabling technology.

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Good opportunity to transition to TMTT. The mitral and tricuspid disease are 3 or 4x as prevalent as aortic stenosis. So the addressable market here is huge, but the actual global market for TAVR is almost $5.5 billion where the TMTT market is only about $1 billion, despite the fact that Abbott's MitraClip got FDA approval less than 2 years after SAPIEN and TAVR. So the question, why has it taken so long for TMTT to ramp up? And looking forward, should we expect this to be a market where we've got to continue to be a little bit patient?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Okay. So starting with edge-to-edge. You got CE Mark for PASCAL a little over 3 years ago. You're the undisputed leader in TAVR. But in mitral, of course, you're entering many years after Abbott. Can you walk us through what's a hypothetical conversation sound like between an Edwards rep and a doc who is currently using MitraClip? How do you convince a doc to switch?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : So far replacement technologies have dominated the market for transcatheter mitral therapies, and nobody has really cracked the code yet on transcatheter mitral replacement. You're studying 2 different Sub-30 French transfemoral mitral replacement valves. I wonder what are your latest thoughts on repair versus replace in mitral? And what do you expect from these 2 replacement programs?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Great. You mentioned EVOQUE and tricuspid. With a viable replacement therapy like EVOQUE, do you think it's possible that the transcatheter tricuspid market could actually ramp up more quickly than the mitral market?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Let's zoom out maybe talk a little bit about R&D. Innovation and evidence generation are obviously really central to your strategy. You're working on a lot of different programs right now across the business. Could your R&D stay in that kind of 17% of sales range for the next 5 or even 10 years? Or could we start to see that ratchet down a bit as some of your TMTT programs evolve?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. A question from the audience about the expense journey for Edwards for awareness or improving diagnosis to really capitalize on the opportunity. Some medtech companies will actually have kind of dedicated market development teams that focus on the referral channel and finding the leakage, et cetera. Do you expect to invest more in that area?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. One more audience question on value-based pricing -- or maybe pricing more generally. Pricing has held up really nicely over the years, been a lot of innovation in the space. How do you think about pricing going forward? And could value-based pricing, as it takes hold, start to change your approach in that area at all?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Great. Great. if I can just maybe sneak one quick last one in. This is the Strategic Decisions Conference after all. If you look out the next 3 to 5 years, your strategy is pretty straightforward. Are there 1 or 2 kind of big strategic decisions that hit the screen for you over the next few years?

Question: Lee Michael Hambright - Sanford C. Bernstein & Co., LLC., Research Division - Analyst : Excellent. Excellent. Mike, thanks so much for being here. Really appreciate it.