Edwards Lifesciences Corporation (NYSE:) Q4 2022 Earnings Call Transcript January 31, 2023
Operator: Greetings, and welcome to the Edwards Lifesciences Fourth Quarter 2022 Earnings Conference Call. Please note, this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Senior Vice President of Investor Relations and Treasurer. Thank you. You may begin.
Mark Wilterding: Thank you very much, Diego, and good afternoon, and thank you all for joining us today. With me on today’s call are Mike Mussallem, Chairman and Chief Executive Officer; and Scott Ullem, our Chief Financial Officer. Also joining us for the Q&A portion of the call are Bernard Zovighian, President of Edwards Life Sciences; Larry Wood, our Global Leader of TAVR and Surgical Structural Heart; Daveen Chopra, our Global Leader of TMTT and Katie Zimon, our Global Leader of Critical Care. Just after the close of regular trading, Edwards Lifesciences released fourth quarter 2022 financial results. During today’s call, management will discuss those results included in the press release and the accompanying financial statements and then use the remaining time for Q&A.
Please note that management will be making forward-looking statements that are based on estimates, assumptions and projections. These statements include, but aren’t limited to, financial guidance and expectations for longer-term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters and foreign currency fluctuations. These statements speak only as of the date on which they were made, and Edwards does 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 and important product safety information may be found in the press release our 2021 annual report on Form 10-K and Edwards’ other SEC filings, all of which are available on the company’s website at edwards.com.
Finally, a quick reminder that when using the terms constant currency, underlying and adjusted, management is referring to non-GAAP financial measures. Otherwise, they are referring to GAAP results. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today’s press release. With that, I’d like to turn the call over to Mike for his comments.
Michael Mussallem: Thank you, Mark. During 2022, our company stayed focused on the long term, making meaningful progress on strategic milestones with the potential of transforming patient care. While the challenging environment negatively impacted sales, we still grew 8%. Looking forward, we remain optimistic that the health care environment will gradually improve and we expect 9% to 12% sales growth in 2023. We didn’t pull back on investing in innovation because of the pandemic, and we didn’t pull back because sales fell a little short. We continue to aggressively invest during this challenging period, which positions the company for sustained leadership in a new era of structural heart and critical care innovation. Looking back at 2022, in TAVR, we made important strides in executing our long-term strategy.
We received approval and launched the innovative SAPIEN 3 Ultra RESILIA valve. In TMTT, each of our platforms demonstrated promising clinical performance, and we received approval for PASCAL Precision in the U.S. and Europe. In Surgical Structural Heart, we extended our leadership position through the launch of MITRIS in the U.S. And in Critical Care, we continue to drive adoption of our transformative smart recovery technologies. Although our initial sales expectations for 2022 anticipated a better environment, we delivered balanced contributions across each of our product groups and regions. We achieved 12% growth in adjusted earnings per share while maintaining R&D at more than 17% of sales, which reflects our commitment to driving durable organic sales growth.
Consistent with our cash deployment strategy, we opportunistically repurchased stock at an accelerated level in 2022. We continue to invest in our production capacity in anticipation of future growth. and we made a series of external investments in promising early-stage technologies. Turning to our fourth quarter financial results. Consistent with our guidance, total company sales grew 7% on a constant currency basis to $1.3 billion. Our broad portfolio of innovative therapies drove this growth despite the health care disruptions in a number of our key geographies. In TAVR, full year 2022 global TAVR sales of $3.5 billion increased 7% on a constant currency basis, building on nearly 20% growth in the year ago period. Sales were below our original guidance of $3.7 billion to $4.0 billion due to foreign exchange headwinds and Covet induced health care challenges in key countries.
In 2022, we announced the approval of SAPIEN 3 Ultra RESILIA in the U.S. Separately, we continue to advance enrollment in our PROGRESS pivotal trial for moderate AS patients and gained significant learnings from our alliance pivotal trial to study the next-generation TAVR technology, SAPIEN X4. These transformative developments reinforce our long-term confidence in the strong growth of transcatheter-based aortic valve interventions. In the fourth quarter, our global TAVR procedures were comparable with Edwards growth. Our global — I should say, global TAVR procedures were comparable with Edwards growth. Our global TAVR sales of $868 million increased 5% year-over-year on a constant currency basis, consistent with our expectations. Sales were up slightly over Q3 in dollars and on a constant currency basis and local selling prices were stable.
In the U.S., Edwards fourth quarter TAVR procedures grew in the mid-single-digit range. As expected, our fourth quarter U.S. TAVR procedure volumes were impacted by the U.S. hospital staffing constraints and the holiday season slowdown. We estimate that our share of procedures was stable. Growth in the U.S. was higher in larger volume centers and in states with fewer COVID restrictions as measured by the Daxferns Containment and Health Index. We’re encouraged by recent hiring trends, which suggests that hospital employment is rebounding. As we mentioned, we began the introduction of SAPIEN 3 Ultra RESILIA in the U.S. the Resilient issues anti-calcification technology addresses one of the primary causes of reintervention following heart valve replacement and is demonstrating a strong track record of performance in Edwards Surgical house.
As of now, this newest valve has been introduced in approximately 10% of U.S. TAVR centers and physician feedback has been encouraging. Outside of the U.S., in the fourth quarter, Edwards TAVR procedures also grew in the mid-single digits, and we estimate total procedure growth was comparable. In Q4, geographies outside of Europe and Japan grew even faster in the quarter. Long term, we see excellent opportunities for growth as we believe international adoption of TAVR remains quite low. In Europe, fourth quarter procedures grew in line with the global rate. Market growth continued to be impacted by a bump in the COVID cases and staffing shortages, which reduced hospital capacity, particularly in larger countries such as Germany. And even though there are a broad range of competitors, our leadership position and local selling prices remained stable throughout the year.
Importantly, a cost-effectiveness study published earlier this month demonstrated that TAVR with SAPIEN three was economically beneficial when compared to surgical aortic valve replacement in treating German patients with low surgical risk. The data suggests that TAVR enhances quality of life and offers a cost-effective option over the long term. These findings are consistent with the cost-effective outcomes for the use of SAPIEN 3 in France, Italy and Spain. In Japan, fourth quarter procedure growth was much slower than expected due to an extended COVID wave and continued restrictions, which limited hospital staffing and capacity. We expect these factors to diminish substantially over the course of 2023 and look forward to launching SAPIEN 3 Ultra RESILIA in Japan later this year.
We remain focused on expanding the availability of TAVR therapy driven by the fact that AS remains a significantly undertreated disease amongst this large elderly population. In summary, our outlook assumes COVID-related challenges improved during 2023 as hospital resource constraints decrease. We remain positive in our outlook for 2023 underlying TAVR sales growth of 9% to 12%, consistent with the range we shared at our December investor conference. We remain confident in this large global opportunity that will double to $10 billion by 2028, which implies a compounded annual growth rate in the low double-digit range. Turning to TMTT. Since launch, we have…