Edwards Lifesciences Q1 2023 Earnings Report

Edwards Lifesciences EPS Results

• Actual EPS: $0.62
• Consensus EPS: $0.61
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.60

Edwards Lifesciences Revenue Results

• Actual Revenue: $1.46 billion
• Expected Revenue: $1.39 billion
• Beat/Miss: Beat by +$65.44 million
• YoY Revenue Growth: +8.80%

Edwards Lifesciences Announcement Details

• Quarter: Q1 2023
• Date: 4/26/2023
• Time: After Market Closes
• Conference Call Date: Wednesday, April 26, 2023
• Conference Call Time: 5:00PM ET

Edwards Lifesciences (NYSE:EW) is a medical technology company focused on products and therapies for structural heart disease and critical care monitoring. The company designs, develops and manufactures prosthetic heart valves and related delivery systems used in both surgical and minimally invasive (transcatheter) procedures. Its portfolio addresses a range of valvular conditions, with an emphasis on technologies that enable transcatheter aortic valve replacement (TAVR) as an alternative to open-heart surgery.

In addition to transcatheter heart valves—including the widely recognized SAPIEN family—Edwards offers surgical tissue valves and ancillary devices used by cardiac surgeons, interventional cardiologists and hospital teams. The company also produces hemodynamic monitoring platforms and consumables intended for perioperative and intensive care settings to support patient management during high-acuity procedures. Customers include hospitals and health systems across multiple geographies, and Edwards distributes its products globally in markets such as North America, Europe and the Asia-Pacific region.

Edwards Lifesciences has a long-standing emphasis on research, clinical evidence and product innovation, pursuing clinical trials and regulatory approvals to expand indications for existing therapies and to develop new treatments for other forms of structural heart disease. Its business model combines manufacturing, direct sales and partnerships to support training, clinical adoption and post-market surveillance. The company’s strategic focus remains on advancing less-invasive cardiac therapies and improving outcomes for patients with valvular and critical cardiovascular conditions.

Edwards Lifesciences Q1 2023 Earnings Call Transcript

Key Takeaways

• Edwards reported Q1 sales of $1.46 billion, up 13% on a constant-currency basis, and raised its full-year revenue growth guidance to 10%–12% from 9%–12%.
• Global TAVR revenue grew 11% to $948 million, with U.S. sales up in the low double digits and the U.S. launch of the SAPIEN 3 Ultra Resilia platform expected to represent the majority of U.S. TAVR sales by year-end.
• Surgical structural heart sales jumped 17% to $248 million, driven by strong adoption of the Resilia tissue portfolio, prompting full-year guidance to the high end of the $870 million–$970 million range.
• Edwards entered a new 15-year IP agreement with Medtronic, paying $300 million—half taken as a one-time charge and half to be amortized—pressuring Q1 earnings.
• CEO succession plans were unveiled, with Chairman and CEO Mike Musallam moving to Board Chair and President Bernard Zavi-gian set to assume the CEO role later in 2023.

Presentation

[Operator]

Greetings, and welcome to the Edwards Lifesciences Q1 2023 earnings results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Senior Vice President, Investor Relations, and Treasurer. Thank you. You may begin.

[Mark Wilterding, Senior Vice President, Investor Relations and Treasurer at Edwards Lifesciences]

Thank you very much, Diego, and thank you everyone for joining us. With me on today's call are Mike Mussallem, Chairman and CEO, Scott Ullem, CFO, and Bernard Zovighian, President of Edwards Lifesciences. Also joining us for the Q&A portion of the call are Larry Wood, our Group President of TAVR and Surgical Structural Heart, Daveen Chopra, our Global Leader of TMTT, and Katie Szyman, our Global Leader of Critical Care. Just after the close of regular trading, Edwards Lifesciences released 1st quarter 2023 financial results. During today's call, management will discuss those results included in the press release and accompanying financial schedules, and then use the remaining time for Q&A. Please note that management will be making forward-looking statements that are based on estimates, assumptions, and projections.

[Mark Wilterding, Senior Vice President, Investor Relations and Treasurer at Edwards Lifesciences]

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 are 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 safety information may be found in the press release, our 2022 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 terms constant currency and adjusted, management is referring to non-GAAP financial measures. Otherwise, they're referring to GAAP results.

[Mark Wilterding, Senior Vice President, Investor Relations and Treasurer at Edwards Lifesciences]

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. Mike?

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Thank you, Mark. We're pleased with our Q1 performance, which exceeded our expectations and reflected an improvement in healthcare staffing, along with strong execution of our patient-focused innovation strategy. Sales of $1.46 billion represented 13% growth on a constant currency basis versus a year ago period. Strong therapy adoption of transcatheter heart valves drove the majority of growth in the Q1, aided by better-than-expected performance of surgical structural heart and critical care. By geography, strong growth in the U.S., Europe, and the rest of the world was partially offset by Japan, where COVID impacts lingered. Q1 results in the U.S. were also positively impacted in the quarter by some catch-up in procedure volumes following a seasonal slowdown late last year.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

While staffing remains a concern at many sites globally, we're optimistic that the environment will continue to improve. In TAVR, Q1 global sales were $948 million, an increase of 11% year-over-year on a constant currency basis. We estimate global TAVR procedure growth was comparable with our growth. Local selling prices were stable. In the U.S., our Q1 TAVR sales grew in the low double digits versus the prior year. We estimate total procedure growth was comparable. As we indicated, we believe that Q1 trends were lifted by improved hospital staffing levels. Results were also lifted by a catch-up in procedure volumes early in the quarter following the holiday season slowdown. We're optimistic about the early results of our SAPIEN 3 Ultra RESILIA launch in the U.S.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

As you know, the RESILIA tissues anti-calcification technology has demonstrated a strong track record of performance in Edwards surgical valves. Adoptions of this advanced technology is proceeding well, and we expect it to represent the majority of our U.S. TAVR sales before year-end. TAVR growth in the Q1 was driven by larger volume centers, and our SAPIEN valves continue to demonstrate distinguished clinical performance. We're pleased with the continued enrollment of our PROGRESS clinical trial studying patients with moderate AS. Related to this, last month at the ACC conference, data were presented that examined mortality rates and cardiac damage of 600,000 early-stage AS patients in the U.S. This study concluded that all degrees of untreated AS severity were associated with increased mortality risk. Of note, the mean two-year all-cause mortality for moderate AS was approximately 20%, approaching the rate of those with severe AS.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Outside the U.S., in the Q1, our constant currency TAVR sales grew approximately 10% on a year-over-year basis. Growth reflected positive contributions from all regions excluding Japan, which was still impacted by COVID and the recent trialing of competitive products. We expect to see higher OUS growth as international adoption of TAVR therapy remains low. In Japan, although growth was below our expectations, we were encouraged that conditions improved as the quarter progressed. We expect COVID headwinds to diminish substantially over the course of 2023. With the launch of the SAPIEN 3 Ultra RESILIA in Japan late last month, we expect growth rates to improve in this country where aortic stenosis remains significantly undertreated relative to other large, developed countries. In Europe, Edwards sales growth was driven by the continued strong adoption of our SAPIEN platform and was broad-based across all countries.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Total TAVR procedures grew over previous quarters despite persistent disruptions related to hospital staffing shortages. It's encouraging that healthcare systems across Europe are prioritizing life-saving structural heart therapies, including TAVR, amidst these challenges. Looking ahead to the EuroPCR Medical Congress next month in Paris, we anticipate additional data from the Edwards Benchmark study focusing on strategies to optimize TAVR programs across 28 European centers. Data will also be presented on the outcomes of balloon-expandable valves for TAVR in TAVR procedures. In summary, given the strength of our Q1 performance, we now expect constant currency growth of 10 to 12% versus our previous expectation of 9 to 12%. Our outlook assumes that hospital resource constraints continue to improve during the year.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

We remain confident that this large global opportunity will increase to $10 billion by 2028, which implies a compounded annual growth rate in the low double digits. Turning to TMTT. Our confidence continues to grow in the long-term potential to transform care for the many patients with mitral and tricuspid disease who need better solutions. We remain steadfast in our three key value drivers to unlock this opportunity. Developing a portfolio of differentiated therapies for the complex mitral and tricuspid anatomies, driving positive pivotal trial results to support approvals and adoption, and prioritizing favorable real-world clinical outcomes. Q1 sales of $42 million grew substantially, driven by overall tear procedure growth, the ongoing launch and growing adoption of PASCAL Precision in Europe, and the initial launch in the United States.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

We're pleased that we continue to have excellent outcomes for patients, and clinician feedback on PASCAL Precision has been consistently positive, particularly highlighting the differentiated premium features of the system. We are ramping production to support the launches of Europe in the U.S. In mitral, we look forward to presenting one-year data from the full cohort of CLASP IID pivotal trial later this year. Meanwhile, we continue to enroll the CLASP IIF pivotal trial with PASCAL for patients with functional mitral regurgitation. In mitral replacement, enrollment of the ENCIRCLE pivotal trial with SAPIEN M3 is ongoing, and we anticipate completing enrollment of the main cohort around the end of 2023. We believe that this replacement therapy will expand options for a broader population of mitral patients.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

In tricuspid, we've completed enrollment of the TRISCEND II pivotal trial of the EVOQUE tricuspid valve replacement system and remain on track for European approval by the end of 2023, and in the U.S. around the end of 2024. The FDA recently approved continued access, allowing U.S. hospitals that were involved in the clinical trial to continue to offer EVOQUE as a therapy option. In addition, the CLASP II TR pivotal trial with PASCAL continues enrolling well. In summary, we're pleased with our continued progress toward bringing a portfolio of therapies combined with contemporary clinical data in order to achieve our vision of transforming the lives of patients with mitral and tricuspid valve disease. We now expect full year 2023 sales of $170 to 200 million versus our previous $160 to 200 million.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

In Surgical Structural Heart, better-than-expected Q1 2023 global sales of $248 million increased a robust 17% on a constant currency basis over the prior year. Growth was driven by penetration of our premium products across all regions, and valve surgery growth was higher than our expectations as hospital staffing levels improved, leading to some catch-up in procedures. We continue to see strong momentum of the RESILIA portfolio globally. Surgeons and patients value the features and benefits of this proprietary tissue technology for both aortic and mitral surgical valve replacement procedures, and we've seen adoption of the MITRIS valve in the U.S. increase in the Q1. The 7-year data from our COMMENCE clinical trial will be presented at the annual meeting of the American Association of Thoracic Surgeons next month.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

We also began enrollment of our MOMENTIS clinical trial to demonstrate the durability of RESILIA in the mitral position. In summary, based on our Q1 sales, we are raising our full year sales expectation to the high end of our $870 to 970 million guidance range. We now expect high single digit underlying growth in 2023, driven by the adoption of our most advanced technologies and an increase in the overall heart valve surgeries. In critical care, Q1 sales of $222 million increased 9% on a constant currency basis, driven by balanced contributions from all product lines. Growth was led by our Smart Recovery portfolio and strong adoption of our Acumen IQ sensor and finger cuff, featuring our unique Hypotension Prediction Index algorithm.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Demand for our Swan-Ganz pulmonary artery catheters and our HemoSphere monitoring platform also remained strong in the Q1, with a healthy pipeline of future opportunities. Based on the strong Q1 performance, we now expect critical care full year 2023 sales of $870 to 940 million versus our previous $840 to 940 million. We remain excited about our pipeline of critical care innovations as we continue to shift our focus to Smart Recovery technologies designed to help clinicians make better decisions and get patients home to their families faster. Now I'll turn the call over to Scott.

[Scott Ullem, CFO at Edwards Lifesciences]

Hey, thanks a lot, Mike. We are very pleased by our start to the year. Q1 was particularly strong in January relative to historical seasonality. The rest of the quarter was more consistent with our growth expectations. All product groups performed well. Sales were balanced across all regions, with the exception of Japan, which was impacted by lingering COVID headwinds. We achieved total sales in the quarter of $1.46 billion, which represents 12.6% year-over-year constant currency growth. We achieved adjusted earnings per share of $0.62. Our GAAP EPS was $0.56, impacted by an intellectual property agreement, which I will speak to later. Contribution from our stronger than expected sales performance was partially offset by a higher provision for performance-based compensation.

[Scott Ullem, CFO at Edwards Lifesciences]

A full reconciliation between our GAAP and adjusted earnings per share for these and other items is included with today's release. For total Edwards, based on the strong start to the year, we now expect 10 to 12% year-over-year sales growth on a constant currency basis, an increase from our prior guidance of 9 to 12%. We now expect to be at the high end of our previous range of $5.6 to 6.0 billion. Absent material moves in foreign exchange, we now expect full year TAVR sales of $3.8 to 4.0 billion, TMTT sales of $170 to 200 million, and Critical Care sales of $870 to 940 million.

[Scott Ullem, CFO at Edwards Lifesciences]

For surgical structural heart, we now expect to be at the high end of our previous guidance range of $870 to 970 million. Lastly, we now expect our full year adjusted EPS to be between $2.48 and $2.60. We're projecting Q2 sales to be between $1.48 billion and $1.56 billion. We're also projecting Q2 adjusted earnings per share of $0.62 to 0.68. I'll now cover additional details of our results. For the Q1, our adjusted gross profit margin was 77.5% as expected, compared to 77.8% in the same period last year and 81% in Q4. This slight year-over-year reduction was driven by a less favorable impact from FX.

[Scott Ullem, CFO at Edwards Lifesciences]

We continue to expect our full year 2023 adjusted gross profit margin to be between 76 to 78%. Selling, general, and administrative expenses in the Q1 were $436 million, or 29.9% of sales, primarily reflecting increased investments over the prior year in transcatheter field-based personnel in support of our growth strategy. These investments were partially offset by the weakening of the euro and yen against the dollar. We continue to expect full year 2023 SG&A as a percent of sales to be 29 to 30% as we continue to invest in field-based personnel and our therapy adoption initiatives. Research and development expenses in the quarter grew 14% over the prior year to $261 million or 17.9% of sales.

[Scott Ullem, CFO at Edwards Lifesciences]

This increase was primarily the result of continued investments in our transcatheter valve innovations, including increased clinical trial activity. For the full year 2023, we continue to expect R&D to be 17 to 18% of sales as we invest in developing new technologies and generating evidence to support TAVR and TMTT. Turning to taxes. Our reported tax rate this quarter was 14.6%. This rate reflects a 70-basis point excess tax benefit from stock-based compensation. We continue to expect our full year tax rate, excluding special items, to be 13 to 17%. Earlier this month, we were pleased to enter into an intellectual property agreement with Medtronic, in which we agreed to a 15-year mutual covenant not to sue with regard to certain structural heart products. We previously had a long-term IP agreement that expired last year.

[Scott Ullem, CFO at Edwards Lifesciences]

The terms of the new agreement limit what we disclose. There will be a reference to it in our Form 10-Q, which we will file soon. In consideration for the agreement, we paid Medtronic $300 million, approximately half of which has been recorded as a one-time charge, and the other half will be amortized over time. Foreign exchange rates decreased Q1 reported sales growth by 380 percentage points, or $44 million compared to the prior year. At current rates, we continue to expect an approximately flat year-over-year impact to full year 2023 sales as compared to 2022. FX rates negatively impacted our Q1 gross profit margin by 70 basis points compared to the prior year. Relative to our January guidance, FX rates had a minimal impact on Q1 earnings per share.

[Scott Ullem, CFO at Edwards Lifesciences]

Free cash flow for the Q1 was $253 million, defined as cash flow from operating activities of $314 million, less capital spending of $61 million. We continue to expect full year 2023 free cash flow will be between $1.0 billion and $1.4 billion. Before turning the call back over to Mike Mussallem, 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 $1.3 billion in cash equivalents and short-term investments as of March 31st. In the Q1, we repurchased approximately $250 million in stock through an accelerated share repurchase agreement, as well as pre-established 10b5-1 programs.

[Scott Ullem, CFO at Edwards Lifesciences]

As a result, average diluted shares outstanding during the quarter declined by approximately 5 million shares to 611 million. We continue to expect average diluted shares outstanding for 2023 to be between 610 million and 615 million. We have approximately $650 million remaining under our current share repurchase authorization. With that, I'll hand it back to Mike. Before I do, I know everyone on both ends of this call joins me in congratulating you on this, your 92nd earnings call. We're now in our 10th year of working together, and it's been a privilege at every step along the way. Your leadership and support as the CEO of Edwards has been an inspiration to me, our employees, and I know it's also fair to say, the investment community. With that, Mike, back to you.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Well, thanks so much, Scott. That means a lot, and I've truly valued your trusted partnership over the years. It's also a great segue. As part of the upcoming planned CEO succession, Bernard has been serving as President of Edwards Lifesciences since January first. Since then, we've invested all our time to successfully transition responsibilities, and I feel confident passing the baton. Next month, I expect to transition to my new role as non-executive Chairman of the Board, and Bernard will assume the CEO role. I'm excited with the board's selection of Bernard, and I'm confident that the company is in great hands and will prosper under his proven leadership. Before we go to Q&A, I'll ask Bernard to say a few words. Bernard.

[Bernard Zovighian, President at Edwards Lifesciences]

Thanks, Mike. I feel extremely fortunate to be leading this special company that has pioneered breakthrough technologies and transformed care for patients around the world. During the well-planned five-month transition, Mike has been extremely generous in sharing his learnings and experience, having successfully transformed Edwards over the last 20-plus years. I am also grateful for the support of the board and the partnership of the executive leadership team. In recent months, I have had the pleasure of meeting and listening to our patients, our trusted partners, and our employees around the world. I've come away from the discussion even more confident in Edwards' bright future. For our patients, we will continue to advance breakthrough innovation that will positively impact their lives. While Edwards has grown and evolved, we never lost sight of why we are here.

[Bernard Zovighian, President at Edwards Lifesciences]

We will stay focused on our long-term strategic goals and foster a patient-first culture that drive everything we do. We know healthcare innovation requires trusted partnership with physicians, regulators, payers, providers, and innovators, we will continue to build upon and further strengthen our deep partnerships to take on ambitious goals and address large unmet needs. Transforming care like we do at Edwards is complex, we remain committed to fostering a culture where our employees really enjoy their impactful work. Our unique organic innovation strategy requires an expert, motivated, and dedicated global team. I want Edwards to continue to be a place that inspires our employees to grow and succeed and attracts bright talent.

[Bernard Zovighian, President at Edwards Lifesciences]

As you heard from Mike and Scott, we believe that 2023 will be an important year for Edwards as we expect a return to higher sales growth and meaningful progress on our innovations to improve care for many more patients. Looking beyond 2023, I remain confident that our long-term strategy and pipeline of innovative therapy will create significant value for patients and healthcare systems, enabling strong organic sales growth. Finally, I am confident that as we deliver on our innovation strategy, we will create exceptional shareholder value. With that, I will pass it back to Mark to open up the floor for Q&A.

[Robbie Marcus, Managing Director and Senior Analyst at J.P. Morgan]

Thank you very much, Bernard. We're ready to take questions now. In order to allow for broad participation, we ask that you please limit the number of questions to one plus one follow-up. If you have additional questions, please reenter the queue, and management will answer as many participants as possible during the remainder of the call. Diego, please go ahead with additional details on accessing the Q&A portion of the call. Thank you.

[Operator]

Thank you. At this time, we'll conduct our question and answer session. To ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please limit yourself to one question and one follow-up. Our first question comes from Larry Biegelsen with Wells Fargo. Please state your question.

[Larry Biegelsen, Managing Director and Senior Medical Device Equity Research Analyst at Wells Fargo]

Good afternoon. Thanks for taking the question. Mike, I just wanna say I think I've been on almost 70 of your 92 calls. I just wanna take this opportunity to congratulate you on what you've accomplished at Edwards and wish you well in retirement. I just wanna take a minute to say I think your pursuit of transcatheter valves may seem obvious now, Mike, but we know that it was a big risk, you know, when you decided to go down that path, and it was clearly the right decision. Congratulations again, Mike, and I'll move on to my questions now. I'd love to start just with two on TMTT. Just first on the TMTT result in the quarter, the $42 million.

[Larry Biegelsen, Managing Director and Senior Medical Device Equity Research Analyst at Wells Fargo]

I'd love to, you know, hear a little bit about the US, OUS trends. You know, how much, you know, did the US contribute, and just any color on the launch of PASCAL, and I have one follow-up.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Yeah. Well, why don't I get started? First of all, thanks so much, Larry. That's very meaningful to me. You're right, we've been on a long journey together, and I really appreciate the support from the investment community. Why don't I turn it over to Bernard and Daveen to sort of answer your questions.

[Bernard Zovighian, President at Edwards Lifesciences]

Sure. No, thanks, you know, Larry. You know, good question, you know, about your TMTT. You know, we are very pleased with this, you know, Q1 results. As you can imagine, you know, we started in Europe, you know, way before, and we also, you know, got, you know, the approval in Europe, you know, for PASCAL Precision before the U.S. It is going, you know, very well in Europe, but, you know, we have been in the U.S. now, you know, for a quarter, you know, quarter plus, and it is going well also. It is at the beginning of it. I don't know, Daveen, if you want to add anything here.

[Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies at Edwards Lifesciences]

Yeah. I'll definitely say, you know, obviously, Europe's obviously been the majority of our revenue, in the U.S. and in Europe, we're in launch mode with PASCAL Precision. You know, we've gotten really positive feedback so far from physicians. They love the technology. They're seeing excellent safety and efficacy. We're continuing to grow. We're continuing to open up new center, training physicians for the first time and giving exposure to this new great technology.

[Larry Biegelsen, Managing Director and Senior Medical Device Equity Research Analyst at Wells Fargo]

That's helpful. Just to follow up on TRILUMINATE, the reactions seem to be mixed from some physicians. I'd love to hear you guys, your reaction to the data and put EVOQUE, which you've just, you know, completed the US pivotal trial for, you know, TRISCEND II, the enrollment, I'm sorry. You know, you know, one would expect with replacement, you're gonna see better efficacy in terms of TR reduction, but how confident are you that you'll see an improvement in outcomes, such as mortality and hospitalization with a reasonable safety profile? Thank you for taking the questions.

[Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies at Edwards Lifesciences]

Yeah, sure. Thanks, Larry. It's Daveen again. I'll jump in a little bit on our thoughts on TRILUMINATE. Honestly on TRILUMINATE, we're very pleased to see a high quality randomized controlled data for the treatment of tricuspid regurgitation for the first time. We're excited to see that this trial show that tricuspid TR is not only safe, but offers significant TR reduction and also offers really meaningful quality of life for patients. I think what we see is that the TRILUMINATE data actually kind of helps confirm outcomes that we've seen in previous PASCAL studies in the tricuspid space, like our CLASP TR EFS, TriCLASP study, et cetera, that we really see the significant TR reduction, great safety, and good quality of life.

[Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies at Edwards Lifesciences]

For us, obviously, the CLASP II TR study is ongoing, and maybe that'll give you some more potential on tricuspid TIR therapy. We also believe that you need a toolbox of technologies for tricuspid disease, and that not only does TIR offer a great solution, but we also think that tricuspid replacement also offers a great solution. Obviously, as the data comes out in the future, we'll help figure out and unpack a lot of the questions that you just answered, that you just asked right there, but I think we'll all figure this out together on this journey.

[Larry Biegelsen, Managing Director and Senior Medical Device Equity Research Analyst at Wells Fargo]

All right. Thanks for taking the questions.

[Operator]

Our next question comes from Robbie Marcus with J.P. Morgan. Please state your question.

[Robbie Marcus, Managing Director and Senior Analyst at J.P. Morgan]

Great. Thanks for taking the question, and Mike, I'll add my congratulations as well. Maybe to start, I wanna spend a minute on TAVR Trends, U.S. and OUS. You said there was some pent-up demand at the beginning of the quarter, but then also it sounds like staffing continues to improve around the world, and if you get a little pricing benefit on SAPIEN 3 Ultra or RESILIA, that might help sales throughout the year. Just love to get your thoughts on what you're seeing. You know, do you think there was a bolus in January and it died off? Or are these trends that can continue to improve and accelerate throughout the year?

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Yeah. Thanks, Robbie, and I appreciate your comments. Why don't we go to Larry on this one?

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Thanks, Robbie. You know, if I look at the quarter, you know, we typically see a lot of seasonality in January as we come out of the holiday, just kind of refilling up the pipeline with screening.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

We saw a much stronger January than we historically have seen. We just saw less seasonality. I'd say February and March played out pretty much in line with our expectations. You know, we've anticipated that the staffing was gonna gradually improve, and I think we see that, and I think that's evidenced in the Q1 results. You know, we expect it to also continually improve throughout the rest of the year. You know, in terms of trying to judge a backlog, it's hard for us to do that, but we do think there was certainly some catch up in January.

[Robbie Marcus, Managing Director and Senior Analyst at J.P. Morgan]

Great. Scott, maybe one for you. OpEx came in a little higher than the street had been expecting in the quarter, yet you reiterated the margin targets for the year. How should we think about the cadence of spending and anything in the Q1 that stood out to you that won't repeat going forward? Thanks.

[Scott Ullem, CFO at Edwards Lifesciences]

Yeah. We did end up with higher spending in the Q1 than we had originally budgeted. Our plans for spending for the rest of the year are really unchanged. For the full year, our guidance for SG&A and R&D as a percentage of sales are unchanged. In the Q1, we came in a little bit higher for several reasons. We had some performance-based compensation. You know, it's highly sensitive to sales by design, we like to reward people when the top line is performing well. We also had some little things, some one-time, one-off expenses for projects we're working on. We had a little bit higher tax rate as a result of income mix that came in U.S. and OUS. Those were some of the special things that you saw flow through in Q1.

[Robbie Marcus, Managing Director and Senior Analyst at J.P. Morgan]

Appreciate it. Thank you.

[Operator]

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

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Hey, guys. Thanks for taking my question. Congrats on a good start here. Mike, let me add my congratulations as well. I wanted to go back to the prior question here on, you know, look at TAVR. I think it was 4% or 5% in Q4. Q1, double-digit growth. Can you quantify what the that improvement from mid-single to double digits, what part of that was perhaps a catch-up versus versus an underlying improvement in procedure trends? When you're thinking about procedure trends, can you perhaps talk about how the quarter progressed and what the exit rates were?

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Yeah. Thanks for your comments, Vijay. I appreciate that. I'll give it to Larry, although I think he already gave it his best shot. Wanted to see if you have anything to add, Larry.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Yeah. I don't know that I have a lot more to add from the last question. You know, you'll note we took up the bottom of our range, and I think so we've tried to reflect all of this in our guidance. We're just encouraged overall by the staffing trends and where we're going. I think, you know, to see TAVR back in double-digit growth, you know, after a couple of tough quarters, just really, I think highlights that the system is getting capacity back, and I think that that's a real plus for patients.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Maybe I'll try to ask this a different way, Larry. Let's see if we can pin this down. SAVR, this is the second straight quarter SAVR is outgrowing TAVR. Is that 17%, you know? What percentage of that 17 is what is volume versus price? Do you have any thoughts on why is SAVR continuing to outgrow TAVR? Shouldn't TAVR be growing faster than SAVR?

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Yeah. Well, I mean, I think, you know, first of all, we're very excited by the surgical growth that we saw in Q1. I think, you know, it reaches probably an all-time high that we haven't seen in a long time. I think that's really a reflection of the innovation and the investments we've made over the last several years. I think part of this has been the adoption of our premium products and the premium we get, and that certainly helps our competitive position. At the same time, we did see, you know, procedure growth that happened that I think results from the capacity similar to what we saw in TAVR. You know, we saw that capacity improvements on the surgical side of our business as well.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

We do get some of the price from our premium products in addition to the growth in the market and then probably a little bit of competitive position as well. There's probably more drivers on the surgical side than there are on the TAVR side.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Sorry. Volume versus price. Larry, can you comment whether majority of this growth was volume versus price on TAVR?

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

I mean, volume was certainly a key contributor to it. I mean, there's no question about that. That's a big thing. Again, you know, there's three things that are contributing to the growth in the surgical business, whereas TAVR, it's pretty much primarily units.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Fantastic. Thanks, guys, and congrats again.

[Operator]

Our next question comes from Joanne Wuensch with Citigroup. Please state your question.

[Joanne Wuensch, Managing Director and Head of U.S. Healthcare Research at Citi]

Good evening, and Mike, you will be missed. Nice quarter to do your 92nd quarter for. I just wanna spend a little bit of time on Japan and China, and particularly in Japan, if you had a tough beginning of the quarter with COVID overhang, what is your run rate looking like right now? Just generally what's happening in the region.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Yeah. Thanks, Joanne. I appreciate your kind comments. Bernard, do you wanna take a shot at that?

[Bernard Zovighian, President at Edwards Lifesciences]

Yes. So, you know, Japan has been, you know, and still, you know, largely impacted by COVID headwinds. You know, we believe it is going to diminish, you know, over the course of 2023. You know, we are also bringing our latest technology in Japan, you know, S3 Ultra RESILIA. We are starting to see some, you know, positive reactions from our customers here. Together with the recovery from COVID and us, you know, bringing our latest technologies, you know, we are very hopeful, you know, for the year.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Yeah. The other thing I can add, Joanne, is that, you know, China is still relatively small on the TAVR front for us. Remember we launched during the COVID years. But Japan is also gonna benefit from the launch of the Ultra RESILIA product this year. We think that's gonna be a lift for Japan as the year goes on. That just launched here this month.

[Danielle Antalffy, Senior Equity Research Analyst and U.S MedTech at UBS]

Thank you very much.

[Operator]

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

[Travis Steed, Managing Director, Equity Research and Medical Technology at Bank of America]

Hey, thanks a lot. Congrats, Mike. You'll be missed as well. 2 questions here. I guess the first, just if you normalize January, I don't know if you could say if the U.S. still grew double digits if you just normalize the January in Q1. The real question is like, how to think about Q2 from here, both U.S. and worldwide TAVR? You know, how much of a step up we should expect in Q2 TAVR sales or growth rates, or just any color on what to expect for Q2 TAVR.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Okay. Thanks, Travis. I appreciate that. Could you replete your question about the Q1 growth so I make sure we get it right?

[Travis Steed, Managing Director, Equity Research and Medical Technology at Bank of America]

Yeah, of course. January, if you normalize the January catch up, if you will, if January looks more normal, did the U.S. TAVR still grow double digits or was it high single digits?

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Well, again, you know, just to try to expand, we typically see pretty fairly extreme seasonality in January, where it's our worst month of the quarter. We just didn't see as much extremism, January was by no means our strongest month. We continue to see a ramp in a quarter. It's just February and March were pretty much in line with our expectations, where January was stronger, but it wasn't like it was our strongest month. You know, I hope that gives more context. I think what we're seeing is the gradual improvement in staffing, and I think what we've tried to build into our guidance is, you know, we took up the bottom of our range because we thought we had a strong Q1.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

You know, it's kind of in our expectations now to be in that 10-12 range globally.

[Scott Ullem, CFO at Edwards Lifesciences]

Yeah. Travis, it's Scott. I'll just add to that. You know, our guidance at the midpoint for Q1 was around 9% growth. That was the $1.41 billion. We beat that by $50 million. Almost half of that was surgical. You know, it probably would have rounded to low double digits, something like that, if we were to normalize January. We're getting pretty precise at this point, trying to isolate every single month of the quarter.

[Travis Steed, Managing Director, Equity Research and Medical Technology at Bank of America]

Yeah. That's helpful. Keith, I guess the next question would be on the RESILIA rollout, you know, in terms of where you're at in penetration there. Then, you know, as you move into 2024, how you're thinking about some of the competitive launches in the US.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

You know, we're very pleased with how the S3UR rollout has gone. You know, we're really following in the footsteps of our, of our surgical franchise. You know, RESILIA, which is on INSPIRIS and now on MITRIS RESILIA, has, you know, become extremely popular with surgeons. So we get to follow the legacy that they've really started for us. We've seen, you know, really positive impact from S3UR, and we expect by the end of the year that that's going to be our leading platform in both the U.S. and Europe. You know, remember, we went for a list price increase with that, which, you know, is never easy to do.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

You know, we've been pretty pleased with how that's gone so far, and I think that just shows that physicians respect and appreciate the value that RESILIA brings to the platform. We're very encouraged with how the launch has gone to date. We'll continue to roll it out through the rest of the year, but we do expect it to be our leading platform. You know, I think you had a follow-up question on competitive launches. Is that correct?

[Travis Steed, Managing Director, Equity Research and Medical Technology at Bank of America]

That's correct, yes.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

You know, I mean, you know, competitive launches have been going on for a long time. You know, if we look at Europe, there's a whole complement of products out there. You know, outside of the number one and number two, all of the competitors command about, probably around 15% of the market, and that's been fairly stable. I think it's, for us, it's more about us continuing to innovate and rolling out our leading platforms, than it is about anything else.

[Travis Steed, Managing Director, Equity Research and Medical Technology at Bank of America]

Okay, great. congrats on a better quarter.

[Operator]

Our next question comes from Danielle Antalffy with UBS. Please state your question.

[Danielle Antalffy, Senior Equity Research Analyst and U.S MedTech at UBS]

Hey, good afternoon, everyone. Thanks so much for taking the question. Mike, it may sound like a broken record over here, but it's the end of an era and you definitely will be missed. It's been such a pleasure, being on this journey with you as you have such a meaningful impact on so many patients' lives. Thanks for letting us share that with you. I guess my first question is on the TAVR growth guidance for the year. If you look at from a comp perspective, I mean, Q1 is a tough comp. You guys put up 11% constant currency growth. I guess I get that we had, you know, some sort of backlog work down in January.

[Danielle Antalffy, Senior Equity Research Analyst and U.S MedTech at UBS]

I guess my question is, why not a little bit more aggressive on the TAVR growth guidance given the strong Q1 print? Is there anything to consider as it relates to moving through the quarters? You know, comps actually get easier as we move through the year. Just wondering if you could comment on that. I have one quick follow-up.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Thanks so much for your nice comment, Danielle. It has been a pleasure for me. Why don't I turn this over to Scott to go through your question?

[Scott Ullem, CFO at Edwards Lifesciences]

Yeah. I mean, the short answer is we did increase the bottom of our range. We're expecting 10 to 12%, not 9 to 12%. It's not a huge move, but it does indicate that we had a nice January and we're still positive on the rest of the year. You know, at this point, it's premature to start tinkering any more than that with guidance. We think this is the right modeling assumption for us in that 10 to 12% range for TAVR.

[Danielle Antalffy, Senior Equity Research Analyst and U.S MedTech at UBS]

Okay. That's fair. I think historically, you guys don't tend to raise guidance very aggressively after the Q1, so that's fair. Quick question, for on the TMTT side of things. I know it's very early in the U.S. on PASCAL launching, but Bernard, just curious what you're seeing as it relates to market growth there and how much you're seeing that market recover. Again, I know you guys are so early, so not sure what you can say, but usually second entrant comes to market and markets accelerate in MedTech. Just wondering if we're getting any signs on what market growth could look like going forward there. Thanks so much.

[Bernard Zovighian, President at Edwards Lifesciences]

Yeah, no, that's a fair question. You know, indeed, you know, we are pleased about, you know, Q1. We have seen some positive signs that, you know, the market is recovering. I'm sure you remember that the mitral market, you know, during COVID, you know, was not, you know, growing, you know, as expected. In Q1, you know, we saw that the market was growing again. Again, you know, we are, you know, if you think about it, of the U.S., you know, we are not, you know, the share leader, correct? You know, we look at the market, we see a good sign that it is recovering, and we are very pleased about, you know, the introduction of our technologies. You know, the customers are reacting, you know, very well, you know, to PASCAL Precision.

[Bernard Zovighian, President at Edwards Lifesciences]

They see, you know, the differentiated, you know, benefit. you know, we feel good about, you know, the impact, you know, we can have here, you know, to obviously the many patients in need. Thank you.

[Danielle Antalffy, Senior Equity Research Analyst and U.S MedTech at UBS]

Thank you.

[Operator]

Thank you. Our next question comes from Richard Newitter with Truist. Please state your question.

[Richard Newitter, Managing Director at Truist Securities]

Hi. Thanks for taking the questions. Two, two for me. I guess the first. I know we've talked about hospital staffing. Is that just a catch-all phrase? I know in the past you said it's the whole workup and everything from getting the patient diagnosed to the entire kind of workup to referral to getting the patient there. With respect to the improvement that we saw from late last year, just wanted to get a sense for, you know, what specifically kinda are you referring to when you say hospital staffing is improving? Kinda the second question on that, just I think you talked about in the past a very varied kinda level of recovery across your install base.

[Richard Newitter, Managing Director at Truist Securities]

Any comments you can provide, you know, as to the or characterize kinda where and which types of implanting centers are recovering and at what rates, or was it just more uniform across the entire install base at this point? Thanks.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Yeah. Maybe I'll start, I'll take your second question first, cause it might take 2 of us to answer your first question. I think, you know, we saw the growth being driven more by larger centers than smaller centers during this quarter. I think this is sort of a trend that we've seen throughout COVID. I think when COVID has spiked, we've seen people stay closer to home. We've seen probably more growth in the smaller centers. As COVID wanes, we see people traveling maybe a little bit further and going to the larger centers. I think this is consistent with trends we've seen over the last year and a half or so. In terms of when we talk about staffing, you know, it depends when you're talking about our surgical business or our TAVR business.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

When you talk about the surgical business, it's primarily OR staff and ICU nurses and sort of the post-care initiative. When you're talking about TAVR, there's a lot more that goes into it because there's a lot more upfront workout. It requires staffing improvements for CT and for angio and sort of the broader cath lab, and we don't need it so much on the aftercare side. I think we've seen just generally, and I think hospitals have been working at this for, you know, probably better than a year now, trying to get people trained and get people in. Remember, you don't just hire a person, and then they're effective from day one. They have to go through a training process with that hospital.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

I would say, generally speaking, you know, you can look at the quarter and say, we saw staffing get better, and that's reflected in our, I think, our broad performance. We certainly saw it in TAVR, and we certainly saw it with surgical. It needs to continue to improve over the rest of the year. It's not like we're done yet. I think hospitals continue to work hard at this. Maybe I'll ask Naveen to comment on the TMTT side, what he saw.

[Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies at Edwards Lifesciences]

Yeah. I mean, I think it's a similar kind of comment that you made there. Probably not all the differences where there's a lot of people, a lot of different steps that go into a TMTT case. Again, as Bernard said, we are still a minority player here, but we continue to be optimistic that all those different parts of the full patient pathway are continuing to get a little bit better in staffing.

[Operator]

Thank you. Our next question comes from Matt Miksic with Barclays. Please state your question. Matt Miksic, your line is open. Please go ahead, unmute yourself.

[Matt Miksic, Managing Director and Senior Equity Research Analyst at Barclays]

Hi. Thanks so much. Thanks for fitting me in. A couple of just quick follow-ups here. One, on, you know, the color that you gave on RESILIA. I appreciate the, you know, the target of kind of getting that to the majority of, you know, the U.S. revenues by the end of the year on the TAVR platform, if I understood that correctly. You know, just broadly, you know, I know you've had a policy of maintaining this kind of set price across the, you know, across your TAVR platform, which as, even as you sort of moved it up through the generations of products. You know, that is a little bit unusual.

[Matt Miksic, Managing Director and Senior Equity Research Analyst at Barclays]

you know, most companies in med devices do tend to sort of contract and rebate and, you know, make adjustments to pricing across, like particularly in the U.S., given the way DRGs work and different hospitals, non-teaching hospitals get different payments than urban hospitals or hospitals here in New York.

[Matt Miksic, Managing Director and Senior Equity Research Analyst at Barclays]

I'm just wondering if this, you know, having RESILIA in the, in the portfolio at a premium, having S3, call it standard or, however you're referring to it in the portfolio, if you're giving any thought to, into sort of, you know, joining, you know, the rest of the group to sort of, help some of the smaller centers maybe be able to, you know, afford to do TAVR when, you know, paying for $30,000 or $32,000 for a valve just might be out of reach given, especially given the way staffing costs have gone up. I'd love to get your thoughts on that. I have one quick follow-up.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Sure. Well, we haven't changed really our pricing philosophy. We do try to be good partners with our hospital, and we did take a list price increase, but that's the first price increase we've rolled out really since launch. This is the first time that we've gone through our price increase. The other thing that we've always done is we've always rebated based on volume. So large volume centers obviously get discounted out, but we try to treat everybody fairly across the country. By having that standardized price, you know, that's the way that we try to do that. Then we try to recognize different centers' performance based on their volume, and that's been our philosophy throughout. I don't see us changing that philosophy. I think that's worked really well for us.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

We do try to work with hospitals and bring a lot of value. You know, we still have people supporting virtually every case in the U.S. and the majority of cases in Europe and all, you know, virtually all the cases in Japan. That's just sort of the model that we have. You know, the other thing we try to do is partner with hospitals and run our things like our Benchmark program to help them be more efficient. If you look at all the data that's been produced for our clinical trials, this is an incredibly cost-effective procedure with almost, you know, unprecedented benefits when you look at mortality and you look at some of the other things that it's done.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

We feel, you know, the prices that we have are more than fair for the value creation that we have.

[Matt Miksic, Managing Director and Senior Equity Research Analyst at Barclays]

That's fair. Then I guess on the, you know, as centers have gotten more active, and staffing Pressure does start to ease a little bit, you know, one of the pressure points has been around, you know, the extensive imaging and sort of additional sort of staffing, specialized staffing that's required for some of these, you know, mitral procedures, TR procedures. Any thoughts on, you know, along the same lines of facilitating, you know, broader utilization and adoption through partnering with hospitals? Anything that you can see yourself doing to sort of help facilitate those procedures given sort of the specialized staffing needs behind them?

[Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies at Edwards Lifesciences]

Yeah, this is Daveen. I mean, obviously, I think we're always gonna look to partner with hospitals. We're gonna look to try to help them across the board. You know, we're obviously in our very early days. We try to provide excellent training, top-notch training to get these patients as efficiently and effectively treated, getting through the recovery process, et cetera. I think our teams, you know, since we're a little bit more into infancy, we don't have the same kind of detailed programs that kind of Larry has, like Benchmark, et cetera, and the TAVR program. We're working really hard to try to, on the tier side as well, start creating those as we start getting more scale and being a great partner. I mean, that's a part of it.

[Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies at Edwards Lifesciences]

We all together just wanna help more patients together in a cost-effective manner. That's kinda how we think about it over the long term.

[Matt Miksic, Managing Director and Senior Equity Research Analyst at Barclays]

That's fair. Mike, I have to say it's been something to behold, you know, the culture, the accomplishments of the company. Congrats, and you will be missed. Thanks so much.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

Thank you, Matt.

[Operator]

Our next question comes from Cecilia Furlong with Morgan Stanley. Please state your question.

[Cecilia Furlong, VP and Equity Research at Morgan Stanley]

Good afternoon, and thank you for taking the questions. I wanted to return to Japan, some of the comments that you called out just around competitive trialing, how you would frame Edwards' growth there versus the market, understanding you're still seeing recovery in the region. Looking forward to really what's reflected in guidance from Japan recovery at this point, as well as Ultra RESILIA rollout.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Cecilia, this is Mike. If, can you, just zero in a little bit on the first part of that question again? I wanna make sure that I understand it.

[Cecilia Furlong, VP and Equity Research at Morgan Stanley]

You talked a bit about competitive dynamics you were seeing in the region, I believe. Just curious if you could?

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Yeah.

[Cecilia Furlong, VP and Equity Research at Morgan Stanley]

Provide a little more detail, just how that impacted your growth versus market growth.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

We had 2 of our, the 2 other competitors in Japan both rolled out new products. It's not uncommon when new products roll out that we see physicians trying those products and understanding how they work and what the features and benefits are. I think we've seen this throughout our history, usually that ends up being largely transient. You know, we're excited because we're just getting ready to do our biggest launch that we've done in Japan since our initial launch, which is S3UR. We're excited about that. I think broader what's in the guidance for Japan is we're expecting a broader COVID recovery. You know, COVID was still pretty big in Q1, and we're looking for a broader COVID recovery and continued uptake.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

It got better during the quarter, but we're looking for it to continue to improve throughout the year, and that's what's in our guidance.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Yeah. The only thing I'd add to it is Japan has been a pretty strong grower for us over the last couple of years, and then really slowed down when COVID hit in the H2 of last year. We're looking forward here, especially with COVID waning and the launch of SAPIEN Ultra RESILIA, that it's really gonna make a difference starting in Q2 and moving forward.

[Operator]

Thank you. Ladies and gentlemen, we have time for one final question before turning it over to management for some closing remarks. That question comes from Josh Jennings with TD Cowen. Please state your question.

[Josh Jennings, Managing Director and Senior Analyst at TD Cowen]

Hi. Good evening. Thanks for taking the questions. Mike, really appreciate all your insights on these 92-minute earnings calls, as I haven't been on half of them. Question really I made for Larry, we're getting questions on the TAVR and TAVR replacement cycle. I'm wondering if you could just size up the percentage of the market currently that TAVR in TAVR represents, and I imagine it becomes a bigger, more meaningful piece as you get out to 2028 and that $10 billion market that you guys have forecasted. When should we start to think about TAVR in TAVR contributing more meaningfully to market growth? Thanks for taking the question.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

No, it's a good question. I don't know that I can quantify it for you today, but, you know, we do TAVR in TAVR, but we also do TAVR in SAVR, you know, for patients that have gotten tissue valves. I think, you know, one of the things that TAVR enabled with its development was the opportunity for more patients to get tissue valves. Even on the surgical side of our business, younger patients can get tissue valves now because physicians and patients know if they outlive their valve, that there is a catheter-based option for them down the road. Certainly in time, TAVR and SAVR will continue to grow and TAVR in TAVR will become a bigger part.

[Larry Wood, Group President, TAVR and Surgical Structural Heart at Edwards Lifesciences]

You know, TAVR valves now are just probably starting to get to the cusp of reaching that age that'll start to be more meaningful, but it will be something that grows in time, certainly as we look at the period that you discussed, which is through 2028.

[Josh Jennings, Managing Director and Senior Analyst at TD Cowen]

Appreciate it.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Okay. Well, this is Mike. I'll make some closing comments. First of all, thank you so much for many of your warm remarks. It's been a special honor and a privilege to lead our team at Edwards Lifesciences for more than 20 years. I really wanna thank our employees who have made immense contributions to advancing care and helping millions of patients around the world. I'm particularly proud of our Patients First culture and our commitment to innovation and excellence. Our success is really a testament to the talented and passionate executive leadership team and our employees worldwide, I believe we are well-positioned for an even brighter future. It's truly been my greatest honor to be Edwards' CEO, I look forward to supporting Edwards as I transition to my new role with the board of directors.

[Mike Mussallem, Chairman and CEO at Edwards Lifesciences]

Thanks a lot for your continued interest in Edwards, and the team will welcome any additional questions after the call.

[Operator]

Thank you. With that, we conclude today's conference. All parties may disconnect. Have a great day.

Participants

Executives

• Bernard Zovighian, President
• Daveen Chopra, Global Leader, Transcatheter Mitral and Tricuspid Therapies
• Larry Wood, Group President, TAVR and Surgical Structural Heart
• Mark Wilterding, Senior Vice President, Investor Relations and Treasurer
• Mike Mussallem, Chairman and CEO
• Scott Ullem, CFO

Analysts

• Cecilia Furlong, VP and Equity Research at Morgan Stanley
• Danielle Antalffy, Senior Equity Research Analyst and U.S MedTech at UBS
• Joanne Wuensch, Managing Director and Head of U.S. Healthcare Research at Citi
• Josh Jennings, Managing Director and Senior Analyst at TD Cowen
• Larry Biegelsen, Managing Director and Senior Medical Device Equity Research Analyst at Wells Fargo
• Matt Miksic, Managing Director and Senior Equity Research Analyst at Barclays
• Richard Newitter, Managing Director at Truist Securities
• Robbie Marcus, Managing Director and Senior Analyst at J.P. Morgan
• Travis Steed, Managing Director, Equity Research and Medical Technology at Bank of America
• Vijay Kumar, Senior Managing Director at Evercore ISI