Edwards Lifesciences Presentation
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- Edwards Lifesciences Patient-Focused Innovations for Structural Heart Disease and Critical Care Monitoring
- Use of Non-GAAP Financial Measures Unless otherwise indicated, all figures are GAAP financial measures The Company uses the term “underlying” when referring to non-GAAP sales information, which excludes discontinued and acquired products, foreign exchange fluctuations, and the THVT sales return reserves and “excluding special items” and “adjusted net income” and “adjusted EPS” to also exclude gains and losses from special items such as significant investments, litigation, amortization and business development transactions. A reconciliation of non-GAAP historical financial measures to the most comparable GAAP measure is available at www.edwards.com The Company is not able to provide a reconciliation of future projections that exclude special items to expected reported results due to the unknown effect, timing and potential significance of special charges or gains, and management’s inability to forecast charges associated with future transactions and initiatives 29/16/16 http://www.edwards.com/
- Cautionary Statement Presentations and comments made today by the management of Edwards Lifesciences Corporation will include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements can sometimes be identified by the use of words such as “may,” “will,” “should,” “anticipate,” “believe,” “plan,” “project,” “estimate,” “expect,” “intend,” “guidance,” “outlook,” “optimistic,” “aspire,” “confident” or other forms of these words or similar expressions. These may include, but are not limited to, the company’s financial goals or expectations for 2016 and beyond; expectations for new products, therapy adoption and the global TAVR opportunity; the timing and results of clinical trials and regulatory approvals; and strategies and opportunities for growth. Forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though they are inherently uncertain and difficult to predict. Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If the Company does update or correct one or more of these statements, investors and others should not conclude that the company will make additional updates or corrections. Forward-looking statements involve risks and uncertainties that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements. Factors that could cause actual results or experience to differ materially from that expressed or implied by the forward looking statements are detailed in the company's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2015. These filings, along with important safety information about our products, may be found at edwards.com. 39/16/16
- Driven by a Passion to Help Patients Edwards partners with clinicians to develop innovative technologies in the areas of structural heart disease and critical care monitoring that enable them to save and enhance lives. 49/16/16
- Global Leadership Over 95% of sales from products in #1 global positions Serving patients in more than 100 countries worldwide 5 U.S. Europe Japan ROW 2010 2015 Transcatheter Heart Valve Therapy Surgical Heart Valve Therapy Critical CareSurgical Heart Valve Therapy Critical Care THVT 9/16/16
- Edwards’ Strategy 6 • Breakthrough therapies with superior clinical and economic evidence • Active product portfolio management Focused Innovation • Pioneering legacy of establishing standards of care • Trusted relationships with clinicians, payors and regulators Industry LeadershipPatient-Centric • Fulfilling unmet needs of structural heart and critically ill patients • Transforming care drives enduring value creation Create Value with Therapies that Transform Patient Care 9/16/16
- Industry Leadership 9/16/16 7
- Edwards is Well Positioned to Maintain Global TAVR Leadership A beating heart alternative to traditional surgery for certain aortic stenosis patients An increasing body of evidence is changing the treatment of aortic stenosis – SAPIEN 3 has delivered superior clinical outcomes Continuing to build robust clinical evidence to expand patient access Investing to be the technology leader 89/16/16
- Global TAVR Opportunity Could Exceed $5B in 2021 9 Observations For Severe, Symptomatic AS Patients • Age plays a significant role in the diagnosis and treatment of aortic stenosis • Additional risk factors not captured in STS score become more important with patient age • A safe interventional procedure has the potential to lift treatment rates in older age group (1) Nkomo 2006, Iivanainen 1996, Aronow 1991, Bach 2007, Freed 2010, Iung 2007, Pellikka 2005, Brown 2008, Thourani 2015, internal estimates. - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 50 55 60 65 70 75 80 85 90 95 100 SAVR TAVR Untreated (estimated) Age P a ti e n ts 2015 Severe Symptomatic AS Patients in the U.S.1 9/16/16
- There are Many Patients Who May Benefit From TAVR 10 Moderate and Severe Aortic Stenosis(1) (AS) ~1.6 M Severe AS(1) ~580,000 Severe AS, Symptomatic(2) ~290,000 ~1/2 Symptomatic (1) Nkomo 2006, Iivanainen 1996, Aronow 1991, Bach 2007 (2) Internal estimates, Freed 2010, Iung 2007, Pellikka 2005; Brown 2008 (n=622) ~260,000~1/2 Asymptomatic Severe AS, Asymptomatic(2) ~290,000 2015 Total U.S. Population High Risk Intermediate Risk Low Risk Asymptomatic 9/16/16
- Positive Outcomes and Expanded Indications Should Encourage Untreated Patients to Seek Therapy 11 Low risk patients: STS
- Product Enhancements, New Technologies and Expanded Indications Strengthen Leadership The Edwards SAPIEN 3 Ultra System – On-balloon delivery system – Next-generation sheath – CE Mark approval expected in 2H 2017 Pulmonic indication for SAPIEN XT enables treatment of adult and pediatric patients CENTERA design expected to be best-in-class self-expanding platform; CE Mark anticipated in 2H 2017 Pursuing indication expansion utilizing current platforms Next generation valve platforms under development 12 Edwards SAPIEN 3 Ultra System The Edwards SAPIEN 3 Ultra System and CENTERA are not approved for sale. 9/16/16
- The Leader in a ~$1.8B Global Surgical Heart Valve Segment Differentiated, long-term evidence and highly trusted brand – More long-term clinical publications than any other surgical valve Surgical AVR expected to continue to be an important option for younger patients and complex procedures Innovation planned beyond aortics, expanding treatment options in other valve positions Strategy is to differentiate surgical offerings with superior clinical and health economic evidence 139/16/16
- 14 (1) Flameng W, et al. J Thorac Cardiovasc Surg. 2015;149:340–45INSPIRIS not approved for sale. EDWARDS INTUITY Elite – Facilitates MIS AVR – Trusted platform, rapid deployment, and smaller incision – Now approved in the U.S. INSPIRIS – RESILIA tissue has demonstrated reduced calcification and improved hemodynamics in rigorous preclinical studies1 – VFit technology is designed for potential future valve-in-valve procedures – EU and U.S. launches anticipated in 2017 INTUITY and INSPIRIS Should Extend Our Leadership in Surgical Valves 9/16/16
- Edwards’ Unmatched Portfolio of Market Leading Hemodynamic Products is a Competitive Advantage 15 ClearSight Finger Cuff Swan-Ganz Pulmonary Artery Catheter FloTrac Sensor TruWave Transducers Core Hemodynamic Products Enhanced Surgical Recovery Products EV1000 Clinical Platform 9/16/16
- Enhanced Surgical Recovery is an Underpenetrated Global Opportunity Enhanced surgical recovery is focused on reducing complications and length of stay ClearSight noninvasive sensor expands benefits of ESR to a broader patient population Innovating to drive future ESR growth – Next generation hemodynamic monitor – Integrated semi-closed loop system for standardized management of patient fluid levels 16 Size of ESR Opportunity Unpenetrated $550M Penetrated $150M Large Opportunity Exists to Reduce Complications from Surgery 9/16/16
- Innovation Fuels Long-Term Growth 9/16/16 17
- Edwards is Investing Aggressively to Lead Transformational Structural Heart Therapies 18 CardiAQ-Edwards Mitral Replacement FORMA Tricuspid Repair HF Programs LV Restoration CardioKinetix LV Reduction Harpoon Degenerative Mitral Repair FMR Program Functional Mitral Repair Selected Programs Description A d ja c e n t V a lv e s H e a rt F a il u re 9/16/16 Note: Harpoon and CardioKinetix are external programs.
- Combined CardiAQ-Edwards Platform Can Drive Leadership Focus on building clinical experience in TMVR CardiAQ platform complements the FORTIS program – One valve, multiple delivery systems – Unique anchoring mechanism Early patient experience is encouraging; more study needed Planned clinical timelines: – U.S. EFS underway; CE Mark trial to begin soon* Near-term product additions: – Lower valve profile, additional valve sizes, delivery system improvements, Edwards tissue 19 The CardiAQ-Edwards valve is not available for sale. *Guidance as of July 26, 2016 9/16/16
- Other Structural Heart Initiatives Focused on Significant Unmet Patient Needs 20 FORMA Harpoon CardioKinetix Implantable spacer that reduces regurgitant tricuspid flow 1.6M U.S. patients suffer from moderate-to-severe TR1 Early human clinical experience is promising U.S. EFS underway Transcatheter approach to chordal repair 1.6M U.S. patients 45-85 years old2 Minority investment and option to acquire Harpoon Medical CE Mark trial enrollment underway Treatment for left ventricular dysfunction 1.4M U.S. Class III patients underserved3 Minority investment and option to acquire CardioKinetix U.S. pivotal trial 50% enrolled; CE Mark as of 2011 (1) Stuge and Liddicoat. Emerging opportunities for cardiac surgeons within structural heart disease. J Thorac Cardio Surg 2006;132:1258-1261 (2) Singh et al., Prevalence and Clinical Determinants of MR…(Framingham), Am J Cardiology 1999 (3) IMPROVE-HF Registry, Nursing Home Survey 2004, NHANES 2009-12, CVRG 2015. FORMA, Harpoon and CardioKinetix are not available for sale. 9/16/16
- Financial Highlights 9/16/16 21
- Edwards is an Attractive Investment Strong organic topline growth Disciplined SG&A expense control Successful long-term track record Shareholder-friendly governance profile Pay-for-performance philosophy Robust free cash flow Commitment to returning capital to shareholders 22 Net Sales ($ in billions and underlying growth rates) $1.90 $2.05 $2.32 $2.49 High End $2.70 - 3.00 2012 2013 2014 2015 2016E 11% 13% 17% ~18% Underlying figures exclude impacts from foreign currency and special items. 9/16/16 Guidance as of 7/26/16. Not an update.
- Q2 Results Add to Strong First Half of 2016 Sales grew 23% (non-GAAP +21%) – THVT sales grew 49% (non-GAAP +45%) EPS was $0.58, up 14% (adjusted EPS $0.76, +33%) 2016 sales guidance raised to high end of $2.7 - $3.0 billion 2016 THVT sales guidance raised to $1.5 - $1.7 billion based on strong therapy adoption 2016 Adjusted EPS guidance increased to $2.78 - $2.88 23 $0.57 $0.76 2Q15 2Q16 +33% Total Underlying Sales (000s) Adjusted EPS $627.0 $759.3 2Q15 2Q16 +21% Underlying/adjusted figures exclude impacts from foreign currency and special items. 9/16/16 Guidance as of 7/26/16. Not an update.
- 2016 Non-GAAP Financial Goals 24 ($ in millions, except EPS) 2016 Guidance Total Net Sales High End of $2,700 - $3,000 Gross Profit Margin 73% - 74% Free Cash Flow $500- $600 EPS $2.78 - $2.88 9/16/16 Guidance as of 7/26/16. Not an update.
- Capital Allocation Priorities 259/16/16 Fund strategic external investments: – Selective acquisitions, likely smaller in size – Minority investments and options – Intellectual property Disciplined capital expenditures to support growth Share repurchase is the preferred method for returning capital to investors Management is committed to disciplined use of cash
- Edwards is Poised for Long-Term Success Patient-centric culture Leading edge research and development Industry leading competitive positions Trusted relationships with clinicians, regulators and payors globally Strong geographic diversification Nimble, adaptive business model Focused strategy to deliver patient benefit and shareholder value 269/16/16
- Non-GAAP Reconciliations 9/16/16 28
- EDWARDS LIFESCIENCES CORPORATION Non-GAAP Financial Information Management considers free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by business operations, after deducting payments for capital expenditures, which cash can then be used for strategic opportunities or other business purposes including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. A reconciliation of non-GAAP historical financial measures to the most comparable GAAP measure is provided in the tables below. Intellectual Property Litigation Expenses - The Company incurred intellectual property litigation expenses of $9.1 million and $1.0 million in the second quarter of 2016 and 2015, respectively. Foreign Exchange - Fluctuations in exchange rates impact the comparative results and sales growth rates of the Company's underlying business. Management believes that excluding the impact of foreign exchange rate fluctuations from its sales growth provides investors a more meaningful comparison to historical financial results. The impact of foreign exchange rate fluctuations has been detailed in the "Unaudited Reconciliation of Sales by Product Group and Region." Purchased In-process Research and Development - The Company recorded a $34.5 million charge in the second quarter of 2016 related to the acquisition of technology for use in its transcatheter heart valve programs. Amortization of Intellectual Property - The Company recorded amortization expense of $1.9 million and $1.7 million in the second quarter of 2016 and 2015, respectively, related to intellectual property. To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses non-GAAP historical financial measures. The Company uses the term “underlying” when referring to non-GAAP sales information, which excludes foreign exchange fluctuations, adjustments for discontinued and acquired products, and sales return reserves associated with transcatheter heart valve therapy ("THVT") product upgrades; and “adjusted” to also exclude amortization of intellectual property, gains and losses from significant investments, impairments, litigation, and business development transactions. Guidance for sales and sales growth rates is provided on an "underlying basis," and projections for diluted earnings per share, net income and growth, gross profit margin, taxes, and free cash flow are also provided on a non-GAAP basis as adjusted for the items identified below due to the inherent difficulty in forecasting such items. The Company is not able to provide a reconciliation of the non- GAAP guidance to comparable GAAP measures due to the unknown effect, timing, and potential significance of special charges or gains, and management's inability to forecast charges associated with future transactions and initiatives. Management does not consider the excluded items or adjustments as part of its day-to-day business or reflective of the core operational activities of the Company as they result from transactions outside the ordinary course of business. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results, and evaluating current performance. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP and reflect an additional way of viewing aspects of the Company's operations by investors that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting the Company's business. The items described below are adjustments to the GAAP financial results in the reconciliations that follow: THVT Sales Return Reserve and Related Costs - In the second quarter of 2015, the Company recorded a net sales return reserve and related costs, primarily related to inventory reserves, of $15.9 million related to estimated THVT product returns expected upon introduction of next-generation THVT products.
- EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of GAAP to Non-GAAP Financial Information RECONCILIATION OF GAAP TO ADJUSTED NET INCOME (in millions, except per share data) 2016 2015 GAAP Net Income 126.6$ 112.7$ Growth Rate % 12.3% Non-GAAP adjustments: (A) THVT sales returns reserve and related costs - 15.9 Intellectual property litigation expenses 9.1 1.0 Amortization of intellectual property 1.9 1.7 Purchased in-process research and development 34.5 - Provision for income taxes Tax effect on reconciling items (B) (7.5) (5.6) Non-GAAP Net Income 164.6$ 125.7$ Growth Rate % 30.9% RECONCILIATION OF GAAP TO ADJUSTED DILUTED EARNINGS PER SHARE GAAP Diluted Earnings Per Share (C) 0.58$ 0.51$ Growth Rate % 13.7% Non-GAAP adjustments: (A), (D) THVT sales returns reserve and related costs - 0.05 Intellectual property litigation expenses 0.03 - Amortization of intellectual property 0.01 0.01 Purchased in-process research and development 0.14 - Adjusted Diluted Earnings Per Share 0.76$ 0.57$ Growth Rate % 33.3% Note: Numbers may not calculate due to rounding. (D) All amounts are tax effected, calculated based upon the impact of the relevant tax jurisdictions' statutory tax rates on the Company's estimated annual effective tax rate, or discrete rate in the quarter, as applicable. Three Months Ended June 30, (A) See description of non-GAAP adjustments on the Non-GAAP Financial Information page. (B) The tax effect on non-GAAP adjustments is calculated based upon the impact of the relevant tax jurisdictions' statutory tax rates on the Company's estimated annual effective tax rate, or discrete rate in the quarter, as applicable. (C) All per share amounts for the prior years were adjusted for the December 11, 2015 two-for-one stock split.
- EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of Sales by Product Group and Region ($ in millions) Sales by Product Group (YTD) 2Q 2016 2Q 2015 Change GAAP Growth Rate* Sales Return Reserve 2Q 2016 Underlying Sales Sales Return Reserve FX Impact 2Q 2015 Underlying Sales Underlying Growth Rate * Transcatheter Heart Valve Therapy 418.6$ 281.4$ 137.2$ 48.7% -$ 418.6$ 5.0$ 2.0$ 288.4$ 45.1% Surgical Heart Valve Therapy 198.7 204.0 (5.3) (2.6%) - 198.7 - 1.5 205.5 (3.3%) Critical Care 142.0 131.4 10.6 8.0% - 142.0 - 1.7 133.1 6.7% Total Sales 759.3$ 616.8$ 142.5$ 23.1% -$ 759.3$ 5.0$ 5.2$ 627.0$ 21.1% * Numbers may not calculate due to rounding. 2015 Adjusted2016 Adjusted
- EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of Sales by Product Group ($ in millions) Sales by Product Group (YTD) 2015 2014 Change GAAP Growth Rate* Sales Returns Reserve 2014 Underlying Sales Sales Returns Reserve FX Impact 2013 Underlying Sales Underlying Growth Rate * Transcatheter Heart Valves 1,180.3$ 943.6$ 236.7$ 25.1% 1.7$ 1,182.0$ (14.1)$ (71.2)$ 858.3$ 37.7% Surgical Heart Valve Therapy 785.0 826.1 (41.1) (5.0%) - 785.0 - (59.7) 766.4 2.5% Critical Care 528.4 553.2 (24.8) (4.5%) - 528.4 - (41.3) 511.9 3.2% Total Sales 2,493.7$ 2,322.9$ 170.8$ 7.4% 1.7$ 2,495.4$ (14.1)$ (172.2)$ 2,136.6$ 16.8% * Numbers may not calculate due to rounding. 2015 Adjusted 2014 Adjusted
- EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of Sales by Product Group ($ in millions) Sales by Product Group (YTD) 2014 2013 Change GAAP Growth Rate* Sales Returns Reserve 2014 Underlying Sales Sales Returns Reserve FX Impact 2013 Underlying Sales Underlying Growth Rate * Transcatheter Heart Valves 943.6$ 707.7$ 235.9$ 33.3% (14.1)$ 929.5$ 14.1$ (0.5)$ 721.3$ 28.9% Surgical Heart Valve Therapy 826.1 801.2 24.9 3.1% - 826.1 - (10.5) 790.7 4.5% Critical Care 553.2 536.6 16.6 3.1% - 553.2 - (12.0) 524.6 5.5% Total Sales 2,322.9$ 2,045.5$ 277.4$ 13.6% (14.1)$ 2,308.8$ 14.1$ (23.0)$ 2,036.6$ 13.3% * Numbers may not calculate due to rounding. 2014 Adjusted 2013 Adjusted
- EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of Sales by Product Group ($ in millions) Sales by Product Group (YTD) 2013 2012 Change GAAP Growth Rate* Sales Returns Reserve 2013 Underlying Sales FX Impact 2012 Underlying Sales Underlying Growth Rate * Transcatheter Heart Valves 707.7$ 552.1$ 155.6$ 28.2% 14.1$ 721.8$ 5.2$ 557.3$ 29.5% Surgical Heart Valve Therapy 801.2 787.5 13.7 1.7% - 801.2 (20.2) 767.3 0.0 Critical Care 536.6 560.0 (23.4) (4.2%) - 536.6 (28.9) 531.1 1.0% Total Sales 2,045.5$ 1,899.6$ 145.9$ 7.7% 14.1$ 2,059.6$ (43.9)$ 1,855.7$ 10.8% * Numbers may not calculate due to rounding. 2013 Adjusted 2012 Adjusted