Edwards Lifesciences Corporation CEO Discusses Q2 2012 Results - Earnings Call Transcript

Edwards Lifesciences Corporation (EW)

Q2 2012 Earnings Call

July 24, 2012 5 p.m. ET


David Erickson – Vice President, Investor-Relations

Michael Mussallem – Chief Executive Officer

Thomas Abate – Chief Financial Officer


Jason Mills – Canaccord Genuity

Larry Biegelsen – Wells Fargo

Kristen Stewart – Deutsche Bank

Amit Bhalla – Citigroup

Michael Weinstein – JP Morgan

Bruce Nudell – Credit Suisse

Glenn Novarro – RBC Capital Markets

David Roman – Goldman Sachs

Tom Gunderson – Piper Jaffray

Raj Denhoy – Jefferies & Co

David Lewis – Morgan Stanley

Bob Hopkins – Bank of America

Spencer Nam – ThinkEquity



Greetings and welcome to the Edwards Lifesciences Corporation Second Quarter 2012 Earnings Conference Call. (Operator Instructions) As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, David Erickson, Vice President and Investor Relations. Thank you, Mr. Erickson, you may begin.

David Erickson

Welcome and thank you for joining us today. Just after the close of regular trading we released our second quarter 2012 financial results. During today’s call we’ll discuss the results included in the press release and the accompanying financial schedules and then use remaining time for Q&A.

Our presenters on today’s call are Mike Mussallem, Chairman and CEO and Tom Abate, CFO.

Before I turn the call over to Mike, I’d like to remind you that during today’s call we will be making forward-looking statements that are based on estimates, assumptions, and projections. These statements include, but aren’t limited to, our expectations regarding sales and sales growth, gross profit margin, net income growth, earnings per share, SG&A, R&D, taxes, free cash flow, diluted share outstanding and foreign currency impacts. These statements also include our current expectations for the timing, status and expected outcomes of our clinical trials, regulatory submissions and approvals and new product introductions as well as expectations regarding market growth and potential impacts of supply interruptions, economic conditions and competitive products.

These statements speak only as of the date on which they are made and we do not undertake any obligation to update them after today. Although we believe them to be reasonable these statements involve risks and uncertainties that could cause actual results to or experiences to differ materially from the forward-looking statements.

Information concerning factors that could cause these differences may be found in our press release, our annual report on Form 10-K for the year ended December 31, 2011 and our other SEC filings which are available on our website at Edwards.com.

Also a quick reminder that when we use the terms underlying, excluding the impact of foreign exchange and excluding special items, we are referring to non-GAAP financial measures. Otherwise we are referring to our GAAP results. Information about our use of non-GAAP measures is included in today’s press release.

Now I’ll turn the call over to Mike Mussallem. Mike?

Michael Mussallem

Thank you, David. Even in a challenging economic environment this quarter we reported strong growth in sales driven by the continued success of our US transcatheter heart valve launch. As the number of US safety and procedures grows rapidly we’re extremely pleased with the continued high procedural success rate being achieved.

During the quarter we also cleared two significant milestones, the favorable FDA panel evaluating safety and for high risk surgical patients and the issuance of the final NCD defining US reimbursement.

Turning to quarterly results, reported sales grew 12% to $482 million driven by the US launch of SAPIEN. Sales growth excluding the impact of foreign exchange was 16%. With the THV launch, US sales grew 37% and represent a growing proportion of our total sales. In the second quarter surgical heart valve therapy products group sales were $201 million which includes $29 million from Cardiac Surgery Systems.

Surgical heart valve sales of $172 million where down 3% or 1% on an underlying basis. The sales trend in the US was comparable to last quarter while sales growth outside the US declined. Globally our pricing remains solid. In the US a competitor’s product introduction last year continued to impact sales growth this quarter. We expect this impact to diminish in the second half of 2012 as we pass the anniversary of that product’s introduction.

In Europe the ongoing economic conditions in Southern Europe weighed more heavily on our results. In Japan, the ongoing conversion of customers to our newly approved Magna Mitral EASE valve was tempered by the recent approval of a competitor’s aortic valve. We expect these somewhat offsetting impacts to continue in Japan for the remainder of the year.

During the quarter we initiated a voluntary recall outside the US of specific lots of heart valves due to a problem with the package equipment in our European manufacturing facility. The majority of the effective products were still in our possession. We promptly communicated with customers and regulators and supply was not interrupted. And most importantly we are confident this did not impact patient safety. The disposition of the effective inventory resulted in a special charge to cost of goods this quarter. We do not anticipate any additional financial impact.

Turning to our cadence and foundation post approval studies of INTUITY, we are currently training centers and expect all of the centers to be enrolling in the fourth quarter. These studies are focused on generating data supporting the patient benefits and health economics of this new procedure compared to traditional open heart surgery. We are very pleased with the pace of enrollment of our TRITON trial, a CE Mark study of our next generation INTUITY system in Europe which features enhancements to both the delivery system and the valve. We continue to expect to complete enrollment this year.

We received a CE Mark in May for Magna EASE with GLX, our next generation tissue platform, and are continuing to gain clinical experience. GLX is a proprietary technology designed to provide additional protection for Bovine pericardial tissue by enhancing anti-calcification for improved durability, and ultimately could be applied to our surgical and transcatheter heart valve platforms.

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