Edwards Lifesciences Corporation (EW) Q2 2012 Earnings Call July 24, 2012 5 p.m. ET Executives David Erickson – Vice President, Investor-Relations Michael Mussallem – Chief Executive Officer Thomas Abate – Chief Financial Officer Analysts 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 Presentation Operator
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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.Read the rest of this transcript for free on seekingalpha.com