Edwards Lifesciences. The Leader in the Science of Heart Valves and Hemodynamic Monitoring

Transcription

1 Edwards Lifesciences The Leader in the Science of Heart Valves and Hemodynamic Monitoring

2 Use of Non-GAAP 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 THV sales return reserves, and excluding special items to also exclude gains and losses from special items such as significant investments, litigation, and business development transactions. A reconciliation of non-gaap historical financial measures to the most comparable GAAP measure is available at 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 8/12/15 2

3 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 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 2015 and beyond; expectations for new products, the timing and results of clinical trials and regulatory approvals, and opportunities for growth; expectations for industry growth; unanticipated effects of competitive dynamics, quality matters and litigation; and the impact of foreign exchange and special items on the company s results. 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, /12/15 3

4 The Global Leader in the Science of Heart Valves and Hemodynamic Monitoring Driven by a passion to help patients, the company 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. 8/12/15 4

5 Edwards Strategy is to Create Value with Therapies That Transform Patient Care 0 Patient- Centric Focus Focused Innovation Industry Leadership Fulfilling unmet needs of structural heart and critically ill patients Transforming care drives enduring value creation Breakthrough therapies with superior clinical and economic evidence Active product portfolio management Pioneering legacy of establishing standards of care Trusted relationships with clinicians, payors and regulators 8/12/15 5

6 Edwards Lifesciences Industry Leadership

7 Transforming Surgical Valve Therapy PERIMOUNT Surgical Valves Magna Ease EDWARDS INTUITY Elite* PERIMOUNT RESILIA INSPIRIS Platform* (Design Goals) Resilient Tissue Technology Optimized for Valve-in- Valve Distinguished Evidence: Unparalleled PERIMOUNT ~25+ year clinical studies Procedural Innovation: Expanded surgical options for complex and MIS cases New Patients: RESILIA TM tissue platform for next generation valves 8/12/15 *The EDWARDS INTUITY Elite valve system is investigational and not available for commercial sale in the U.S. RESILIA and INSPIRIS are investigational and not available for commercial sale. 7

8 Vision is to Drive a New Standard of Care for Surgical Valve Therapy Potential Patient Benefits Reduced Trauma / Pain; Minimal Scarring Predictable Outcomes Less Time On Pump / Faster Procedure* EDWARDS INTUITY Elite New Therapy Goals Simplified Integrated Standardized Hospital System Benefits Expanded Patient Access Simplified Procedure* Reduced Hospital Resources* Shorter Recovery Time* Reduced LOS* Contributing to growth in Europe; expecting U.S. launch in /12/15 The EDWARDS INTUITY Elite valve system is investigational and not available for commercial sale in the U.S. *When used in a minimally invasive approach 8

9 Edwards is Well Positioned to Maintain Global TAVR Leadership A beating heart alternative to traditional surgery for high risk aortic stenosis patients Global TAVR opportunity continues to be strong Large opportunity in U.S. EU remains large and growing Japan momentum building Investing aggressively to extend leadership U.S. Launch of SAPIEN 3 with Commander Delivery System for High Risk Patients Underway 8/12/15 9

10 Edwards Estimates Global TAVR to Exceed $3 Billion 2014 ~$1.5B ROW Japan U.S. EU Opportunity Expected to Double Japan 2019 >$3B ROW U.S. EU Expanding Valve Sizes Improving Economics Increasing Awareness Indication Expansion LOS 8/12/15 ROW: Rest of World (EEMEA, Canada, Asia Pacific, Latin America) 10

11 Edwards Offers the Broadest Portfolio of Hemodynamic Solutions Core Hemodynamic Products Enhanced Surgical Recovery Products Swan-Ganz Catheter TruWave Transducers ClearSight Noninvasive Finger Cuff FloTrac Minimally Invasive Sensor VAMP Blood Sampling PreSep Catheter VolumeView Set EV1000 Clinical Platform We estimate a patient is treated with an Edwards Critical Care product every 3 seconds* 8/12/15 *Based on unit sales 11

12 ESR is Focused on Reducing Patient Complications and Length of Stay Improving outcomes, lowering costs* Reduced 56% Reduced by 2 Days Growing awareness ESR is an underpenetrated opportunity Unpenetrated $570M Penetrated $130M $700M Complication Rate Average LOS March 31, 2015 Strong revenue growth EW s ESR 5 Yr CAGR $150 17% $100 $50 $0 millions '06 '09 '12 '15E 8/12/15 Source: Public company filings and internal estimates * Hamilton et al. Anesth Analg 2011; Corcoran et al. Anesth Analg

13 Edwards Lifesciences Innovation Fuels Long-Term Growth

14 Edwards Long-Term Growth Primarily Fueled by Innovation Multiple TAVR growth opportunities Next generation products Expanded indications and applications Transformation of valve surgery MIS platforms Innovative options for younger and more complex patients Critical Care expansion ESR as standard of care Complementary technologies for ESR New interventional / MIS opportunities Transcatheter Mitral Valve programs Structural Heart Disease 8/12/15 14

15 The Mitral Opportunity is Large; Pursuing Multiple Transcatheter Platforms Mitral disease is under-treated versus guidelines Degenerative 53% surgical treatment* Functional 16% surgical treatment* Mitral disease is more prevalent than aortic disease To date, more than 20 patients in multiple countries treated with FORTIS Pending acquisition of CardiAQ advances development of a transformational therapy Journey to commercialization may be long; durable success will require significantly more experience 8/12/15 *Bach et al. Failure of Guideline Adherence for Intervention in Patients With Severe Mitral Regurgitation. J. Am. Coll. Cardiol. 2009;54; The FORTIS and CardiAQ valve systems are investigational devices and not available for commercial sale. 15

16 Edwards Lifesciences Financial Highlights

17 Strong Year-to-Date Momentum TOTAL UNDERLYING SALES $ Q14 $ Q14 $ Q15 GLOBAL UNDERLYING THVT SALES $ % +42% $ Q15 OUS UNDERLYING THVT SALES +25% $137.7 Strong sales performance across all product lines and regions Therapy adoption driving robust THVT growth Expect competitive activity will continue to increase Notable contributions from EDWARDS INTUITY Elite & ESR platforms Maintained full-year sales guidance Non-GAAP Diluted EPS +28% Raised Full-Year 2015 Non-GAAP EPS guidance to $4.30 to $ earnings largely insulated from FX but 2016 impact potentially significant* 2Q14 2Q15 8/12/15 Underlying figures represent non-gaap results and exclude impacts from foreign currency and special items. Reconciliations to GAAP results are available at ir.edwards.com. * If foreign exchange rates remain at current levels 17

18 Edwards is an Attractive Long-Term Investment Successful long-term track record Superior value creation since 2000 spinoff Sales and earnings growth higher than industry peers Experienced and tenured management team Focused and aggressive R&D investment to drive strong sales growth Strong and flexible balance sheet Robust free cash flow 8/12/15 Net Sales and R&D Investment charts are in millions 18

19 Helping Patients is Our Life s Work, and

20 EDWARDS LIFESCIENCES CORPORATION Non-GAAP Financial Information 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, as well as adjustments for discontinued and acquired products and sales return reserves associated with transcatheter heart valve therapy ("THV") product upgrades, and excluding special items to also exclude gains and losses from special items such as significant investments, litigation, and business development transactions, and for 2012 to include the tax benefit for the U.S. Research and Development ("R&D") tax credit, which was required to be included in 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 the same non-gaap (or excluding special items ) basis due to the inherent difficulty in forecasting such items. The Company is not able to provide a reconciliation of these non-gaap 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. Management does not consider the excluded items or adjustments as part of 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 core operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting the Company's business. 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. The items described below are adjustments to the GAAP financial results in the reconciliations that follow: THV Sales Return Reserve and Related Costs - In the fourth quarter of 2013,the first and second quarters of 2014, and the second quarter of 2015, the Company recorded a net sales return reserve and related costs, primarily related to inventory reserves, of $15.2 million, $15.6 million, $6.1 million, and $15.9 million, respectively, related to estimated THV product returns expected upon introduction of next-generation THV products. In the third and fourth quarters of 2014, the Company recorded a net reversal of the reserve of $16.0 million and $3.5 million, respectively, upon delivery of the next-generation THV products. Intellectual Property Litigation Expense (Income), net - The Company incurred intellectual property litigation expenses of $1.0 million and $2.6 million in the second quarter of 2015 and 2014, respectively, and $9.6 million, $22.1 million, $14.7 million, $4.7 million, and $8.5 million in the years ended 2014, 2013, 2012, 2011, and 2010, respectively. In addition, in the second quarter of 2014, the Company recorded a $750.0 million gain related to an agreement with Medtronic to settle all outstanding patent litigation. In the first quarter of 2013, the Company recorded an $83.6 million gain related to the April 2010 jury award from Medtronic of damages for infringement of the U.S. Andersen transcatheter heart valve patent. Charitable Foundation Contribution - The Company recorded a $50.0 million charge in the second quarter of 2014 for a charitable contribution to the Edwards Lifesciences Foundation. Acquisition of In-process Research and Development - The Company recorded a $10.2 million charge related to the acquisition of transcatheter mitral valve intellectual property in the fourth quarter of The Company recorded a $7.0 million charge in the second quarter of 2012 for the upfront licensing and royalty fees related to the licensing of intellectual property. Settlements and litigation - The Company recorded a $7.5 million charge in the first quarter of 2014 to settle past and future obligations related to one of its intellectual property agreements and a $3.3 million charge in the fourth quarter of 2011 for a litigation settlement. Asset Write-down - The Company recorded a $5.0 million charge in the third quarter of 2014 to write-down assets related to its automated glucose monitoring program. The charge related primarily to intellectual property, fixed assets, inventory and severance expenses. The Company recorded a $5.9 million charge in the fourth quarter of 2013 related to the impairment of in-process research and development assets. The Company recorded a $3.3 million charge in the fourth quarter of 2010 and a $3.9 million charge in the third quarter of 2010 related to the impairment of certain investments in unconsolidated affiliates. In the second quarter of 2010, the Company recorded an $8.3 million charge related to the write-down of assets, primarily intellectual property, due to the discontinuation of the Company's EVOLUTION II clinical trial of the Edwards MONARC system. Realignment Expenses - The Company recorded a $10.4 million charge, $9.0 million charge, $5.5 million charge and $7.2 million charge in the fourth quarter of 2013, 2012, 2011 and 2010, respectively, related primarily to severance expenses associated with a global workforce realignment. Product Recall - In the second quarter of 2012, the Company increased its non-gaap gross profit by $8.1 million to exclude the impact of its voluntary recall of certain heart valves and Critical Care catheters. European Receivables Reserve - During 2011, the Company recorded a $12.8 million charge to reflect the increased risk associated with its southern European receivables, primarily Greece. Provision for Income Taxes - During the second quarter of 2014, the Company recorded a $6.2 million tax benefit due to the remeasurement of its uncertain tax positions. During the first quarter of 2013, the Company recorded an $8.4 million income tax benefit relating to the federal R&D tax credit that was extended in 2013 retroactive to the beginning of The $8.4 million benefit was included in non-gaap earnings and non-gaap diluted earnings per share during the fourth quarter of During the first quarter of 2012, the Company recorded a $2.3 million tax benefit due to the remeasurement of its uncertain tax positions. During the fourth quarter of 2011, the Company recorded a $4.0 million tax benefit due to the expiration of various statutes of limitations. During the second and third quarters of 2011, the Company recorded a $2.5 million and $6.9 million tax benefit, respectively, related to a ruling made by tax authorities in Switzerland. During the fourth quarter of 2010, the Company recorded a $7.9 million income tax benefit related to the reduction of certain intercompany pricing reserves and during the second quarter of 2010, the Company recorded a $9.8 million income tax benefit resulting from a partial settlement of a prior year tax audit. Given the magnitude and unusual nature of the tax events relative to the periods presented, non-gaap net income and earnings per share has been adjusted for these tax events. Foreign Exchange - Fluctuation in exchange rates impacts 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."

21 EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of GAAP to Non-GAAP Financial Information RECONCILIATION OF GAAP TO NON-GAAP NET INCOME Three Months Ended Year Ended June 30, December 31, (in millions, except per share data) GAAP Net Income $ $ $ $ $ $ $ Growth Rate % (79.4%) 108.5% 33.5% 23.2% 9.4% Non-GAAP adjustments: (A) THV sales returns reserve and related costs Intellectual property litigation expenses (income), net 1.0 (747.4) (740.4) (61.5) Charitable foundation contribution Acquisition of in-process research and development Settlements and litigation Asset write-down Realignment expenses Product recalls European receivables reserve Provision for income taxes Tax effect on reconciling items (B) (5.2) (10.9) (5.8) (7.6) Remeasurement of uncertain tax position reserve (A) - (6.2) (6.2) - (2.3) - - Federal research and development tax credit (A) (8.4) 8.4 Expiration of various statutes of limitations (A) (4.0) - Tax rulings and settlements (A) (9.4) (9.8) Resolution of outstanding transfer price issues (A) (7.9) Non-GAAP Net Income $ $ 94.0 $ $ $ $ $ Growth Rate % 32.3% 3.2% 13.1% 33.4% 9.7% RECONCILIATION OF GAAP TO NON-GAAP DILUTED EARNINGS PER SHARE GAAP Diluted Earnings Per Share $ 1.02 $ 5.09 $ 7.48 $ 3.42 $ 2.46 $ 1.98 $ 1.81 Growth Rate % (80.0%) 118.7% 39.0% 24.2% 9.4% (A), (C) Non-GAAP adjustments: THV sales returns reserve and related costs Intellectual property litigation expenses (income), net 0.01 (4.51) (4.44) (0.34) Charitable foundation contribution Acquisition of in-process research and development Settlements and litigation Asset write-down Realignment expenses Product recalls European receivables reserve Provision for income taxes Remeasurement of uncertain tax position reserve - (0.06) (0.06) - (0.02) - - Federal research and development tax credit (0.07) Expiration of various statutes of limitations (0.04) - Tax rulings and settlements (0.08) (0.08) Resolution of outstanding transfer price issues (0.07) Non-GAAP Diluted Earnings Per Share $ 1.13 $ 0.88 $ 3.50 $ 3.23 $ 2.75 $ 2.04 $ 1.86 Growth Rate % 28.4% 8.4% 17.5% 34.8% 9.7% Note: Numbers may not calculate due to rounding. (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 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.

22 EDWARDS LIFESCIENCES CORPORATION Unaudited Reconciliation of Sales by Product Group and Region ($ in millions) Sales by Product Group (QTD) 2Q Q 2014 Change GAAP Growth Rate* Sales Swap Reserve 2015 Adjusted 2Q 2015 Underlying Sales Sales Return Reserve 2014 Adjusted FX Impact 2Q 2014 Underlying Sales Underlying Growth Rate * Transcatheter Heart Valve Therapy $ $ $ % $ 5.0 $ $ 2.0 $ (20.3) $ % THV United States % % THV Outside the United States % (3.9) (20.3) % Surgical Heart Valve Therapy (10.0) (4.6%) (17.0) % Critical Care (10.0) (7.1%) (11.7) % Total Sales $ $ $ % $ 5.0 $ $ 2.0 $ (49.0) $ % * Numbers may not calculate due to rounding.