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Text: Just after the close of regular trading, Edwards released fourth quarter 2021 financial results.
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.
Finally, a quick reminder that when using the terms underlying and adjusted, management is referring to non-GAAP financial measures.
Otherwise, they are referring to GAAP results.
We're proud of our performance in 2021.
Although hospitals continue to be impacted by COVID, it was a year of significant milestones and investment for Edwards and our teams were relentless.
In TAVR, we made important strides in executing our long-term strategy.
In particular, we invested in increasing awareness, pursued further therapy expansion and advance new technologies.
We completed enrollment of the EARLY-TAVR trial, an important pivotal study studying the treatment of severe aortic stenosis patients before their symptoms develop.
Separately, we initiated enrollment in our PROGRESS trial for moderate AS patients, and we received FDA approval for our ALLIANCE pivotal trial to start our next-generation TAVR technology, SAPIEN X4.
In TMTT, we achieved our significant 2021 milestones as we continue to make meaningful progress on advancing our three key value drivers: a portfolio of pioneering therapies for patients; positive pivotal trial results to support approvals and adoption; and favorable real-world clinical outcomes.
We are pleased to have treated over 3,000 patients in 2021 with our differentiated portfolio of TMTT therapies, gaining valuable learnings through both our clinical and commercial experiences.
Each of our platforms demonstrated promising outcomes and clinical performance.
I'm also pleased to announce that we completed enrollment of our CLASP IID pivotal trial in 2021, an important milestone that keeps us on track for U.S. approval late this year.
In Surgical Structural Heart, we extended our leadership position through the adoption of our premium technologies.
We also implemented valuable additions to our smart monitoring advancements in critical care.
Most importantly, in 2021, even more patients benefited from Edwards' life-saving technologies than ever before.
I'm also proud to say that throughout the year, our employees remain dedicated to keeping our commitments to patients and to one another.
Despite the ongoing pandemic that fueled global challenges, our employees found innovative ways to support hospital procedures and to ensure our ability to supply our life-saving therapies was not impacted.
And through their efforts, we were able to get our technologies into the hands of our trusted partners around the world so they could serve their patients.
Now I'd like to cover several 2021 financial highlights before I get into the quarterly details.
In 2021, we are pleased to achieve all of our key financial expectations.
Underlying sales increased 18% to $5.2 billion, driven by balanced organic sales growth in each region.
We achieved 19% growth in adjusted earnings per share, while also increasing R&D, 19%.
The significant increase in R&D and infrastructure investments this year helped strengthen our long-term outlook.
And as you heard at our investor conference last month, we are as convinced as ever about the tremendous opportunity we have to enhance patients' lives and bring significant value to the healthcare system.
Turning to our financial results.
Fourth quarter sales of $1.3 billion increased 13% on a constant currency basis versus the year ago period.
Growth was driven by our portfolio of innovative technologies, although at the lower end of our October expectations due to the pronounced impact of Omicron on hospital resources in December, especially in the U.S. Full year 2021 global TAVR sales of $3.4 billion increased 18% on an underlying basis versus the prior year.
Despite intermittent challenges associated with the pandemic throughout the year, sales were in line with our original guidance of 3.2 to 3.6 billion and were driven by increased awareness of the benefits of TAVR therapy with our SAPIEN platform.
In the fourth quarter, our global TAVR sales were $872 million, an increase of 13% on an underlying basis, with impressive strength outside the U.S.
We estimate global TAVR procedure growth was comparable with our growth.
And globally, average selling prices were stable as we maintained our disciplined pricing strategy.
In the U.S., our TAVR sales grew 10% year over year in the fourth quarter, and we estimate that our share of procedures was stable.
As previously mentioned, the Omicron variant had a noticeable impact on hospital resources in December as cases were postponed or limited in a number of hospitals.
Growth in the U.S. was highest in small- to mid-volume centers, which are helping provide access to a broader population of aortic stenosis patients.
Outside the U.S., in the fourth quarter, our sales grew approximately 20% year over year on an underlying basis, and we estimate total TAVR procedure growth was comparable.
We continue to be encouraged by the strong international adoption of TAVR broadly in all regions.
In Europe, Edwards' growth was in the mid-teens, and we estimate that our competitive position was stable.
Growth was broad-based across the region.
It's worth noting that a recent cost-effectiveness study demonstrated that TAVR with SAPIEN 3 was economically dominant when compared to surgical aortic valve replacement in treating French patients with severe symptomatic aortic stenosis who are at low surgical mortality -- who are at low risk of surgical mortality.
We're also encouraged by the recently published guidelines from the European Association of Cardiothoracic Surgery, which now definitively recommend TAVR for patients over 75.
We believe both of these developments represents an important long-term opportunity to bring TAVR therapy to even more patients in need.
Sales growth in Japan was also strong, where therapy adoption is still relatively low.
Several important milestones were achieved in Q4.
For the first time, the number of TAVR procedures performed in Japan was comparable with the surgical aortic valve replacements.
Furthermore, in each prefecture in Japan, there is now at least one hospital offering SAPIEN.
Following the recent reimbursement approval for the treatment of patients at low surgical risk, we remain focused on expanding the availability of TAVR therapy throughout the country.
Longer term, we see excellent opportunities for continued OUS growth as we believe global adoption of TAVR therapy remains quite low.
In addition to our geographic expansion of our TAVR therapies, we remain focused on indication expansion.
In Q4, we completed enrollment of our EARLY-TAVR pivotal trial, which is focused on the treatment of asymptomatic AS patients.
Separately, we initiated enrollment in PROGRESS, an important pivotal trial for moderate aortic stenosis to determine the optimal time to treat patients who have this progressive disease.
We believe that some patients may benefit from earlier treatment before they have symptoms or before their AS becomes severe, rather than risking irreversible damage to their heart as the disease progresses.
We also took steps to advance our innovative product portfolio.
In Q4, we received FDA approval for our ALLIANCE pivotal trial to study our next-generation TAVR device, SAPIEN X4.
Additionally, in Q4, we received FDA approval to use SAPIEN 3 with our Alterra adaptive pre-stent for congenital heart patients.
This should result in a quality of life improvement and a reduction in the number of procedures that these younger patients will require over their lifetime.
In summary, despite a slower-than-expected start to the year, we continue to anticipate 2022 underlying TAVR sales growth of 12 to 15%, consistent with the range we shared at our December investor conference.
Our outlook assumes COVID-related challenges early in 2022, turning to more normalized growth environment as headwinds from Omicron subside and hospital resource constraints stabilize.
We remain confident in this large global opportunity will double to $10 billion by 2028, which implies a compounded annual growth rate in the low double-digit range.
As I mentioned, in the fourth quarter, we completed enrollment of our CLASP IID pivotal trial, and we remain on track to present data in the second half of 2022.
This important milestone keeps us on track for U.S. approval late this year of PASCAL for patients with degenerative mitral regurgitation.
We also continue to expect European approval of our next-generation PASCAL Precision System later this year.
At the PCR London Valves conference in Q4, PASCAL 30-day outcomes from our MiCLASP post-market approval study of more than 250 patients in Europe were presented.
The data highlighted safe and effective MR reduction in a post-market setting.
We also progressed on the enrollment of our CLASP IIF pivotal trial for patients with functional mitral disease.
In mitral replacement, we continue to expand our experience with both our transcatheter mitral replacement therapies through the ENCIRCLE pivotal trial for SAPIEN M3 and the MISCEND study for EVOQUE Eos.
Early experience with these sub-French transfemoral therapies increase our confidence in both platforms.
Turning to transcatheter tricuspid therapies, results from the TRISCEND study were presented at the Annual TCT Conference in November and demonstrated that early patient outcomes with the EVOQUE tricuspid were favorable and sustained at six months.
We are encouraged by the procedural success rates and also the significant TR reduction and sustained improvements in quality of life measures experienced by these patients.
We continue to make meaningful progress in enrolling our two tricuspid pivotal trials the tri cusp -- the TRISCEND II pivotal trial for the EVOQUE system and the CLASP IITR pivotal trial with PASCAL in patients with symptomatic severe tricuspid regurgitation.
We anticipate a late 2022 approval of EVOQUE tricuspid in Europe and remain committed to providing solutions for these patients that have very poor prognosis and few treatment options today.
Turning to the sales performance of TMTT.
Fourth quarter revenue of $25 million grew sequentially from the third quarter as we saw increased adoption of the PASCAL system despite the negative COVID impact in December.
Full year 2021 global sales more than doubled to $86 million.
As we continue to expand the availability of PASCAL to more centers in Europe, we are pleased with the excellent outcomes for patients supported by our high-touch model.
We look forward to continuing our progress toward advancing our vision to transform the lives of patients with mitral and tricuspid valve disease in 2022 with the milestones that we outlined in our recent investor conference.
Despite the COVID impact so far this year, we continue to expect TMTT sales of 140 to $170 million for 2022.
We estimate the global TMTT opportunity will grow to approximately $5 billion by 2028, and we remain committed to bringing our groundbreaking portfolio of therapies to patients with these life-threatening diseases.
We are confident our portfolio strategy positions us well for leadership.
In Surgical Structural Heart, full year global sales were $889 million, up 15% on an underlying basis versus the prior year.
Fourth quarter 2021 global sales of $221 million increased 9% on an underlying basis over the prior year.
Although we saw that hospital staffing shortages continued to worsen throughout the quarter, especially in the U.S., life-saving surgical therapies continue to be prioritized over elective procedures.
We're excited about the continued global adoption of INSPIRIS RESILIA aortic surgical valve, the KONECT RESILIA aortic tissue valve conduit and our MITRIS RESILIA valve.
We remain encouraged by the growing evidence that supports Edwards RESILIA tissue valves, including two studies being presented at the Society of Thoracic Surgeons Conference this weekend.
The COMMENCE study demonstrates excellent hemodynamics of this tissue technology across all aortic valve sizes at five years, while a European economic value study shows a cost reduction with the use of INSPIRIS versus mechanical valves.
In summary, we continue to expect that our full year 2022 underlying sales growth will be in the mid-single-digit range for Surgical Structural Heart, driven by adoption of our premium technologies and procedure growth.
Even as TAVR adoption expands, we're excited about our ability to provide innovative surgical treatment options for patients, extend our global leadership, and be the partner of choice for cardiac surgeons.
Turning to Critical Care.
Full year global sales of $835 million increased 14% on an underlying basis versus the prior year.
2021 growth was driven by balanced contributions from all product lines led by HemoSphere sales as capital spending resumed.
Our TruWave disposable pressure monitoring devices used in the ICU also remained in high demand due to the elevated COVID hospitalizations in both the U.S. and Europe.
Fourth quarter Critical Care sales of $212 million increased 8% on an underlying basis, driven by strong demand for HemoSphere.
Demand for our broad portfolio of smart recovery sensors also remained robust in the fourth quarter, including ClearSight, our noninvasive finger cuff, which achieved sustained performance at or above pre-COVID levels.
As discussed at our recent investor conference, the integration of a full range of technologies creates a unique offering of enhanced recovery tools and predictive analytics capabilities to further strengthen our leadership in hemodynamic monitoring.
In summary, we continue to expect mid-single-digit underlying sales growth for 2022, and we remain excited about our pipeline of innovative critical care products.
Today, I'll provide a wrap-up of 2021, including detailed results from the fourth quarter, as well as provide an update on guidance for the first quarter and full year of this year.
Sales in the fourth quarter increased 12.6% on an underlying basis.
Adjusted earnings per share was $0.51, and GAAP earnings per share was $0.53.
Our fourth quarter sales were negatively impacted by the wave of COVID that began late in the quarter, especially in the U.S. Earnings per share in the quarter was below our expectations as it was impacted by weaker-than-expected sales and we accelerated certain spending into the fourth quarter of 2021 that we had planned to incur during 2022, including preparation for TMTT product launches.
For the full year 2021, we are pleased with our performance as sales increased 18% on an underlying basis to $5.2 billion and adjusted earnings per share grew 19% to $2.22.
I'll now cover the details of our results and then discuss guidance for 2022.
For the fourth quarter, our adjusted gross profit margin was 76.8%, compared to 75.3% in the same period last year.
This increase was primarily driven by a favorable impact from foreign exchange.
We continue to expect our full year 2022 adjusted gross profit margin to be between 78 and 79%.
This year, our rate should be lifted by a favorable impact from foreign exchange and an improved product mix, partially offset by investments in our manufacturing capacity.
Selling, general and administrative expenses in the fourth quarter were $424 million or 31.9% of sales, compared to $339 million in the prior year.
This increase was driven by the resumption of medical congresses and commercial activities compared to the COVID impacted prior year, as well as the addition of personnel in preparation for new product launches.
We continue to expect full year 2022 SG&A as a percent of sales, excluding special items, to be between 28 and 30%.
Research and development expenses in the quarter grew 19% to $233 million or 17.5% of sales.
This increase was primarily the result of continued investments in our transcatheter innovations, including increased TMTT clinical trial activity.
For the full year 2022, we continue to expect R&D as a percentage of sales to be in the 17 to 18% range as we invest in developing new technologies and generating evidence to support TAVR and TMTT growth.
During the fourth quarter, we recorded an $18 million net reduction in the fair value of our contingent consideration liabilities, which benefited earnings per share by $0.03.
This gain was excluded from the adjusted earnings per share of $0.51 I mentioned earlier.
This reduction reflects an accounting adjustment associated with reduced expectations of making a future milestone payment for a previous acquisition.
Our reported tax rate this quarter was 10.9% or 12.7%, excluding the impact of special items.
This rate included an approximate 3 percentage point benefit from the accounting for stock-based compensation.
Our full year 2021 tax rate, excluding special items, was 12.6%.
We continue to expect our full year rate in 2022 to be between 11 and 15%, which includes an estimated benefit of 3 percentage points from stock-based compensation accounting.
Foreign exchange rates decreased fourth quarter reported sales by approximately 1% or $10 million compared to the prior year.
At current rates, we now expect an approximate $100 million negative impact or about 2% to full year 2022 sales as compared to 2021.
Foreign exchange rates positively impacted our fourth quarter gross profit margin by 140 basis points compared to the prior year.
Free cash flow for the fourth quarter was $284 million, defined as cash flow from operating activities of $374 million, less capital spending of $90 million.
Full year 2021 free cash flow was $1.4 billion, up from $734 million in 2020.
We continue to expect full year 2022 free cash flow to be between 1.2 and $1.5 billion.
In 2022, we expect our cash flow will be reduced by approximately $200 million due to a change in tax regulations involving the timing of the deductions for research and development expenses.
Turning to the balance sheet.
We have a strong balance sheet, with approximately $1.5 billion in cash, cash equivalents, and short-term investments at the end of the year.
Consistent with our practice of opportunistically repurchasing shares, we purchased approximately $100 million during the fourth quarter.
We still have remaining share repurchase authorization of $1.1 billion.
Average shares outstanding during the fourth quarter were $632 million, relatively consistent with the prior quarter.
We continue to expect average diluted shares outstanding for 2022 to be between 630 and $635 million.
Before turning the call back over to Mike, I'll finish with financial guidance for 2022.
Despite a slow start to the year associated with Omicron's impact on hospital resources, we are planning for conditions to gradually improve and therefore, are maintaining all of our previous sales guidance ranges for 2022.
For total Edwards, we continue to expect sales to grow at a low double-digit rate to 5.5 billion to $6 billion.
For TAVR, we expect sales of 3.7 to $4 billion.
And for TMTT, we expect sales of 140 to $170 million.
We expect Surgical Structural Heart sales of 870 to $950 million and Critical Care sales of 820 to $900 million.
For full year 2022, we continue to expect adjusted earnings per share of $2.50 to $2.65.
For the first quarter of 2022, we project total sales to be between 1.27 and $1.35 billion and adjusted earnings per share of $0.54 to $0.62.
And with that, I'll pass it back to Mike.
So in conclusion, we're proud of the significant progress we made in 2021, advancing new transformational therapies and delivering strong financial performance.
We expect continued growth and progress in 2022.
We are enthusiastic about the continued expansion of catheter-based therapies for the many structural heart patients still in need, which positions us well long-term success.
As the global population ages and cardiovascular disease remains the No.
1 largest health burden, we believe the opportunity to serve our patients will nearly double between now and 2028.
We are confident that our patient-focused innovation strategy can transform care and bring value to patients and the healthcare system.

user
compname says q4 sales grew 12% to $1.33 billion, up 13% on an underlying basis.
q4 sales grew 12% to $1.33 billion, up 13% on an underlying basis.
fy 2022 financial guidance unchanged.
q4 earnings per share was $0.53; q4 adjusted earnings per share was $0.51.
qtrly tavr sales of $872 million, up 12%.
tavr sales negatively impacted in last several weeks of q4 due to impact omicron had on hospital resources in u.s.
co is reaffirming 2022 sales guidance for all product groups.
sees q1 total sales between $1.27 and $1.35 billion, and q1 adjusted earnings per share of $0.54 to $0.62.
believe that opportunity to serve our patients will nearly double between now and 2028.

assistant