Categories Earnings Call Transcripts, Health Care

Edwards Lifesciences Corp (EW) Q3 2020 Earnings Call Transcript

EW Earnings Call - Final Transcript

Edwards Lifesciences Corp  (NYSE: EW) Q3 2020 earnings call dated Oct. 21, 2020

Corporate Participants:

Mark Wilterding — Investor Relations

Michael A. Mussallem — Chairman and Chief Executive Officer

Scott B. Ullem — Corporate Vice President, Chief Financial Officer

Analysts:

David Lewis — Morgan Stanley — Analyst

Bob Hopkins — Bank of America Merrill Lynch — Analyst

Joanne Wuensch — Citi — Analyst

Raj Denhoy — Jefferies — Analyst

Robbie Marcus — JP Morgan — Analyst

Matthew Miksic — Credit Suisse — Analyst

Danielle Antalffy — SVB Leerink — Analyst

Adam Maeder — Piper Sandler — Analyst

Matthew Taylor — UBS — Analyst

Larry Biegelsen — Wells Fargo Securities — Analyst

Vijay Kumar — Evercore ISI — Analyst

Brandon Vazquez — William Blair — Analyst

Presentation:

Operator

Greetings, ladies and gentlemen and welcome to the Edwards Lifesciences Third Quarter 2020 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the conference over to our host, Mark Wilterding, President of Investor Relations. Thank you. You may begin.

Mark Wilterding — Investor Relations

Thanks, Diego. Good afternoon everyone and thank you for joining us. With me on today’s call are Mike Mussallem, Chairman and Chief Executive Officer and Scott Ullem, Chief Financial Officer.

Just after the close of regular trading, Edwards Lifesciences released third quarter 2020 financial results. During today’s call management will discuss those results included in the press release and accompanying financial schedules and then use the remaining time for Q&A.

Please note that management will be making forward-looking statements that are based on estimates, assumptions and projections. These statements include but are not limited to financial guidance and expectations for longer-term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters and foreign currency fluctuations. These statements speak only as of the date on which they were made and Edwards does not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties, including but not limited to those associated with COVID-19 pandemic that could cause actual results to differ materially. Information concerning factors that could cause these differences and important product safety information may be found in the press release, our 2019 Annual Report on Form 10-K and Edwards’ other SEC filings, all of which are available on the Company’s website at edwards.com.

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. Reconciliations between GAAP and non-GAAP numbers mentioned during this call are included in today’s press release.

With that, I’d like to turn the call over to Mike for his comments. Mike?

Michael A. Mussallem — Chairman and Chief Executive Officer

Thank you, Mark. Let me begin by saying I am very proud of our passionate team and the way that they continue to serve patients during this difficult period. Our supply chain has delivered and our field team has continued to support the dedicated clinicians that count on Edwards.

We’re pleased to report better-than-expected third-quarter results despite the challenges of the ongoing COVID pandemic. Sales of $1.1 billion increased 4% reflecting growth around the world. Global TAVR sales headlined our growth with continued adoption of our SAPIEN valve platform and a step-up in procedure volumes as newly diagnosed patients entered the system and were treated. In the third quarter we are also pleased to report growing investments in new therapies and compelling clinical data announced that at the recent TCT Connect conference that we will be having a meaningful impact on future patient care.

In TAVR third quarter global sales were $745 million, up 6%. Growth was led by therapy adoption across all geographies with notable strength in Europe. Globally, our average selling price remained stable. Although third quarter treatment rates were lifted somewhat by the postponement of treatment in the second quarter, particularly in Europe, we believe that going forward there is no significant backlog of patients in the system.

Taking a step back we know that a sad consequence of the intense focus on the pandemic has been that many patients like those with structural heart disease are delaying screening and treatment or not being treated at all. Evidence continues to suggest that delaying valve replacement for patients with aortic stenosis inevitably results in adverse events and increased mortality. A recent Swiss study AS DEFER demonstrated that nearly 20% of patients who delayed a previous scheduled aortic valve replacement reported to the hospital with valve related symptoms or worsening heart failure. And closer to home, a study conducted last month by the Structural Heart Program of Mount Sinai Hospital reported that 10% of patients waiting for aortic valve replacement required urgent TAVR or passed away during the first month after elective procedures were halted due to COVID. After three months, 35% of patients affected by the ban on elective procedures required an urgent intervention or passed away. There is growing recognition that postponing treatment of AS has significant consequences.

At the same time, however, we know that this remains a very difficult time for the patients we serve as they continue to weigh the risk of COVID against the severe effects of progressive heart valve disease. Our observations indicate that most hospitals globally have determined that they can safely treat their AS patients in need and at the same time care for COVID patients.

In conclusion, strong evidence indicates that TAVR is a proven therapy with excellent outcomes. It offers efficient use of hospital resources and can benefit many more patients whose structural heart disease is deadly and under-treated today.

Now, turning back to the third quarter TAVR results by region. In the US, our TAVR sales increased in the mid-single digit range versus last year despite approximately 30% growth in the year-ago period. We were very encouraged by the improvement in procedure volumes in Q3 with 100% of our active sites across all 50 states performing TAVR cases, up from approximately 90% in Q2. Third quarter growth across the more than 750 centers in the US was highest in smaller centers which are providing access to a broader population of aortic stenosis patients. Two-thirds of our US TAVR centers have completed training and proctoring with SAPIEN 3 Ultra and physician feedback on ease of use and improved paravalvular leak performance remains outstanding.

Outside of the US in the third quarter, our underlying TAVR sales increased in the high-single digit range year-over-year. We continue to be encouraged by the strong international adoption of TAVR particularly in Europe where growth continues to be faster than expected. Edwards’ underlying TAVR growth in Europe versus the prior year was in the high single-digit range. We saw unit increases in nearly every country across Europe. Growth was driven by continued strong adoption of our SAPIEN 3 Ultra platform. And although transcatheter valves have been commercially available for over a decade in Europe, AS continues to be significantly undertreated.

Outside of the US and Europe, we’re continuing to see strong TAVR adoption driven by SAPIEN 3. Sales growth in Japan and other regions was strong as aortic stenosis remains an immensely undertreated disease and we remain focused on increasing the availability of TAVR therapy.

In China, where Edwards recently received regulatory approval to begin treating high-risk patients suffering from severe aortic stenosis, we successfully completed our first cases in the third quarter. And although it will likely take significant time to expand our TAVR presence in China, we look forward to partnering with hospitals across the country to introduce this therapy through our comprehensive, proven training program.

In summary, we anticipate regional variability due to the pandemic. Yet based on our year-to-date performance, we continue to anticipate global TAVR sales growth for 2020 will be at the high end of our previous range of minus 5% to plus 5%. We anticipate a return to double-digit growth in 2021 and we expect quarterly growth rates to be — will be lower year-over-year in Q1 and Q4 with more normal market dynamics versus higher growth in Q2 and Q3 when the COVID impact was most severe. Global TAVR growth reinforces our belief in our projection of a $7 billion plus opportunity by 2024.

Turning to transcatheter mitral and tricuspid therapies, or TMTT. We continue to view this opportunity as one with substantial unmet patient needs and the potential to drive significant growth. Our focus will be on the advancement of three key value drivers, which we believe are the leading indicators of our success. A portfolio of differentiated therapies, favorable real-world clinical outcomes, and favorable results from rigorous pivotal trials, which will ultimately support approvals and adoption.

As an example of our differentiated therapies, we recently received the CE Mark and began introducing PASCAL Ace implant system for mitral and tricuspid repair. PASCAL Ace has the differentiated features of PASCAL with a narrower profile. It is designed to complement PASCAL and provide further options to optimize treatment for patients with mitral and tricuspid regurgitation. In mitral valve replacement we continue to advance both transfemoral EVOQUE and SAPIEN M3 platforms and we remain on track to initiate the US pivotal trial for SAPIEN M3 before the end of the year.

In addition, with EVOQUE tricuspid, we are encouraged by the experience gained in our early feasibility study and are on track to initiate our pivotal trial by year-end. We are pleased to demonstrate clinical success in these programs as reported at the recent TCT Connect conference. We presented roll-in [Phonetic] data from our CLASP IID pivotal study.

In US centers with no prior experience the PASCAL system showed favorable 30-day outcomes in patients with the generative mitral valves, including low complication rates, significant regurgitation reduction and improvements in quality of life. Our one-year CE Mark CLASP data for PASCAL mitral repair demonstrated robust and sustained MR reduction. In addition, PASCAL tricuspid repair demonstrated positive 30-day results and Cardioband tricuspid follow-up demonstrated favorable two-year results.

And importantly, we’re making progress on five TMTT pivotal studies. While initial pivotal clinical trial results could be delayed by a couple of quarters, we are now enrolling patients at pre-COVID rates and looking forward to generating a body of clinical evidence across our portfolio demonstrating excellent outcomes for each one of our therapies.

Third quarter global sales were $12 million. Although the situation remains fluid, we were able to resume activation of new centers in Europe and increase commercial procedures. We continue to advance our commercialization of PASCAL in Europe and remain focused on physician training, procedural success and patient outcomes.

In summary, we expect procedures and activation of centers to continue to be subject to COVID interruptions in Europe. We anticipate TMTT sales of around $40 million in 2020 versus our previous estimate of $30 million to $45 million.

In addition, while still early in the 2021 forecasting process, our aspiration is to double 2020 TMTT sales in 2021. We continue to believe the TMTT opportunity remains significant and now expect a $3 billion global market by 2025. We reiterate our confidence in this long-term opportunity and are passionate about bringing a portfolio of solutions to the many patients in need.

In Surgical Structural Heart sales for the third quarter of $203 million were similar to the 2019 levels decreasing 1% on an underlying basis. During the third quarter, we observed that patients were more willing to seek heart valve surgery and hospitals more able to manage surgical patient flow. Ongoing prioritization of heart surgery in many hospitals also contributed to rebounding case volumes.

We remain very encouraged by the steady adoption of Edwards premium RESILIA tissue valves, including the INSPIRIS aortic surgical valve and the recently launched KONECT aortic valve conduit in the US.

In the third quarter INSPIRIS valve utilization grew in all regions driven by increased demand among younger and more active patients. INSPIRIS is becoming the surgical valve standard of care in many geographies around the world. We continue to add new INSPIRIS centers in both the US and Europe and adoption is growing in our existing centers.

Following the first commercial cases of the HARPOON in Q2 in Europe, we continue to focus on intensive physician training and robust data collection for this new beating heart mitral valve repair system. We are seeing positive initial patient results with faster surgery and recovery times with this minimally-invasive therapy.

In summary, we continue to expect Surgical Structural Heart sales for full year 2020 will decline in the 5% to 15% range from 2019. Localized COVID-19 hotspots may continue to be headwinds to procedure growth. However, our expectation remains that in Q4, our sales will return to positive growth driven by the market adoption of our newest technologies. We’re excited about our ability to provide innovative surgical treatment options for more patients and extend our global leadership in premium Surgical Structural Heart technologies.

In Critical Care sales for the quarter were $181 million, in line with the year-ago period. Demand for our products used in cardiac surgeries was solid, but was offset by the COVID-driven impact of delayed elective procedures. Sales of our TruWave disposable pressure monitoring devices used in the ICU were lifted by a large one-time order in Europe associated with ICU capacity expansion. However, we continue to experience a decline in HemoSphere orders in the US as hospitals continue to limit their capital spending as a result of COVID.

In summary, we continue to anticipate that critical care sales will be negative for 2020 largely due to anticipated reduced capital spending in the US, which is still within our original guidance range of minus 5% to plus 5%.

And now I’ll turn the call over to Scott.

Scott B. Ullem — Corporate Vice President, Chief Financial Officer

Thanks a lot, Mike. Today I’ll provide additional perspective on the third quarter along with how we anticipate the rest of the year may unfold. Our 4% underlying sales growth in the third quarter was better than we expected as we performed well across all our product lines and geographies, especially Europe. Earnings were also stronger than we expected, driven primarily by the top line performance combined with our constrained spending.

As I previously mentioned, we have implemented cost control measures during COVID but we intentionally did not take any actions to significantly impact our employees or reduce investments supporting our long-term strategy. This allowed us to deliver a strong operating profit margin and adjusted earnings per share in the third quarter of $0.51, a 9% increase over 2019. GAAP earnings per share was $0.01 higher at $0.52.

For the third quarter, our adjusted gross margin was 75.5%, down from 75.9% in the prior-year quarter. This decrease was driven by a negative impact from foreign exchange and incremental costs associated with responding to COVID, partially offset by improved manufacturing efficiencies.

Selling, general and administrative expenses in the third quarter were $307 million, or 26.9% of sales compared to $306 million in the prior year. This consistent level of spending included increased transcatheter structural heart field personnel related expenses, including expanding the TMTT field organization in Europe, offset by reduced spending resulting from COVID. As I mentioned earlier, we did not initiate any actions to significantly impact our employees nor to reduce investment plans supporting our long-term strategy.

Research and development expenses in the third quarter were $196 million or 17.1% of sales compared to $195 million in the prior year. This consistent level of spending included increased investments in transcatheter mitral valve replacement clinical trials, partially offset by lower TAVR clinical trial costs and reduced spending resulting from COVID.

Turning to taxes. Our reported tax rate this quarter was 10.7% or 11.2% excluding the impact of special items. This rate included a 450 basis point benefit from the accounting for employee stock-based compensation, which was 130 basis points or $0.01 favorable to our expectations. We continue to expect our full-year 2020 tax rate, excluding special items, to be between 11% and 15%.

Foreign exchange rates increased third-quarter sales growth by 60 basis points or $7 million compared to the prior year. At current rates, we now expect FX to have a neutral impact to full year 2020 sales versus 2019. Our previous guidance estimated a negative $30 million impact. FX rates negatively impacted our third quarter gross profit margin by 140 basis points compared to the prior year. Relative to our July guidance, FX rates lifted our earnings by — our earnings per share by $0.01.

Turning to the balance sheet, we have a strong balance sheet with approximately $1.9 billion in cash and investments at the end of the quarter. In addition, we have an undrawn line of credit up to $1 billion. Our public bonds of approximately $600 million don’t mature until 2028.

Average shares outstanding during the third quarter were 631 million and we expect average shares outstanding for the full year to remain at this level. Recall that in June, we increased the number of shares outstanding by executing a 3-for-1 stock split.

Free cash flow for the third quarter was $113 million, defined as cash flow from operating activities of $216 million, less capital spending of $103 million. Our year-to-date free cash flow was $361 million. Free cash flow was negatively impacted by a $100 million payment related to the settlement of the intellectual property matter last quarter.

Now I’ll finish up with our 2020 guidance for the remainder of the year. Our guidance assumes that the worst of the ’20 — of the COVID financial impact to Edwards is behind us although we anticipate regional hotspots and risks for the foreseeable future. Given that, we anticipate we will achieve fourth quarter year-over-year, underlying sales growth, similar to the third quarter. Within our product groups, we now expect TMTT sales of around $40 million. We continue to estimate TAVR growth to be at the high end of our previous range of minus 5% to plus 5%, Critical Care growth to be negative for 2020, but still within our previous guidance range of minus 5% to plus 5% and surgical growth still within our previous guidance range of minus 5% to minus 15% versus 2019.

We are raising the bottom end of our full year adjusted earnings per share guidance range to be now between $1.85 and $1.95 and for the fourth quarter we estimate adjusted earnings per share of $0.50 to $0.60.

And with that, I’ll turn it back over to Mike.

Michael A. Mussallem — Chairman and Chief Executive Officer

Thanks, Scott. I want to conclude by saying that Edwards is a dedicated member of the critical healthcare infrastructure and I admire the agility, resourcefulness and passion of our employees and partners in maintaining their important work on behalf of patients. Putting patients first has never been more important than it is today.

As we stand together with the global community, I’m gratified for our extraordinary team and partners and I’m optimistic about the future of delivering innovations to even more patients around the world.

With that, I’ll turn it back over to Mark.

Mark Wilterding — Investor Relations

Thank you, Mike. Before we open it up for questions, I am pleased to announce that our 2020 Investor Conference will be held on Thursday, December 10th. We anticipate a great event and a new virtual format that I hope you’ll really like. As usual, this event will include updates on our latest technologies, views on longer-term market potential and our outlook for the year ahead. More information will be available in the upcoming weeks on our website.

With that, we’re ready to take questions. In order to allow for broad participation, we ask that you please limit the number of questions to one plus one follow-up. If you have additional questions, please re-enter the queue and management will answer as many participants as possible during the remainder of the call. Diego?

Questions and Answers:

Operator

Thank you. [Operator Instructions] One moment please while we poll for questions. Our first question comes from David Lewis with Morgan Stanley. Please state your question.

David Lewis — Morgan Stanley — Analyst

Good afternoon. Just a couple of questions for me and thank you for taking them. So it seems you’re heading into Analyst Day here and a raising guidance probably makes limited sense. But I did want to parse out sort of the fourth quarter guidance and just be very crystal clear on what it means. Do we take the fourth quarter TAVR commentary to mean no improvement sequentially in TAVR or is it more we see some improvement at a lower rate, but we’re just adjusting that for potential risk of resurgence flu, what have you?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, thanks David. So it’s a little bit of all that. We grew 4% in the third quarter and we said that we thought the fourth quarter growth would be similar to that which we think is pretty remarkable in an environment like this and a real testament to our team and the supply chain. There are three factors that we considered when we set our Q4 sales guidance. One of them related to what we did last year. You will have to remember as a total company, we grew 20% and 30% TAVR growth in Q4 of ’19, even more in the US. So, by comparison, it’s quite a difference matter of fact. So the absolute sales number in Q4 is going to be certainly higher than the sales number in Q3.

There is an issue, I think, associated with our thinking related to the persistence of COVID-19 in the US and Europe. We think it’s probably prudent at this stage to just to be thoughtful because of the uncertainty associated with that.

And then one other factor that I’ll mention is we don’t believe that there is much of a significant backlog in Europe any longer, which probably gave us somewhat of a lift, a little bit of a lift in Q3 and not be repeated in Q4.

David Lewis — Morgan Stanley — Analyst

Okay. But you are seeing improvement in September, Mike, and you’re seeing some improvement into October in that underlying TAVR business in the US.

Michael A. Mussallem — Chairman and Chief Executive Officer

So — yeah. We’re not going to get into specific months, David. But you just have to remember the steep curve that we were growing at. So when we — even if the growth rate will remain constant, think of how many additional patients are being treated each month.

David Lewis — Morgan Stanley — Analyst

Yeah. So just a sequential comp issue, totally understand. And then just maybe one clinical for me and I’ll jump back in queue. Just the Medtronic head-to-head study they announced, Mike, just kind of curious if you think that population they described represents 40% of the available patients and frankly some clinicians feel that trial may actually favor S3 and non-hemodynamic endpoints. Just kind of curious on what patient population that targets and your thoughts on their strategy here and impacts to the market in general. Thanks so much.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, thanks. I think it’s a testament to the fact that TAVR is certainly a competitive field, right. Our whole industry is competitive and certainly TAVR is that. When we reflect on it, we put more of our focus on bringing new patients into the system. And we just think this disease is so undertreated, it’s a deadly disease, it’s what’s most important to us. If you look at why Edwards has grown in the past or why we’re going to grow in the future, that’s the biggest factor. I think you know that we’re extremely happy with SAPIEN 3 and the Ultra platform and there is just a large body of high-quality clinical evidence that supports those. So to have a head-to-head study on one factor it might be it, but we believe that clinicians make decisions based on the total patient outcomes and not one singular element.

David Lewis — Morgan Stanley — Analyst

Thanks so much.

Operator

Thank you. Our next question comes from Bob Hopkins with Bank of America. Please state your question.

Bob Hopkins — Bank of America Merrill Lynch — Analyst

Oh, great. Thank you and good afternoon. Just two quick things. One is a timing — timeline question, second is a TAVR follow-up. On the timeline side, Mike, I was wondering if you could just comment on any update on the readout on the asymptomatic trial and then also on timelines for US PASCAL approval. I assume those are unchanged, but just wanted to check.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. Thanks, Bob. Yeah, COVID-19 did impact the pace of enrollment, much in line with other trials. We’ve been encouraged by the pickup of enrollment in Q3 compared to Q2. But we’re not really providing an update at this time. We’ll have more to talk about at the investor conference and so we ask you to stay tuned for that.

Bob Hopkins — Bank of America Merrill Lynch — Analyst

Okay. And then on the TAVR follow-up side, just curious if you’re able to quantify how much rescheduled procedures might have helped Q3? And I was also wondering if you could just comment on the COVID flare-up that’s going on right now. Is that something that is slowing TAVR currently or are you just sort of taking that into consideration, you’re taking that possibility into consideration as you give Q4 guidance? Thank you.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. In the beginning part of that question, Bob, you wanted to me to get a little deeper on was about the backlog question and how much was there?

Bob Hopkins — Bank of America Merrill Lynch — Analyst

Just — yeah, in Q3, do you have — you may not have it [Phonetic] but just [Speech Overlap] —

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. Well, so we didn’t — so, we saw — we feel like we saw a different story in the US and Europe. And so US is the biggest part of our business. We don’t think there was much clearing of the backlog in Q3. We think that there just wasn’t much carryover. US hospitals tend not to run with big backlogs. In Europe, by contrast, there occasionally can be those depending on the country and we did indeed work those down. We feel like at this point in time there aren’t backlogs that are going to significantly impact our Q4 performance.

So I don’t know if that’s clear.

Bob Hopkins — Bank of America Merrill Lynch — Analyst

Yeah.

Michael A. Mussallem — Chairman and Chief Executive Officer

We have pretty much in the US all our hospitals performing cases which means that you also have hospitals that are screening patients. And so we are into a little bit more of a normal cadence at this point.

In terms of the COVID question, I think it’s a general concern. We’re not trying to signal something that’s an inflection point that we see. Just a general concern with the numbers that we’re watching in the US and Europe, we think it’s prudent for us to be careful because of the uncertainty.

Bob Hopkins — Bank of America Merrill Lynch — Analyst

Yeah. Fair enough. Thanks so much.

Operator

Thank you. Our next question comes from Joanne Wuensch with Citi. Please state your question.

Joanne Wuensch — Citi — Analyst

Thank you very much for taking the question. I have two. The first one is, can you walk us through the bridge to doubling TMTT revenues in 2021? How much is that coming from PASCAL and your level of confidence at reaching that at this stage? And then my second question is geographic reach outside of the three core markets I think has been next focus on China. Where are we on that launch and expansion? Thank you.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. Thanks, Joanne. As you can imagine we’re kind of early in our planning process for 2021. So we’re kind of going out there a bit and extending ourselves when we talk about our aspiration to double. So we’ll probably have more to talk about that to get in depth when we are together at the investor conference. But much like this year, the majority of those sales are likely to be PASCAL. We’re not necessarily — it’s going to be the addition of new sites that are going to help you do that. And we’ll have PASCAL and PASCAL Ace that will help us and we’ll be doing treatment of not only MR patients but TR patients next year, meaning tricuspid. So that combination is what’s leading our — us to have this aspiration to double.

Your question about China, we are really pleased that we completed our first cases. We think it’s going to take significant time. Even though we’re really excited about this. It was a major milestone for Chinese patients. The first time a multinational company is in there. There is just a lot of hurdles for a couple of reasons. Some are self-imposed. We are committed to make sure that we really carefully work with physicians so that they get well trained on our systems and get great results every time. There is also a fair amount of, I don’t know maybe bureaucracy is not the right term, but there is a lot of process related to really coming up in China. So it’s going to take us some time. And frankly, it’s a new journey for us to bring a therapy that this novel to China. So we don’t have a lot of experience with that.

Joanne Wuensch — Citi — Analyst

Thank you very much.

Michael A. Mussallem — Chairman and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Raj Denhoy with Jefferies. Please state your question.

Raj Denhoy — Jefferies — Analyst

Hi. Good afternoon. I hate to come back to this point, but the guidance for TAVR for the year, I know you’re talking about sort of 5% the upper end of the previous range. That sort of implies that the fourth quarter is going to be relatively flat, I guess, to the kind of 6% to this quarter. And I appreciate the commentary around Europe and not — maybe not seeing it bullish there. But I guess I’m just curious whether there is anything more to that, right. Is that really a kind of pullback from what you’re seeing or is it really just kind of a flattening of the recovery here into the back half of the year, the last quarter of the year?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, maybe I’m looking at this much different than you, Raj. I’m really excited about what’s going on with our business and the fact that we are going to be able to maintain this kind of growth rate. When you consider that last year TAVR grew 30% globally, and a matter of fact, I think it was 40% in the US and then we’re going to put a growth rate on top of it while the global pandemic is going on. I mean I feel pretty proud of that. I don’t know that it gets a lot better than that. So to think that there is something that we feel uncomfortable about is probably reading the signals wrong and maybe I didn’t state it the way I really feel about it.

Raj Denhoy — Jefferies — Analyst

No, that’s crystal clear. Yeah, definitely glass half full, not half empty. So it’s crystal clear. And maybe just on PASCAL, right, so a decent — a good quarter actually in terms of where you ended up there. Is that any indication of what’s happening on the ground in Europe? Is your strategy of pricing at a premium starting to yield some results for you there?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. So we are pleased with our results on PASCAL in the quarter. And again a very fluid situation having to ramp this up during the pandemic is a little bit challenging. But we’re really pleased with the way it’s come up, it’s because we added new centers in the quarter. We continue to implement what we call our high-touch model. So we’re very engaged with clinicians, involved in every case and working hard to make sure that they get great results each time.

So that’s really turned out to be what’s most important for us. The pricing is much the same as we’ve talked about in the past. We do have a premium. We think this is a really good therapy and performs at a superior level. Obviously, we need to back that up with data, but our strategy is unchanged.

Raj Denhoy — Jefferies — Analyst

Okay, very good. Thank you. Appreciate it.

Michael A. Mussallem — Chairman and Chief Executive Officer

Sure.

Operator

Our next question comes from Robbie Marcus with JP Morgan. Please state your question.

Robbie Marcus — JP Morgan — Analyst

Yeah, thanks for taking the question. And I’m sure you’ll get into this more at the Analyst Day. But I have to ask, the double-digit growth next year it’s easy comps this year and I would imagine everybody expected double-digit growth. How should we put this in perspective? Is this maybe double-digit growth CAGAR off 2019 numbers, any way you can help frame it because I’m sure there is a wide variance around what people interpret that to mean?

Michael A. Mussallem — Chairman and Chief Executive Officer

No, you’re so right, Robbie. I mean everybody should have some pretty terrific growth. I imagine if you’re an airline you could really have impressive growth rates coming off a low base. But one of the things that I think is remarkable about Edwards is we just didn’t take as big a dip as many other companies. So to return to double-digit growth, I think still is meaningful.

If there is something that I can add for color, it’s what I tried to relate it to the quarters. And so we would expect in quarters like one and four that are a little bit more comparable to a steady state, we will be likely to see the lower growth rates and then see much higher growth rates. So it should be usual ones probably for Q2 and Q3 when COVID was hitting the hardest. But hopefully that ends up providing some color, but your point is well taken.

Robbie Marcus — JP Morgan — Analyst

That’s really helpful. Appreciate it. And then maybe just a quick follow-up here. One of your competitors smaller in the TAVR space recently talked about at TCT some fatigue in structural heart trial recruiting. It sounds like you’re more back to normal. Should we expect trials to continue at pre-COVID levels here given that doctors are still catching up on patients to a degree or should we expect that it was a six-month delay for most trials and the clock can restart here? Thanks.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, it’s a good question, Robbie. As you might imagine to make predictions on something like this is challenging. We kind of stick our neck out here a little bit. When we are talking about our TMTT trials, we said, we think it did go back to pre-COVID levels. And in TAVR where we have some pretty aggressive enrollment, it’s probably getting closer. It might be a little short of it, but it’s moving along pretty well and we’re hoping that the situation continues to be stable and roll that way.

Robbie Marcus — JP Morgan — Analyst

Great. Thanks a lot.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah.

Operator

Our next question comes from Matt Miksic with Credit Suisse. Please state your question.

Matthew Miksic — Credit Suisse — Analyst

Hi. Thanks for taking the question. I have just one on — a follow-up on sort of the TAVR environment and one on maybe sort of pipeline for patients and the process for getting more of these patients in the centers. But first, just you mentioned I think Mike in your prepared remarks that smaller centers grew faster in the US here in the third quarter. I’m just wondering is that off of — more of a constrained performance in Q2 or do you find that they are sort of leading are lagging? Is there any kind of pattern in large or small centers or regionally that you can talk about, just color on how all these centers are coming back? And then I have one follow-up.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, thanks Matt. And very fair question. We’ve given different guidance in the past for other quarters. We’re more or less just trying to tell you what we saw which is that the smaller centers seem to grow faster. In terms of being and explain the why behind that we’d be speculating to some extent. We make — we can make up stories that maybe the larger centers or in [Phonetic] big metropolitan areas that we’re harder hit by COVID. But we really don’t have hard evidence to back that up, Matt. But we just did see it in the smaller centers more than the larger.

Matthew Miksic — Credit Suisse — Analyst

It’s great. And then the follow-up just on the challenges around ramping up patients coming into the centers and being diagnosed. I’ve seen some of the data you presented on the number of echoes taking a dip in the toughest part of the pandemic, and I’m assuming recovering coming out of that. Is it sort of — as you look at or centers look at trying to get their pace of patients up and going again for the reasons you described and risks to patients and so on, is it echo part of the process, is it just getting patients in to see their cardiologists? Where do you think maybe the biggest challenges are or the biggest — greatest progress that’s been made in turning that around?

Michael A. Mussallem — Chairman and Chief Executive Officer

Okay. Yeah. Thanks, Matt. I mean I don’t want to miss the really big issue, which is that by and large our conversations with hospitals, they have — they really strongly believe that they now know how to do TAVR cases or to treat structural heart patients and COVID patients at the same time. When this first hit in Q2 that was a question mark. And I think that for all the right reasons for patients and for the health of hospitals they figured that out. So that’s been important.

It’s hard to speak in generalities around the whole world. But if we just take US, which is the biggest market when the hospitals sort of closed the stores and prepared for COVID, not only did they stopped doing procedures they stopped doing screening. And so when this got turned back on they turned on both the screening process and the actual procedures at the same way.

Now, I don’t know that they have actually additional screening capacity beyond what they’ve had in the past. So that probably becomes somewhat of a constraint, but there probably were some patients that were either lost sadly just because they passed away or are just not in the system today that would have been otherwise in a more normal year.

Matthew Miksic — Credit Suisse — Analyst

Thank you for the color.

Operator

Our next question comes from Danielle Antalffy with SVB Leerink. Please state your question.

Danielle Antalffy — SVB Leerink — Analyst

Hey. Good afternoon, guys. Thanks so much for taking the question. Just a question on PASCAL in Europe. And I’m curious, Mike, if you could give a little bit of color on how centers are adopting PASCAL. We saw with TAVR a lot of these centers carry more than one device on the market. Are you seeing — on their shelves, I am sorry. Are you seeing the same with the mitral repair product or they are switching essentially to PASCAL from MitraClip?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, it’s a good question and I know I probably [Phonetic] — I’ll be generalizing to some extent. So that’s already dangerous. But I wouldn’t say that we see people completely switch from one system to another. I think that we see them more or less split. Again, they’re very interested in PASCAL, they invite us in, in many cases they’re learning, we’re part of the procedures and help them work through it.

As we think about and maybe to just give you something else to think about, I know we are hyper-focused on how much we sell of PASCAL in the quarter. But if you really look for leading indicators of what’s going to be most important for TMTT, I think there is three factors. How is this portfolio of differentiated therapies really developing? Are they coming along? Are those good procedures? Are they learnable, teachable? Are they fast procedures? Are they reproducible? How about your real-world clinical outcomes? You saw some of the leading indicators of that at TCT Connect and I think it’s encouraging. And then just how are we doing on the clinical trials? We’ve got some very rigorous clinical trials that are going to provide really incredible data. And so those are going to be the things that both lead to approvals and adoption.

So although the sales are an interest one to track, I don’t know that it’s a strong or leading indicator of some of these other factors. We frankly put more energy to make sure we get great results than just try and maximize sales.

Danielle Antalffy — SVB Leerink — Analyst

Got it. That’s helpful. Thanks. And then if I could ask one more question and that’s on the head-to-head trials that Medtronic is running or trial, the SMART trial, and just the whole dynamic of the hemodynamic gradient. And I’m curious if you guys have had to counter detail that at all in the field, this is more noise from Medtronic than something that actual physicians care about. Thanks so much.

Michael A. Mussallem — Chairman and Chief Executive Officer

Sure. Our folks probably answer questions about that on a regular basis. What we know is, we’re just really pleased with the SAPIEN 3 and especially the SAPIEN 3 Ultra performance. We think people have relied on it, not just normally but even during this pandemic. I think the performance speaks for itself. We’ve got some pretty impressive data that’s been generated over time, whether it’s death, stroke, paravalvular leak, low pacemaker rate, the list goes on. And so we just have a high level of confidence in this and don’t — we wonder whether — how important that factor is going to be long term to look at one thing.

Danielle Antalffy — SVB Leerink — Analyst

Thanks. That’s helpful.

Operator

Our next question comes from Adam Maeder with Piper Sandler. Please state your question.

Adam Maeder — Piper Sandler — Analyst

Hi, guys. Thanks for taking the questions. Maybe to start just on PASCAL Ace, I was hoping to get some additional detail there. I think you mentioned that it has a narrow profile. So how should we think about the clinical impact? Is it improved safety or efficacy, is it for different anatomy? Just any color you could provide there would be great and then I had a follow-up.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. Yeah, thanks for that, Adam. So first of all think of it as having the — almost the same differentiated features as PASCAL. So it’s got the independent panels, it’s got a spacer, all those things like PASCAL but with a narrower profile. It’s a [Indecipherable] system.

The questions you ask about, okay, how is it going to manifest itself clinically. We are expecting it to be a complement that as physicians gain experience they will say, oh, maybe this is a good case to use a PASCAL Ace. Frankly, we’re still early in our experience and those are some of the answers that we’re going to get as we get deeper experience. At this point we’re still — it’s still new enough that we can’t say definitively where that’s going to fit on a long-term basis.

Adam Maeder — Piper Sandler — Analyst

Got it. Okay. Thanks for the color there, Mike. And then for the follow-up maybe switching to TAVR, just curious if you had a sense for the number of US TAVR sites that were added in Q3. What are the expectations going forward? Do you think we’re in an environment now where we can see new sites start to come back online at a healthy clip? Thanks so much for taking the questions.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, thanks. I’m trying to think of the data. I know that we talked about the fact that there were about 750. The last time we reported in, I don’t remember what the number is. And so I have to go back and check on that.

Just to give you a little bit color though, we’re probably anticipating in the US that this maxes out maybe in the 850 range. So I don’t know if that helps you think about it. The rate that they are actually joining, I don’t know off the top of my head.

Adam Maeder — Piper Sandler — Analyst

Got it. Thank you.

Operator

Our next question comes from Matt Taylor with UBS. Please state your question.

Matthew Taylor — UBS — Analyst

Hi. Thank you for taking the question. So I just wanted to follow up on that center question for next year. When you’re thinking about this double-digit growth, do you need to add a lot of centers to do that? Can you talk about your assumptions for center adds and how much of that growth comes from existing versus new centers?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. Yeah, thanks for that. Well, you could imagine, most of our growth is going to come from existing centers. New centers, by their nature, are smaller. I don’t know the specific number that’s in there, maybe that’s a good question to ask at the investor conference. But that’s not going to be the bulk of our growth. The bulk of our growth is going to come from growth in existing centers. Remember, we’re at 750 already. So to drive these kind of big numbers, you can just — you can anticipate that.

Matthew Taylor — UBS — Analyst

And just to follow, everybody has been kind of dancing [Phonetic] around this question, but I mean the consensus is modeled around 19% or 20% growth on the old number and you’re talking about double-digit growth. Can you comment at all about consensus and whether you think that’s progressive, realistic? Is there a scenario that you can do that number?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. I am maybe not as intimately familiar with the consensus as you are. But I’ll just remind you that, what to say, 19% is probably driven off a much lower base than Edwards is actually delivering in 2020. So what you might want to do is to think about it more in terms of the actual sales rather than a sales growth rate.

Matthew Taylor — UBS — Analyst

Okay. All right. Thanks, Mike.

Operator

Our next question comes from Larry Biegelsen with Wells Fargo. Please state your question.

Larry Biegelsen — Wells Fargo Securities — Analyst

Hey. Good afternoon, guys. Thanks for taking the question. Two on the pipeline, one on catalyst in 2021. What are the most important ones, Mike? I’m not — what are — I’m not interested in laundry — I’m not asking for a laundry list, but what do you think the most important ones are? And I’m specifically interested to know if we could see the CLASP IID data next year and EVOQUE for tricuspid CE Mark approval and I have one follow-up.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, I don’t think that we’re going to see pivotal trial results in 2021. I think those are more likely to come in 2022. I do expect there to be a steady drumbeat of the new data almost on a continuous basis. We have so many innovations going on, Larry, that I think at every meeting you’re going to see follow-ups on CE Mark studies, you’re going to see first experiences, you’re going to see a lot of things that are really powerful leading indicators. But in terms of a pivotal trial, I don’t think that we have one in ’21.

Larry Biegelsen — Wells Fargo Securities — Analyst

Thanks. And, Mike, on the tricuspid market there does seem to be a lot of enthusiasm for transcatheter tricuspid therapies. And I guess my question for you is do you think we’re going to need randomized controlled data to kind of drive that market outside the US or do you think it could develop like we saw TAVR develop before you came out with the PARTNER trial? There you had pretty strong uptake for SAPIEN in Europe before the randomized control data. So what do you think — what’s your view on the tricuspid market what it’s going to take to drive that?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah. So, Larry, I mean you’re pretty familiar, right. You came along for this journey and TAVR. And even though we had nice sales for TAVR in Europe they really didn’t take off until we had the pivotal data in the US and made a significant step-up with those big pivotal studies.

Now having said that, kind of like TAVR there is a lot of excitement on the part of clinicians to treat their tricuspid patients. There aren’t many answers for them and so they are anxious to have solutions. So if we can deliver some results we think it could be interesting. But, boy, predicting the tricuspid adoption rate is still very difficult. I think it’s going to be so important for us to get some long-term results on that before we can make it.

We have a lot of studies coming, TRISCEND II, the CLASP which is the EVOQUE trial, we have the EVOQUE TR pivotal trial, we have CLASP II which is the tricuspid trial. So we have real trials that are pointed at or exploring this. And finally, the answer to your question, but it’s still early, Larry.

Larry Biegelsen — Wells Fargo Securities — Analyst

Thank you, Mike.

Operator

Our next question comes from Vijay Kumar with Evercore ISI. Please state your question.

Vijay Kumar — Evercore ISI — Analyst

Hey, guys. Thanks for taking my question. Mike, one on TAVR. The asymptomatic market or moderate AS, if you will, either one of those, any numbers around how big these opportunities could be sizing either moderate or asymptomatic?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, that’s a good question. It’s interesting. Almost the more we learn about AS, the more we learn about AS. The market turns out to be pretty significant of people that are undiagnosed and not really in the system. And so, it’s difficult for us to say that quantitatively. We are — we do think the asymptomatic patients is a significant population and we think that the moderate AS is also a very significant population. We haven’t been able to accurately size those at this point. That will be a good one maybe for us to get a little deeper when we’re together in December. But this one, we’re confident that it’s a driver and going to be a driver on a very long-term basis, but it’s not clear what the size is at this point.

Vijay Kumar — Evercore ISI — Analyst

Understood. And one quick one for Scott. Maybe when you look at the spending for ’21, Scott, as marketing spend comes back, clinical trials open up, reopen or restart, I guess, how should we think about opex? And anything on the FX dynamics for next year when we think about gross margins? Thank you, guys.

Scott B. Ullem — Corporate Vice President, Chief Financial Officer

Well, it’s early to talk about what our operating margins may look like in 2021. Although I will tell you we’re eager to get back to full pace of travel, of being out in the field, of being with customers and of ramping our clinical trials back up to fully pre-COVID levels. And so we’re anticipating that those expenses will ramp as quickly as we’re allowed to do it.

In terms of FX for 2021, it’s just premature to say. I mean, you know what happened in 2020 which is, we expected a big headwind from FX to sales, ends up with that dissipated. Now, we’re expecting no headwinds to sales for FX. And so it’s just — it’s premature to speculate what that’s going to look like in 2021, although we will be talking more about that at our investor conference when we give guidance in December.

Vijay Kumar — Evercore ISI — Analyst

Understood. Thanks, guys.

Operator

Thank you. Our next question comes from Margaret Kaczor with William Blair. Please state your question.

Brandon Vazquez — William Blair — Analyst

Hi. This is Brandon on for Margaret. Thanks for taking the questions. First one I just had one at TCT this year there was a lot of presentations or a lot of focus within the valve-in-valve, I guess, treatment opportunity. I was curious how meaningful this is today in practice or is this more kind of a clinical focus? And do you guys think that the data that’s been collected so far is compelling enough to convince physicians to treat low-risk patients while we’re kind of waiting for long-term durability data? And there was even some TAVR within SAVR. So is that a meaningful opportunity as we move forward?

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, thanks. We’re really pleased to report that five-year data of valve-in — or TAVR-in-TAVR, if you will, and it says, hey, pretty good quality of life and so forth maintained through five years and that data is always valuable. A little bit of what you have to do is to put it in perspective, remember that data goes back quite a ways. And so that — at that time, I’m not sure we even had intermediate approved for very long. And so the average age of those patients were nearly 80 years old. So they were sick and at high risk.

And when — if you just take a look and see what those results look like and then in this fast-moving TAVR world where improvements have been significant, we would expect that as technologies improve and we move to lower-risk patients that those results get even better. Just having a valve-in-valve option for these younger patients with tissue valves or transcath valves is a big deal for them to be able to avoid surgery. So we think it’s something the clinical community and patients especially really value.

Brandon Vazquez — William Blair — Analyst

Thanks. And then just in terms of kind of the rebound that’s going on within TAVR, I think in prior calls we’ve kind of discussed that it’s been broad adoption within all risk classes. Any specific risk classes kind of leading the rebound now and, kind of, are you happy with the progress being made into the low-risk opportunity even through COVID? Thank you.

Michael A. Mussallem — Chairman and Chief Executive Officer

Yeah, yeah. Thanks. Yeah, no, we don’t have any particular visibility of these patients by risk level that gives us a deeper insight to the question you’re asking about what we’re seeing right now. So we just don’t have much on that.

In terms of the adoption of low risk, we saw a pretty steep inflection point once the data was presented last year. It’s getting to a point now where it’s been out there for more than a year. We’re still seeing steady increases but not at the same pace that we saw when it was first introduced last year.

Brandon Vazquez — William Blair — Analyst

Thank you.

Mark Wilterding — Investor Relations

Thank you. That’s all the time we have for questions today. I’ll turn it back to management for closing remarks.

Michael A. Mussallem — Chairman and Chief Executive Officer

Okay. Well, thanks very much for your continued interest in Edwards. Scott, Mark and I are going to welcome any additional questions by telephone. And with that, back to you, Mark.

Mark Wilterding — Investor Relations

Thank you very much. Diego, that does it from our perspective.

Operator

[Operator Closing Remarks]

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