Greetings and welcome to the Edwards Lifesciences 3rd Quarter 2021 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to our host, Mark Wilterding, Vice President of Investor Relations and Treasurer. Thank you. You may begin.

Good afternoon. And thank you all 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 2021 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 of which they are 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 the pandemic that could cause actual results to differ materially. Information concerning factors that could cause these differences and important product safety information can be found in the press release, our 2020 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're referring to GAAP results. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today's press release. With that, I'd like to turn the call over to Mike for his comments, Mike.

Thanks, Mark. Let me begin by expressing appreciation for our global teams who have been highly engaged throughout the pandemic. We're also pleased that our supply chain remained resilient during these challenging times to meet the needs of the patients we serve. Turning to results, third quarter total Company sales of $1.3 billion increased 14% on a constant-currency basis versus the year-ago period. Strong mid-teens growth was driven by our innovative platforms, although lower than our July expectations due to the significant impact COVID had on U.S. hospitals. Although we experienced encouraging signs of patient confidence and continued willingness to seek medical care in July, the Delta variant had a significant impact on hospital resources during the last two months of the third quarter, especially in the U.S. Despite the pronounced impact of the Delta variant in the U.S. in Q3, we're encouraged by the recent decline in hospital COVID admissions. We believe some procedures were unfortunately deferred in the third quarter. And based on what we saw in Q2, we expect many of these patients who deferred treatment in Q3 will be treated in the future. We continue to expect total Company sales growth to be in the high teens for the full year. In TAVR, third quarter global sales were $508 million, up 14% on an underlying basis versus the year-ago period. We estimate global TAVR procedure growth was comparable to our growth in the third quarter. Globally, our average selling price remained stable. In the U.S., our TAVR sales grew 12% on a year-over-year basis and we estimate that our share of procedures was stable. Growth was broad-based across both high and low volume centers. As you might expect, procedure volumes in Q3 were affected by seasonality and varied by geography and even by hospital, as patients and providers turned their focus again to the pandemic. Our TAVR sales in July benefited from encouraging signs of continued recovery from the pandemic; however, procedures were negatively impacted in the last two months of Q3 due to the significant impact Delta had on hospital resources. Outside the U.S. in the third quarter, our sales grew approximately 20% on a year-over-year basis, and we estimate total TAVR procedure growth was comparable. We continue to be encouraged by strong international adoption of TAVR, broadly, in all regions. And despite the impact of Delta, the TAVR market in Europe showed relative resilience with strong growth in procedure volumes. Growth was broad-based across Europe and driven by continued strong adoption of our SAPIEN 3 Ultra platform. We were pleased with the growth rate considering that in Q3 of 2020, centers in Europe had already recovered from pandemic lows. Longer-term, we see excellent opportunities for continued OUS growth, as we believe global adoption of TAVR therapy remains quite low. It's worth noting that published guidelines from the European Association of Cardiothoracic Surgery definitively recommend TAVR for patients over the age of 75. The acknowledgment by the Surgical Society that TAVR is preferred for those over 75 is a significant development. We believe these guidelines represent an important long-term opportunity and although transcatheter valves have been commercially available for over a decade in Europe, it remains clear that there is still a large unmet need for this therapy. Strong TAVR adoption continued in Q3 in Japan. As expected, we received reimbursement approval in Q3 for treatment of patients at low surgical risk. We remain focused on expanding the availability of TAVR therapy throughout this country, driven by the fact that AS remains a significantly under-treated disease among this large elderly population. At the upcoming TCT meeting, there's a planned late-breaking update on the economic outcomes of PARTNER 3 at 2 years. In summary, based on October procedure trends, we expect Q4 growth for TAVR to be similar to Q3. We continue to expect underlying TAVR sales growth of around 20% in 2021. We remain as confident as ever, about the long-term potential of TAVR because of its transformational impact on the many patients suffering from aortic stenosis and because many remain untreated. The long-term potential reinforces our view that this global TAVR opportunity will exceed $7 billion by 2024, which implies a low double-digit compound annual growth rate. Now, turning to TMTT, we've made meaningful progress across all our platforms with over 6000 patients treated to date, to transform treatment and unlock the significant long-term growth opportunity. We remain focused on three key value drivers: a portfolio of different shaded therapies, positive pivotal trial results to support approvals and adoption, and favorable real-world clinical outcomes. This quarter we progressed on the enrollment of 5 pivotal trials across our portfolio to support therapies for patients suffering from mitral and tricuspid regurgitation. We are gaining experience with the PASCAL precision platform as part of our class trials, and physician feedback continues to be positive. We look forward to presenting randomized data from the class 2D pivotal trial next year and remain on track for the U.S. approval of PASCAL for patients with DMR late next year. This important milestone will mark a transition from large single-arm studies through significant pivotal trial results that support approval and adoption and will be the first of several key datasets from our class of trials. We continue to treat patients with both of our transcatheter mitral replacement therapies through the ENCIRCLE pivotal trial SAPIEN M3 and MISCEND study of EVOQUE Eos. We are ramping up enrollment with our novel EVOQUE tricuspid replacement therapy as part of the TRISCEND II pivotal trial. These transcatheter therapies are critical for many patients without treatment options today and exemplify the importance of a comprehensive portfolio. As we continue to expand our body of clinical evidence, we look forward to presenting meaningful data at TCT and PCR London Valves next month. Presentations will include six-month outcomes of EVOQUE tricuspid replacement from our clinical trial experience in the TRISCEND study. In addition, 30-day outcomes for mitral repair with PASCAL from our MISCEND post-market clinical follow-ups study of over 250 patients. We also anticipate several live case demonstrations of our differentiated therapies. Turning to the financial performance in TMTT, despite the impact of Delta and summer seasonality, global sales of $22 million were driven by the continued adoption of PASCAL in Europe. As we expanded commercially, we continue to experience high procedural success rates and excellent clinical outcomes for patients. And we remain committed to employing our high-touch clinical support model. We are pleased with our level of site activation during the quarter. We continue to expect to achieve our previous full-year guidance of $80 million to $100 million and estimate the global TMTT opportunity to triple to approximately $3 billion by 2025. And we're pleased with our progress toward advancing our vision to transform the lives of patients with mitral and tricuspid valve disease. In Surgical Structural Heart, third quarter global sales were $217 million, up 6% on an underlying basis versus the year-ago period. Despite the Q3 resurgence of COVID cases, we were encouraged to see continued SABR procedure growth across most regions. We remain encouraged by the steady global adoption of Edwards RESILIA tissue valves, including INSPIRIS RESILIA aortic valve, the KONECT RESILIA valves conduit and our MITRIS RESILIA mitral valve. This advanced tissue treatment is increasingly supported by a growing body of real-world evidence, as demonstrated at the European Association of Cardiothoracic Surgeons annual meeting earlier this year. Registry data confirmed excellent real-world outcomes with INSPIRIS RESILIA in patients under the age of 60. As patients increase their awareness of surgical valve choices, we believe that they are learning about the durability potential of RESILIA and engaging with their physicians to choose this technology. In summary, we have confidence that our full-year 2021 underlying sales growth will be in the mid-teens for Surgical Structural Heart, driven by market growth and adoption of our premium technologies. We continue to believe the Surgical Structural Heart market that we serve will grow mid-single-digits through 2026. In Critical Care, third quarter global sales were $213 million, up 17% on an underlying basis versus the year-ago period. Growth was driven by contributions from all product lines led primarily by strong HemoSphere capital sales in the U.S. Our True Wave disposable pressure monitoring devices used in the ICU remained in demand due to the elevated hospitalizations in the U.S., and demand for products used in high-risk surgery also grew year-over-year in addition to demand for the ClearSight non-invasive finger cup used in elective procedures. In summary, we continue to believe that Critical Care will grow revenue in the low double-digit range in 2021. We remain excited about our pipeline of Critical Care innovations as we continue to shift our focus to smart recovery technologies designed to help clinicians make better decisions for their patients. And now I'll turn the call over to Scott.

Thanks, Mike. Today, I'll provide additional perspective on the third quarter, along with how we anticipate the rest of the year may unfold and some color on what to expect at the investor conference on December 8th. Total sales in the third quarter grew 14% on an underlying basis over the prior year. As indicated earlier, this strong sales growth is lower than we expected in July before the U.S. Delta surge. Earnings in the quarter of $0.54 met our expectations as COVID-related constrained spending more than offset lower-than-expected sales. As Mike mentioned, based on the improving trends with the Delta variant and our October procedure trends, we're projecting total Q4 sales of between $1.30 billion and $1.38 billion. As it relates to each product line, we are forecasting fourth quarter TAVR sales of $850 million to $910 million and still have the potential to reach underlying TAVR sales growth of around 20% for the full-year 2021. We're also maintaining our previous ranges for TMTT, Surgical Structural Heart, and Critical Care. We continue to expect our full-year adjusted earnings per share guidance at the high-end of $2.07 to $2.27 with fourth-quarter adjusted EPS of $0.53 to $0.59. And now I will cover additional details of our third quarter results. Our adjusted gross profit margin was 76.3%, up from 75.5% in the same period last year when we experienced substantial costs responding to COVID. The improvement was also driven by a more profitable product mix, partially offset by a negative impact from foreign exchange. Like most companies, we are seeing signs of inflation in things like some of the raw materials we use in production, as well as shipping and logistics. With that said, some of the extraordinary costs we incurred when COVID hit last year have lessened. The net result is no material impact to our gross profit margin performance or guidance for 2021. More broadly, we're continuing our investments to ensure that our supply chain is strong and resilient and capable of delivering life-saving products for our patients. We continue to expect our 2021 adjusted gross profit margin to be between 76% and 77%. Selling general and administrative expenses in the third quarter were $364 million or 27.8% of sales compared to $307 million in the prior year. This increase was primarily driven by personnel-related costs and increased commercial activities compared to the COVID impacted prior year. We are planning a sequential ramp-up of expenses in the fourth quarter as COVID-related restrictions continued to subside. We still expect full-year 2021 SG&A expenses as a percentage of sales excluding special items to be 28% to 29%. Research and development expenses in the quarter grew 22% over the prior year to $238 million or 18.2% of sales. This increase was primarily the result of continued investments in our transcatheter innovations, including increased clinical trial activity. We are planning to increase these expenses in the fourth quarter as we invest in developing new technologies and generating evidence to expand indications for TAVR and TMTT. For the full-year 2021, we continue to expect R&D expenses as a percentage of sales to be 17% to 18%. Turning to taxes, our reported tax rate this quarter was 13% or 13.9% excluding the impact of special items. This rate included a 320-basis point benefit from the accounting for stock-based compensation. We continue to expect our full-year rate in 2021, excluding special items, to be between 11% and 15%, including an estimated benefit of four percentage points from stock-based compensation accounting. Foreign exchange rates increased third quarter reported sales growth by 70 basis points for $8 million compared to the prior year. At current rates, we continue to expect an approximate $70 million positive impact, or about 1.5%, to full-year 2021 sales compared to 2020. Foreign exchange rates negatively impacted our third quarter gross profit margin by 30 basis points compared to the prior year. And relative to our July guidance, FX rates positively impacted our third quarter earnings per share by less than a penny. Free cash flow for the third quarter was $471 million, defined as cash flow from operating activities of $532 million less capital spending of $61 million. Our year-to-date free cash flow was $1.1 billion. The strong cash flows are a reflection of our exceptional portfolio of patient-focused technologies that are generating returns from previous investments, which allows us to fund future internal and external opportunities. We continue to maintain a strong and flexible balance sheet with approximately $3 billion in cash and investments as of September 30th. Average shares outstanding during the third quarter were 632 million and we continue to expect our average diluted shares outstanding for 2021 to be at the lower end of our 630 to 635 million guidance range. We have approximately $1.2 billion remaining under the share repurchase program. Before turning the call back over to Mike, I'll make a quick comment about our outlook for 2022. It's premature to offer detailed guidance today, but we will provide 2022 financial guidance at our Investor Conference on December 8th. In general, in 2022, we're planning on less disruption from COVID, as we assume the resumption of more normalized sales and earnings growth. We will provide guidance for gross profit and operating margins, as well as more visibility into any potential impact from changes in corporate tax rates. And with that, I'll pass it back to Mike.

Thanks, Scott. We're very pleased with our strong year-to-date performance despite the headwinds associated with the pandemic. And as patients and clinicians increasingly choose transcatheter valve therapy, we remain optimistic about the long-term growth opportunity. We are committed to aggressively investing in our focused innovation strategy because we believe there is a broad group of patients still suffering from structural heart disease, and the pandemic's impact will wane. We remain confident that the innovative therapies resulting from our investments will continue to drive strong organic growth in the years to come. And with that, I'll turn it back over to Mark.

Hey, thanks a lot, Mike. And as you heard from Scott earlier, our 2021 Investor Conference will take place on Wednesday, December 8th, here at our headquarters in Irvine, California. For those of you able to join us on campus, the conference will be hosted with appropriate safety precautions, and there will also be available via webcast. Either way, we really hope you can be a part of it. In addition to our 2022 financial guidance, you'll hear more about Edwards' focused innovation strategy and our comprehensive and exciting product pipeline. For more information, please visit the Investor Relations section of the Edwards website at ir.edwards.com. So, with that, we're ready to take your questions. As a reminder, please limit the number of questions to 1, plus 1 follow-up, to allow for broad participation. If you have additional questions, please reenter the queue, and management will answer as many participants as possible during the remainder of the call. Diego?

Thank you. Our first question comes from Vijay Kumar with Evercore ISI. Please state your question.

Hey, guys. Thanks for taking my question. Maybe for the first one, Mike or Scott, perhaps the Q4 guidance here. What are the underlying assumptions here in terms of any further disruptions from future waves or perhaps even the flu season where it might be perhaps hard to differentiate respiratory symptoms between a traditional flu versus the COVID? So, some commentary on Q4 assumptions would be helpful.

Yes. Thanks, Vijay. Like so many others, we really struggle with precisely projecting the pandemic. Edwards' business is strong; all the fundamentals are in a great place, and we know that there are many patients with structural heart disease, in particular, that are in need. We feel great about it from that perspective, but the pandemic ends up having an impact on hospitals and their ability to be able to handle the volumes, and we find it very spotty. It's regional in nature and the good news is we're watching the Delta variant come down in the U.S., and that's where we felt most of the impact, and that's very good. Of course, there is concern about will there be some kind of a winter surge that is not apparent at this point. So those things are always possible. We have by and large modeled the fact that we think things are going to get gradually better. We have taken into account where we are in October. And in October, we saw run rates that were similar to what we saw in the last couple of months of Q3. And so that has also gone into our thinking. So, I don't know if that answers your question, Vijay?

No. That's helpful, Mike. And just on the last comments around hospital capacity to handling volumes, I guess labor shortage has been spoken about on the one hand. When I think about the limited number of centers and the issue of labor shortages, it feels like hanging backlog or excess cases might be a challenge for them. On the flip side, Mike, conscious sedation, where patients are in and out pretty quickly, these are highly profitable procedures, so should we perhaps be making a case for hospitals to incentivize drug volumes? I'm curious how you balance this too.

Yes. No, it's a great point, Vijay, and it is one of the pluses that's associated with TAVR that often there isn't an ICU stay. But when we watch what happens with various hospitals and sometimes whether it's for staffing reasons or just the fact that they're swamped with COVID patients, they will just put up the stop sign and decide that they're just not going to do procedures and whether they are elective or resource consuming or not. We're probably more impacted by the ICU capability. But it's not always the case. Sometimes it's just broadly across the hospital. So I don't have one answer for all because it tends to be a bit more nuanced with this hospital being a bit different, but hopefully, it provides you with a little bit of color.

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

Okay. Thanks, and good afternoon. Mike, I realize it's a challenging time to make forecasts. And I won't ask you about forecasts. What I'm curious about and would love your views on, is just what we know now, what are you seeing out there now? How much better is the environment than it was a month ago? Just curious to see your net views on, and I'm asking specifically from a TAVR perspective. How much improvement you are seeing, where are we right now relative to where we were just a few months ago? Thank you.

Thank you, Bob. That's a great question. Our team monitors daily sales closely and adjusts their outlook based on daily changes. Things have improved somewhat today compared to earlier in the month, but I don’t want to delve too deeply into specifics. Generally, October has been similar to the end of Q3, and we didn't want to suggest that October has returned to the conditions of Q2. We haven't seen that type of environment yet, but we remain optimistic. We’ve spoken with many people, and the improvement in Delta is a trend we believe will be beneficial. We often think of TAVR as a delayed indicator of COVID trends, as cases typically lead to ICU admissions, which may influence our caseload a bit later. However, this is somewhat speculative.

Bob, I'll just check on something that Mike said. Which is if you just roll forward, what things have been trending like in October, the growth rate for Q4 and TAVR looks a lot like it did for Q3, which is, call it 14%. So, like Mike said, it's moving around, we're watching it carefully and try not to overreact or underreact to what the daily sales trends look like. But if you had to call it right now, that's sort of what the trend looks like. And then for the full year, it gets you to something nearer the 20% underlying growth rate that we've talked about for all of 2021.

Okay. Thank you, Scott. That's very helpful. And then last quick question is just on the U.S. trial for PASCAL and when we'll see those data, is there a set time for that yet or just sometime early in 2022?

We don't have clarity on when the timing for that will be. We say it'll be next year. We're sticking with our date and our belief that we will have approval by the end of next year. But we really don't have clarity on when it's going to be presented. That'll be one that we'll hopefully, we'll have a little bit more visibility when we get to the investor conference, Bob. I'm trying to give you a sense for it at that time.

Thank you. Our next question comes from Robbie Marcus with JPMorgan. Please state your question.

Great. Thanks for taking the questions. First one for me, earlier this year, we saw some competitive data that maybe looks a little more competitive with SAPIEN 3. I know it's still early days and the European numbers look good this quarter, but are you starting to see any shift in trends or reception to some of the newer Valves in Europe recently?

The short answer is no; it's been very similar feeling that we've had throughout the year that was the case in the past. We continue to think that the top two competitors make up about 85% of the sales in Europe, and all the rest, which is a full complement of competitors, make up the other 15%. We really haven't seen any significant shifts in that, if that's helpful.

Yes, it is. I have a question for Scott. This quarter highlighted the financial leverage potential of the business. You mentioned increased spending in the fourth quarter, but how do you view our gross margin and operating expenses compared to a pre-COVID environment? In other words, if we look ahead to a time without COVID, is there potential for further improvement in gross margin? Also, how constrained are our SG&A and R&D expenditures compared to what you would ideally spend in an unrestricted setting?

We do think gross margin has room to improve from, as does operating margin. Keep in mind we're already starting from relatively strong margins compared to our industry. So, our priority has been investing aggressively in internal growth more so than on trying to expand margins. But I do think there's going to be opportunity for those margins to gradually, incrementally, slowly expand over time. And it's something that we try to think carefully about. Short-term though, to your question about COVID, it's been remarkable; our margins have remained pretty stable despite the fact that sales are down relative to pre-COVID levels. Because expenses are down as well, largely driven by things that are happening out in the field. So, travel, meetings, attendance at various different societies and events. And so, it's been kind of a natural hedge against the sales headwinds that we've seen from COVID, and we're benefiting from that. To be honest though, we'd like to see expenses go back up along with sales because it's an indication that the environment is more normalized, that we're able to invest aggressively that we can enroll our clinical trials at the higher rates that we saw pre-COVID. And so, that's the way we're thinking about margins overall.

Our next question comes from Josh Jennings with Cowen, please go ahead with your question.

Hi. Good evening. Thanks so much for taking the questions. I wanted to start, Mike; I was hoping to just learn a little bit about your updated thoughts on the backlog that you mentioned in the second quarter earnings call. Assume with just the environment that that's peeled back a little bit. But one, just any kind of review of the referral channels and patients coming off the sideline in Q3. And should investors be thinking that that 2Q phenomenon could reemerge in 2022 as we move through this COVID surge?

Thanks, Josh. You're on a key point, and we do talk about it quite a bit inside. We don't have perfect visibility and perfect data. So much of what we rely on are anecdotal reports when we spent a lot of time with our customers and front-line clinical specialists to try and gain some kind of perspective. It's tough for us to nail the timing and magnitude of this, but clearly, we feel like we got a small lift in Q2 from patients that came into the system that had probably deferred care. If we reflect back on the total pandemic when things first stopped back in 2020, back in the March/April timeframe, it's difficult for us to say that we saw those patients come back into the system. But differently, it felt like the last winter's patients did indeed, some of those, some small quantity showed up and supplemented Q2. It's not a giant number but it's additive, and we speculate that the similar kind of thing might happen as a result of the patients that have deferred care during the Delta variant. During the Delta variant, we're speculating again, we may indeed have had these patients that actually saw their physicians and got diagnosed but that the actual treaters in regional hotspots weren't there to provide the therapy. So, we think there is some reason why this might come back; exactly when it might come back is very difficult, but as COVID wanes, we're hoping that indeed, we see a similar phenomenon as we saw in Q2.

Thanks for that. And then just one follow-up, and we get a lot of questions just on low-risk penetration. I think the TVT registry update was presented a couple of weeks ago. And I think for 2020, the update was at 28% of patients received TAVR were low-risk. That seems pretty low. It seems like we're still in early innings of low-risk penetration, but just would love to get your thoughts in terms of where the TAVR market is, in terms of penetrating that low-risk opportunity. Thanks a lot.

Thank you, Josh. I wish I could say the issue is of low risk. We believe there is an under-treatment issue throughout all risk levels, whether high, intermediate, or low risk for surgery. We still think it’s early days for this. We believe many patients who should be receiving therapy are not, and this is due to various reasons; in many cases, they are simply unaware that TAVR is an available and suitable option for them. Therefore, it remains a key initiative for us. We have been making progress, but it has been slow and steady, and we are not there yet. I'm hesitant to put too much emphasis on that penetration number. Overall, we think penetration rates are even lower than what has been reported.

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

Thank you for the opportunity to ask a question. I have one regarding Europe and overseas TAVR, followed by a question on general market trends. The numbers from Europe and overseas have shown less sequential impact compared to the U.S., and there has been significant attention on staffing and challenges within the U.S. Given the surge, I wonder if you are experiencing similar staffing issues in other regions and if you could highlight the areas of strength that contributed to the strong Q3 performance outside the U.S. despite the surge and other challenges. I also have one follow-up question.

Yeah. Thanks, Matt. No, your observation was correct. We saw a far more impact in the U.S. than we saw in Europe. Our colleagues in Europe, by comparison, were pretty healthy growth rates. And you'll notice in my comments that if you go back to Q3 of last year, it's not as though Europe was really doing poorly. They actually had a growth quarter versus 2019. I think all I want to say high-single-digit growth or something last year. So, this is growth on top of that growth, which is pretty significant considering this therapy was introduced in Europe back in '07; it's pretty mature. And here we are still growing even during a pandemic. For whatever reason, the Delta variant didn't seem to impact the European centers the same way it did in the U.S.

That's great. And then if I could, I know Scott, you had laid out some basics or bullet points of what we can expect at the Analyst Meeting and Investor Meeting in December. But in past years, there's one thing that seems to have come up year-over-year, which is great growth in, say, a given year for TAVR, and then the issue of comps becomes a conversation for the following year. And I guess one of the things heading into '22, I think you mentioned decreasing impact of COVID or something like that, and back to normalized growth. I'd just be curious to hear whether you expect comps to be potentially a little bit less of the conversation when you frame out your expectations to start '22 given the way this year has played out?

Well, I guess by definition, the comps are important just as we think about growth rates, but it sort of ties back to Vijay's question earlier on about when do we start seeing COVID more in the rearview mirror and less in the windshield, and to the extent that that lessens as we get to the end of the fourth quarter, beginning the first quarter, for example, then prospects for 2022 growth are going to be higher. If COVID is playing a more meaningful role in certain regions or hot spots that are more noticeable, then that's going to impact our growth overall. That's probably the biggest uncertainty that we have going into 2022, because overall, we feel really positive about the growth prospects for TAVR in the U.S. and Europe and Japan and in the rest of the world. One of the things that we're talking about earlier with this low-risk penetration, while it's difficult to calculate the actual penetration. Remember the timing on low risk, where we have the data for low-risk, we're PARTNER 3 at ACC in 2019. We got approval in the third quarter of 2019, and shortly thereafter, COVID became a factor. It interrupted our growth for TAVR. And so, we haven't really had this period that's uninterrupted from COVID for any extent of time since we got the low-risk approval. It's one of the reasons why we think there's just great growth opportunities longer-term for TAVR.

That's helpful color. Thank you, Scott.

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

Hey. Good afternoon, everyone. Thanks so much for taking the question. I had a question on PASCAL shifting to nitrile now. I was just wondering, Mike, if you could talk a little bit about the U.S. launch strategy. I know it's early, but you guys launched at a premium price in Europe. Curious about whether that's the plan for the U.S. if you can disclose that. and if it is, what we need to see from the data set that's going to be presented next year.

Yes. Thanks. Yes. No. As we indicated, we're looking forward to having PASCAL approved, and again it would be approved for DMR by the end of '22 in our views. We're already taking some of the initial steps to build some capabilities and will assemble a dedicated field team, and we will be implementing our high-touch model. We're really going to focus on just getting excellent real-world outcomes. We're going to take advantage of all the learnings that we've had from launching TAVR around the globe and launching TMTT in Europe. In general, we do consider PASCAL a premium therapy and would also implement our premium pricing plan that would be consistent with what we've done elsewhere in the world. Hopefully, that gives you a little color on how we would approach this.

That's very helpful. And then the follow-up question I have is, as far as target centers initially, I mean, is the plan to target existing TAVR centers to leverage your TAVR superior market share, or will you go specifically to micro centers? How do we think about the initial target centers? Thanks so much.

Thanks, Danielle. It's a little early to say, this is going to be an interesting evolution. In some cases, the same people that do TAVR will do mitral cases, and in others, there's dedicated teams. It's a little too early for us to say we're going to get into it. We'll have more to talk about when we're together at the investor conference. But right now, I really don't have any specific color for you.

Thank you. And our next question comes from Cecilia Furlong with Morgan Stanley. Please go ahead with your question.

Great. Thank you for taking the question. I wanted to ask, Mike, about Japan, and what you've seen just throughout this year in terms of the centers over there that are certified to perform TAVR, how that's trended? And then as you think about low-risk reimbursement, the outlook given the landscape of TAVR centers, kind of near-term and then flowing into 2022 as well.

Yeah. Thanks. So, we were very pleased to get the low-risk reimbursement approval. That happened mid-quarter, I want to say, sometime in August. There are indeed new centers that get added. Those get added on a pretty deliberate basis. And those new centers tend to be slow to ramp up. There are significant regulatory requirements that are necessary to fire up new centers. But having said that, it's a dramatically under-treated disease in Japan. They have a very large elderly population. And when we think about it in terms of, for example, TAVR per million, we say, 'Boy, there's still a long way to go.' So, we're very pleased at the growth rate, the growth rate in Japan was even higher than our international growth. And the reimbursement is important. It's an important key. It's exciting to be able to get that and hopefully that begins helping Japanese clinicians redefine the importance of TAVR for their patients, and I think we've got to take it for granted that low-risk was already present in other places around the world, but it just has not been in Japan until this last quarter.

Okay. Great. And I wanted to ask as well, just what you're seeing on the clinical enrollment landscape, given COVID. And if you could provide any updates either on early TAVR or X4, and when you expect to ramp in enrollments there. Thank you.

Yeah. Thanks. You might recall, Cecilia, that early on we said that there was an impact on our trial enrollments. We're not experiencing that the same way during this flare-up of Delta. It doesn't make it easier, but hospitals have done a nice job of adjusting and adapting. They have very committed teams. And so, whether it's our trials in TAVR or our trials in TMTT, it feels like we've done well. We basically feel that our trials' timing has not been impacted by this latest surge.

Thank you. And our next question comes from Larry Biegelsen with Wells Fargo. Please go ahead with your question.

Hey, good afternoon, guys. Thanks for taking the question. Just one from me on PASCAL, Mike, in Europe. It looks like your share has been inching up, and by our math, you've reached about 20% share in Europe after about 3 years. So, my question is, what gets you higher? I know that your goal is to be a market leader. So, do you need the RCT data, and how are physicians using PASCAL in Europe? Are they mostly using it for DMR, or are they using it for both DMR and FMR? What gets your share? What do you think you need to get that share up? Thanks for taking it.

Thanks, Larry. As you might imagine, it's difficult to estimate shares, but frankly, we haven't really gone into this thinking that that's our focus. Our focus has been to get outstanding clinical results. And we focus on that both within our trials and within our commercial experience, and that's where we've pushed our team. When you ask me what's it going to take to get your share up, it's going to be impressive clinical results. That will show up in two ways: one in the day-to-day experiences of clinicians and patients and the other is when they actually get a chance to see some of our results. You'll see more and more data that is going to become available over time as you see clinical information. So even at the upcoming TCT, I think you'll see more information on some of our early clinical experiences. At this point, we're not even in every country in Europe, but our focus just to underline the point again is not on share; this is a really big opportunity. There are so many patients with mitral regurgitation, and there are many that are just not being well served today. That's where our focus is.

Thanks for taking the question.

Our next question comes from Adam Meter with Piper Sandler. Please go ahead with your question.

Hey, guys, good afternoon. Thanks for taking the questions. Just one from the U.S. TAVR market and competition specifically. There's a new TAVR competitor that recently entered the market. I know it's early here, but have you seen any impact in the marketplace, and can you comment on how that new competitor is approaching the market, anything from a pricing standpoint? And then maybe just more broadly, how do you see the potential impact of this third player going forward? Thanks so much.

Thanks, Adam. Yeah, when we talked about our results, whether it was our global results or our U.S. results, what we said was it was broad-based, but the procedure volume growth, and the Edwards growth were comparable. We really didn't see anything that was noteworthy here in terms of talking about share. We've mentioned before that we have a full complement of competitors in Europe. And so that may be some kind of a leading indicator, but we just haven't seen anything in the data in the U.S.

Okay, understood. Thanks, Mike.

Sure.

Our next question comes from Anthony Petrone with Jefferies. Please go ahead.

Thanks. One quick follow-up for Scott. It's just on expectations on the Analyst Day. I just want to make sure. Is the Company issuing top-line guidance or is it just P&L guidance? And then a question on low-risk; we are seeing direct-to-consumer advertising in all the areas of med-tech, albeit it's more in consumer health facing markets. But does direct-to-consumer in low-risk make sense here to open up that opportunity as we move into a period of higher vaccination and eventually antivirals? Thanks.

Yes, thanks, Anthony. Relating to the investor conference, we're expecting to provide guidance for the top line and the rest of the income statements. Typically, we talk about sales dollar ranges and underlying growth rates based upon our forecast for how the year is going to end up when we get to December. We will also talk about margins, gross margin, operating margins, and whatever other financial metrics we've got clarity enough on to guide to. As it relates to DTC, I'll start and then Mike can offer perspective as well. We think that market activation and inspiring more patients to come to get treated is a really important part of the future and long-term growth of TAVR, and so, we are already investing some resources around getting directly to patients, to primary care physicians, to referring physicians, and we'll be doing more of that in the future. It's not aimed specifically at a patient in a particular risk category. We're trying to get to all patients who have severe symptomatic aortic stenosis, and we expect that's going to be an important driver of growth.

Yeah, I'll just pile on there, Anthony. Thanks; it's a good question. If you go back, historically, in the early days of TAVR, we really counted on the physicians that did TAVR to educate their referring base. And that's the way that we counted on the word getting out, and I don't know if we were under the impression that that actually would be sufficient. But we've learned over the years that that's dramatically insufficient. As Scott said, we've gone on a number of roads here to make sure that the referral base is indeed educated. We've made some good progress there, although we're far from satisfied in terms of where we are right now. But to be really specific, going all the way upstream to consumer, we do believe that that could be a valuable lever. We're specifically doing some experimenting in that regard and maybe have some more specific things to share with you when you come to the Investor Conference.

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

Good afternoon. And thank you for taking the question. Could we spend a minute on Critical Care? The last couple of quarters have been particularly strong. Is it possible to tease out how much of that strength is just underlying? In other words, will it continue into 2022 and '23 or is it just sort of, I want to call it one-time in nature associated with the pandemic?

Thanks. So, it's a good question, Joanne. I mean, if you were to ask our teams here, you're going to keep growing at 17%. I think they'd say, no, that's not realistic. That we got some help this quarter by some large U.S. capital orders that really helped out. And that made a difference. Now, overall, are we pleased with what's going on in Critical Care? Is there more innovation than ever? Are they sustaining a pretty healthy growth rate that is better than I think med-tech averages? I think all of those are true, and we're very proud of that, or we're going to continue hitting it hard in that regard. But in terms of being able to maintain these kind of growth rates that we did in this quarter, that's not likely.

As a follow-up question, use of cash. Can you remind us of your thinking on that topic? And thank you.

Sure, I'll tackle that one, Joanne. Thanks for the question on use of cash. Really, our priorities have not changed. Our first priority is to fund prospects for long-term organic growth that are generated internally, and we want to make sure that we're fully funding those platforms. We supplement that with external investments, so we'll buy small-sized early-stage companies, usually pre-revenue. Sometimes we invest in options to acquire companies based upon certain milestones or targets being met. And so, beyond growth internally and externally, we look at the balance sheet. We've been consistently repurchasing shares, as you know; we're going to continue to do that opportunistically, and we think that's going to be an important way that we can give capital back to shareholders over time.

Thank you so much.

Our next question comes from Pito Chickering with Deutsche Bank. Please state your question.

Good afternoon, guys. Thanks for taking my questions. I follow up on Josh's low-risk penetration question. Like, if you look specifically at low-risk patients, where do you see in those patients in the third quarter versus the second quarter? And what do you assume those patients in the fourth quarter? Just curious how much that finalized impacted in the back half of the year due to COVID.

Thank you, Pito. I apologize for reiterating this, but it's important to remember that the FDA's classification of patients into high risk, intermediate risk, and low risk was established as a regulatory pathway for TAVR. This was intended to prioritize treatment for the oldest and sickest patients first to minimize the risks associated with this new therapy. When evaluating a patient, their main concerns revolve around survival risks rather than the risks tied to surgery itself. The key question is about the quality of life with TAVR compared to living with aortic stenosis. We often spend little time differentiating between low risk and intermediate risk since both clinicians and patients typically focus less on these classifications. Regarding patient behavior in the third quarter, while we don't have complete visibility, we believe patients were seeking other doctors, getting diagnosed, and being screened. However, several treating hospitals stopped accepting patients, which had a significant impact during the quarter.

Fair enough, and then Scott, a final question for you. You aren't changing the TMTT guidance, that's a pretty wide range. Just curious what would have to occur at the high end versus low end of the range. Thanks so much.

That's a good question. Like TAVR and other businesses, a lot of this is going to depend upon how much of a factor the Delta variant plays in the fourth quarter. There are a couple of different elements to our TMTT businesses right now. One is our commercial position in Europe, where we're selling PASCAL primarily. And then the other is clinical trial enrollment where there is reimbursement in the U.S. What we're looking for is for there to be a normalization of patient flow in both Europe and the U.S. And that's really going to be an important determinant for where things go in the fourth quarter. We're expecting sequential growth in Q4, and that will contribute to where we end up in that range of $80 to $100 million in expected full-year sales.

Thanks so much.

Thanks, Pito. I think we have time for one more question, maybe.

Thank you. And our final question comes from Chris Pasquale with Guggenheim. Please proceed with your question.

Thanks for fitting me in. I have a quick question about TMTT and another about TAVR. Mike, in your remarks, you mentioned progress in enrolling the five TMTT pivotal trials during the quarter. I believe this group includes class 2D. Can you confirm if class 2D has completed its enrollment? Any details would be appreciated.

We haven't provided specifics on that yet. However, we are committed to our belief that we will have 2D approved by late 2022, which suggests that we are nearing the completion of our enrollment. This will enable us to prepare for the PMA and go through that process. A lot of work remains to be done, and we will provide more detailed information during the investor conference.

Okay. Then there's a late breaker at AHA that's looking at asymptomatic AS patients. It's not your trial, so I understand you're not in the weave there. But curious if you know anything about it and to what extent that data could be instructive as we think about what we might see in the future from early TAVR.

Yes, it's a good question. I don't have personal knowledge of that trial, and so I can't really comment on it. The AHA are a strong organization and good partners, and I think they really care about patients with AS. But I am not sure precisely what trial that you're referring to. You know how we feel about asymptomatic patients. We feel like these are patients that should be treated. To decide via of differing treatment and waiting for symptoms is an outdated thought process, and we're very committed to change that through rigorous clinical trials.

Thanks, Mike.

Okay. Well, thanks all for your continued interest in Edwards. Scott and I will welcome any additional questions by telephone.

Thank you. This concludes today's conference. All parties may disconnect. Have a good evening.