Edwards Lifesciences is the global leader in the science of heart valves and hemodynamic monitoring. Driven by a passion to help patients, we partner with clinicians to develop innovative technologies in the areas of structural heart disease and critical care monitoring that enable them to save and enhance lives. ABOUT US >
I’ve been given a whole new
adventure to live!
Letter to Shareholders
I am proud to say that we completed 2013 with the strongest results in Edwards Lifesciences’ 13-year history. Many of our financial measures are healthier than ever before and our robust market leadership positions bode well for the future. Although we did not reach all of the financial goals we set before the year, we have prepared ourselves well going forward by delivering on several significant milestones that strengthened our position as the global leader in the science of heart valves and hemodynamic monitoring.
Most importantly, many more patients are benefitting from our medical technologies, which have been proven to save lives, reduce the time patients spend in the hospital and enable a quicker return to everyday activities.
I believe that Edwards is well positioned to meet the challenges of a competitive marketplace and evolving healthcare economy. We have an impressive pipeline of innovative medical technology solutions that will continue to serve unmet patient and clinician needs in the years to come. And, as we continue to develop novel technologies for these patients in need, we are committed to defending our intellectual property.
As the healthcare landscape shifts to accommodate new models of delivering care, we must continue working together as a community to improve the quality and value of care and make a meaningful impact for patients. It is imperative that we continue to create tools that add value to a physician’s existing skill set, and provide clinical and economic evidence to the payors who are increasingly focused on value-based care. We believe that we add the most value for patients, physicians, hospitals and investors when we truly innovate patient care.
As we grow, Edwards continues to attract important talent worldwide. We are pleased to welcome Scott B. Ullem who brings nearly 25 years of broad financial experience, proven leadership skills and a successful record as CFO of a global public company. Thomas M. Abate retired as CFO at the end of 2013. Tom played an important role in establishing Edwards as a standalone company in 2000 and has been a valuable business partner. We wish him the very best.
Not only do Edwards’ employees dedicate themselves to fulfilling the Edwards promise of acting with determination on behalf of people fighting cardiovascular disease, but they also demonstrate a commitment to making a positive impact on the communities in which we live and work.
Our commitment to charitable giving and participation in philanthropic causes is one of the defining elements of the Edwards culture. Edwards provides opportunities for our employees to volunteer in their communities throughout the year. In 2013, the Edwards Lifesciences Fund granted
$5.5 million to more than 400 non-profit organizations, including contributions from our Employee Matching Gift Program.
As we look to the future, we plan to continue in sharing our success through corporate giving and we intend to focus our efforts to make an even greater impact. This year, we are undertaking a bold initiative that by 2020 our philanthropy will positively impact the global burden of heart valve disease by supporting the education, screening and treatment of one million underserved people.
Solid 2013 Results
As we started 2013, our initial expectations for the recently launched transcatheter valve sales in the U.S. were very bright. And we finished toward the low end of our original global estimated range. The U.S. grew slower than we expected and Europe grew faster, resulting in a solid
30 percent underlying growth rate for transcatheter valve sales globally. This contributed to total company sales of $2.05 billion, which grew 11 percent on an underlying basis.
Our gross profit margin was strong at 75 percent, non-GAAP diluted earnings per share grew 16 percent and we generated $306 million in non-GAAP free cash flow, our strongest performance to date.
To strengthen our leadership and enable future growth opportunities, we invested 16 percent of sales in research and development. During the year, we repurchased 6.8 million shares for $497 million and took advantage of our strong financial position by issuing $600 million of 5-year fixed interest rate notes.
LEADING THE FUTURE OF TRANSCATHETER VALVE TECHNOLOGIES
A number of important transcatheter valve developments were among this year’s highlights, helping to drive Edwards’ progress.
During the year, we announced key clinical evidence in The PARTNER II Trial that further validated transcatheter aortic valve replacement (TAVR) in the treatment of very ill patients. In particular, one-year patient outcomes with the Edwards SAPIEN XT heart valve demonstrated very positive results. In this clinical study, we observed similar outcomes between the Edwards SAPIEN transcatheter heart valve and the next-generation Edwards SAPIEN XT valve, which should pave the way for a less invasive and easier TAVR procedure.
Longer-term updates from The PARTNER Trial strengthened the evidence that the SAPIEN valve is a safe and less-invasive alternative for those patients who need valve replacement, but are at high surgical risk. Most notably, at three years, the mortality rate for patients treated with the Edwards SAPIEN valve was statistically equivalent to that of patients who had received open-heart surgical aortic valve replacement.
During the year, we received regulatory approval and reimbursement for our Edwards SAPIEN XT heart valve in Japan, making it the country’s first commercially available transcatheter aortic heart valve. We know that severe aortic stenosis is undertreated in Japan, and patients who urgently need access to a nonsurgical solution now have an advanced treatment option. With additional approvals in Australia and Canada this year, our life-saving TAVR therapy is now available in more than 60 countries.
In Europe, we recently received regulatory approval to launch our most advanced Edwards SAPIEN 3 valve. U.S. studies of this valve were initiated in August, which we hope will ultimately enable access for U.S. patients more quickly.
Also in the U.S., the Food and Drug Administration in September approved revised labeling for our Edwards SAPIEN valve to include alternate access points, in addition to the transfemoral and transapical approaches, giving patients and their physicians more options for treatment.
We believe that our next-generation technologies have the potential for even greater results than those we are already seeing, and we are continuing to explore new ways to apply our transformational technology to other unmet patient needs such as mitral valve disease.
CONTINUING TO ADVANCE SURGICAL HEART VALVES
In our Surgical Heart Valve Therapy product group, we are investing in our leadership position that is built on a history of trusted, proven, and durable implants. We are continuing to lead the way toward faster, more efficient procedures and quicker recovery times that we believe will help transform the surgical treatment of heart valve disease.
We are encouraged by the progress made in advancing the development of less-invasive technologies such as the EDWARDS INTUITY valve system, which is being evaluated in ongoing studies that now include the next-generation EDWARDS INTUITY Elite valve.
This valve has been well-received by clinicians for its lower profile to better enable minimally invasive procedures, and rapid-deployment features that hold promise for a quicker and easier procedure. We also received regulatory clearance for several of our leading surgical valve products in key global markets such as China, which offers significant opportunity for patient treatment in the future. In addition, new data were published on the Carpentier-Edwards PERIMOUNT valves demonstrating expected durability of greater than 17 years in patients age 60 and younger, the only tissue valve with such strong evidence.
DEVELOPING LESS-INVASIVE MONITORING SOLUTIONS
Our Critical Care product group also delivered on several important milestones this year, while contributing modestly to sales.
Our Enhanced Surgical Recovery program is having a positive impact on patient outcomes and recovery by providing clinicians with tools to accurately determine that surgical patients have the right fluids at the right times. We are committed to expanding the use of our innovative solutions to help hospitals achieve more successful surgeries. We believe the tools we offer can help bring clarity to complex therapeutic decision making and help clinicians manage patients in a more optimal manner, improving outcomes and reducing overall costs.
Following important design and functionality improvements, our GlucoClear system for continuous blood glucose monitoring for critically ill patients has been introduced in several key European hospitals, where we are evaluating our ability to meet this significant unmet need.
ROBUST PIPELINE KEY TO DRIVING LONG-TERM GROWTH
In 2014, we will remain focused on developing and investing in technologies to better address patient needs, including minimally invasive technologies, with the potential to improve patient care by enabling faster, more reliable procedures, shorter hospital stays, reduced complications and improved survival.
We anticipate U.S. approval of our Edwards SAPIEN XT valve with the NovaFlex delivery system during the first half of 2014, and we expect a rapid introduction to follow. Patient enrollment in the European study of our cutting-edge, self-expanding Edwards CENTERA valve with an enhanced delivery system is expected to commence mid-year.
In Surgical Heart Valve Therapy, we anticipate European approval and launch in 2014 of our next-generation EDWARDS INTUITY Elite valve system, aided by the recent approval in Germany of higher reimbursement. Also during the year, we plan to complete enrollment in the U.S. clinical trials of both EDWARDS INTUITY Elite and the GLX advanced tissue platform.
In Critical Care, the integration of our ClearSight non-invasive monitoring technology into our EV1000 platform is complete and was introduced in early 2014.
EDWARDS’ LONG-TERM FUTURE IS BRIGHT
It is our privilege to continue to serve patients and clinicians worldwide. We take great pride in knowing our innovative medical technologies provide improved care and better patient outcomes.
In 2014, we expect more competition with our transcatheter heart valves as other companies begin introducing products in the U.S. and Europe. Given the timing of these competitive entries, as well as launches of our own next-generation technologies, Edwards’ growth will likely be difficult to predict in the short term, but we are well prepared to defend our leadership position and believe that our robust product pipeline positions us for sustainable long-term growth. Edwards is fortunate to have strong competitive positions in attractive and growing fields.
We are dedicated to making long-term investments to strengthen our leadership in structural heart disease and critical care, and position Edwards for sustained growth for years to come. Additionally, we plan to continue to expand our presence in emerging markets, offering medical technologies to regions that previously have not benefitted from advanced care options.
As we continue to grow, we are also dedicated to generating the robust clinical and economic evidence increasingly expected by patients, clinicians and payors in the new healthcare environment, ensuring that we enhance the value of delivering comprehensive care.
Edwards remains passionate about the highest standards of quality and accountability to ensure our work consistently reflects our company’s credo. Our steadfast commitment to our patients, clinicians, employees and shareholders will continue to drive our progress, and fuel innovative solutions, for years to come.
We thank you for your continued trust, partnership and support.
This Annual Report includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements include, but are not limited to, the Company’s financial goals, expectations for, expectations for sustainable future growth, potential upside opportunities, plans to upgrade to new technologies, the expectation that product launches will strengthen the Company’s leadership position, developments in the mitral program and pipeline of new products, and expected future business potential. Forward-looking statements are based on estimates and assumptions made by management of the Company and are believed to be reasonable, though they are inherently uncertain and difficult to predict. Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. Forward- looking statements involve risks and uncertainties that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements. Factors that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements include the pace of adoption of the Company’s transcatheter valve programs and the ability of the Company to continue to lead in the development of this field; the Company’s success in developing new products, obtaining regulatory approvals, creating new market opportunities and launching new products on time; the availability and amounts of reimbursement for the Company’s products; the availability of competitive products; the impact of currency exchange rates; the timing or results of pending or future clinical milestones and trials; actions by the U.S. Food and Drug Administration and other regulatory agencies; economic developments in key markets; and other risks detailed in the Company’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2013.
Caution: The Edwards SAPIEN XT and Edwards SAPIEN 3 are investigational devices in the U.S., limited by U.S. federal law to investigational use. ClearSight, EDWARDS INTUITY and INTUITY Elite valve systems, GL advanced tissue platform, GlucoClear, and Edwards CENTERA transcatheter heart valve are not available for commercial sale in the U.S.
Providing innovative solutions to fight cardiovascular disease
More than 300,000 valve replacements are performed worldwide each year through open-heart surgery, utilizing either bioprosthetic tissue valves or mechanical valves. Since developing the first heart valve in 1958, Edwards has continued to meaningfully advance heart valve therapy and, more than 50 years later, we remain a global leader in this field.
Trusted partners unified to improving quality of life
Edwards Lifesciences partners with the clinician community dedicated to delivering better care. These clinicians are vital in fueling healthcare progress, identifying patient needs that could be served with innovative technologies and partnering with companies to provide the expertise that makes those innovations a reality. When clinicians work closely with industry, they bring their expertise on human physiology and hands-on care delivery to the development of new patient-centered technological innovations. In an environment defined by transparency and research independence, the continuing collaboration between clinicians and innovators can create the next life-changing invention.
Professor Justus Strauch, MD
Cardiac Surgeon, Ruhr University of Bonham
“The typical symptoms of aortic stenosis are chest pain, dizziness and shortness of breath, which we saw in Wolf. We chose the EDWARDS INTUITY valve because it’s designed to offer excellent hemodynamics and facilitate smaller incisions. The rapid deployment system itself is streamlined to reduce bypass and cross-clamping times compared to conventional valves. My personal vision is to treat patients with excellent treatment options and, for me, those include smaller incisions, minimally invasive cardiac surgery, short cross-clamp times and short cardio pulmonary bypass times. These are very important treatment options in modern cardiac surgery and are among the reasons I choose the EDWARDS INTUITY valve.”
Michael Sander, MD
Professor of Anesthesiology and Intensive Care Unit, Charité University Hospital
“Enhanced surgical recovery is a concept that is centered around the patient. We have established a program called Hip-Hop with a protocol that also utilizes FloTrac in combination with EV1000 for our hip replacement patients. These tools are easy to use with good graphical display where we can see the comfort zone of the patient.” Charité’s Hip-Hop program, based on the enhanced surgical recovery concept, is seeing a decrease in complication rates, such as infection, bleeding and cardiovascular complications. Prevention of complications lead to shorter lengths of stay that results in reduced costs, which is better for both the hospital and the patients.
Andrew Newcomb, MD (pictured, no quote)
Director Cardiothoracic Surgeon, St. Vincent’s Hospital Melbourne
Philip Davis, MD
Deputy Director Cardiothoracic Surgeon, St. Vincent’s Hospital Melbourne
“We have the utmost confidence in the INTUITY Valve System due to its platform of proven durability. The visualization of valve seating is excellent and its low profile allows for easy placement and gives me total confidence that the valve will stay in place. With INTUITY’s rapid deployment we were confident in reducing procedure time with shorter time on bypass to hopefully reduce the risk of complications.”
Shermeen Vakharia, MD, MBA
Vice Chair for Quality and Patient Safety, Dept. of Anesthesiology and Perioperative Care, UC Irvine Medical Center
“We started goal-directed fluid therapy with major abdominal surgery. When we saw the outcomes were really good, the adoption rate was very fast. We then began branching out to other surgeries like orthopedic and vascular surgery and even in the ICU’s. With the implementation of goal-directed therapy, studies have shown our patients to recover faster after surgery, get out of bed faster, and go home faster to have a better quality of life. Edwards’ Enhanced Surgical Recovery program can help us implement our goal-directed therapy plans very quickly and efficiently and that is good for us and our patients.”
Helping patients is our life’s work
Edwards was founded more than 50 years ago on the novel idea of an artificial heart valve that few thought possible. Since then, we have established a remarkable track record of innovation. We thrive on discovery and expand the boundaries of medical technology. But we never forget that our work achieves a much greater goal than innovation itself. Our efforts help clinicians around the world enhance and save lives.
The employees of Edwards Lifesciences share in a singular mission of helping patients. Their skill and dedication fuel our ability to help critically ill patients and those affected by the number one killer in the world – cardiovascular disease. Each of our employees is dedicated to furthering the Edwards vision to help clinicians, patients and their families work together as a united community to improve the quality of life around the globe.
After just two years, the first Starr-Edwards mitral valve was designed, developed, tested, and successfully placed in a patient. Newspapers around the world reported on what they termed a “miraculous” heart surgery.
Edwards Lifesciences is a global leader in heart valves and hemodynamic monitoring. We partner with physicians to produce innovative medical solutions designed to help patients live longer, healthier and more productive lives. Our technologies address large and growing patient populations in which there are significant unmet clinical needs, such as structural heart disease and advanced monitoring of the acutely ill. Each of our product areas has a rich history and unique patient focus.
Global Corporate Giving
Culture of inspiration and dedication
Edwards Lifesciences’ commitment to helping others reaches far beyond the technologies that we innovate, and through our corporate giving, we are able to help many more people around the world live better lives. Throughout 2013, The Edwards Lifesciences Fund supported approximately 400 non-profit organizations with health- and community-focused grants totaling $5.5 million, with a goal of helping underserved heart valve or critically ill patients, and strengthening the communities where our employees live and work.
This record year of giving represents a 22 percent increase compared with 2012 and is a trend we will strive to continue.
We also give back to those in need through employee volunteerism and aspire to have all of our employees participate in at least one charitable activity each year. Our employees can be found serving communities around the world and in 2013, 72 percent of our employees engaged in some form of philanthropy, including assembling care packages in Irvine for U.S. service men and women serving abroad, supporting the Special Olympics in California and Japan, preparing low-income kids in Puerto Rico to go back to school, building and distributing wheelchairs for the underserved in China, hosting heart wellness days in Singapore, distributing scholarships to high-achieving, underserved students in Utah, and wearing red and walking to raise awareness of the impact of heart disease in all of our global locations.
In addition to this, we donated much-needed medical technologies to AmeriCares, to be used on medical mission trips serving indigent populations around the world.
While our philanthropy is a source of great pride, we always want to do more. In the years to come, we expect our philanthropic efforts will continue to grow, fueled by the smiles on the faces of those whose lives we touch.