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Edwards Lifesciences (NYSE:EW)

Q2 2011 Earnings Call

July 21, 2011 5:00 pm ET

Executives

Thomas Abate - Chief Financial Officer, Principal Accounting Officer and Corporate Vice President

David Erickson - VP, IR

Michael Mussallem - Chairman of the Board and Chief Executive Officer

Analysts

Elie Kobrin

Sara Michelmore - Brean Murray, Carret & Co., LLC

Jason Mills - Canaccord Genuity

Michael Weinstein - JP Morgan Chase & Co

David Roman - Goldman Sachs Group Inc.

Bruce Jackson - Morgan Joseph TriArtisan LLC

Glenn Novarro - RBC Capital Markets, LLC

Raj Denhoy - Jefferies & Company, Inc.

Larry Biegelsen - Wells Fargo Securities, LLC

Kristen Stewart - Deutsche Bank AG

Suraj Kalia - Rodman & Renshaw, LLC

Ben Andrew - William Blair & Company L.L.C.

David Lewis - Morgan Stanley

Bruce Nudell - Crédit Suisse AG

Matthew Taylor

Spencer Nam - Madison Williams and Company LLC

Christopher Pasquale - JP Morgan Chase & Co

Amit Bhalla - Citigroup Inc

Operator

Greetings, and welcome to the Edwards Lifesciences Corporation Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, David Erickson, Vice President, Investor Relations. Thank you, Mr. Erickson, you may begin.

David Erickson

Welcome, and thank you for joining us today. Just after the close of regular trading, we released our second quarter 2011 financial results. During today's call, we'll discuss the results included in the press release and accompanying financial schedules, and then we'll use the remaining time for Q&A. Our presenters on today's call are Mike Mussallem, Chairman and CEO; and Tom Abate, CFO.

Before I turn the call over to Mike, I'd like to remind you that during today's call we will be making forward-looking statements that are based on estimates, assumptions and projections. These statements include, but aren't limited to, our expectations regarding sales and sales growth, gross profit margin, net income, and net income growth, goals for earnings per share and earnings growth, SG&A, R&D, tax rates and free cash flow, share repurchases and other financial expectations, including our assumptions regarding the timing and extent of the U.S. approval, launch, and reimbursement for the SAPIEN Transcatheter Heart Valve, which are critical elements to our 2011 projections.

These statements also include our current expectations for regulatory submissions and approvals related to a variety of new products and indications, as well as the timing and expected outcomes of new or currently ongoing clinical trials, the expected impact of new product introductions and the impact of foreign exchange fluctuations and special items on our financial results.

These statements speak only as of the date on which they were made, and we do not undertake any obligations to update them after today. Although we believe them to be reasonable, these statements involve risks and uncertainties that could cause actual results or experiences to differ materially from the forward-looking statements.

Information concerning factors that could cause these differences may be found in our press release, our annual report on Form 10-K for the year ended December 31, 2010, and our other SEC filings which are available on our website at edwards.com. Also as a quick reminder that when we use the terms underlying and excluding special items, we are referring to non-GAAP financial measures, otherwise we are referring to our GAAP results. Additional information about our use of non-GAAP measures is included in today's press release.

Now I'll turn the call over to Mike Mussallem. Mike?

Michael Mussallem

Thank you, David. We're very pleased to report second quarter results that reflect continued strength in our Health Valve Therapy, and Clinical Care product lines. Again, this quarter, the demand for less-invasive options to treat high-risk aortic stenosis patients drove strong sales of our SAPIEN technology.

Before we go deeper into this quarter's results, I'd like to comment on yesterday's advisory panel. The FDA panel extensively explored a number of questions regarding the therapy's complications and introduction pace, and we take their concerns seriously. We're encouraged that after considering all the risks and benefits, the panel strongly recommended approval of SAPIEN. As such, we remain confident about our U.S. launch revenue and timing assumptions, as well as our long-term outlook.

On a reported basis, second quarter sales grew 18% to $431 million, while on an underlying basis, sales were up 11%. Sales outside the U.S. grew 27%, and now represent 65% of our total sales.

Turning to product line results, second quarter reported Heart Valve Therapy sales grew 23% to $263 million. This included $85 million from transcatheter heart valves, which grew 60%, or 46% on an underlying basis. Surgical heart valves grew 10%, or 4.2% on an underlying basis, with our newest products continuing to drive the growth.

In the U.S., we believe our 2% growth rate was tempered somewhat by slower procedure growth than last quarter. Outside the U.S., tissue valve growth was particularly strong in Asia.

In Japan, we saw modest share gains, and surgeries continued to be performed at normal levels. Although pricing was stable in each region, strong emerging market growth led to a global average that was slightly lower than a year-ago.

As expected, we received regulatory clearance for our Physio tricuspid ring during the quarter in both the U.S. and Europe, and have initiated our launch. This product, which has been designed to offer a more physiologic tricuspid repair, has received a favorable initial feedback.

In Japan, just last week, we received an earlier than expected approval for our Magna Ease aortic valve, and will begin to introduce this product immediately. Additionally, we have converted more than half our customers in Japan to our recently approved mitral valve with thermo fix.

We continue to make progress on our Edwards INTUITY rapid deployment aortic valve system. During the second quarter, we received additional questions from European regulators, and we have submitted our response. We now believe that we will receive a CE mark in the fourth quarter.

Interim data from the TRITON trial continues to demonstrate encouraging results and potential. To support INTUITY's reimbursement, we will focus our initial commercial efforts on a select group of centers to collect clinical outcome measures, as well as economic and quality-of-life data. And in the U.S., we continue to expect IDE approval this year.

In summary, based on our first-half performance, we remain confident in achieving the top of our 3% to 5% underlying sales growth guidance for surgical valves.

Turning to transcatheter heart valves. Strong procedure growth and continued adoption of our new 29 millimeter SAPIEN XT valve in Europe, helped drive sales of $85 million this quarter. Transfemoral sales remained strong and consist almost exclusively of the SAPIEN XT valve, which was introduced in Europe one year ago.

Transapical sales aided by our new 29 millimeter SAPIEN XT, grew an impressive 50% this quarter. Overall, commercial sales of TF are somewhat higher than TA.

In May, at the EuroPCR meeting, we introduced our new eSheath expandable sheath technology, and NovaFlex Plus delivery system to our European customers. We have received very positive feedback about the products ease-of-use benefits, and we're continuing to convert customers to this enhanced transfemoral delivery system. While the new delivery system had little impact on this quarter's result, we expect to have it to be a larger contributor starting in the third quarter.

The integration of our recently acquired Embrella deflection device is proceeding according to plan. In the fourth quarter, we expect to begin a new European multi-center clinical study of our Embrella technology to better understand its impact on procedural outcomes.

Yesterday, the FDA held its advisory panel meeting on Cohort B of the PARTNER Trial as part of the PMA approval process of SAPIEN in inoperable patients. The panel's strong recommendation for approval represents another important step on the path to FDA approval of SAPIEN. As I indicated earlier, we remain optimistic as ever about the THV opportunity.

In April, we submitted our PMA for Cohort A, the Surgical arm of PARTNER. Based on clearly meeting the trial endpoints, we assume a second quarter 2012 PMA approval.

The formation of our U.S. THV field organization is proceeding on schedule, and we have developed a comprehensive and proven clinical training program. Additionally, we are evaluating the initial hospitals best positioned to treat patients with inoperable aortic stenosis. Production is going well, and we have sufficient SAPIEN inventory to support our U.S. launch.

We continue to expect $20 million to $25 million in SAPIEN sales in our first quarter of U.S. commercialization, and $150 million to $250 million in the first full year. As we have previously stated, we plan to set the pace of the launch based on maintaining a high level of procedural success.

From a U.S. reimbursement standpoint, our discussion with CMS are proceeding well. In March, CMS indicated that the aortic valve replacement codes are proper for reimbursement of TAVR procedures, until the permanent codes take effect on October 1, 2011.

In June, the new procedure codes were formally approved, and we expect those codes to be aligned to payment codes in the August, IPPS final rule. We continue to believe that the reimbursement available today will be available upon U.S. approval.

Turning to our U.S. PARTNER II clinical study. Trial sites for Cohort B have been completing their IRB process, and are rapidly screening patients.

At the end of the quarter, more than 100 inoperable patients have been enrolled, with half enrolled just in the month of June. We continue to have a high degree of confidence that enrollment will be completed by the end of this year.

For Cohort A, the surgical arm, we've made a great deal of progress with the FDA to optimize a trial design that broadens the inclusion criteria beyond the PARTNER high-risk definition. Accordingly, we expect IDE approval by the end of August.

In Japan, we completed enrollment in our PREVAIL trial of SAPIEN XT, and are collecting follow-up data. We continue to anticipate regulatory approval as early as 2013.

In June, we announced the successful first implant of SAPIEN XT valve in China. These transfemoral implantations will performed as special access cases under a joint educational and training program between Edwards and the Second Military Medical University. We hope to gain the necessary approvals to launch in China as early as 2013.

Given current exchange rates and our strong first half performance, we now project global transcatheter heart valve sales for our full year of $330 million to $360 million, which includes $20 million to $25 million of commercial U.S. THV sales.

Turning to Critical Care. Sales were $128 million for the quarter, up 16% on a reported basis, and up 9% on an underlying basis. Growth was strong across most geographies and product lines.

In Japan, underlying sales were flat as prior year periods included the discontinued Somanetics product line, and customers worked down the inventory that they added last quarter in reaction to the disaster.

Sales of our advanced monitoring products once again, generated strong results this quarter, and global pressure monitoring sales drove growth in our legacy product category.

In our Advanced Monitoring portfolio, late in the quarter, we received U.S. regulatory clearance for our EV1000 monitor. Clinician feedback is very positive, and we expect it to become the best in class device to boost Critical Care growth over the next couple of years.

With regard to our in-hospital Glucose Monitoring program, the development of our second-generation product is nearing completion. We still anticipate obtaining CE Mark for this device by the end of this year-end, and expect to begin European sales in 2012.

In the U.S., we've met with the FDA to clarify the regulatory pathway. We plan to submit an IDE, and begin a U.S. trial early in 2012.

In summary, with our strong year-to-date results, we remain confident in our outlook for Critical Care. Even though we're discontinuing certain non-strategic products as previously discussed, we continue to believe we will achieve the top of our full-year underlying sales growth guidance of 5% to 8%.

Turning to Cardiac Surgery Systems. Sales for the quarter were $27 million, up 3% on a reported basis, and down 2% on an underlying basis. These results were due primarily to a voluntary recall in June of an externally supplied introducer sheet, a minor, yet integral component in our MIS product line. The issue has been resolved, and the product is available.

Growth in our core cannula business continued at its typical rate. We now expect full year CSS sales to be in the middle of our guidance range of $105 million to $115 million, with an underlying growth rate of approximately 6% to 8%.

Total reported vascular sales, which is comprised of our Fogarty products, was approximately $13 million this quarter, down slightly from the prior year. And now I'll turn the call over to Tom.

Thomas Abate

Thanks, Mike. This quarter, we achieved diluted EPS of $0.48, and non-GAAP diluted EPS of $0.49, which was a 7% increase versus prior year. At the same time, we increased our R&D investment by 28%, and continued to ramp our spending in preparation for our U.S. THV launch. And while we're investing heavily to prepare for that launch, excluding special items, we're still projecting double-digit earnings growth for 2011.

For the quarter, our gross profit margin was 70.4%, compared to 72.5% in the same period last year. This decrease was driven predominantly by a 180 basis point impact from foreign exchange. At current rates, this negative effect is expected to increase, resulting in a third quarter gross profit margin of approximately 70%. With the lift from existing FX contracts in the fourth quarter, and the expected launch of SAPIEN in the U.S., we expect to exit the year at approximately 73%.

Second quarter SG&A expenses were $163 million, or 37.8% of sales, an increase of $23 million over the prior year. This increase was driven primarily by the impact of foreign exchange, plus $8 million of U.S. transcatheter heart valve launch-related investment. For full year 2011, we continue to expect SG&A to be between 37% and 39% of sales.

R&D expenses in the quarter were $65 million, or 15.1% of sales, an increase of $14 million over the prior year. This increase was primarily the result of additional investments in clinical studies and development efforts in our transcatheter valve program.

Also included in this quarter's figure was a $2 million in-process R&D charge pertaining to the acquisition of mitro valves technology. For full-year 2011, we continue to expect R&D as a percentage of sales to be between 14% and 16%.

During the quarter, we recorded a $4 million charge to reflect the increased collection risk associated with our receivables increase. Additionally, we recorded a $2.5 million income tax benefit, resulting from the partial settlement of a European tax audit. The net impact of these items reduced diluted earnings per share by $0.01.

Our reported tax rate for the second quarter was 20.2%. Excluding special items, this rate was 22.9%. For the full year 2011, we now expect that rate to be approximately 24%, excluding special items.

FX rates positively impacted second quarter sales by approximately $23 million, and our bottom line by $0.01 compared to the prior year. Relative to our prior guidance, there was no FX impact to our bottom line in the quarter.

Looking forward, at current rates, we continue to expect $40 million to $50 million positive impact of 2011 full year sales versus prior year. Free cash flow generated during the second quarter was $42 million. We define this is cash flow from operating activities of $59 million, less capital spending of $70 million. For 2011, excluding special items, we continue to expect free cash flow to be between $190 million to $200 million.

During the quarter, we repurchased approximately 970,000 shares, for $83.2 million. We continue to project diluted shares outstanding to be approximately 120 million shares for the remainder of the year.

Our balance sheet, on our balance sheet, we ended the quarter with a net cash position of $293 million. Total cash of $468 million, exceeded our total debt of $175 million.

Our DSO at the end of the quarter was 69 days, a small increase from the prior quarter. Inventory turns were 2.2, relatively unchanged from prior quarter.

Turning to our 2011 sales guidance. For Heart Valve Therapy, we continue to expect sales to be between $1.01 billion and $1.05 billion, with an underlying growth rate at the upper end of our 16% to 20% range.

In Critical Care, we continue to expect sales to be at the top of our $470 million to $500 million range, and underlying growth at the top of our 5% to 8% range.

In Cardiac Surgery Systems, we now expect to be in the middle of our previously stated $105 million to $115 million range, with an underlying sales growth of 6% to 8%.

[ph] For Vascular, we continue to expect sales of $50 million to $60 million. And for the full year, as before, we expect total sales to be in the range of $1.66 billion to $1.74 billion.

For the third quarter 2011, we project total sales of $395 million to $415 million, and diluted EPS of $0.37 to $0.39, excluding special items. We continue to expect full-year net income growth of 11% to 13%, and diluted EPS in the range of $2.01 to $2.07, excluding special items.

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

Michael Mussallem

Thank you, Tom. In closing, not only do we believe that Edwards' leading product lines are well-positioned globally to continue to contribute to our long term success. We remain optimistic for the potential of transcatheter valve technologies to drive accelerating revenue growth and expanding operating margins.

We look forward to making this therapy more available to U.S. patients suffering from severe aortic stenosis who currently have limited treatment options.

Before we open up to questions, I'd encourage you to mark your calendars for Friday, December 9, when we'll host our 2011 Investor Conference in New York. This event will include updates on our new technologies, as well as our outlook for 2012, and more information will be made available in the next couple of months. And with that, I'll turn the call back over to David.

David Erickson

Thank you, Mike. order to allow broad participation in the Q&A, we ask that you please limit the number of questions. If you have additional questions, please re-enter the queue, and we will answer as many as we can during the remainder of the call. Operator, we're ready to take questions, please.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Amit Bhalla with Citigroup.

Amit Bhalla - Citigroup Inc

Mike, I had a question in terms of the launch trajectory that you're assuming for SAPIEN. At your Analyst Meeting last year, you talked about 200 to 400 initial train sites. But yesterday at the panel, I believe Larry Wood, was talking about 150 to 250 sites. So can you talk a little bit about, why the change in the number of initial sites?

Michael Mussallem

You're correct, that is a change. We've updated our launch plans to include 150 to 250 centers in the first year, newly trained centers. We continue to be very confident in the $150 million to $250 million range in year one. We made the change more in collaboration with the societies, in response to their concerns that the rollout be measured, and actually, it's very consistent with our models. We have more sophisticated models at this point, than what we had at that time, and we're very comfortable. -- what it really means is, you're going to see more patients per center as a result of this change.

Amit Bhalla - Citigroup Inc

Okay. And then just a follow-up, Mike. You mentioned that the U.S. procedure volumes for surgical valves were a little bit weaker, but can you comment on what kind of impact maybe there is from competitive trialing of a new tissue valve on the market, is that having any impact?

Michael Mussallem

Yes, of course. No, what we're broadly -- what we noted was, that although we saw a procedure volumes, we feel like really tick up in Q1 compared to where they were on the second half. They seem like they were treated some in the second quarter compared to the first. Yes, there was a launch of a competitor product in April, and we did feel that to some extent, but that's in the numbers. I think the -- we think there was probably a bigger impact from the procedural change than there was actually from the competitive activity this quarter.

Operator

Our next question comes from the line of Jason Mills.

Jason Mills - Canaccord Genuity

Mike, in Europe, can you help us out with respect to sort of the profile of your customer base there? Really what I'm try to get at, as you talk to Amit's question about the utilization rates seemingly being higher in fewer number of centers. Could you help us understand in Europe, sort of over the last 12 months, as revenue has continued to climb, what the -- how should we characterize sort of the mix between those high-volume centers, and sort of middle volume, low-volume centers? And at the top end, was that 20% to 30% of the centers? And what sort of utilization rates are you seeing them track to?

Michael Mussallem

Yes. Let me try and help you, Jason. I'm not sure that I can land you exactly on that -- on those comparisons. One of the things that we clearly, saw here, is as we introduce the 29 millimeter valve, there were patients -- that we feel like we're not treated, that we're now treating today. And so our growth, in this continued growth and growth in the market, is probably not necessarily come from more centers, but it's come from patients flowing into existing centers. So XT was helpful, and this 29 millimeter valve is helpful. Does that help you?

Jason Mills - Canaccord Genuity

It does. I'm just trying to get a sense for utilization rates. I mean, clearly, you're seeing strong rates o U.S. Is that populated primarily in the top 20%, 30%, 40%. I'm just trying to get a sense of the dichotomy in Europe?

Michael Mussallem

Yes. For so for example, we're adding centers in other geographies outside Europe, that's supplementing growth. But we would say the growth was in Europe, in existing centers, it's probably the larger driver of the overall growth.

Jason Mills - Canaccord Genuity

Okay, great. And the second question is, just there was a slide that you put up yesterday with respect to the early cap experience, that surprised some panelists. That said, I think most of us are waiting for a broader swap of the continued access protocol with more patients, than we would expect, I think overtime further results to mirror more of the pivotal trial data. Could you speak to whether or not, that is something that is maybe governing your current guidance with respect to new center adds that you train centers very well based on the experience you had early on in cap?

Michael Mussallem

Okay. Let me comment a little bit about the continued access question. Yes, I think in an effort to answer the questions that were raised by panelists yesterday, we responded pretty hastily and probably, did some speculation. We shouldn't have done that. This group is really a subset. And you have to remember, what was really in front of the panel was, there was a data lock, and we've done deep and extensive analysis of the group before this. And so really, we haven't done that kind of analysis on the continued access group. We really expect that this continued access to have very much the same outcomes that are reflective of the PARTNER Trial when it gets aggregated in total.

Operator

Our next question comes from the line of Raj Denhoy with Jefferies & Company.

Raj Denhoy - Jefferies & Company, Inc.

I wonder if I could [indiscernible] a little bit , I think you've mentioned that your expectation now is for an approval of the Cohort A population by April -- sorry, by the second quarter of 2012. I'm curious, is that new, and is that based upon any discussions with the FDA? Or any potential timing of the panel that you understand at this point?

Michael Mussallem

Yes. We don't have any particular insight on a panel date. So no, there's nothing there. No. This is more consistent with our original assumptions. We said that we actually made that submission sometime ago, this was back in April of this year that we submitted this. We say -- we think that given the importance of this technology, that we'd have approximately one year approval timing. So that really lands us in something. And we're saying, nothing has really happened recently, that caused us to feel any differently about that timing.

Raj Denhoy - Jefferies & Company, Inc.

Okay. and then just kind of another follow-up to the panel yesterday, I think one of the things that -- the panel seems to stoke some fears amongst folks, with the concern the FDA maybe expressed over the neurologic risks that the trial demonstrated. Nothing is really new, but do you think that the agencies focused on that might have some bearing on the approval of Cohort A? Do you think it puts out anymore risk just given what we learned yesterday from the FDA's comments and their concern?

Michael Mussallem

Yes, and no, it's a good point. And obviously, it was focused on very, very heavily. And there's no doubt that stroke is an issue, and it's a very important issue. And no one is more committed to trying to resolve those issues than we are. But I guess, as it relates to the approval of Cohort A, in the final analysis after an awful lot of discussion, the panel even agreed that the benefits outweigh the risk for Cohort B. And we think that, that will continue to be the case for Cohort A. Remember, Cohort A clearly met its endpoints, and that data has been out there and available for some time.

Operator

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

Kristen Stewart - Deutsche Bank AG

Mike, I guess in your prepared remarks, you had mentioned about the coding for the valves, and I was wondering if you can just move over that a little bit. I know that their were some discussions in March to try to separate out for the ICD-9 codes, specifically for transcatheter valves. And you had said that, I missed that a little bit, but did you say that they had formally approved separate codes that they'll map under the surgical? Or that they'll just continue to flow under the surgical codes?

Michael Mussallem

Let me repeat those, Kristen, and see if it's clear, and if not come back. You said in March, CMS indicated that the aortic valve replacement codes are proper for the reimbursement of TAVR procedures, until the permanent codes take effect on October 1. And that in June, the new procedural codes were formally approved, we expect those codes to be aligned to the payment codes in the August -- at the IPPS final rule. So I know we're sort of getting into the weeds a little bit, but we thought as we are getting closer, that we wanted to give you a little bit more detail on what's going on and what to anticipate, is that helpful?

Kristen Stewart - Deutsche Bank AG

Yes. In March, as I recall, was that they felt that the surgical replacing codes were proper, is that correct?

Michael Mussallem

Yes, that's correct, that's what I'm trying to indicate. There are surgical codes that are currently designated for patients that are severe, and complicated cases. And those are the codes that we expect to map to.

Kristen Stewart - Deutsche Bank AG

Right. Because I know there were some discussions back then, that there might be separate codes specific for transcatheter, but that will not be done this year.

Michael Mussallem

Well, I mean, you're into a broader subject, and whether there's going to be new codes and national coverage decisions and so forth, and that's more difficult to ascertain.

Kristen Stewart - Deutsche Bank AG

Okay. That was going to be my next question, just in terms of CMS reimbursement. One of the things that came up yesterday at the panel was the notion that there should be some form of registry. To what level could there be some sort of linkage between reimbursement and a registry, by way of like a covered evidence development, like we've seen with some other technologies?

Michael Mussallem

Yes, you're correctly noted, Kristen, that there's a strong desire amongst the physicians in the societies in particular, to have a registry. They'd love to track all patients for a new transformative technology like this. What we believe will be the case, and we've continued to stay on this, is that CMS will reimburse to the label and to the labeling -- so the evolution to our registry, that would be great. If that happened, there's a lot to be done, between where we are right now on our registry, that would really accomplish all the goals. We're currently working with FDA on a post-approval study. And that the registry really doesn't exist yet. But big picture, we really think that CMS is going to continue to reimburse the label.

Kristen Stewart - Deutsche Bank AG

And your guidance is based on that view? Just only label?

Michael Mussallem

Our guidance is based on the view that CMS will reimburse the label.

Operator

Our next question comes from the line of David Luis, Morgan Stanley.

David Lewis - Morgan Stanley

Mike, I appreciate the updated timing on PARTNER IIa. Is it safe to assume at this time, when the IDE gets formalized, that we're going to see 2-year follow-up data as part of that IDE?

Michael Mussallem

Yes, it's a great question. That P2A is not final yet. We said that we would expect that we would get that finalized and approved by the end of August. There's been questions raised, and we're in discussion right now, on whether there should be longer follow-up and how many patients. I would just summarize to say, we'd be pleased to have a longer follow-up period if it enables us to study a broader patient population, okay? And we're in those exact discussions with them today. Again, not final, but we think that's a very good trade-off for patients and the company.

David Lewis - Morgan Stanley

Okay, very helpful. And Mike, at a recent clinical meeting, there was some discussion about whether there should be a more direct study, comparing transapical versus traditional aortic valve surgery, and there were some discussions that perhaps Edwards was thinking of funding such a study perhaps in Europe. Is Edwards thinking of funding such a study? Do you think the study is necessary? Or would you like to see a study like that be funded?

Michael Mussallem

Yes, we have not taken a position on that one. I can tell you, just by going through our prioritized list, this has not floated to the top of the list. We're more interested in getting these technologies, the next generation technologies available to patients. And so I don't see us necessarily sponsoring that. There may be some small studies, David, but you know, again, I don't think you're going to see anything very profound coming from us.

Operator

Our next question comes from the line of Larry Biegelsen with Wells Fargo Investments.

Larry Biegelsen - Wells Fargo Securities, LLC

On the centers in year one, just a clarification, 150 to 250 new centers, so that's on top of existing centers, is that correct, Mike?

Michael Mussallem

Yes.

Larry Biegelsen - Wells Fargo Securities, LLC

And do you think that CMS or FDA will play a role in certifying centers, or do you think they'll leave it up to the company?

Michael Mussallem

It's a good question. I think that's not clear at this point. I think that societies believe that they can play a very useful role. And you can see that the ACC and STS have stepped forward and talked about their views. You may have heard a little bit yesterday, about the fact that 4 societies, 2 cardiology, and 2 surgery societies are working collaboratively to write guidelines. So I think you'll see an evolution of that. And I think it would increase their collective confidence that this is going to be done in a high integrity fashion. Whether that exactly happens or not, I don't know. I don't think it changes a lot from our perspective, because I think we're largely on the exact same page of the societies in terms of, what kind of centers would be qualified to do this, or what kind of patients this would be appropriate for. We continue to be on the same page of sort of, is the right patients, right technology for them, and trying to drive very high outcomes.

Larry Biegelsen - Wells Fargo Securities, LLC

So Mike, you're confident in the 150 to 250 centers, that everybody will be on the same page? And then I had a follow-up.

Michael Mussallem

I think so, Larry. I mean, I tell you, we do -- we reiterated our confidence to the $150 million to $250 million. We believe that, that's very much doable within this 150 to 250 additional training centers.

Larry Biegelsen - Wells Fargo Securities, LLC

And Mike, on the transapical alarm for Cohort A, after 12 months, we saw the mortality rate become higher, for transapical versus surgery. Do you have -- could you talk a little bit to that? Are you going to have more follow-up data beyond 12 months when you present at panel? I mean there's obviously -- there's some concern in the investment community about the approvability of transapical in Cohort A. Is there any light you can shed on that, that would ease people's concerns?

Michael Mussallem

I guess I'll say this, Larry, I don't know that we saw a lot different in the PARTNER results than we've seen in Europe with our source registry. And I don't know whether you took note of the comment of how well, and how strong the demand is for transapical in Europe. So this is where they actually have the availability of SAPIEN XT. And here, we have almost as high a TA volume as we have TF. And it's a market where everything is available. And I think that should be quite a signal to people. The other thing to know, that as we try and preserve this heart team, the TA becomes essential for a high-level of engagement by surgeons. So we really think, yes, of course, there'll be more data analyzed on TA. But remember, that's a much sicker patient population. They've performed, we think, very consistently with expectations, and so we're not overly concerned about that.

Thomas Abate

It's also the only way that a patient with a small vessel gets access to the technology. So you have to keep in mind that there are folks that the TF procedure is not the best choice for them. So that they're very high-risk patients, and this is something that without TA, they don't have a solution. So it's very critical to us.

Operator

Our next question comes from the line of Mike Weinstein with JPMorgan Chase.

Christopher Pasquale - JP Morgan Chase & Co

This is Chris Pasquale here for Mike. I just want to follow-up on the question about the pace of center start-ups in the U.S. Mike, has your view changed on the way the market will play out long-term, with more concentrated volumes at large centers? Or you're just paring back your initial rollout plans, with the idea that, eventually, the technology will be disseminated broadly?

Michael Mussallem

Yes. Chris, I would say, broadly. At this point, our view has not really changed in the long term in terms of what we're going to see. There's a lot of questions that have been raised about regional centers of excellence, and that's, I think, an important consideration along the way. We're the beneficiary of an awful lot of experience outside the U.S. And it's just not large surgical centers that necessarily equal great success with transcatheter heart valves. There are many factors involved. And we think overtime, this is a technology that actually, can be useful in more than just a few centers. We don't expect this to be restrictive to kind of way, that you might see some of the other more complicated technologies restricted.

Christopher Pasquale - JP Morgan Chase & Co

And then on Embrella, when can we expect some results from that European study? I would assume the follow-up there is going to be pretty short. And how are you thinking about the potential to include cerebral protection in PARTNER II?

Michael Mussallem

Yes. At this point, it's premature to talk about Embrella and PARTNER II. We want to gain some first hand experience. What we try to relate here is, that we're in the process of bringing Embrella into Edwards right now. This means, run it through all of Edwards' quality systems, and make sure that it's bulletproof. We're going to be in a position to start clinical trial in the fourth quarter to really take a look at that thoroughly in multiple centers. You're right, we don't need a lot of follow-up, because we're really going to be most focused on the more acute success. So we would think, probably, early in 2012, we'll start to get some kind of signal. I don't know if it's going to be a strong enough signal to make decisions at that point, but we'll start learning at that point.

Operator

Our next question comes from the line of Bruce Nudell with Crédit Suisse.

Bruce Nudell - Crédit Suisse AG

Mike, you had mentioned that the data set for transapical in PARTNER Ia is likely to be augmented. To what extent and what's the data source that it'll be the kind of randomized apple-to-apple? How large a augmentation might we expect?

Michael Mussallem

Thanks, Bruce. I don't know -- if I sent that signal, I'd didn't mean to send that signal, that we were going to augment the data set in Cohort A. We think it's a really robust data set that's based on a very strong randomized clinical trial. I mean, you saw that the results were even published in New England Journal of Medicine. So we think we've got some pretty strong data. There'll be longer follow-up of course, that goes on, because that's going to be available at that time. But if I send a signal that there's going to be supplemental data, I didn't mean to.

Bruce Nudell - Crédit Suisse AG

Okay. And then just one follow-up, just conceptually, when you think about the evolution of the market, and you think about the ultimate split between inoperable and operable in the next 5 years or so, do you think they'll be like heavy recruitment of people who currently don't even get referred for surgical consult, but are rejected. You know, like people who, doctors just don't even think, are even worthy of forwarding on?

Michael Mussallem

Yes, thanks, Bruce. I guess our best way to be able to talk about that is to relate a little bit to our experience outside of the U.S. We've consistently seen that there is more patients that come into the system, than came into the system when it was only surgery that was an option. And that of course, when those patients come in, some of those will be good candidates for transcatheter heart valves, but in other cases, they're going to be good surgical candidates. And in some cases, they're going to be so far gone, that they're just not good candidates for either one of these therapies. But it's no doubt, that when there's an option like transcatheter heart valves available, that it stimulates more patient demand. And there's a percentage that goes each way. Overall, it's net growth.

Operator

Our next question comes from the line of Glenn Novarro with RBC Capital Markets.

Glenn Novarro - RBC Capital Markets, LLC

Two questions for Mike, then a question for Tom. Mike, can you just remind us how many centers in the U.S. are currently trained to do the TAVR procedure?

Michael Mussallem

In the U.S., today, we have, it's really the partner sites, it's in the neighborhood of 25 sites. So that gives you a sense for it.

Glenn Novarro - RBC Capital Markets, LLC

So it's 25, plus the 150 to 250 in year one. That's the right math, correct?

Michael Mussallem

Yes.

Glenn Novarro - RBC Capital Markets, LLC

And then, are you still confident of an October approval?

Michael Mussallem

We still feel good about that. Obviously, when you're trying to predict something like this, it becomes nearly impossible. You all have a chance to see a lot of companies that go through this process. But given what we've already been through, the power of the results, that we feel like was a strong panel yesterday, we continue to feel that that's a pretty reasonable estimate.

Glenn Novarro - RBC Capital Markets, LLC

Okay, great. And then for Tom, in the $0.49 that you delivered on an adjusted basis, you said there was a $2 million in-process R&D charge. A lot of companies would exclude that from the adjusted numbers. So I'm just curious why that was included.

Thomas Abate

Thanks for acknowledging that, Glenn. We felt that -- and it was the smallest of an item that it was, it was fair to actually talk about it, identify it, but to include it in our figures.

Glenn Novarro - RBC Capital Markets, LLC

When I plug it in my number, it looks like it took $0.01, or $0.02 out of the results, am I off there?

Thomas Abate

No, absolutely. It's slightly over $0.01.

Glenn Novarro - RBC Capital Markets, LLC

Okay, because on the surface, people are going to say, you missed your EPS number relative to consensus. So if you excluded that a lot of companies do, you would have been in line to slightly better, is that fair to say?

Thomas Abate

That is absolutely correct, Glenn.

Operator

Our next question comes from the line of David Roman with Goldman Sachs.

David Roman - Goldman Sachs Group Inc.

I wanted to follow up on some of the questions others have asked regarding stroke. On the last call going into the AATS meeting, I think there was some suggestion that when we saw the data, that further stratified the patients in PARTNER A, we may be able to derive a more specific conclusion about which patients are most at risk for stroke to try to better get, or get a handle on which patients might be excluded, or at least, viewed as less likely to be in the PARTNER A population. Was there anything you guys saw on that data that would better help articulate the PARTNER A population most at risk for stroke, and how we should think about that?

Michael Mussallem

Yes. I mean, you all had a chance -- and thanks for the question, David. You all had a chance to hear that discussion yesterday and look at it. And you could see that there was a strong desire by the FDA, certainly a strong desire on the part of our own CEC and Executive Committee to get much deeper on stroke than was ever anticipated when we started the trial. So remember, part of it was noted as [indiscernible]. When we went into the trial, we just were ready to talk all stroke. And now we want to get much deeper and cut this so that we can learn more about it. We know a few things, as it relates to PARTNER A. The TA patients, by their nature, have a higher risk of stroke. So these are patients, because they have peripheral vascular disease in most cases, are going to automatically put them in it. Broadly though, this field is still relatively new. I think there's a strong belief on the part of those that are practicing, that anti-platelet therapy is going to be important. And so that standard is still being sharpened, and moving it from simply, a guideline to a requirement we think will be important. And we're working closely with the clinical communities to define this more clearly.

David Roman - Goldman Sachs Group Inc.

And as you work through some of those details, whether it's defining anti-platelet therapy, or other measures that physicians have to undertake upon adoption of procedure, are these measures that you anticipate will be fully defined before you gain approval, and hence, included in the label, or things that will start of evolve over time? And will we see modifications to treatment paradigms as the product gets rolled out commercially?

Michael Mussallem

Yes. Well, those are being defined for PARTNER II. I don't think you're going to see those in a label and there's no real way of enforcing that. That's really left to clinicians to use their judgment. I wouldn't be surprised if many clinicians move to what is believed as best practice. But no, I think guidelines are going to evolve more slowly over time clinical results.

David Roman - Goldman Sachs Group Inc.

And Tom, very quickly on the P&L gross margins, I just want to clarify, is 180 basis points headwind related to currency, and assuming rates stay at current level, you would be similar to where you were this quarter in the third quarter?

Thomas Abate

Actually, the FX impact increases pretty significantly. And that's one of the reasons why I tried to give you a specific number for Q3. So I'd say, stick close to that.

David Roman - Goldman Sachs Group Inc.

Okay. And then the 73% exiting the year, that's entirely driven by product mix?

Thomas Abate

No. What we try to do is 2 components. So there's a big improvement in FX, in fact it has almost has no impact on the margin in the fourth quarter. So it's that FX improvement, plus the introduction, the assumed introduction of SAPIEN. So 2 factors get us to the 73%.

Operator

Our next question comes from the line of Ben Andrew with William Blair.

Ben Andrew - William Blair & Company L.L.C.

Mike, maybe talk a little bit more about the cap data, and when we could see a broader set that you sort of referred to earlier in the call.

Michael Mussallem

I don't really know there -- we probably got into a discussion that I'm not sure that we really belonged in to get into this continued access population. I'm sure it's going to be analyzed at some point. Our view is that, it's not going to be material to FDA as they evaluate whether that they should go forward on PARTNER B, but we'll obviously, do any kind of analysis that they like. But the continued access population, it really deserves careful looking at, because you have the group that was discussed yesterday, which those that are still randomized. Then, you had a broader group after randomization. Now that group goes up to I think, 400-plus patients and growing. And so this gets substantial. And we have to take into account, some of these patients actually start crossing over, and so the PAS, again, follow just like all pivotal trials do, it will follow and have analysis in the long run, but probably not in the near term. We'll -- one thing that you probably heard, we are committed to follow these patients for 5 years.

Ben Andrew - William Blair & Company L.L.C.

Right. And then just thinking about the existing centers, the 25-ish you mentioned from PARTNER 1, versus the new centers you bring on. How do you think about the mix of patients between those 2 groups, say, in the first quarter versus, say, the first-year? In terms of where the patients are going to be treated.

Michael Mussallem

Well, I think there's no doubt for those centers that already have some referral networks developed, like those that are partner sites. You're going to see them do many more cases. Now the other side of that is brand-new centers will do some stocking orders. So you'll also see quite a bit come from them. So the combination of those 2, we said, will generate between $20 million and $25 million in the first quarter.

Operator

Our next question comes from the line of Spencer Nam with Madison Williams.

Spencer Nam - Madison Williams and Company LLC

Just a couple of quick questions here. So this 150 to 250 sites that you guys are talking about, what scenario do you end up with 150 versus 250? How should we think about -- because to me those 2 numbers, a big gap between them. And I was curious how you guys think about 2 different outcomes there?

Michael Mussallem

Clearly, if we were at the lower end of that, that would affect our ultimate sales for the first year.

Spencer Nam - Madison Williams and Company LLC

Got it. That's helpful. And then on the reimbursement, I'm interested in finding out what you guys, in terms of your conversation with CMS and other private payers, kind of getting ready for this launch. What do you guys think about their willingness to pay? Clearly, there are some established guidelines from surgical sites and all that, but given that this is a new procedure, what is the risk of the reimbursement community, squeezing the reimbursement guideline, a little bit more than, maybe U.S. anticipated. How comfortable are you guys are, thinking that you guys will get a fair shake in terms of reimbursement?

Michael Mussallem

Yes. We believe that we will. It's impossible to be able to predict the future on this, of course. But we believe that CMS is going to continue, or will stay true to the standard of reimbursing to labeling. This will be a well-vetted procedure that's backed up with randomized clinical trials, an awful lot of discussion, deep engagements by the societies. And we think that in the final analysis, this judgment, that the benefits outweigh the risk, are going to carry over to reimbursement policy as well.

Operator

Our next question comes from the line of Sara Michelmore with Brean Murray.

Sara Michelmore - Brean Murray, Carret & Co., LLC

Mike, I just thought I changed the subject to INTUITY, if I could. And you mentioned a little bit about reimbursement in Europe following a CE Mark late in the year. But if you could just provide us just a little bit more color in terms of how that would work? If you actually would need formal reimbursement to get the procedure going in Europe? Or just general thoughts, would be helpful.

Michael Mussallem

Thanks, Sara, that's helpful. Yes, what we said was that our initial focus of our commercial efforts is that go to a select group of centers, and collect that clinical outcome measures and economic data, Quality of Life data. What we meant is, we'll have a CE Mark, it gives us the ability to go out and sell, but we don't think we want to go through a broad launch at this point. Because what we'd like to do is to have INTUITY's value established before we go to launch. And so I guess maybe -- and I'm guessing now what's underneath your question here. That would probably mean that you wouldn't anticipate a lot of INTUITY sales while we're still collecting those data because we think there's a much bigger picture, a much more important one that we need to develop. And so we're taking long run view there. We've said, let's collect the data that's necessary. And we believe all the signals are there, that would allow us to demonstrate that this has high economic value, and that, that is in place before a broad launch.

Sara Michelmore - Brean Murray, Carret & Co., LLC

Understood. And then in terms of the U.S. clinical trial, I don't think you've shared much in terms of the details there, and I understand your in front of the FDA with this IDE submission. And just in general terms, what do you have to demonstrate for that clinical trials at a large undertaking, is it a controlled, versus a standard care, a standard surgery, can you just give us just a big picture will be helpful?

Michael Mussallem

Yes. We're still in discussions. We're sure don't think it's going to be bigger than PARTNER. But this valve can be interpreted, either as a surgical valve or something very novel. And we're in those discussions. I don't have any specifics to share with you at this point.

Sara Michelmore - Brean Murray, Carret & Co., LLC

Okay. So it's not determined right now what the scope of that trial would be at some point, okay. And then, in terms of XT in Japan, you are on schedule, I guess, for a 2013 approval potentially. But where does that stand in terms of reimbursement for the valve? How will that work in a Japanese market?

Michael Mussallem

Yes. There's kind of a 2-step process in Japan, in general. We pursue regulatory approval, and we're well down that path. And so the regulators pointed us towards some specific clinical data that they'd like to see generated in Japan. And as we say, that trial is enrolled at this point. And so it's gone through its time period. And so it's going through its time period. And once that data is analyzed and so forth, then we expect it to be a favorable result. And again, I'll remind you that this is a SAPIEN XT that we're going for in Japan. Then we make a separate petition to the Ministry of Health and Welfare for reimbursement. And our intention would be, to have reimbursement in place before we launch.

Sara Michelmore - Brean Murray, Carret & Co., LLC

Okay. And then just one last one on Magna Ease, that approval in Japan, was I guess, a quarter earlier than I think you had told us you were planning for. Can you just remind us what the opportunity is for that valve in that market?

Michael Mussallem

Sure. Thanks. And this probably needs to be the last one. Thanks, Sara, though for your diligence. Yes, we were pleased. We weren't expecting the Magna Ease aortic valve this soon, so we were very pleased to get that approval. This has become our #1 selling valve in the world, so we're very excited about bringing that in Japan. You may know that we have a very strong market position in Japan. So this is going to be an opportunity for us to move our customers through this lower profile. It's particularly going to be helpful for these smaller patients. So not only will it be a bit of an upgrade for those that are already buying Edwards products, but we think it's going to bring some patients that are small today that might to get mechanical valves over to a tissue valve.

Operator

Our next question comes from the line of Matthew Taylor with Barclays Capital.

Matthew Taylor

Just a couple of questions about the panel yesterday. I'm curious to know whether you thought the feedback from the panel was consistent from the feedback that you've gotten from clinicians throughout the progress of doing the PARTNER trials? And if there's anything that surprised you about the panel, or the feedback from the clinicians or the FDA.

Michael Mussallem

Well, I would say, broadly, nothing really new. Probably, a bit of a difference in tone map was there. It's clear that this panel is not nearly as close as many of the clinicians that we deal with, where this has become a big part of their life's work. And so we end up having more detailed conversations. And in a way, this is a chance for us to step back and have some experts review this, that aren't so deep in our technology, and don't know so much about these patients and this disease. So we feel like that we probably even need to do a better job of explaining to this group where we are. I don't know if that gets at your question.

Operator

Our next question comes from the line of Suraj Kalia with Rodman & Renshaw.

Suraj Kalia - Rodman & Renshaw, LLC

Michael, first and foremost congrats on the panel decision. Everything I've heard on the quarterly calls, Michael, suggests that the U.S. market dynamics are going to be dot-for-dot, what we have seen in Europe. You look at the consensus numbers, everything, seems like it's mapping out, people are mapping it out pretty closely. The question I have, Michael, is, I'm curious, are checks in Europe, suggest that 60% to 70% of these valves are being put off label and I'm curious in your assessment, one, related to the stroke rates that we are seeing, currently, admittedly, there's a higher profile, larger profile device. But I'm just interested, how do we -- how should we look at the market dynamics in the U.S, especially related to what's happening in Europe and how that will flow through into the U.S.?

Michael Mussallem

Sure. thanks for that question, Raj. Well, let's start from the top. We absolutely do not agree that 60% to 70% of the valves are being used off-label. We think a high, high percentage of these valves are being used on label. I think label actually, calls for more than a euro score of 15 or 20, and we're tracking in the 25% range. So the first registry showed 27, I think we're around 25 today. So we're very, very comfortable in terms of some very high-risk patients that are being treated. Now I can't speak to whether, competitors are also following that. But certainly, we know we're a big part of the people that are serving that. Those patients in Europe. And that we're very rigorous about helping people stay on label, and we don't think it has. There was just recently a circulation paper that was published, I think it was Dr. Martin Thomas that actually authored that, and he had a quote that was in that, that says, "there's not been indication creep." And again, I don't have the words exactly right, but I would encourage you to go back and review that. I think it was just published in the last few weeks.

Thomas Abate

And he repeated that at the panel. It is the testimony of the panel also yesterday.

Suraj Kalia - Rodman & Renshaw, LLC

And final question, Michael, one of the things that caught our attention in the panel yesterday was, the switch in definition of stroke from old stroked to major stroke. I'm sure there are legitimate clinical arguments Marty Leon [ph] and the Edwards team has made, but just fast forward, looking at Cohort A, can something trip us in terms of this old stroke versus -- I mean, if memory serves me right, at one year, I think transfemoral was like 5% or so, and I forget what the control was 2 or something. I'm just curious -- and it's said major stroke, I remember that. But when you look at old stroke with the FDA threw a wrench in this whole process again, or how should we look about that?

Michael Mussallem

I think it's a good way. I think stroke is key on everybody's mind, because when you think about complications, here's probably the most serious complication. And actually, we look forward to tackling this stroke issue, because if we can get this one managed, we think there's substantial upside. But you have to remember, when we went into this thing and the trial was designed sometime ago, it was indeed indicated, that we were going to measure all stroke. That's what was prespecified, and what FDA reminded us is that, the pure science is to stay with those prespecified measures. Along the way, it became apparent that stroke was becoming an important complication that needed to be understood. And so it wasn't just my Marty Leon [ph], but our clinical events committee, our Executive Committee, that said they really value deeper analysis. And so they started cutting it, not only by major stroke and minor stroke, but many other ways. We -- I want to remind you, we continue to provide all the data exactly the way FDA wanted it. In other words, by all strokes. But we supplemented it with this additional analysis. This was all under the banner of trying to understand it better. And we recognize that for Cohort A, there's a 2% to 4% higher level of stroke in these patients. But again, this is a very sick group.

Operator

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

Kristen Stewart - Deutsche Bank AG

One of the things that came up yesterday was also, the valve and valves, I guess the lack of preclinical data. I'm just wondering to the extent that the FDA wants that, or I guess what are your thoughts that the FDA would want that before approval and to what extent could you get them data to get them comfortable, if that's the case.

Michael Mussallem

Since we're not seeking that as an indication, we didn't feel any reason that we needed to provide that data. We certainly understand exactly where FDA is coming from, because some clinicians, in an effort to save patients lives, in many cases where there aren't options, aren't going to want to use our valves. And I think where this ultimately landed, is that FDA will probably put some kind of warning, and that reminds people that we don't have any data on valve and valve. But we don't think that that's going to constrain the approval of the product.

Kristen Stewart - Deutsche Bank AG

Okay, great. And then, we had discussed already the coding from a hospital perspective. Any color that you have on how physicians will be reimbursed for these procedures? Will they map also to surgical code, or will they map to some other code, perhaps more of an interventional code?

Michael Mussallem

Yes. We don't have clear definition of that. It's going to happen after FDA approval, and we'll know more. At that point, we're going to make our application for those codes. So that's really one step away, so we don't have the specifics to add. It will be a specifically new code.

Kristen Stewart - Deutsche Bank AG

And the cost effectiveness Cohort A, is that still this fall?

Michael Mussallem

[indiscernible]

Operator

Our next question comes from the line of Elie Kobrin with Bank of America Merrill Lynch.

Elie Kobrin

I think Mike, one of the takeaways from the panel yesterday was that the assessment of stroke, in TAVR trials going forward needs to be much more rigorous. And there was even discussion about potentially including neurological evaluations by neurologists for all patients in these trials. I was wondering if you could speak to any components of the PARTNER II protocol, that specifically address that issue?

Michael Mussallem

I think that's a great observation, Elie. Yes, in fact, in our PARTNER II discussions, there have been specific discussions about doing neuro assessments. And we're in agreement with doing that. We're all committed to learning together, and this is going to be evaluated much more thoroughly in the future.

Elie Kobrin

So is that being incorporated into the ongoing PARTNER II trial now? Or is there any, do you guys have a reason to believe FDA may want you to actually pause the study and revise the protocol?

Michael Mussallem

Well, I need to go back and check, but my understanding, is that it would be incorporated into PARTNER IIa. I don't know for a fact that it's incorporated in PARTNER IIb.

Operator

Your next question comes from the line of Bruce Jackson.

Bruce Jackson - Morgan Joseph TriArtisan LLC

Getting back to the valve in valve, are you collecting any clinical data? And would you comment on your long-term regulatory strategy for valve in valve?

Michael Mussallem

I probably haven't done a very good job of explaining it. When you listen to the panelist yesterday, it's why the heck don't you generate some valve in valve data? And the short answer is, it's not that simple to analyze. So there's a few things that you could evaluate. In other words, you need to do specific studies within specific valves, right? And when you start thinking about failing tissue valves, there aren't that many that are out there. So being able to do the appropriate tests and get the appropriate models for failing tissue valves and fulfill regulatory requirements for doing it, it's difficult and challenging to do. And you're probably going after some very small numbers in the final analysis. So that probably is more meaningful. Obviously, it's meaningful to patients. It's probably not a big driver in terms of number of patients that you're going to get valve in valve in total. Is that helped clarify it? Or do you have more specific question, Bruce.

Operator

Our next question comes from the line of Mike Weinstein with JPMorgan Chase.

Michael Weinstein - JP Morgan Chase & Co

I might have missed this earlier, but 2 quick questions. Will we see further follow-up from Cohort A, STCC, and part of the reason I'm asking, Mike, was on the discussion on the transapical subset in particular, there was -- as the numbers got very small. As we went out behind 12 months, there was some question as to where the curves were heading, the mortality curves, for the transapical arm, versus the control arm. And I was wondering if we actually would see a larger and out 18 months or more?

Michael Mussallem

The real specific answer, Mike, is I don't know exactly what's going to be presented at TCT. You know there's going to be a strong desire to see more data. I think I specifically, don't know the answer, Mike. So I'll leave it there.

Michael Weinstein - JP Morgan Chase & Co

Not a problem. And I wanted to make sure I kind of got the bounce back of what you said earlier with regard to the CMS, so I just want to make sure your thoughts and process there hasn't changed. Your expectation is still that CMS will not issue a national cover decision or not to open one up at least, prior to the FDA approval?

Michael Mussallem

Yes. At this point, we're not sure of the timing of a national coverage decision. At one time, we would've thought that it was some ways off. There's more discussion today, more engagement by societies, and it's possible that a national coverage decision could be sooner than we originally thought. Big picture, we continue to believe that CMS is going to reimburse the label. And as long as that's the case, we really don't think there's any changes to our models.

Operator

Sir, there are no further questions at this time. I would like to turn the floor back over to you for closing comments.

Michael Mussallem

Great. Thank you. And thanks for your continued interest in Edwards. Tom, and David, and I are going to welcome any other additional questions by telephone. Let me turn it back over to you David.

David Erickson

Thank you for joining us on today's call. The reconciliations between GAAP and non-GAAP numbers mentioned during this call, which include underlying growth rates and amounts adjusted for special items, are included in today's press release and can also be found in the Investor Relations section of our website at edwards.com.

If you missed any portion of today's call, a telephonic replay will be available for 72 hours. To access this please dial (877) 660-6853 or (201) 612-7415, use account number 2995, and the passcode is 375014.

Additionally, an audio replay will be archived on the Investor Relations section of our website. Thank you very much.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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