Edwards Lifesciences Corp (EW) — Q3 2018 Earnings Call Transcript

Welcome, and thank you for joining us today. Just after the close of regular trading, we released our third quarter 2018 financial results. During today’s call, we’ll discuss the results included in the press release and accompanying financial schedules, and then use the remaining time for Q&A. Our presenters on today’s call are Mike Mussallem, Chairman and CEO; and Scott Ullem, CFO. Before we begin, 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 financial guidance, expectations for product opportunities, clinical trials, litigation, new product approvals, reimbursement, competitive matters and foreign currency fluctuations. These statements speak only as of the date on which they are made, and we do not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially. Information concerning factors that could cause these differences and important product safety information may be found in our press release, our 2017 Annual Report on Form 10-K and our other SEC filings, all of which are available on our website at Edwards.com. Also, a quick reminder that when we use the terms underlying, organic and adjusted, 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 and our website. And now, I’ll turn the call over to Mike Mussallem. Mike?

Thank you, David. We’re pleased to report strong third quarter adjusted sales of $921 million, or an 11% growth on an underlying basis consistent with our expectations, driven by a remarkable portfolio of innovative technologies. Year-to-date, underlying sales growth was 10%, and it was consistent with our full-year guidance of 10% to 11%. And even with the backdrop of a tough fourth quarter comparison, we expect 2018 to be a year of strong financial performance, while also aggressively investing in our future. Looking forward, based on recent learnings, we have increased confidence that our innovative lifesaving therapies can benefit many more patients whose structural heart disease is deadly and undertreated today. In transcatheter heart valve therapy, global third quarter sales were $558 million. Underlying sales were up 12.7% compared to the prior year, which reflects continued impressive organic growth. We estimate global TAVR procedures continued to grow robustly in the mid-teens. Our worldwide sales grew at a lower rate due to a modest year-over-year share decline outside the U.S. and lower royalty revenues. Globally, our average selling price remained stable. In the U.S., total procedures for the third quarter grew in the mid-teens versus the prior year, and our growth was comparable. Growth was highest in newer and smaller centers, where this therapy is increasingly accessible to a broader population of aortic stenosis patients. Based on our continued research, we are increasingly confident that there are many patients who would benefit from TAVR who are not diagnosed or treated today. We’re continuing our efforts to increase awareness, improve diagnosis and help patients receive the care specified in medical guidelines. Late in the third quarter, we began enrolling our limited Continued Access Protocol, or CAP, for our U.S. PARTNER 3 trial, which has a minimal impact on this quarter’s results. And we continue to anticipate data from the PARTNER 3 trial to be presented at the ACC meeting in March of 2019, followed by the receipt of a low-risk indication late that year. Earlier this month, we announced the commencement of the U.S. pivotal trial that will study our self-expanding CENTERA transcatheter valve for patients at intermediate risk of open-heart surgery. And we expect the SAPIEN 3 Ultra system to gain U.S. regulatory approval around the end of the year. Following a public comment period and a review of TAVR outcomes at the Medicare Advisory Committee meeting in July, CMS is currently in the process of formulating a draft provision of the National Coverage Determination, or NCD. This reconsideration is critically important for U.S. patients seeking treatment for this deadly disease. We assume any changes to the current NCD are likely to significantly affect the global TAVR opportunity. We expect the new NCD to be finalized by June 2019. Outside the U.S., procedures showed significant continued growth estimated to be in the mid-teens. Our procedures grew in the low double digits. We continue to see excellent long-term opportunities for growth, as we believe international adoption of TAVR therapy is still low. In Europe, we estimate the TAVR procedures grew at an impressive mid-teens rate spread broadly across most countries. On a year-over-year basis, we experienced some expected share loss. However, our share stabilized this quarter compared to last quarter. This quarter, we are implementing a targeted commercial introduction in Europe of our feature-rich CENTERA platform, which demonstrated outstanding clinical outcomes in its early experience. And we remain on track to receive a CE Mark of the SAPIEN 3 Ultra system in the fourth quarter. We’ve decided to implement a controlled rollout strategy of Ultra, including training to ensure high procedural success of this advanced valve and delivery system and now expected to have a minimal impact on results this year. In an unrelated development earlier today, we announced that a court in Germany granted a preliminary injunction on future commercial sales of our SAPIEN 3 Ultra valve in that country. The decision does not impact sales of our SAPIEN 3 or CENTERA valves or the clinical study for European approval of SAPIEN 3 Ultra. We will promptly appeal. In Japan, we continue to see strong TAVR therapy adoption, driven by SAPIEN 3 and new centers continue to be qualified. This is our fastest-growing region this quarter, where we believe aortic stenosis still remains a large untreated disease. In summary, year-to-date underlying sales growth for THVT is 12.5%, and we would expect full-year 2018 to be in that area because of a limited contribution from Cardioband, which I’ll discuss in a moment and a revised rollout strategy for SAPIEN 3 Ultra. We’re encouraged that the TAVR opportunity remains robust and we’re confident in our new product offerings to sustain our strong global leadership position. In Surgical Valve Therapy, underlying sales for the third quarter was $199 million, up 3% on an underlying basis consistent with our expectations. Growth was driven by solid aortic unit volume and continued adoption of our new premium aortic valves. With the approval of reimbursement, we’re pleased to announce that we began launching our INSPIRIS RESILIA aortic valve in Japan last month. We expect strong adoption of this new class of resilient tissue valves in this important region. This valve is designed to be an attractive option for active patients when we’ve observed a trend of physicians treating younger patients in our early global experience. In summary, in surgical heart valve therapy, we continue to expect full-year 2018 underlying sales growth of 2% to 4%. Even as TAVR adoption expands, we are excited about our ability to provide innovative surgical treatment options for more patients and to extend our global leadership in surgical heart valve technologies. In Critical Care, our sales for the quarter were $164 million and grew 15% on an underlying basis. This performance was strong across all our product lines, led primarily by demand for HemoSphere. Sales in the U.S. were particularly robust this quarter, additionally aided by new group purchasing organization contracts. HemoSphere, our next-generation all-in-one monitoring platform that is replacing our older monitoring systems continue to receive excellent feedback from clinicians. HemoSphere is designed to provide greater clarity on a patient’s hemodynamic status. This new monitor is expected to continue to be an important growth driver, although hospital capital replacement cycles can be somewhat unpredictable. We continue to introduce our Acumen Hypotension Predictive Index, or HPI, to a limited number of hospitals utilizing our current platform until it becomes available on HemoSphere, which is expected in the fourth quarter. This first-of-a-kind technology leverages predictive analytics to alert clinicians of dangerous hypotension or low blood pressure before it occurs in their surgical patients. In summary, due to excitement by early adopters of HemoSphere, 2018 is turning out to be a particularly strong year for Critical Care. We now expect 2018 underlying sales growth to exceed the top end of our full-year guidance range of 6% to 8%. Turning to our Transcatheter Mitral and Tricuspid Therapies, or TMTT, we continue to invest aggressively in our portfolio of therapies. As you’ve heard last month at TCT, the results of the COAPT trial clearly demonstrated the importance of reducing mitral regurgitation, reinforcing confidence in our strategy to address this large opportunity. There were also updates on our TMTT programs, and you can expect a more complete overview of our portfolio at our Investor Conference in December. Today, I will cover some select updates. Beginning with transcatheter mitral repair, patients continue to be treated commercially in Europe with Cardioband, and we’re encouraged by the high level of interest from clinicians in its potential. Third quarter sales were limited to $1 million due to the ongoing supply constraint in both our mitral and tricuspid programs, and we expect that trend to continue in the fourth quarter. In order to fortify our near-term supply and scale for longer-term volume expectations, we’ve decided to transfer production of this platform from the facility that we acquired to other Edwards manufacturing locations. We expect Cardioband supply constraints to progressively improve throughout 2019. We believe as this therapy advances, the annular reduction provided by Cardioband can be an important first-line treatment for many mitral patients. We continue to receive variable clinician feedback on our PASCAL mitral repair therapy and still expect the European launch of this platform in 2019. In the U.S., we’re pleased to announce the approval of our pivotal trial to study patients with primary mitral regurgitation and are in the process of securing hospital contracts. In mitral valve replacement, we’re encouraged by the positive scientific presentations of TCT last month on our new EVOQUE system, which is built on the learnings and experiences of CardiAQ. We continue to make good clinical progress with EVOQUE and SAPIEN M3 systems and remain confident in our transseptal mitral replacement strategy. In transcatheter tricuspid repair, again, constrained by supply, clinicians continue to treat a limited number of patients in Europe with our Cardioband Tricuspid Annular Reduction System and we’ve received positive feedback on this therapy. In the U.S., we have initiated our early feasibility study. Overall, we remain enthusiastic about the opportunities for our transcatheter therapies to help patients who are suffering from mitral and tricuspid valve disease and we continue to expect a large global opportunity. And now I’ll turn the call over to Scott.

Thank you, Mike. I’m pleased to report another quarter of double-digit underlying sales growth. Adjusted sales were $921 million, up 11% over 2017. These results were in line with our expectations in our typical third quarter seasonality. Consistent with our practice in the prior two quarters, adjusted sales exclude a sales return reserve related to our conversion to a consignment inventory model for surgical valves in the United States, which was $14 million this quarter. We still expect to complete the conversion by year-end and now estimate the conversion will impact sales by approximately $80 million to $90 million this year. Adjusted earnings per share was $1.07 and GAAP earnings per share was $1.06. Adjusted EPS growth was 27%, which benefited from a lower tax rate, driven by U.S. tax reform and solid growth in operating income. Adjusted earnings per share was $0.02 higher this quarter than it would have been if the excess tax benefit was as we estimated in our guidance last quarter. For the quarter, our adjusted gross profit margin was 75.5%, compared to 74.4% in the same period last year. This improvement primarily reflects the benefit of a more profitable product mix and the absence of last year’s expenses associated with Hurricane Maria in Puerto Rico. These benefits were partially offset by continued investments in manufacturing capacity. We continue to expect our full-year 2018 gross profit margin, excluding special items to be between 74% and 76%. Turning to selling, general and administrative expenses, third quarter expenses increased 10% over the prior year to $270 million, or 29.7% of sales. This increase was driven by personnel-related expenses. The ratio of SG&A as a percentage of sales would have been 40 basis points lower if you exclude the impact of the HVT consignment conversion. We continue to expect full-year SG&A, excluding special items to be between 28% and 29% of sales. Research and development investments in the quarter increased 13% over the prior year to $162 million, or 17.8% of sales. This increase was primarily the result of continued investments in our transcatheter programs, including spending on clinical trials. We continue to expect R&D, excluding special items to be between 16% and 17% of sales for the full-year. Our reported tax rate for the quarter was 9.2%, down from 19.7% in the prior year period. This reduction was driven primarily by U.S. tax reform. This quarter’s rate benefited 490 basis points from the accounting for employee stock-based compensation, which was 190 basis points higher than we estimated in our guidance last quarter. Excluding the impact from special items, our tax rate this quarter was 13.5%. We continue to expect our full-year tax rate, excluding special items to be at the low end of our previous range of 13% to 16%. Foreign exchange rates decreased third quarter sales growth by $7 million, or 0.9% compared to the prior year. At current rates, we continue to expect an approximate $30 million lift, or about 1% to full-year 2018 sales compared to the prior year. Compared to our July guidance, FX rates benefited earnings per share by about a $0.01 this quarter, reflecting the effective currency hedging program we have in place. Free cash flow generated during the quarter was $257 million. We define this as cash flow from operating activities of $342 million, less capital expenditures of $85 million. Our year-to-date adjusted free cash flow, which excludes last quarter’s tax audit settlements and repatriation taxes, was $550 million. Turning to the balance sheet. Total debt at the end of the quarter was $1.2 billion, and we had cash, cash equivalents and short-term investments of $1.6 billion. Just after the end of the quarter, we retired maturing bonds, which reduced both of these amounts by about $600 million. Now turning to our 2018 guidance. For the full-year, as we discussed earlier, we are now modeling slightly lower transcatheter heart valve therapy sales and higher critical care sales. For the total company, our prior guidance ranges are unchanged as we continue to expect to achieve the higher end of each of the current sales guidance ranges of $2.1 billion to $2.4 billion for transcatheter heart valve therapy, $810 million to $850 million for surgical heart valve therapy, and $610 million to $650 million for critical care, and for total Edwards $3.5 billion to $3.9 billion. Our prior guidance ranges for adjusted earnings per share and free cash flow are also unchanged. We continue to expect our full-year adjusted EPS to be between $4.60 and $4.75. Lastly, we continue to expect adjusted free cash flow to be at the higher end of $700 million to $775 million. For the fourth quarter of 2018 at current foreign exchange rates, we project adjusted sales to be between $950 million and $1 billion, and adjusted earnings per share to be between $1.05 and $1.20. And with that, I’ll hand it back to Mike.

Thanks, Scott. We remain confident in our outlook for continued strong sales growth and are passionate about helping more patients around the world. We continue to focus on driving organic growth with leading innovative technologies, while aggressively investing in our future. Our foundation of leadership, coupled with our robust product pipeline positions us well for continued longer-term success and greater shareholder value, as we pursue multibillion market opportunities. And with that, I’ll turn it back over to David.

Thank you, Mike. Before we open it for questions, I would like to remind you to mark your calendars for the evening of Tuesday December 4th, and the morning of Wednesday December 5th, when we will be hosting our 2018 Investor Conference at our corporate headquarters here in Irvine, California. This event will include discussions with key opinion leaders, updates on our latest technologies and views on longer-term market potential, as well as our outlook for 2019. More information will be available in the coming weeks. We’re ready to take questions now. In order to allow broad participation, we ask that you please limit the number of questions. If you have additional questions, please reenter the queue and we’ll answer as many as we can during the remainder of the call. Operator, please go ahead.

Good afternoon, guys. Thanks for taking the question. One on 2019 legal question. So Mike and Scott, I know you won’t provide 2019 guidance until the Investor Conference in December. But you’ve always been helpful in providing some puts and takes looking at the following year. I think consensus is modeling about 10% revenue growth next year, which is similar to the underlying sales growth you’re getting to this year. It does seem like there’s more tailwinds in 2019 than 2018, which should help and the Street’s modeling about 12% EPS growth. So is there anything you would call out there? And I had one follow-up.

Yes, Larry. You’ve kind of answered your own question. We’re not in a position to provide 2019 guidance until we get to the Investor Conference. But I mean, if we just want to think big picture, our TAVR business is healthy, and we continue to expect mid-teens growth in that marketplace through 2021 and beyond for that matter. And we know AS is dramatically undertreated. And when you couple that with this comprehensive TMTT portfolio with some very nice mid to longer-term growth opportunities, we think it provides a very positive backdrop. We’re committed to win in that space and we’ve been aggressively invested. And we just have continued confidence in our innovation strategy. So we’ll get into the numbers later, Larry, but I think we have nothing specific to share at this time.

Okay, I understand. So Mike, let me push my luck a little bit and ask a legal question. I spoke with an investor today, he said, “I love what Edwards is doing in transcatheter heart valves, and I’d like to buy this stock.” But frankly, I’m concerned Boston could potentially enjoy in both SAPIEN 3 and Ultra in Germany any day. And I know you’re appealing those decisions, but in the meantime, Boston does have that option. So Mike, if you were speaking to that investor, how would you relay his or her concern? Thanks for taking the questions.

Well, I think big picture, you know that Boston Scientific has initiated litigation and involves a number of patents in multiple countries and is likely to yield a number of court actions over an extended period of time. The recent developments have not changed our view that Boston’s patents are invalid and we’re confident in our leading intellectual property position.

Hi, Mike, thanks for taking the question. I wanted to go back to Larry’s question about puts and takes. What we’ve seen thus far in 2018 and frankly for the last 18 months are trials that would suggest that the low-risk opportunity for you in TAVR is meaningful and could be material to growth rates for the marketplace. The LRT trial from Washington Hospital Center comes to mind recently. And there are other puts and takes obviously with some of your product launches and seemingly perhaps having more impact on 2019 than 2018. So I guess, if we just stick with the market growth rates and sort of your share trends, both in the United States and Europe, would you anticipate that the goings on with respect to trials and low-risk over the next six to 12 months, as well as new market entrants, Boston in the United States, sort of offset by your product launches would create an environment, where market growth rates are still strong, maybe commensurate with what we’ve seen this year and you can maintain share over that time?

Yes. Thanks, Jason, it’s a good question. As I said, we continue to be confident about the long-term growth prospects for TAVR. But as you correctly surmised, I think, this data that’s going to come out related to the low-risk indication has the potential to be some kind of a catalyst. As we said before probably not a step function, but a net positive to a market that’s already growing quite nicely. As we’ve talked before, our pricing has been quite stable. And so the question comes back to share, but it’s share of a rapidly growing market and we’re pretty confident in our position. I mean, it’s absolutely true that we’re going to have new competition, but at the same time 2019 is going to the first year that we have real impacts from our Ultra valve and CENTERA.

Okay, it’s helpful. And then on the mitral side, Mike, you were asked several questions at the TCT meeting about COAPT. And I’m wondering with the benefit of an extra month or so since that trial was presented? If you have any different or augmented perspective on how COAPT may or may not change the landscape in mitral? And maybe more specifically how fast these trials enroll, whether it would be your PASCAL study uptick in Europe of Cardioband and PASCAL? And then also on the replacement side, what COAPT may or may not do with respect to excitement around our clinical trial enrollment in those studies if you have a couple going on I know?

Yes. Thanks, Jason. As you correctly pointed out, we’ve got quite a bit going on in the mitral space and we’re excited about the new developments. The results of COAPT clearly demonstrated the importance of reducing mitral regurgitation. And it does reinforce our confidence in our strategy to try and address this opportunity that’s very large. We’re just- we’re enthusiastic about the transcatheter therapies to help patients that are suffering in these areas. So we feel good about it. It can’t hurt enrollment, that’s for sure. It should facilitate that, both on the PASCAL side and our other clinical trials that we have ahead.

Good afternoon. Mike, just two questions for you. First, just on Cardioband. In my sense as you reiterated sort of the $15 million contribution at TCT. So could you just talk about when the decision on manufacturing was reached? Should we assume basically zero revenue for Cardioband in the fourth quarter? And as you think about next year, you talked about scaling up manufacturing. Is $15 million a better way thinking about 2019, or is that sort of conservative relative to how you see the manufacturing scale-up next year? And then I have a quick follow-up.

Yes. Well, thanks, David. You’re right, we’re more and more optimistic about being able to scale-up Cardioband and now we expect that to change. We fell short of our goals of our current supply base and also the acquired facility. And so we’ve already begun this process to begin the transition to other facilities. As I mentioned in prepared remarks, we expect the supply constraints to progressively improve throughout 2019, and we’d expect the manufacturing transition probably to finish by the end of the year. So it’s premature for us to be able to actually estimate numbers, David, but hopefully that gives you a sense of the direction and the rationale why.

Hey, David, it’s Scott. I just add. In terms of contributions to Q4, it’s not going to be zero, but it’s probably going to look something more like what we did in Q3, maybe $1 million or somewhere in that range.

Yes. So the – this trial, what we call the trial class is one where we’re going to be studying primary mitral regurgitation. It’s going to be a two to one randomization versus MitraClip and it’s going to be by – for patients that are deemed inoperable by the local heart team. So the same way the MitraClip is labeled today. It will be a non-inferiority study around 300 patients at 50 centers primary endpoint MR grade reduction and then secondary endpoint of major adverse events.

Good afternoon, and thank you, guys. I wanted to start with a question on pricing. I think, you guys mentioned in your prepared comments that the global pricing dynamic for TAVR has been stable. But I’m interested in sort what went on in the quarter competitively? I think that’s been a topic of interest all year long. It seems like your competitors are still pretty active in fighting for market share in various ways. So I’d be interested in if you could put some color on what’s going on in pricing? What’s assumed in the rest of the year for your guidance on that topic? Thank you.

Yes. Isaac, thanks. Yes, you’re right. We did mention in prepared remarks that global average selling price remains stable, and we would expect that condition to continue in 2018. That’s been very steady for some time to come. I know that we had some conversations last quarter about some aggressive pricing that we saw in Europe. We probably, although there continues to be a significant difference between Edwards pricing and our competitors. That’s probably sell down a little bit. And we look from a share perspective to believe that it’s probably stabilized versus the quarter before. So I don’t know if that helps get an extra question.

Yes, sure. That’s helpful. And then just a follow-up on your comments for the MEDCAC panel outcome. There has been obviously a lot of debate about, if that – how the NCD gets updated? What that means for the marketplace in TAVR overall? I’m just trying to make sure I understand your reasoning as to why you don’t think you’ve got a lot of meaningful impact, at least, initially and how you think that will play out over time? Thank you.

Yes, it’s a good question. I think big picture, CMS is taking a look at what’s going on in TAVR from a reimbursement perspective and consider that a success. So although the NCD needs updating and it will be updated, we don’t expect right now for it to have a significant impact on the TAVR opportunity. Now, of course, depending on what they decide, it could have some influence up or down. But we’re just trying to share with you that when we do our own modeling, we’re kind of modeling no significant change.

Hey, guys, thanks for taking my question. So maybe I wanted to start one with the 2019 drivers, obviously, given where we are in the year, I think, all eyes are turned to 2019. When I think about the negatives, right, Mike, the – obviously, you have pricing pressure ongoing in Europe and you have a new competitor coming into the U.S. at some point, possibly mid of next year. But on the other side, you have low-risk approval Cardioband ramping up and PASCAL launching. I don’t think you commented on the timing of PASCAL launch and we’re just assuming mid of 2019, and the base case seems to be one offsets the other. Is that any reason why TAVR growth in 2019 could be below 2018 levels that you could think of?

Yes. So I appreciate the fact that you’re looking at the negative, so we look at the future and we’re pretty positive about it. The pricing pressure in Europe is something that we’ve dealt with for a long time. That’s been there and we’re excited about having new products in the future. And although we won’t have a big impact on Q4, it will have an impact going forward. The U.S. approval has been somewhat inevitable that there was going to be that competition that we kind of fully accounted for that. We’re going to be excited about bringing CENTERA and Ultra to the U.S. as well. In terms of the upside on TMTT and some of those, we’re not prepared yet to talk about when we’re going to launch PASCAL in terms of what time of the year, but it’s going to be positive. But you also have to remember that THV, the aortic business is a much larger business and has more influence on our near-term – probably our 2019 sales. Sure. We – the big picture for us, we continue to get positive feedback and our belief is that annular reduction that’s provided by Cardioband could be a really important first-line therapy. Again, it’s going to require some advancements on our part, but we continue to feel strongly about that. In terms of the future implications of the active trial, post-COAPT, we are assessing the implications of clinical trial design based on what was learned in that. And we hope that we’re going to have more to share with you about that when we get to our Investor Conference in December.

Hi, good afternoon. I wonder if I could maybe just dig a little bit on Europe. I think, you mentioned that you did see some share loss early in the year, but it’s stable at this point. I’m curious if you can confirm that, and really anything you can give us just in terms of the dynamics in Europe as we sit here today?

Yes. I think, as we indicated last quarter, we felt like we experienced some share loss and so we continue. That share loss has happened, and so it continues to be reflected in our year-over-year growth rates. What we’re saying is sequentially share seemed to stabilize from our perspective. So this was – so we’re saying, we didn’t see it as a continued trend that continued into the third quarter. Does that get at your question, Raj?

It does. Yes, it doesn’t. And I’m curious if there’s anything more you can offer in terms of where that was? Was it specific accounts or why you did experience a share loss and why you don’t expect it’s going to get any worse even in Europe?

Yes. I don’t know that I’m able to do that. I mean, this is a pretty vast kind of – a lot of countries, a lot of moving parts here. I think it’s just generally true. Even when we think back to what happened in Q2, it’s not like it’s widespread. It doesn’t take a lot of procedures to change the actual results in transcatheter heart valves.

Good afternoon, Mike. Let me come back to your comments on the now the controlled launch for both the new TAVR and CENTERA and Ultra. Is this the new norm using going forward we should generally assume? And it makes sense, I get it, to release more slowly. And maybe you could help us understand what controlled means? Does it mean to receptors? Does it mean that it will take you six months to sort of get your sea legs as it were, or no, this is a process that it could take a couple of years. Can you help us better frame and the thinking behind all that?

Yes, I don’t know it’s the new norm. We certainly feel responsible. We are going to customers and offering systems that we think are improvements over systems that already have some very high performance. So you know the way that SAPIEN 3 is performed in big data sets. And so we feel the obligation to make sure that the next generations of systems whether it’s CENTERA or Ultra, continue to perform at least at that level or better. And so we just want to make sure that we invest the time to do that. For the most part, I expect this training to be done by our clinical specialists. It’s not like we’re going to start reproctoring patients again, but we do feel like we want people to slow down and recognize, hey, there’s a number of advancements in these systems, let’s really focus on them, understand them well so that you get great performance right from the first patient.

All right. So we’ve been investing and increasing our capacity now for a couple of years. And remember, we were supply constrained, and so we had some catching up to do just to support THV. Now we’re ramping up to also support an expansion in TMTT. And so we’ve been making investments in our existing facilities in the U.S. and outside of the U.S. And as you know, we’re working on building a new facility in Costa Rica and just announced a plan earlier this year to put a facility in Ireland. And so I think that spending and investment is going to continue for a number of years down the road. You’ve seen it reflected in our higher capital expenditure investments. We’d probably be over $200 million this year. And the result is going to be that we will be able to satisfy the needs for really addressing these large untapped markets in years ahead.

Hi, good afternoon. Hey, Mike, I know you don’t want to give guidance for 2019. But as I think about what I’m hearing on this call a slower rollout of SAPIEN Ultra in 2019 and hopefully some positive benefits later in the year from PARTNER 3. So should one assume, as we build our models for 2019, kind of a slower first-half and a stronger second-half? And I know the comps are going to be a little bit easier as well. So maybe some color on kind of how we should think about 2019 and U.S. TAVR ramp? Thanks.

Yes, thanks. I think, you’ve got the right idea. I do think you should more think of ramp rather than step function in 2019. And you’re right, whether it’s the way we roll out new products or the way the products – or the way that physicians and the rest of the marketplace absorb the low-risk data. We think this is going to happen in a gradual fashion rather than sort of a jump. So yes, I think it’s reasonable to think about that. Remember, the low-risk approval itself doesn’t come until late in 2019.

Thank you for joining us on today’s call. Reconciliations between GAAP and non-GAAP numbers mentioned during this call, which include underlying sales and 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 have missed any portions of today’s call, the telephonic replay will be available for 72 hours. And you can access this by dialing 877-660-6853 or 201-612-7415 and use the conference number 136-834-34. Additionally, an audio replay will be available on the Investor relations section of our website. Thank you very much.