Keynote with the CEO of Edwards Lifesciences and Managing Partner & COO of SV Health Investors | LSI USA '24

Paul LaViolette  0:07  
Good morning. And Bernard needs no introduction. But and I'm not going to give him one, I'm gonna let him do that himself. But we're really honored to have Bernard here, really for two reasons. One, this is a med tech ecosystem meeting. I think Edwards is one of the most prolific disruptors and innovators in our, in our space. And we need to hear about how that's going a little bit about, I'll say the secret sauce of Edwards innovation recipe. And then I want to I want to give this minute to really introduce Bernard to the industry, Bernard is now the CEO of Edwards. I think everyone's aware, Edwards is has been a leading company for a couple of decades and was led by Mike Musallam. Mike is still chairman of the board. But this is a succession challenge, unlike really any other first time that there's a new CEO at Edwards in its history. And I think it's just a fantastic opportunity to get to know Bernard and his vision for the company. So Bernard, thank you for being here. And what I'd love to do on that concept of introducing you to the to the team here is to give you a sense, or an opportunity to talk about how you developed as, as an executive, pre Edwards, maybe tell us a little bit about some of your stops along the way, and some of the most impactful events for you. And maybe some of your biggest successes. And if there is one, maybe a failure, or two that, that I think folks really love to hear how leaders were changed based on the highs and lows of their early stage career development.

Bernard Zovighian  1:56  
Absolutely, Paul, thank you. I'm glad to be here. Good morning, everyone. If you notice an accent, it is not from New York, you know, the sound system is working well. So don't complain about it. So I have been with the medtech industry for about 50 years. And I have been very fortunate, you know, to have been with two world class company, j&j for 20 years. And Edwards for about 10 years. You know, what I was reflecting a lot about these two companies. So what I learned, you know, from j&j, you know, first was, I learned about the life science industry, you know, how important you know, all what we do for patient is meaningful. I learned about processes, I learned about how to bring it to market, you know, technologies. Also, it is one of these, you know, giant, were in my mind, you know, they are one of the best talent management, you know, being able to identify the talent early on in their career, being able to move them challenge them stretch van, and I have a perfect example, you know, I started in the south of France, and they moved me, you know, nine times in 20 years, different function, different locations. So, you learn a lot and you are developing as a leader. When I joined at Worlds, it was, it was kind of a revelation for me, yet, I suddenly realized that, you know, various V's company, Edwards Lifesciences, which is an amazing company, build by a legend in the industry, don't make me sell them, who to care about the entire ecosystem, the people, the culture, the innovation, the risk taking the long term commitment, you know, all together. So from the day I joined Univer company about 10 years ago to today, I'm still amazed by you know, the 20,000 employees that we have at Edwards and how do we do things? So back to your question Paul, about a few things that I want to share with you in terms of what did I learn you know, the sweats successes and and also you know, failure I want to say that you know, I want to use your two example edibles. So first one is I was so lucky to start by leading the surgical business unit, which is the historical business unit. We have been a pioneer for 65 years. And did we became complacent? Absolutely not. You know, we are still committed to expand to innovate. to partner with physicians to impact you know, more patients, since these, you know, gave me truly the DNA of a company. And then about six, seven years ago, you know, Mike came to me and said, Look, you know, what we want to do now, building on the type of success. And again, I'm sure you all know Tammy Octavia is probably you know, the number one success in the medtech. Industry today, we want to do the same for my three patients, and tricuspid patients, this patient have no options. And we are going to do it in a way that we are going to be proud of when we look back, by bringing in the best technology by bringing in the best evidence, understanding the disease, understanding the patients, partnering with physicians. And today, this patient has no options, maybe 10 years later, they will have options, and we will be this company. So I took on this challenge, you know, six, seven years ago, and today in this division, this business unit, reached an inflection point, we have the only approved your portfolio of technologies to treat you this patients in US, in Europe, and in Japan, and we are expanding. So for sure, this was an amazing learning, learning, if you think about it, committing upfront that to be the leader, years later. The willingness to take the risk, many of the things we tried failed, many of them, we apply you know the learning, we made decisions, to make things better to improve you have a portfolio we are willingness to invest at risk, you get a very often you must have allows you to make tech company, what are we doing? I know it is not what you are doing, you know, in the startup world, but in the larger med tech industry, what they are doing, they wait for revenue, they send they send you know, one project. And then you know they wait for the second one. Here we started with 10. investing billions, upfront before any revenue. So for sure, a big learning now, you know, failure. You know, I had so many here in the last six years, we still TT limited to five or six. Yeah, it is like you know, it is like you you believe in a project you believe in the technology. Two years later, you realize it was a bad idea. And I think the ability to stop it. One of the greatest success today of TMT is a project when the team came to me and said we believe it is a good project. I said I don't really I don't think so I don't believe in it. Let's kill it. We didn't listen to me. We did it anyway. Because also, you know, they felt that we could do that. They felt that, you know, failing, even if I said no up front was going to be okay. So they felt empowered to do their job.

Paul LaViolette  8:24  
That is amazing. And that that speaks to risk tolerance as part of the culture. And you have to have that in innovation. Right, even as investors we understand when we make an investment, we believe everyone will work. But we also underwrite overall to a presumed failure rate. So we don't think the one we're investing in is going to be the failure, right? But we know they're going to be there and the art is in selecting them. Maybe spend a few minutes Bernard talking about the overarching culture of innovation at Edwards. And when you think about a number, what's most impressive to me is 17% of sales investment in r&d, which has to be the highest among the major companies and speaks to your conviction to be thinking about leadership and driving next generation technology. So how are you leading that culture and investment at the highest level really in the industry? No,

Bernard Zovighian  9:24  
thanks. That's a very good one. It is an important one. And I am always thinking about how to make it even better. It is not just about financials. So yes, you know, we invest a lot 17 to 18% of revenue in r&d, about a billion a year. It is also about the people. We have 2000 engineers solely dedicated to bringing in a breakthrough technologies. But it is also about the objectives. As you know, we are we are focusing on large unmet patient needs, we want to be first, first is important to us. Because this gives us the opportunity to create a market and you have options as a company, you can go for share, or you can go for let's create a market share is easier. The market exists already. We don't believe it is your go to strategy for us, what we like to do is take risks go first create markets, because what you do is you connect all of the ecosystem, inventors, pills, providers, physicians, with engineers, and you create something which is sustainable. So yes, you know, the road is long, yes, the road is complex. But this is, you know, the way we are thinking about it. So usually when decisions are easy for me to stop a project, it is when we look at the project, and we say we are going to be number three. If it is about you know us being number two, we'll look at it. What we really like is us, you know, being number one, creating the market, being the leader, remaining the leader. And that's, you know, truly, you know, the mantra for everybody at annuals, and specifically get over 2000, engineers, and all of the leaders,

Paul LaViolette  11:45  
one of the things I want to hear about is what is I think unique to Edwards as a leader. There are a lot of small, medium sized companies in our world that do one thing or are have a singular focus, singular direction, Edwards has moved into the upper level, the upper echelon of medtech leadership in scale and an all financial metrics, and yet is not really a diversified med tech player. It is a concentrated focus med tech player really focused on structural heart disease. And that is a a regimentation and a rigorous direction that most companies lack maybe you could describe a little bit about why that is so viable for Edwards.

Bernard Zovighian  12:34  
Yes, I obviously, you know, becoming the CEO about a year ago, I took the time to think about, you know, how to bring this special company to the next level. And I studied a lot, you know, what companies are doing? And you know, that they're not most of the companies, what are we doing an extreme diversification? So we are in one segment or two segments, and what are they saying, let's go to this first and fourth, and fifth segments, let's buy companies. And every year, you know, they grow in a very successful manner, we all have your names, that we say, you know, look at this company, they do amazing, they grow, they are very successful, they impact your patient care. They are very distinguished. And the question for me was, is it what I want to do? Are we this kind of company? And clearly the answer was no, no, for many reasons. The first one, I do believe that structural health disease is so big, so broad, there are so many patients in needs, that we have an interesting strategy to further expand within sort of ill health disease, we are present in some sub segment, but not all of them. So by us, you know, expanding within a space that we know, well, you know, within a space that basically, you know, we have no competitions, we have a capability. We know how to take more risk. You know, we have, you know, the domain knowledge, you know, will position us, you know, for a great differentiation. So, I'm looking at this one as saying, like, you know, we can expand, we can diversified, but within one space, a space that we know, well, a space that we are committed to. So let's see what basically our vision and strategy as an implication of that decision was one of our business critical care. I'm sure you saw the news was not necessarily the fitting that call A vision. So we said, You know what, let's manage a portfolio. And all your good companies are doing that, you know, correctly, you have a clear direction, a clear vision, a clear strategy, you know, your space, and you have one business not exactly, you know, in its core. So we made the decision to spin off, you know, critical care.

Paul LaViolette  15:19  
And that's enabled in part by the richness right of what structural heart offers. I want to, I want to reflect specifically on TAVR. Yes. And obviously TAVR is today the corner stone of structural heart. But for those, those of us who are older, we remember a world before TAVR existed. And I reflect back on the days when interventional cardiology didn't exist, right? We had angiography we'd had we had, there was no such thing as interventional cardiology. 35 years later, it's extraordinarily common. You go back 20 years, there was no such thing as interventional structural heart, there was surgery, or there was nothing else. And so today TAVR, multibillion Edwards leads in market development, technology development, clinical evidence, tell us a little bit about the, again, the secret sauce of TAVR leadership, because that is so I think, foretelling of what will follow with TMT and other businesses instructional Yeah,

Bernard Zovighian  16:22  
now, that's a very good question. And, again, I spend, you know, a lot of time, you know, understanding how did we become so successful in Tableau? So 20 years ago, everything started with a vision. Mike, misaligned, you know, CEO at the time said, you know, what, we are going to transform care for this patient. And he showed me because he kept, you know, many of the communication he got at the time for many people saying, You are crazy, it will never happen, it'll never work. Never. If you think about today, a million patients have been treated with staff here today. It is the new standard of care. So for me, it is also you know, thinking about, you need to have a vision, you need to believe in it, it was not an easy ride. The first three, four years, were tough years. I am sure, you know, if Mike was here, you know, many time, he was probably thinking Charlie Killian of his prom project, because it is never going to be successful. So it is about again, you know, the risk taking, you know, the vision, the investment behind it, but also the technology advancement. If you look at today, a TAVR procedure, I don't know how many of you have seen one, it is so easy. Half an hour, barely no complication for patients, the patient gets in, you know, the night before. Next day, we are leaving the hospital, they have a new life. So all of that together is what it is like technology, evidence, physician training, of team support every case, every case, to make sure patient outcome is achieved for every patients. So that's, you know, to the Univer magic year. Now, the question is, so where is it going? You know, some people you know, last year, you know, some people at Wall Street were saying, you know, it is the end of tabular growth, you know, all of that. And I was telling them, and I think, you know, they start to believe in me now, say no, it is just the beginning of Tavira. You know, it is still you know, under penetrated in the US. So imagine, in Europe, imagine in emerging countries, you're barely penetrated. So we have a ton of patient to tweet to establish, we are only traveled with only approved for severe symptomatic patients, which is a very narrow patient population. And as a typical error was way, you know, we are, you know, bringing evidence to expand indication to asymptomatic patients to moderate risk, you know, patients. So in the years to come, you know, what we see is, you know, plenty of opportunity for travel. So more patient, you know, more indications, your new technologies, more evidence, so we still be even voted to today's and amazing success story. But I see, you know, a great success during the next 10 years, you know, forever.

Paul LaViolette  19:43  
You know, you just said in a typical Edwards way, but really it wasn't there, that there was no typical Edwards way 1015 years ago TAVR didn't exist. You had a legacy surgical franchise and a critical care franchise and really create had this blueprint with however, that now I think is a model for market creation. And I do want to remind folks of an anecdote j&j, Boston Scientific and Medtronic, we're all investors in the first TAVR asset, Pvt. And all three passed on the deal, all three said, and I was there, I was on the board of VVt. At the time, all three said, we're not so sure about this thing. It was by no means obvious that the market would be large, that a million patients could be treated that the category could expand. And it was passed by by then the three largest interventional cardiovascular franchises in the world. And in today's economics, I think the final purchase price was it was $135 million, with an urn out of small one today, that would be a drop in the bucket, right for typical M&A. So who wouldn't today look back and say, Would you spend a couple of 100 million dollars to buy a leadership ticket into a market that could be a five to $10 billion, et cetera, et cetera, et cetera, everybody would do it. But everyone passed except for Edwards. And I think that that there's, there's a message in there about about the the long term vision. So let's flip the card. Now onto the next phase, right, which is TMT t, you can do repair, you can do replacement, you can do mitral, you can do tricuspid, there's a larger patient population by far in aggregate in comparison to aortic stenosis. So you're then charged with creating the vision for TMT t, you basically have a whiteboard, and nothing tell us how you got to where we are today.

Bernard Zovighian  21:52  
So we one is we will look at, you know, the type of story. And you told you the story in a very well, you know, the PVT story. But the success in my mind, you know, became after, you know, the engineers developing the technology, the jet the generation of evidence, I think the right people training physicians, to do that, you need to commit long term. If you care about your next quarter of earnings of the next year growth, you don't do these kind of things. It is impossible. You need to be a long term player to be able to invest in a company by a technologies and spend, you know, five 610 years to make it a huge success to create a market. It is a different kind of playbook. So in tmtd, it was the same. So we look at this world. And then we said, So what's different, the patient was very different, the patient have very different, they are very diverse, the anatomy, comorbidities, the complexity of his patients. So from the beginning, we realize that one technology, one modality will not be sufficient. And when you know, we love this one, you know why? Because we said nobody's going to do it. None of us strategic, I'm going to take the risk to invest in a portfolio of technologies, investing billions upfront for long term vision. But we put together this portfolio this vision, initially were you know, probably, you know, 10 bats, we have done to four ish. And, you know, we have two being approved. So a repair technology for mitral and tricuspid and the replacement technology for tricuspid. There is a Mitel technology coming soon. And you know, one or two, you know, maybe in the pipeline but we were able to you know, to start wide and world rationalized and invest more into, you know, the likely scenario of success. But it took us what, seven years. Seven years of putting a plan together changing the plan. Guess how many time we change the plan in any given year in the last seven years. About 10 times we start the year Cigna and we believe that we are sure and in March we said you know what? Not sure about this one. Let's change the plan or change we'll have a study or let's shake the design of a study or let's you know work on gen two of this technology. Or no it is not a good one. Let's blend these two technologies. Let's blend these two teams together.

Paul LaViolette  24:58  
It's amazing and what has come out of it most recently is a product called a voc which some of you may have heard about PMA approval, no panel, entirely new category with an active cardiac implant treating a patient population that basically didn't have alternatives. Tell us how that came about. Because that, to me, is the single best individual example that looks like a following example to the sapien franchise and tavern. Yeah. So

Bernard Zovighian  25:32  
obviously, you know, this one is, again, it's the beginning was not easy. So we started a mitral replacement program 15 years ago. Complete failure. So we went to gen two, didn't make it happen. So we sell, you know, we saw technology out there, and we said, you know, it looks great technology, let's buy the company. But the company didn't make it. We took what we bought, ask our engineers to improve it, not to success. The team said, you know, what, with what we learn in surgical with what we learned, you know, 15 years ago, and with that technology, we could develop it for the right side of the heart. And ebook was evoke was born at that time. You know, about your six years ago, we did our first immense, very successful, we did an AFS the fastest and avoiding EMFs. When we talk to FDA about the result, we put together and pivotal study, randomized study, fastest involvement ever, in a clinical study and an approval, you know, without honor, you know, given Univer, the granular clinical outcome. So, but we think about it depends, you know, when do you look at this story, correct. If you look at the story of the last two years, you say you are amazing, very busy. If you look as miserable as 15 year, you say innovation is complex.

Paul LaViolette  27:22  
I think that innovation is complex message is perfect for the next story, because now you take your successes in TAVR, your the franchise foundation that you built for TMT T and to the credit of the management team, say, you know, what's next after that, and you've identified a call it a new leg to the stool, a new interventional space that is derived from structural heart disease, but maybe not valvular disease. So tell us a little bit about what your vision is for the next franchise beyond GMT T and TAVR.

Bernard Zovighian  28:00  
So, this one is coming from for two reasons. The first one is about you know, obviously, you know, we are getting a big company, 6 billion in revenue growing fast. Do we want do I want to sustain that? Absolutely. So when you have, you know, this kind of science and scare to grow at that, at that pace, you need to have you know, innovation coming. And, and I talk also a lot about you know, we don't want you know, this extreme diversification, we want to stay in a space the large one and growing one, you know, talk to learn how disease, but also it is coming from the fact that innovation takes time. Together took more than 10 years, you know to be allowed your business you know, think about TMT T seven years. And it is today a 220 million business, growing 5060 70% You know, every quarter, but not yet big business, if you think about it. So two from 50 men to a lot being a large business, you need 10 years, plus or minus. So I'm already thinking about, you know, the next 10 years. So I do believe that Tableau has so many catalyst tndte is just the beginning. But we need to think about the year 10 Year 11 and heart failure within structural health disease is a very large space with our so many patients in need. We have barely no options. Their life is miserable. You know, they go with and you know, they go into the hospital, you know, twice, you know, three, four times a year. It takes drugs, they can't have a normal life. So do I believe everyone else can come in with technologies and change in the care of his patient Absolutely. Is is going to be easy, absolutely not, it is going to take us time, we will have to have your multiple bets. And we are very committed to do that. Again, we are not going to see your revenue next year. But we are going to be there.

Paul LaViolette  30:15  
Maybe overarching all of this at a high level for innovation, you have a lot of r&d, investment, as we've talked about engineers, millions and millions of dollars. Organic investment, then you have mentioned buying companies bought this one didn't work for mitral might might be re purpose for tricuspid. Tell us about your thoughts on organic investment in organic investment. And, and, and let's say balance sheet work, and how you think about taking advantage of the entire ecosystem for innovation, whether it's inside Edwards or from outside, what

Bernard Zovighian  30:59  
I like very much, you know, if you think about, you know, who we are, and the success we had, have people could be proud, but also resistant to looking outside. And they are not and we are not. We know that there are so many amazing technologies out there, you know, so many great people in startups that you know, we want to be connected. We are severely open to obviously organic innovation, we spend a lot but also very open and very active in making acquisitions, technology acquisitions. What we like the most when we think about acquisition is, you know, pre revenue acquisitions. Because we believe that our capability is truly about innovating fast, you know, making the technology better. Bringing the right evidence, training physicians. So if you make an acquisition of POS revenue companies, they are already in market. And usually, it is not the way you know, we want you to market to be you know, we care about the patient. We care about the payers, we care about reimbursement, we care about all of this. And so our experiences, the sooner we get in, the better it is so we can create the market the way we want.

Paul LaViolette  32:43  
We're out of time. Maybe do you have any final comment for the innovators in the room? You This is a difficult environment is a difficult financing environment. It's hard to raise capital. M&A has been slow, there's been no IPO. And yet you sit here with a 10 year vision and a passion for leading and creating new markets. What's your message to the innovators in the in the in the med tech space?

Bernard Zovighian  33:09  
I believe you know, we have the same job. And so for me, it is all about believing. You need to believe you need to have a plan and change your plan. So many times, you know, I see people telling me, No, I like my plan. I look at them and I say change your plan. You will like you have a new one. You plan our plan has to be changed on a regular basis, not the vision.

Paul LaViolette  33:44  
Well, Bernard, thank you. It's a great message. Edwards is a great company. This has been a wonderful introduction to a great leader. Thank you. Thank

Bernard Zovighian  33:52  
you so much, everyone.