Greetings, and welcome to the Edwards Lifesciences Corporation Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Erickson, Vice President of Investor Relations. Thank you, Mr. Erickson, you may begin.

Welcome, and thank you for joining us today. Just after the close of regular trading, we released our fourth quarter 2012 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 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, earnings per share, SG&A, R&D, taxes, free cash flow, diluted shares outstanding and foreign currency impacts. These statements also include our current expectations for the timing, status and expected outcomes of our clinical trials, regulatory submissions and approvals, reimbursement conditions, as well as expectations regarding the U.S. launch of SAPIEN, other new product introductions and our pipeline. 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. 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, 2011; and our other SEC filings, which are available on our website at edwards.com. Also, a quick reminder that when we use the terms underlying, excluding the impact of foreign exchange, excluding special items, and adjusted for 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 will turn the call over to Mike Mussallem. Mike?

Thank you, David. Our fourth quarter capped the year of significant progress as we introduced our innovative SAPIEN technology to the U.S. We're very proud that more than 5,000 patients in the U.S. have been treated with our transcatheter valve since launch, and we're aggressively investing to expand the availability of this important therapy. In spite of a difficult economic environment, underlying sales were up 16% in 2012 driven by a strong finish in each of our product lines. During the year, we continue to invest in new technologies to treat even more patients in the future. The significant increase in R&D investments in 2012 helped fuel important progress in our transcatheter and surgical valve therapy programs, as well as our Critical Care technologies. In the fourth quarter, we also adjusted for a couple of special items. Tom will explain our treatment of the R&D tax credit during his comments. Separately, I wanted to mention the realignment charge. We think that one of the keys to remaining an innovative company is to constantly adapt. From time to time, we reallocate our resources to better align with our strategy, which helps minimize the need for larger corrections in the future. Now, turning to the quarterly results. Reported sales grew 19% to $511 million. Sales growth excluding the impact of foreign exchange was 21%. Total U.S. sales grew 46%, and represent a growing proportion of our total sales. In transcatheter heart valves, fourth quarter sales of $161 million grew 77% excluding the impact of foreign exchange, driven by the ongoing U.S. launch of SAPIEN. In the U.S. THV sales were $81 million for the quarter, which included clinical sales of $7 million and net stocking sales of $16 million. As a reminder, the net stocking figure also includes the offsetting impact of…

Thank you, Mike. Before I get into the financial results, I would like to explain how we accounted for the retroactive portion of the federal R&D tax credit that was passed in January. For comparison purposes, we reflected the benefit in the fourth quarter 2012. Specifically in our non-GAAP results for the quarter, we included an $8.4 million tax benefit equaling $0.07 per share, which represents the full-year 2012 credit. As required, we will record the benefit in our first quarter 2013 GAAP results, but we'll exclude it from non-GAAP results. This, combined with the $9 million realignment charge that Mike mentioned, reduced the GAAP earnings per share by $0.13. Turning to our results, while we fell short of our original goals for the year, we still achieved 16% underlying sales growth and recorded strong bottom line growth even as we increased our R&D investment to 18%. For the quarter, we achieved diluted EPS of $0.77 and non-GAAP diluted EPS of $0.90, a 45% growth rate over last year. For the quarter, our gross profit margin was 75.4% compared to 72.2% in the same period last year. This improvement was driven primarily by a more profitable product mix and a favorable impact from foreign exchange. For 2013, we expect our gross profit margin to benefit from a more favorable product mix. However, at today's exchange rates, we do not expect the FX lift we experienced in the second half of 2012. We continue to expect full-year gross profit, excluding special items, to be between 74% and 76%. Fourth quarter SG&A expenses of $178 million or 35% of sales benefited from disciplined spending and lower sales-related incentive expenses. Fourth quarter expenses increased $14 million over the prior-year driven primarily by U.S. transcatheter launch-related investments. We continue to expect SG&A expenses to…

Thanks, Tom. We expect another exciting year for Edwards Lifesciences with continued strong sales growth, greater operating leverage and progress on a number of important clinical milestones. We also plan to continue investing substantially in the development of transcatheter valves and other structural heart disease therapies, as well as in Critical Care technologies. We believe our patient-focused innovation strategy, global presence and strong financial footing uniquely positions us for a sustainable competitive advantage. With that, I'll turn it back over to David.

Thank you, Mike. In order to allow broad participation in the Q&A, [Operator Instructions] Operator, we're ready for questions, please.

[Operator Instructions] Our first question comes from the line of Larry Biegelsen with Wells Fargo.

Let me start with a question on the U.S. launch. $16 million in stocking in Q4. Mike, in the last call, you said you expected a few million dollars in stocking. So am I thinking about this right? If you had come in, and stocked just a few million dollars, you would have fallen below the 2 30 to 2 40 in your U.S. SAPIEN guidance? Is that fair or am I doing the math right? And maybe you can talk a little bit about the difference in the stocking versus your expectations?

Yes, the stocking clearly was more than we expected, Larry, and I think we thought it was going to be a lower number. And so, yes, you're right. There is a real impact here that the $16 million of stocking lifted us. But I think you need to look at a little bit of a broader picture here. We -- there was such a rush for trans -- to be trained on transapical that we trained an awful lot of accounts more than we expected to train in the quarter. And with that came the stocking orders. At the same time, there was a pretty tremendous queue of transapical patients that have been collected by hospitals. And these are patients that could not have been treated with the transfemoral system. And in particular here with the SAPIEN valve and its large delivery profile it probably exasperated that number. And so what we believe happened here is kind of a triaging effect, where there was a real rush to be able to treat these transapical patients and part of that drove more training, more transapical training, than we anticipated. And probably held down some of the transfemoral numbers in the quarter. We heard, at least anecdotally, that a number of our talents, for example, only have 1 day a week that were dedicated to the TAVR procedure. And so those -- for the fourth quarter, in many cases, were exclusively transapical procedures. Hopefully that helps.

That helps. And let me use my second question on PARTNER II B at ACC. Maybe if you can talk about your expectations a little bit based on maybe some of the registry data we've seen from Europe. Will we see any of the nested registries also at ACC? And just lastly, do you expect a panel for XT?

Okay. Let me see if I can get them. Well, first of all, Larry, in terms of what we expect to see out of ACC, we really don't have any insight to share on that one. You know how we feel about the SAPIEN XT valve. We think it's -- that, that's very good therapy. But no real heads-up here in terms of what they expect to see out of that trial. Your second question, Larry, I just want to make sure...

Those nested registries, Mike, in the -- any nested registries? And just lastly...

No, I don't expect to have anything published on the nested registry -- anything is possible, Larry, but I'm not expecting that. And finally, you asked about whether we thought there would be a panel on PARTNER II...

XT.

Yes, on XT? Yes, we think it's probably unlikely. When we gave you estimates on what to expect, we said that we would have a submission of the PARTNER II Cohort B by midyear and there would be about a 365-day review process. Again, that's just an estimate on our part. That would be our estimate of how this thing would go and it anticipates that there -- it's unlikely there's a panel. But FDA really hasn't weighed in on that, so we don't know. We would say, it'd be very likely that there would be a panel on PARTNER II A since that's a different group of patients.

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

Mike, next year, your guidance is, in the U.S., is $390 million to $440 million. And if I heard you right, it sounds like it's going to be kind of a clean number, devoid of stocking and probably not heavily influenced by clinical trials. In your minds eye, where do you think that -- what do you think that would represent in terms of penetration of the PARTNER I opportunity, at least in the shorter-term before you could maybe recruit people who are not referred today?

Yes, thanks, Bruce. Well, probably 2 very different points here. One is that in the $390 million to $440 million, those are reported results and so we would indeed see a little bit of lift from clinical units, particularly in the first half of the year while we're still finishing up PARTNER II, and then, actually, stocking is going to go from being a little lift in the first half to being a drag in the back half. And it's probably actually a drag on reported sales for the year in total. At least that's the way we've modeled it. We never know exactly how this is going to turn out. And so that's what's in the number. In terms of how deeply will we penetrate, we think there's an awful lot of patients out there, Bruce, that are not treated. Whatever kind of results we would have in 2013, we think doesn't come close to even getting after the potential population.

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

Two questions. First, as you think about the first quarter for 2013, U.S. SAPIEN sales, do we get another $14 million or $16 million in stocking or will that trend a little bit lower? And then how should we be thinking about the overall U.S. SAPIEN sales for the first quarter? Should we be thinking $90 million to $100 million? And then I have a follow-up.

Okay. Well, first of all, it probably wouldn't be surprising to see clinical sales be similar but probably stocking is going to be a little bit less. We'll still have stocking but -- and it'll be certainly helpful. It'll be the biggest positive of the year will come in the first quarter. I'm not sure that we have a first quarter estimate.

I would put it in the range of, say, 10 to 15, less than we saw in Q4. But that's not as solid to be able to predict that.

And then the other reason I was talking about a bigger 1Q number, it just seems like 1Q and 2Q will be a little bit stronger than the back end of the year, because you got all that stocking lift, or is the back end going to be significantly stronger as we get a hell of a lot more commercial sales?

Yes. So clearly, during the year, the actual number of procedures, we expect to step up. And that will be -- that will be increasing throughout the year. It's this net stocking impact that we're trying to provide some guidance on. Net stocking is a lift in Q1, that will be the biggest lift of the year. Not so much in Q2. It's hard for us to estimate, but it may or may not be a lift. In the back half, we're pretty convinced that consignment is going to be bigger than stocking. It will actually pull down reported results even though procedures are going up.

Okay. That's actually great color. And then just -- one thing, one question on the EPS guidance, you just really had a strong fourth quarter here, where you beat consensus by $0.12, $0.13. Where is the spend going to be in 2013 that holds you back from raising EPS guidance?

Well, you know, Glen, if you look at our history, Q4 is typically, on an EPS basis, our strongest quarter. So to take and draw parallels from there is a little bit -- you've got to be careful. We are going to continue to invest in the business in absolute dollars, that's for sure. And we also have the medical device tax. If you remember, one of the things that's going to step us up, I think I said, was about 90 basis points. So we'll probably have a percentage point or close to that. For that and we also have a Japan investment that we're putting in, that's probably another 50 to 60 basis points. So if you're looking particularly at SG&A, there's some of the comparisons. And we're also -- we were very disciplined on our spending in Q4. So I think that the quarter was strong, no doubt it was strong and obviously, the R&D tax credit was all loaded in that quarter. But if you peel it back, I think the guidance still makes a lot of sense and still shows nice growth.

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

So just to follow-up on Glenn's question, and just to make sure we're clear. So, despite the 4Q upside, do you think that the range you gave 1.5 months ago at the Analyst Meeting is still the right range for 2013?

Correct.

Okay. Maybe to clarify a couple of items just from your prepared remarks, how many centers did you end 2012 with in the U.S. in planning SAPIEN?

There was approximately 200 centers, Mike, and that includes the PARTNER centers.

Okay. And help us -- one of the challenges we've had on the modeling side is to think about the impact of these nested registries you had, which are obviously opening up some different patient populations that you can treat, otherwise. Can you just share with us your plans for additional registries in 2013, just so we can get some sense of some additional opportunity for the company?

Yes. I don't think that we have anything to report at this, Mike, in terms of additional nested registries. I mean, there may turn out to be other items that we'd study and we'll fill you in as those become apparent. But at this point, I would say, the nested registries we already have are probably pretty well enrolled. There are probably still a few patients enrolled in some of these, but they're mostly in -- and there's nothing. This is really up to FDA, if we would get additional nested registries.

Okay. Then last one. Mike, just any thoughts on just the pickup in the underlying surgical heart valve business? You sound like most of that was coming from emerging markets, but you did see some incremental strength in both the U.S. and Europe, relative to the prior few quarters. Any insights there?

Yes, the U.S., indeed, did step up. Some of that just maybe that the market grew a little bit faster, some of it may be a diminishing impact from competition. We think those are probably the primary factors. Outside the U.S -- so we saw some particular strength -- well, both Japan was valuable and grew for us and also emerging markets were drivers. And so, overall, those were both a little stronger than they have been earlier in the year.

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

I wanted to just clarify something on the guidance ranges, Tom, and maybe you can just remind us on currency. Because there's actually quite a number of moving parts since you last reported. The Japanese yen has been on a tear, the euro has also strengthened a little bit. Can you just maybe remind us about how FX flows through your P&L and any considerations that we should have on the impact of currency movement since you last spoke to us?

Sure, David. When we looked at it, interestingly enough, they tend to offset just maybe the way they were balanced between regions and businesses. I didn't see a significant change. Maybe 10 basis points overall for us on any line. So did not see that as a big factor. Obviously, sales are directly affected and what we have is we have our hedged contracts, which are designed to offset those movements and those are generally in cost of goods sold. The rest of it is expenses, operational expenses, that are in the foreign currencies, and we hope that a combination between the hedge and the natural hedges, the hedges we buy and the natural hedges, end up getting us covered to, say, approximately about 90% of the risk.

Okay. That's helpful. And then maybe, Mike, strategically, you obviously brought back some stock this quarter, there is naturally some dislocation in October around the Q3 results. But maybe you could just help us think about what you're going to do with the cash balance as it continues to grow and maybe comment on how -- share repurchases, is this the type of thing we should think of that you'll do selectively as there are outside moves in the stock to the downside or is it something more consistent that we can expect going forward?

Yes, I think it's fair to say, David, that we're more aggressive purchasers of the stock when we think there are opportunities there. And so we do moderate our buying patterns based on price. Overall, we continue to like share repurchases only in the absence of where we see really good strategic investments. If we found something close to home in -- whether it's in structural heart disease or in Critical Care technologies that we thought will really spell growth for the company in the future, that would be our first call on cash. We don't have anything to talk about at this point. But in the absence of that we would selectively do share repurchase.

Okay. And then maybe lastly, back on the margin side. Tom, I know you talked about the impact of FX on the gross margin not having as pronounced an impact as it did in the second half of the year. But how should we think about the underlying change in the gross profit margin? Just sort of isolate the mix impact from transcatheter valves here, but it was a pretty big year-over-year improvement, but I assume that the second half of '11 was a little bit depressed due to FX. So if you just really got the drivers of the year-over-year change in gross margin, how would you help us distill an underlying gross profit move?

Sure. It was clearly in year '11, we had a pretty negative impact from foreign exchange. So a good portion of the boost was what would happen at '11. And as a full year, David, probably the best way to think of it is, we said, it still remained to be the case as we said back in Investor Conference, probably the full-year rate of 74.4%,has maybe 50, 60 basis points of help. So the underlying rate, I'd put it just under 74%. And our guidance for next year, being 74% to 76% implies, we'll probably get 100 to 120 product mix is the way it looks right now. And the vast majority of that would come from the growth of transcatheter. Just [indiscernible].

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

Mike, I was wondering if you could just maybe shed a little bit more details on the global realignment, what exactly you're doing differently in light of the environment.

Yes, thanks, Kristen. What we routinely do is take a look at our portfolio. We take a look at the products that we're selling. We take a look at where we're making the products and so forth. And where the growth is going to be in the future. And when we make our additions, whether they're in R&D or SG&A, we really try to move resources to where the opportunities are. And in many cases, that means we move it away from other opportunities. And so, particularly in this case, our biggest expense item is obviously employees. So we had just under 100 employees that, actually, we didn't have jobs for going forward. We tried to handle them with a great deal of respect. And they moved out of the company and that's what drove the charge that you saw this quarter. We're fortunate still to be a growing company. I think we added in that same quarter probably more than 200 jobs for a net increase of more than 100 jobs because of the opportunities that Edwards have, but that was the nature of the realignment.

Which businesses were those employees coming from?

It was a mixture of some of our core businesses, both Critical Care and Surgical Heart Valves.

Okay. And can you just comment maybe on the environment in Europe, I know with transcatheter valve you talked about pricing being a little bit under pressure, I think you mentioned volume discounts? But maybe if you could just shed a little bit more light on that and just how you feel about pricing going forward in 2013 now that we have a couple of new competitors on the market.

Sure. Yes, we're fortunate that we're a market leader and so we try not to have our pricing driven by some new competitor and we've got a very strong market position. So we're quite disciplined on that. Having said that, for our big customers that achieved substantial volumes, we give them discounts. And also, we find in some cases that we have more growth in countries that have more attractive pricing. The combination of that probably had a 2% to 3% impact year-over-year in 2012 versus 2011.

And just kind of what are your expectations for growth next year, or I guess, 2013, are you still anticipating kind of high single-digit or 10% growth in Europe?

In Europe, yes. We feel pretty much the same as we spoke about it at the Investor Conference, Kristen, which is we think the market may grow around 10% for the year, and we think we might grow some maybe at 1/2 that rate because of that new competition that's coming.

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

I'm just wondering if I could follow-up a little bit on that last question. In your remarks, I think you commented that you're still not seeing much in terms of impact from competition in Europe, but I think you also noted that your TA business was down in Europe. So I guess I'm curious what gives you confidence at this point that it's not competition that's impacting that business.

Yes, it's a good question. Our competition tends to be pretty concentrated in, I think primarily in Germany. We saw a tremendous growth in our transfemoral business, actually about 35% growth in transfemoral on a year-over-year basis. And so net-net, we feel pretty good about actually what's going on from an overall share perspective. We -- just because we're out there and we're in these accounts, we think we have a pretty good handle on what the competition is introducing and our sense is they're just not very big numbers.

Primarily, transfemoral-first, then we hear more of that.

Yes, the bigger impact that we really hear with the phenomena that's happening out there is there's more of a transfemoral-first approach is what's causing the transfemoral numbers to go up and transapical to go down.

Okay. And maybe just one follow-up. The TA training number in the U.S. I think you noted that there was 150 centers that were TA trained. I think you've commented in the past that there was a stocking requirement of 8 valves for every center that got trained on the TA approach and understanding there were some of those that were PARTNER sites, it would still suggest a stocking number that would be even above the number you guys did in the quarter. And so I'm just -- I understand also there's some consignment offsetting that. But was there some mistake in that calculation in terms of what the requirements were for TA trained sites?

No, Raj. You're circling around it pretty well. The bulk of that $16 million of stocking was really probably net that resulted in transapical. And you're right, transapical probably got pulled down little bit by some consignment and the transfemoral in the quarter, although it got a lift from stocking, also we had the beginning of some significant movement to consignment as well. So the bulk of that $16 million is really transapical stocking. But as you correctly point out, consignment does detract from that.

But Raj, if you're working with the math, you also have to remember, one of the things we said is that some of the larger centers came in for TA that if they were close to earning consignment that we probably would -- we would not go through with the second stocking order that they would go straight into consignment. So it's smaller than you would think. If you try to match that up to the number of centers, it's quite a bit less. And that's a big piece of the story. There's quite a few of those guys that came in first. We did not book a stocking order.

Okay. And then it all sounds like with the 200 centers in total at the end of the year that perhaps the training rate on new centers may have slowed a little bit as you started training more TA centers?

Well, yes, as you can imagine, Raj, training the number of TA centers really consumed tremendous amount of capacity. We were some very busy folks during the fourth quarter training people in the transapical approach.

Our next question comes from the line of Danielle Antalffy with Leerink Swann.

I was hoping that maybe you could give some more color on TA versus TF in the U.S. in the quarter. Just -- you mentioned in response to a question earlier that the high level of TA activity could have pressured TF. I'm just wondering if you could give us some direction there and maybe quantify that a little bit. Now I assume you feel like you've worked through the bolus now and we've returned to sort of normal activity going forward from here on out.

Yes, good question, Danielle. Yes. What we said is from a pure sales perspective, about 45% of what was sold in the U.S. in the quarter was transapical. Because there was quite a bit of stocking, actually that number was probably from a procedure point of view, that probably accounted for more like 25% to 30% of the actual procedures may have been transapical. And although we don't have accurate data on how much of the bolus we worked off, we believe that a large part of the bolus probably was worked off during the quarter. But again, this is one of these determinations that's made by the Heart team and so there's other factors involved, often it's the strength of the surgical program or the Cardiology program that will drive it one way or the other.

Okay. That's helpful. And then just a follow-up on that. Are you seeing, especially at the higher volume centers, are you seeing any change in activity on their end or in the infrastructure, I guess I should say, on their end adding -- the docs at your Analyst meeting mentioned they were working to hire more surgeons. What are you seeing out there as far as that goes, to sort of handle the higher volume of patients now that you have TA approved and [indiscernible]

Yes, it's a good question, Danielle. We hear anecdotally that there is some movement in the large centers to add a second team, for example. But it's difficult for us to generalize. I think, broadly, we'd say the increases that we're seeing right now are coming from new centers as opposed to additions in the existing big centers.

Our next question comes from the line of Jason Mills with Cannacord Genuity.

Back to TAVI in the U.S. Real quick, just trying to calibrate our models entering 2013 here a little bit better. And I apologize if I just haven't got it yet. But if you sort of equalize for your comments on stocking both in the fourth quarter and your thoughts for the first half of the year. It looks like from a procedural standpoint, there needs to be an uptick in growth sequentially. That's fairly meaningful, 30%, 40%. Assuming, let's say, a linear sales figure to the midpoint of your U.S. guidance for the year, because you've got the drag on -- with stocking in the second half. If we just sort of arbitrarily assume a linear amount of $100 million or $110 million, you kind of get to that number. So it assumes a fairly significant ramp in procedural volume, actually, implant rates Q4 to Q1. Can you help us out, sort of quantitatively, as to whether or not I'm in the right ballpark there in terms of what we need to see?

Yes. Well, we do expect it to be a ramp, Jason, that's for sure. We expect to see a little of our seasonality, of course, in the third quarter but overall, a ramp throughout the year. I'm not sure I've run specific numbers on sequential quarter-over-quarters but there must be more of a doubling of procedures from 2012 to 2013. There's just a lot more procedures in the year as this launch progresses.

Okay. That's helpful. And then secondly for me, you saw it a little bit in Europe when TAVI was launched in the subsequent couple of years with respect to the Halo effect on your surgical valve platform. In this quarter, that part of your business was just a tad bit better than what we expected. Are we starting to see a similar Halo effect as we see higher number of severe symptomatic aortic valve patients entering the queue, some of whom, unfortunately, not TAVI candidates ending up on the table with a cardiac surgeon, are you starting to see the benefit of that early?

Yes, we look for that, Jason. We can't say at this point that we've really seen the uptick in the surgical business as a result of transfemoral. Part of the theory that we have is this is more likely to track really the advent of transapical cases. And that, as you know, just started here late in October. And so as that starts to become part of their practice, we think it's more likely to see this kind of Halo show up, and we'll be looking closely for it and be glad to share that with you.

Lastly, real quick, transaortic. Anecdotally, the TA number was strong even from a procedure standpoint. Do you have any evidence that transaortic is catching on here in the U.S.? And then what's the update on evident -- reimbursement for evidence development there?

Yes. Clearly, there's interest in transaortic. And we're seeing it across Europe as well, and certainly in the U.S. Right now, the NCD does not provide for the reimbursement of a transaortic delivery and, so, that probably has a very real impact on how often it's done. We actually thought that this special protocol that would be approved by CMS would be done at this point. It's still not quite done. It's at the final throes. I think the societies that are actually running these registries decided to take it through FDA first and to have an approved protocol and an approved ID, and they pretty much cleared that hurdle. And so now we think there's just the final hurdle to get through CMS. So that should be around the corner for us. And at that time, we'll get a better handle on TAL.

Our next question comes from the line of Amit Bhalla with Citigroup.

This is actually Adam in for Amit. I don't want to go back Europe TAVI for a question. I just -- talk about the reimbursement landscape there and any significant changes you've seen in the quarter, expectations of new reimbursements to come online in the first quarter?

Yes, not a substantial change in reimbursement during the quarter. We did see probably a little uptick in France in terms of the number of centers, but no real -- no real change, for example, we've been anticipating some improvements in the U.K. No real changes yet.

Our next question comes from the line of Rick Wise with Stifel, Nicolaus.

It's actually Miroslava for Rick today. If I could go back to the U.S. volumes, it sounds like you're anticipating quite a dramatic uptick in 2013. But TA volumes, if the bolus is already done, those should be leveling off. Maybe help us think through what are the drivers behind the acceleration. I appreciate there is another probably 100 centers or so coming online, but those would probably not be the higher volume sites. What drives your confidence that you see volumes accelerating to that extent in 2012 -- '13, I'm sorry.

Yes. Well, broadly, we think a lot of centers are just getting going, Miro. So we think there's going to be a substantial lift in 2013 and given that it's only the real second full year of launch, we don't think it's unusual to have this kind of a growth rate. As it relates to TA, that, that gets to be a little bit tricky business. I'm not sure of your question exactly but it's tough to know exactly what the TA percentages are going to do. Remember, this is the SAPIEN technology, and we, historically, saw higher TA percentages with SAPIEN because of a larger profile during introduction and that drifts down. And at the same time, you've got this under current of a TF-first approach. So we're not certain exactly where that goes. But in terms of the -- what's going to happen to the 2013 numbers, we just think the underlying demand is substantial across-the-board and that these Heart teams are going to continue to be treated, they gain their confidence -- as we say, there's 200 centers that are trained as we exited the year.

Okay, great. Maybe secondarily, as competitors trials ramp up and as more competitors start their trials, actually both in Europe and in the U.S. in the second half of the year, have you accounted for that in your guidance?

Yes. We think we have. We factored that in to some extent. If it turns out to be unusual, then we would be affected by it but we believe that, that's in our numbers and we certainly model that.

Okay. Great. And my final one is on mitral. Any color as to when we might see anything from your mitral program, like a first demand experience, or any details on the device?

You can be certain that as soon as we have something meaningful to announce that we'll get it out there. No real change to what we said at our Investor Conference, which is we thought that our first demand was likely in 2013.

Our next question comes from the line of Bob Hopkins with Bank of America Merrill Lynch.

Just a couple of quick ones. Tom, by my calculation, fourth quarter gross margin excluding currency was probably somewhere in the 74.5 or greater range. Is that roughly correct?

Actually, the boost from currency in -- specifically in the fourth quarter was bigger than that, Bob. Its probably closer to 200 basis points.

And then back on the number of centers, I think at the Analyst Day, Mike, you said that you thought you might train 100 or greater centers in 2013. Is that still a good number for U.S. centers to be trained in 2013?

We think that's a reasonable number, Bob, yes. We said 200 in total over 2 years, and most likely that it will split pretty evenly.

And then you got a lot of questions on the call about the stocking disclosures that you make and the trial revenues. And I was just wondering if, for the sake of simplicity, you might be willing to give us, for the full year 2013, what you think the combined stocking plus trial, clinical trial revenue, might be for you guys in the United States?

Yes, if we could predict that with a great deal of precision, we'd probably try and get it out there, Bob. It's difficult -- that's a difficult one for us to predict accurately. So we more or less just try and share what we think is going to happen from a trend and direction point of view.

Okay. And then lastly, Mike, there's a bunch of questions about Europe but I'm not sure if anyone really got your views on what you saw in the fourth quarter in Europe specifically. I mean, did it feel like the market got better? Because obviously, over the course of 2012, things fell off pretty rapidly from Q2 to Q1 and Q3, Q2. But did you see -- just some comments on Europe generally in Q4, obviously, the numbers, the growth rates a little bit better. And is that market -- how did that feel in the fourth quarter?

Yes, I think we've talked pretty extensively about TF and TA. Maybe from a country mix point of view, we saw Germany continue to be a strong grower. You're talking about -- depending on whether you're talking about procedures, sales, some in the 10% to 20% range. And France helped a little bit, too. I think the biggest difference is we didn't have as big a decline in the fourth quarter out of Southern Europe as we had seen a little bit earlier. They were negative but not nearly as negative as they have been previously. I think it was maybe literally single-digit declines for the first time that we haven't seen for a while.

Our next question comes from the line of David Lewis with Morgan Stanley.

It's Steve Beuchaw here for David. I wanted to ask about Europe, first of all from a different direction and still on transcatheter valves. I mean, Mike, I wonder if you could spend a few minutes giving us a sense on what you're seeing there on the clinical environment with some of the data that we've seen like the GARY and the PRAGMATIC registries and now we have a new set of valve guidelines. Given the data that we have there, in 2013, can we be spending a little bit more time talking about the differences in clinical outcomes between SAPIEN and other products? And should we be thinking, given the data that we have, about expanding the use of transcatheter valves and relative to surgery just on the basis of that data?

Yes, well, you're absolutely correct, Steve. There's going to be a lot more data that becomes apparent because of these registries. The SAPIEN platform already has a tremendous amount of data. And we feel like it's a best-in-class system. We haven't spent a lot of time trying to differentiate ourselves versus our competitors. We spent far more time trying to make sure that these patients that have been untreated get treated and feel like we've made some headway there. Is there some chance here that patients that aren't as sick get treated, I suppose there could be some lift, but we think the more fundamental lift will come actually when the PARTNER II data that measures these -- that evaluates these patients with STS scores down to 4 becomes available.

And then I wanted to follow-up on a question that was asked earlier on surgical valves some of the strengths there, this Halo effect concept. We saw good numbers in cardiac surgeries, vascular picked up a little bit more than we might have expected. Is it possible that there are other fluid dynamics there? Maybe tenders? Maybe getting into new centers more broadly? And, lastly, could there be maybe any selling day issues that you would point to?

So say it again, you're talking about what would be the reason for the lift in surgical valves in the fourth quarter, is that what you're asking?

Really, outside of surgical valves. Cardiac surgery, strong; vascular, pretty strong, that suggests there might be something more broad than the Halo effect in the thoracic surgery suite.

Yes. Well, I think -- when it comes to sales data, I think there is -- there was an extra sale day in the U.S. and that may be the case outside the U.S. as well. When it's not really profound, we normally don't talk about it. But I think that clearly was the case. It's very difficult for us to say with 1 quarter of data what's happening in the environment. I'd love to say something in general about the market but it's too soon.

Our next question comes from the line of Spencer Nam with Janney Capital.

First question is on the cost of TAVI program and potential impact of this on centers signing up for the program. You guys still sound like there's a pent-up demand with the centers trying to join the TAVI program here. But whether -- I'm curious whether you guys are feeling any sort of pushback from some of the centers out there because of the economics potentially impacting, making this more of a broad-based program for these centers.

Yes. I think it's certainly true that some of the new centers are challenged from an economic perspective. Probably the best data on this was the PARTNER data, and that showed that it was cost effective. But nonetheless, we know that it certainly is more profitable for some of large academic centers in the East versus what it might be in some of the smaller centers or those in more rural areas. So that is the comment. I mean, broadly though, when we think about cost-effectiveness, the more that the procedure gets refined and the more we're able to reduce complications and get people out of the hospital faster, we feel like that is improving everyday, that really improves the economics. And so although there is some consternation on the part of some of the new accounts, we think the trend is going in the right direction. And we feel pretty good about the cost-effectiveness of the technology overall.

Are you guys sharing some data with the hospitals -- new hospitals, when you have these discussions on the lowering trends of average day of stay or the lowering cost of procedure costs associated with improved -- increasing number of patients and so forth? I mean, are these data points being shared or kind of -- how does the discussion play out here?

Yes. As part of their training, we have a lot of open discussion. And we certainly try and support them as they think about starting their program. We share the available data that's available and the total impact that it might have on the hospital. And so, they come with a number of their own questions and we try and be as helpful as possible.

Can I just put in a one quick question, on the XT approval timeline, if the panel is not going to happen, why would you guys feel that it may take more than 6, 7 months for approval?

Yes, you sounds exactly like what we say to FDA. Of course, we will ask for a faster approval timelines. You guys know the history of this. We probably don't have much better estimate than you may have. We feel like this estimate of 365 days is certainly faster than the averages that FDA typically has in this space. And so that's more than 500 days. So we're going to stay with our estimate at this point, Spencer, though.

That is all the time we have for questions today. I would now like to turn the floor back over to management for closing comments.

Okay. Well, thanks for your continued interest in Edwards. Tom and David and I welcome any additional questions by telephone. So with that, back to you, David.

Thank you for joining us on today's call. Reconciliations between GAAP and non-GAAP numbers mentioned during the call, which include underlying growth rates, sales results excluding currency impacts and amounts adjusted for special items are included in today's press release and can 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 and use passcode 407869. In addition, an audio replay will be archived on the Investor Relations section of our website. Thank you very much.

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