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Greetings and welcome to the Edwards Lifesciences Corporation's Fourth Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.
[Operator instructions]
I will now turn the conference over to our host, Mark Wilterding, Vice President of Investor Relations. Thank you. You may begin.
Thanks, Diego. Good afternoon and thank you for joining us everyone. With me on today's call are Mike Mussallem, Chairman and Chief Executive Officer; and Scott Ullem, Chief Financial Officer. Just after the close of regular trading, Edwards Lifesciences released fourth quarter 2020 financial results.
During today's call, Management will discuss those results included in the press release and accompanying financial schedules and then use the remaining time for Q&A. Please note that Management will be making forward-looking statements that are based on estimates, assumptions, and projections. These statements include, but aren't limited to financial guidance and expectations for longer-term growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters, and foreign currency fluctuations. These statements speak only as of the date when they were made and Edwards does not take -- undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties, including but not limited to those associated with the pandemic that could cause actual results to differ materially. Information concerning factors that could cause these differences and important safety information may be found in the press release our 2019 Annual Report on Form 10-K and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Finally, a quick reminder that when using the terms underlying and adjusted, Management is referring to non-GAAP financial measures, otherwise they are referring to GAAP results. Reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today's press release.
With that, I'd like to turn the call over to Mike for his comments. Mike?
Thank you, Mark. Before we discuss fourth quarter's results and our expectations for 2021 and beyond, I want to spend a minute reflecting on 2020. Structural heart patients were severely impacted beginning in March, experiencing significant difficulties entering the system, which also had a profound impact on second quarter procedures and even though healthcare systems adapted to the challenge, the resurgence of COVID that began late in the year continues to impact structural heart patients, who need care.
Despite unprecedented challenges throughout the year, I'm proud of our team's steadfast dedication to our patient-focused strategy. We continue to invest in developing solutions that extend lives, improve the quality of life and offer greater value for the healthcare system. Along those lines, we celebrated some exciting milestones in 2020 that directly impacted patients. In TAVR, despite headwinds, more than 100,000 patients benefited from treatment with SAPIEN valves worldwide.
In Surgical Structural Heart, we launched our KONECT aortic valved conduit and Inspiris became the leading aortic surgical valve worldwide. We've seen early positive clinical evidence across the TMTT platform, physician feedback is encouraging and patient outcomes have been distinguished. And in Critical Care, we met the increased demand for core pressure monitoring products due to the pandemic, and we're proud that we were able to help over 1 million patients globally with our monitoring technology.
To support our innovation and growth, we continued to invest in our people and our infrastructure. During the year when job losses impacted many families across the globe, Edwards prioritized protecting our employees and we grew our team to 15,000 worldwide. We continue to make strategic R&D investments that enabled us to fuel progress and despite this unique environment and extraordinary prior year growth, underlying sales grew 1% in 2020 to $4.4 billion, which is a reflection of the life-threatening needs of the patients that Edwards serves.
Looking into 2021, while we expect the pandemic to continue to impact the global healthcare system, we remain optimistic about the year ahead. As we indicated at our investor conference, we expect full year sales between $4.9 billion and $5.3 billion representing mid-teens underlying growth on a year-over-year basis. Based on our year-to-date experience, we expect Q1 sales to be slightly down sequentially, although in line with the first quarter of last year, which was largely unaffected by COVID.
Our 2021 guidance continues to assume COVID will stress the global healthcare system, it leads through the winter months with procedures ramping later in the year. This expectation assumes that vaccines are effective and widely administered by mid-year 2021 and hospitals continue to improve their ability to treat non-COVID patients, who need care for conditions such as aortic stenosis and even though we expect the COVID impact on sales at the start of the year, we are continuing to invest now in our innovations that have the tremendous opportunity to enhance patients' lives and bring significant value to the healthcare system. We recognize the uncertain impact and timeframe for recovery from this unique global challenge, but we remain confident that our patient-focused strategy of continued investment positions us well and even stronger when the world emerges from the pandemic.
Now turning to our quarterly results, consistent with our guidance at our investor conference last month, fourth quarter sales of $1.2 billion were in line with the year ago period when Edwards' grew nearly 20% on an underlying basis, reflecting the strength, even during the ongoing pandemic. Full-year 2020 global sales -- global TAVR sales of 2.9 billion increased 4% on an underlying basis over the prior year. 2020 growth reflected increased sales in every region lifted by greater awareness of the benefits of TAVR therapy and increased adoption of our leading technologies.
Based on the strength of the SAPIEN platform, we retained our strong leadership position while also maintaining our disciplined price strategy. In the fourth quarter, global TAVR sales were $776 million, up slightly from the year ago period. We estimate global TAVR procedure growth was comparable with our growth and globally, average selling prices were stable. Although the rollout was somewhat impacted, SAPIEN 3 Ultra now represents more than two-thirds of our global TAVR sales and physician feedback on ease of use and improved paravalvular leak performance remains outstanding.
In the U.S., our Q4 TAVR sales were approximately level with the third quarter and declined in the mid-single digit range versus last year. We estimate overall Q4 U.S. procedures declined at a comparable rate. Recall that our U.S. TAVR sales in the year ago period increased nearly 40% driven by the strong PARTNER 3 evidence that led to a third quarter 2019 indication expansion and improved patient access under an updated TAVR NCD. We expect these factors to resume lifting treatment rates, as the pandemic subsides.
Growth at smaller TAVR centers, which are providing local access to aortic stenosis patients was more than offset by declines in larger accounts, where referrals have been disrupted by the resurgence of COVID. Outside the U.S., in the fourth quarter, we estimated total TAVR procedures grew in the high single digits on a year-over-year basis and Edwards growth was comparable. Edwards' underlying TAVR growth in Europe versus the prior year was in the mid-single digit range.
Growth was driven by continued strong adoption of our SAPIEN platform and was more pronounced in countries that were more severely impacted by the first wave of COVID in 2020. Outside of the U.S. and Europe, we continue to see very good TAVR adoption in the fourth quarter. Sales growth in Japan, Australia, and Korea were strong, where therapy adoption is still low. In Japan, we continue to anticipate providing SAPIEN 3 for low-risk patients prior to the end of this year. In China, which was a minor contributor to Q4 sales, we remain focused on growing our dedicated clinical support team to assist leading hospitals, as they build their TAVR programs.
In addition to geographic expansion of our TAVR therapies, we remain focused on indication expansion. We talked at our recent Investor Conference about our early TAVR trial, which is focused on the treatment of asymptomatic patients. Enrollment is now two-thirds complete and we remain optimistic that the trial will be fully enrolled in 2021. Separately, we continue to plan to initiate an important pivotal trial for moderate aortic stenosis to determine the optimal time to treat patients, who have this progressive disease. We believe that some patients may benefit from earlier treatment, when they have moderate AS rather than risking irreversible damage as the disease progresses. We're optimistic about the potential of this trial and we anticipate FDA approval to begin enrollment this year.
In November 2020, we are pleased that the American Heart Association announced the launch of an initiative, called Target Aortic Stenosis, a quality improvement program aimed to develop optimal standards of care. The program features a learning collaborative comprised of experts and volunteers from pilot hospital locations around the nation. AHA noticed that if left untreated, the condition worsens and patients with severe aortic stenosis have a survival rate as low as 50% at two years. Aortic stenosis is also a risk factor for heart failure, a costly disease projected the cost the US Healthcare System $70 billion in 2030.
In summary, we continue to anticipate 2021 underlying TAVR sales growth in the 15% to 20% range, as we shared at our Investor Conference. We expect continuing COVID related challenges early in 2021, turning to a more normalized growth environment in the second half of the year. We remain confident in this large global opportunity will exceed $7 billion by 2024, which implies a compounded annual growth rate in the low double-digit range.
Turning to Transcatheter Mitral and Tricuspid Therapies or TMTT, we've made meaningful progress moving from early stage development to clinical use across all of our platforms with over 3,000 patients treated to-date. To transform treatment and unlock the significant long-term growth opportunity, we remain focused on three key value drivers, a portfolio of differentiated therapies, positive pivotal trial results to support approvals and adoption and favorable real-world clinical outcomes. In Europe, PASCAL leaflet repair continues to deliver excellent results.
In Q4, we continued the introduction of PASCAL Ace for mitral and tricuspid patients and we're pleased with the early real world results and positive physician feedback regarding its differentiated features and narrower profile. We plan to make both PASCAL Ace and PASCAL available on a single next generation platform called the PASCAL Precision System. This new system is designed to elevate the user experience with enhanced maneuverability, navigation, and stability enabling improved procedural precision.
From a clinical perspective, in this challenging near-term environment, we are experiencing a negative impact to clinical trial enrollment. However, our team and research partners are highly motivated to build on the differentiated data presented in 2020 and expand our body of clinical evidence in this exciting field. We will look forward to presenting meaningful follow-up data across our portfolio at medical meetings later this year.
We progressed in the enrollment of our three CLASP pivotal studies. We also received approval for use of the Edwards PASCAL Precision System in these pivotal studies. The company is still expects U.S. approval of PASCAL for patients with DMR late next year. We continue to enrolling SAPIEN M3 pivotal study and Circle designed to demonstrate strong safety and efficacy for transcatheter mitral replacement and we're on track to initiate our first clinical experience with our next generation EVOQUE Mitral Replacement System.
The EVOQUE tricuspid replacement study, TRISCEND continue to enroll in Q4 and we're on track to initiate the TRISCEND II randomized pivotal study based on FDA's Breakthrough pathway designation. We look forward to bringing this important treatment option to more patients that are in significant need.
Turning to recent news, we commenced CMS for ensuring mitral valve disease patients have improved access to therapy options through the updated NCD. This update, which includes coverage with Evidence Development achieves the balance of patient access with high quality outcomes. Fourth quarter global sales were $13 million, representing sequential improvement versus Q3. Full year 2020 sales were $42 million.
We expect continuing COVID related challenges early in 2021, but we anticipate a ramp up through the rest of the year. We maintain our beliefs that the total TMTT sales will approximately double in 2021. We continue to estimate the global TMTT opportunity to reach $3 billion by 2025 with significant growth beyond. We remain committed to transforming the treatment of these patients and believe our portfolio strategy positions us well for ultimate leadership.
In Surgical Structural Heart, full-year 2020 global sales of $762 million decreased 10% on an underlying basis over the prior year, in line of our guidance, with our guidance of 5% to 15% decline. Fourth quarter sales of $204 million held steady with Q3 and declined 2% year-over-year on an underlying basis, which was below our previous expectation for positive growth. Over the course of the quarter, hospitals experience an influx of COVID patients limiting surgical procedures.
Despite this impact, we are encouraged that the U.S. achieve positive growth in Q4, driven by adoption of our newest premium technologies. We remain very encouraged by the steady global adoption of Edwards Premium RESILIA tissue valves, including the Inspiris aortic surgical valve and the recently launched KONECT aortic valved conduit. In the fourth quarter, Inspiris valve utilization grew in all regions, and we continue to add new centers.
Sales in the U.S. are ramping for KONECT, the first preassembled ready to implant aortic tissue valve conduit for patients, who require replacement of the aortic valve, root, and the ascending aorta, which is a critical unmet patient need. We continue to focus on comprehensive physician training and robust data collection for the HARPOON Beating Heart Mitral Valve Repair System. We are seeing favorable patient outcomes with faster surgery and recovery times with this minimally invasive therapy. The U.S. pivotal trial is now underway and the first patient was treated in December.
In summary, we expect full-year 2021 underlying sales growth in the high single-digit range for surgical structural heart driven by market adoption of our newest technologies. After a challenging start, we expect improving year-over-year comparisons, as we progress through the year. We are excited by our ability to provide innovative surgical treatment options for more patients and to extend our global leadership in premium Surgical Structural Heart technologies. We believe the current $1.8 billion Surgical Structural Heart opportunity will grow mid single digits through 2026.
In Critical Care, full year 2020 global sales of $725 million decreased 3% on an underlying basis versus the prior year, in line with our guidance of flat to down 5%. Fourth quarter Critical Care sales of $198 million decreased 2% on an underlying basis, driven by the decline in HemoSphere orders in the U.S., as hospitals limited their capital spending. Sales of our TruWave disposable pressure monitoring devices used in the ICU were lifted by the increased COVID hospitalizations late in the fourth quarter in both the U.S. and Europe.
Demand for our products used in more intense surgeries remains strong, but were more than offset by the impact of delayed elective procedures. In summary, we expect full-year 2021 underlying sales growth in the high single-digit range for critical care. We remain excited about our pipeline of Critical Care innovations, as we continue to shift our focus to smart recovery technologies designed to help clinicians make better decisions for their patients.
Now, I'll ask Scott to provide some more detail on the company's financial results.
Hey, thanks a lot Mike. Today, I'll provide a wrap-up of 2020 including detailed results from the fourth quarter as well as provide an update on guidance for the first quarter and full year of 2021. Despite the wave of COVID that began during the fourth quarter, we are pleased that we were able to achieve our sales guidance ranges across all product lines.
Sales in the fourth quarter were flat year-over-year on an underlying basis and adjusted earnings per share grew 2% to $0.50 versus the prior year. GAAP earnings per share was similar at $0.49. For the full year 2020, sales increased 1% on an underlying basis to $4.4 billion, adjusted earnings per share was flat at $1.86 and we generated over $700 million of adjusted free cash flow. During 2020, we achieved cost efficiencies, but we intentionally did not take any actions to significantly impact our employees or reduce investments supporting our long-term strategy. I'll now cover the details of our results and then discuss guidance for 2021.
For the fourth quarter, our adjusted gross profit margin was 75.3% compared to 75.8% in the same period last year. This reduction was driven by a negative impact from foreign exchange and incremental costs associated with responding to COVID, partially offset by lower performance-based compensation. We continue to expect our 2021 adjusted gross profit margin to be between 76% and 77%. Our rate should be lifted by an improved product mix, partially offset by a negative impact from foreign exchange.
Selling, general and administrative expenses in the fourth quarter were $339 million or 28.4% of sales, compared to $347 million in the prior year. This decrease was primarily driven by reduced spending resulting from COVID and lower performance-based compensation, partially offset by the impact from foreign exchange. We continue to expect full year 2021 SG&A as a percentage of sales, excluding special items to be 28% to 29%, which is similar to pre-COVID levels.
Research and development expenses in the quarter grew 1% to $196 million or 16.4% of sales. This small increase was primarily the result of higher investments in TMTT and costs associated with discontinuing our SUTRAFIX program, partially offset by reduced performance-based compensation. For the full year 2021, we continue to expect R&D as a percentage of sales to be in the 17% to 18% range, similar to pre-COVID levels, as we invest in developing new technologies and generating evidence to expand indications for TAVR and TMTT including enrolling seven clinical trials.
Taxes, our reported tax rate this quarter was 13.1% or 13.9% excluding the impact of special items. This rate included a 350 basis point benefit from the accounting for stock-based compensation. Our full-year 2020 tax rate, excluding special items was 12.5%. We continue to expect our full year rate in 2021 excluding special items to be between 11% and 15%, including an estimated benefit of 5 percentage points from stock based compensation accounting. Foreign exchange rates increased fourth quarter reported sales growth by 150 basis points or $18 million compared to the prior year.
At current rates, we now expect an approximate $100 million positive impact or about 2% to full year 2021 sales compared to 2020. FX rates negatively impacted our fourth quarter gross profit margin by 150 basis points compared to the prior year. Free cash flow for the fourth quarter was $287 million, defined as cash flow from operating activities of $400 million, less capital spending of $113 million.
Now turning to the balance sheet, we have a strong balance sheet with approximately $2.2 billion in cash and investments as of the end of the year. In addition, we have an undrawn line of credit of up to $1 billion. We have public bonds outstanding of about $600 million that don't mature until 2028. Average shares outstanding during the fourth quarter were 632 million, relatively consistent with the prior quarter. We now expect average diluted shares outstanding for 2021 to be between 630 million and 635 million.
So before turning the call back over to Mike, I'll finish with financial guidance for 2021. We are maintaining all of our previous sales guidance ranges for 2021. For total Edwards, we expect sales of $4.9 billion to $5.3 billion. For TAVR, we expect sales of $3.2 billion to $3.6 billion. For TMTT, we expect sales of approximately $80 million. We expect Surgical Structural Heart sales of $800 million to $900 million and Critical Care sales of $725 million to $800 million. For the full year 2021, we continue to expect adjusted earnings per share of $2 to $2.20. For the first quarter of 2021, we project total sales to be between $1.1billion and $1.2 billion and adjusted earnings per share of $0.43 to $0.50.
And so with that, I'll pass it back to Mike.
Thanks, Scott. While a year like 2020 could threaten to cause persistent disruptions, our strategy of patient-focused innovations remains unwavering. As we look to 2021 and beyond, I'm as excited as ever about the work happening at Edwards and more importantly what we envision for the future of patient care. I continue to believe we are poised for success and that our innovation and cultural imperative to put patients first will drive strong organic sales growth and create long-term value.
Thanks a lot, Mike. With that, we're ready to take questions. In order to allow for broad participation, we ask that you please limit the number of questions to one plus one follow-up. If you have additional questions, please re-enter the queue and Management will answer as many participants as possible during the remainder of the call. Diego?
Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Bob Hopkins with Bank of America. Please state your question.
Great and good afternoon. Mike, I was wondering, since we just met in December, if you comment on maybe just two quick things, first question would be just how different is the environment out there right now, the selling environment out there right now versus what you seeing at the time of the Analyst Day, kind of on the margins are things getting a little worse, are they getting a little better, just would love some thoughts on that topic and then I have one quick follow-up.
Yeah. I would say in general, it's been a little worse. It was already trending negative and we anticipated it was going to be a tough winter and it certainly has turned out to be that way, but probably a little worse since that time.
Okay. And then the other thing I'd love to get your quick comments on is just thinking a little bit long-term on the tricuspid opportunity and the reason I ask is that obviously, Abbott has reported some numbers too and their tricuspid business is already annualizing at over $50 million, if you just take the results this quarter and multiply it times four, so it looks like some pretty robust interest in tricuspid repair right off the bat, so would love your thoughts on that market and how quickly you think that could develop and what hurdles might be. Thank you.
Yeah. Thanks, Bob. It's interesting. So the tricuspid market size in terms of number of patients, it's very large, it's certainly as big as the mitral opportunity and we've talked about the fact that that patient group is greatly underserved. So in terms of people actually getting procedures, you're talking about 1%, 2%, 3% very low numbers. So if we can actually develop a great solution for them, it's going to be an important deal. They don't have great answers. And so the burden is going to be on us to develop great solutions and to create evidence that we are actually doing that. We have -- we have a high level of confidence that we can do it, of course mitral is going to be bigger here in the near term. It's got an earlier start, but we think there is a lot of potential in this. The patients themselves are very diverse and that's why we think, when it's all done for tricuspid patients, it's going to require a portfolio.
Thank you. Our next question comes from David Lewis with Morgan Stanley. Please state your question.
Great. Thanks for taking the question. Mike or Scott, I just want to followup here on guidance for a second. So obviously resurgence trends have probably trended more negatively than when you sort of gave earlier guidance in December, so while things are trending more negatively, you're still sort of holding things that are really going to drive even more significant inflection points, if you will, of course, we've got a great team, and a nice reputation and a nice really differentiated products, but the data is going to be the bigger issue and again it's -- it's got much more potential than this in the long run.
Thank you. And that's all the questions we have, I'll turn it back to Mr. Mussallem for closing remarks.
Okay. Well, thanks for all the continued interest in Edwards, and even though COVID is challenging right now, we do see better days ahead and we're very optimistic about the future of Edwards Lifesciences. So Mark, Scott, and I welcome any additional questions by telephone.
And with that, back to you, Mark.
I don't think Mark's mic is open now, sir. Thank you. And this concludes today's conference and you can access the replay by dialing 877-660-6853, please use conference ID 13710472. Once again, to access the replay, please dial 877-660-6853 and using conference ID 13710472. Have a good day. Thank you.