Scott Ullem: Well, it’s a good question. It’s tough to isolate all the elements that are going into just the first couple of weeks of the year. But generally speaking, overall, it seems like the trends are favorable. And this is what we expected to happen in 2023 with hospital staffing constraints abating with overall disruptions in the health care system, getting a little bit better in the U.S. and outside of the U.S. And just the multiple different signals that we see and anecdotes that we hear give us confidence that we’re on the right track. And again, looking to the 9% to 12% growth rate guidance for 2023. January, it’s pretty early to say, but obviously, we wouldn’t the signals that we’ve seen in January are reflected in the guidance that we’ve given in that $13.70 to $14.50 sales range for the first quarter.
Operator: Our next question comes from Joanne Wuensch with Citibank.
Joanne Wuensch: I have two quick ones. It looks like you have 81% gross margin in the fourth quarter, your guide for ’23 is the reversal of your FX hedges. Can you walk us through sort of — should we just straight line it down over the next couple of quarters, how we should think about that? And then the second question, it sounds like things are getting better. Are you seeing wait lists cropping up in different places?
Scott Ullem: Why don’t I take the first piece, and then I’ll let somebody else jump in on the wait list question. Just in terms of gross margin, it’s pretty simple. I mean there are a bunch of little moving pieces. We always get a little bit of benefit from mix. We get a little bit of benefit from all of the activities we have to improve efficiency in global supply chain. But really, the difference between the gross margin in the fourth quarter of 2022 and the full year 2022 versus the guidance we’ve given for 2023 and is all FX. And FX hits us with both hedge contracts that we have as well as inventory valuations outside of the U.S. that’s really the source of the decline from 2022 to 2023 gross margins.
Michael Mussallem: And on the backlog question, Joanne, as we’ve mentioned before, we don’t have great analytics on backlogs. And so a lot of it we just hear anecdotally from customers. But what we do here say, yes, indeed, there is backlog that’s spotty and across the U.S. and other countries for that matter.
Operator: Our next question comes from Chris Pasquale with Nephron.
Chris Pasquale: Mike, I wanted to go back to the COVID-related headwinds in the U.S. and one hypothesis that I think concerns investors what you guys really haven’t talked much about is the idea that excess mortality in your patient population could have depleted your pool and that, that might take longer to normalize than something that’s a little bit simpler like hospital staffing. Do you see that as a significant factor? Or do you still view it as a bottom of the funnel issue with capacity?
Michael Mussallem: Yes. Just at the highest level, sadly, for these patients, it’s true. There has to be some mortality that goes on. They just don’t wait well. And we know that, that’s a very serious consequence of the environment that we’re in. Having said that, this isn’t a small pool. It’s a really, really big pool. And so even the sad mortality that comes from this is not close to really putting a dent in the number of patients that could legitimately use help through having their severe AS treated.
Chris Pasquale: Okay. That’s helpful. And then just one on mitral. Any line of sight into Class I and T completing enrollment of those studies have been going on for a while and I don’t think you guys have provided a time line there.
Daveen Chopra: Yes. So this is Daveen. So I’ll follow up a little bit on Class II TR first and I’ll talk about IIF separately. So first, on Class II TRs, you remember, we think that in our prioritization, while we think tier for tricuspid is really important, we actually believe that EVOQUE has the potential to be more important to tricuspid patients. But we know that this is a large and diverse population of people. So we’ve got to have a portfolio of options. So we were committed to running two different pivotal studies, obviously, the TRISCEND II for EVOQUE as well as the Class II TR for PASCAL. And many of these sites are actually — many of our clinical sites, especially in the U.S. actually have both trials at that site.
So what we did is we actually ask sites to prioritize TRISCEND II enrollment and actually drive that fastest. And so that’s on track to kind of complete enrollment here in the first half of 2023, as we’ve kind of talked about before. So now as that finishes up, we’re asking kind of sites to kind of drive enrollment in Class II TR hopefully, we’ll then see enrollment in that trial then pick up. And moving on to Class IIF, right, our functional kind of trial a randomized trial. We haven’t yet kind of shared expectation for kind of approval or commercialization yet on that. That trial is enrolling right now. It’s a really important trial for us. And again, a lot of the sites that were actually in Class IID again, the other mitral, were also sites that are also in Class IIF.
And as you imagine, we initially said, “Hey, guys, let’s really drive enrollment in Class IID and which the sites did really well,” they helped drive our approval. And now we’ve again asked them to kind of switch their prioritization to Class IIF. So we see kind of the enrollment in that trial, which is again, it’s a larger trial, a 450-person trial kind of enrolling right now. So that’s kind of an update on those two trials.
Operator: Our next question comes from Cecila Furlong with Morgan Stanley.
Cecilia Furlong: I wanted to ask just a follow-up question on TAVR in Japan. How you’re thinking about a cadence in ’23 following a bit more pressure. It sounded like in — and then just as you think about the impact from low-risk patients, additional patients coming into the funnel there as well as RESILIA rollout, if you could talk to us about your strategy and pricing strategy there, too?
Michael Mussallem: Maybe I’ll start out with Japan and then turn it over to Larry for the others that he can sort of complete the thought. Japan had been a real lift to our growth rate for the past few years and even earlier this year. But when that wave of COVID came through in Q3, it really was a setback for that health care system. And the way that the Japanese system deals with it is to implement a lot of restrictions. And so that really had some pretty big impact in Q3, and that continued into Q4. It was even more dramatic in Q4 than we expected. The situation is much better in Japan. And so we see a very solid, substantial improvement during the course of 2023. So we expect Japan to be a real contributor to growth going forward. Larry?
Operator: We can’t hear Larry.
Larry Wood: Sorry, can you hear me okay now?
Operator: Yes, go ahead.
Larry Wood: Okay. So the — there’s a lot of things to be excited about in Japan. In addition to the recovery that Mike talked about more broadly, we do have S3 Ultra RESILIA that’s coming probably right before the — probably in Q2, then we’ll begin rolling that out. Low-risk approval is also a big thing. We recently got approval for TAVR-in-TAVR, which is a big thing for Japan. So we’re really looking for them to recover and get back to more of the historic growth rates.
Cecilia Furlong: Great. And if I could follow up to just RESILIA in the U.S., you talked about 10% center penetration at this point, but can you speak to just your strategy adoption interest in Q1 and how you think about at this point, the cadence of converting centers over the next few quarters?
Larry Wood: Sure. Yes. So we’re really pleased with how the launch has gone so far. Remember, this approval came earlier than we anticipated. So it felt like we had built up a ton of inventory, and so we had to build up that inventory as we roll it out. So we’re pretty much right I think, where we plan to be, and we expect the rollout to continue through the entire year. But we’re happy with outcome so far. The physician feedback has been positive. And we think it’s good for us. We’re also going for a price increase, which is the first price increase that we’ve done in — since launch, which has been over 10 years. It’s pretty modest. It’s less than 5%, but we think it reflects the innovation and the value that we bring with the RESILIA technology.
Operator: Our next question comes from Travis Steed with Bank of America.
