Edwards Lifesciences Corp (EW)

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results. See “Note Regarding Forward-Looking Statements” preceding Part I, Item 1 in this Quarterly Report on Form 10-Q.

We are the leading global structural heart disease innovation company, driven by a passion to improve patient lives. Through breakthrough technologies, world-class evidence, and partnerships with clinicians and healthcare stakeholders, our employees are inspired by our patient-focused culture to deliver life-changing innovations to those who need them most. We conduct operations worldwide that are managed in the following geographical regions: United States, Europe, Japan, and Rest of World. Our products are categorized into the following groups: Transcatheter Aortic Valve Replacement (“TAVR”), Transcatheter Mitral and Tricuspid Therapies (“TMTT”), and Surgical.

In February 2026, we acquired Autus Valve Technologies, Inc. (“Autus”) for total consideration of $128.9 million with contingent consideration of up to $132.5 million payable based on the achievement of certain regulatory and sales milestones.

In May 2026, we amended several agreements with a medical device company (the “Consolidated VIE”), which we previously accounted for as an unconsolidated VIE. As a result of the amendments, we determined we have become the primary beneficiary of the Consolidated VIE and it has been consolidated in our condensed consolidated financial statements as of May 2026.

The results of Autus and the Consolidated VIE have been included in our condensed consolidated financial statements from the date of the acquisition and amendment dates, respectively.

We sold (i) our Critical Care product group (“Critical Care”) to Becton, Dickinson and Company (“BD”) in September 2024 and (ii) a business that was not focused on implantable medical innovations for structural heart diseases (the “non-core product group”) in December 2025 (collectively, the “discontinued product groups”). We determined that the conditions for the discontinued operations presentation had been met with respect to the discontinued product groups for the periods presented prior to their sale. As such, the historical financial condition and results of the discontinued product groups have been reflected as discontinued operations in our Condensed Consolidated Financial Statements for the applicable periods presented. Our discussion and analysis of our results of operations is reflective of our continuing operations. See Note 4 to the Condensed Consolidated Financial Statements for further information.

Due to changes to U.S. trade policy, such as increased tariffs on imports and including non-U.S. retaliatory tariffs, we have and will continue to assess potential impacts on our business. As needed, we will pursue options to mitigate the impact of tariffs, including through our supply chain and potential exemptions and exclusions. Failure to sufficiently mitigate the impact of tariffs, including significant inflation and other impacts on our customers, could also reduce demand for our products and adversely affect our business, financial condition and results of operations. Given the uncertainties around U.S. trade policy and future tariff rates, we are unable to predict the nature of the tariffs and whether we will be able to successfully mitigate their impact.

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Financial Highlights

Our net sales for the first six months of 2026 were $3.4 billion, representing an increase of $444.7 million compared to the first six months of 2025, driven primarily by sales of our TAVR and TMTT products.

Our gross profit increased in the six months ended June 30, 2026, driven primarily by our sales growth. Gross profit as a percentage of sales decreased primarily due to the impact from foreign currency rate fluctuations partially offset by lower manufacturing expenses. The decrease in our diluted earnings per share in the six months ended June 30, 2026, was driven by an increase in our tax expense partially offset by our aforementioned operational performance.

Healthcare Environment, Opportunities, and Challenges

The medical technology industry is highly competitive and continues to evolve. We measure our success both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and innovations, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation.

We are dedicated to generating robust clinical, economic, and quality-of-life evidence that is increasingly expected by patients, clinicians, and payors in the current healthcare environment, with the goal of encouraging the adoption of innovative new medical therapies that demonstrate superior outcomes.

New Accounting Standards

Information on new accounting standards is included in Note 1 to the Condensed Consolidated Financial Statements.

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Results of Operations

Net Sales by Region

(dollars in millions)

Net sales outside of the United States include the impact of foreign currency exchange rate fluctuations, as further detailed in the discussion below. The impact of foreign currency exchange rate fluctuations on net sales is not necessarily indicative of the impact on net income due to the corresponding effect of foreign currency exchange rate fluctuations on international manufacturing and operating costs, and our hedging activities.

Net Sales by Product Group

(dollars in millions)

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Transcatheter Aortic Valve Replacement Sales

Net sales of TAVR products increased for the three and six months ended June 30, 2026, driven by higher sales of the Edwards SAPIEN platform in 2026, primarily due to higher sales of the Edwards SAPIEN 3 Ultra RESILIA valve in the United States, Europe, and Japan. In addition, during the three and six months ended June 30, 2026, foreign currency exchange rate fluctuations increased net sales outside of the United States by $8.4 million and $40.4 million, respectively, primarily due to the strengthening of the Euro against the United States dollar.

In January 2026, we received United States Food and Drug Administration (“FDA”) approval for the SAPIEN 3 transcatheter pulmonic valve delivery system, an advancement designed specifically to support pediatric and adult patients living with congenital heart disease.

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Transcatheter Mitral and Tricuspid Therapies Sales

Net sales of TMTT products increased for the three and six months ended June 30, 2026, primarily due to higher sales of our PASCAL transcatheter edge-to-edge repair system, EVOQUE tricuspid valve replacement system, and SAPIEN M3 mitral valve replacement system in the United States and Europe.

In June 2026, we received CE Mark for the Edwards SAPIEN M3 RESILIA, increasing access to therapy for the patient population with mitral annular calcification.

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Surgical

Net sales of Surgical products increased for the three and six months ended June 30, 2026, primarily due to higher sales of the INSPIRIS RESILIA aortic valve, the MITRIS RESILIA valve, and KONECT RESILIA tissue valved conduit in the United States and Europe.

In May 2026, we received the FDA approval for TRIFORMIS RESILIA, the first-ever surgical tricuspid valve replacement designed specifically for patients with tricuspid valve disease.

In June 2026, we received FDA 510(k) clearance for ECLIPTIS, our surgical Left Atrial Appendage technology.

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Gross Profit

Our gross profit increased in the three and six months ended June 30, 2026, primarily driven by our sales growth discussed above. The change in gross profit as a percentage of net sales for the three and six months ended June 30, 2026 was primarily driven by a 0.7 percentage point and 0.5 percentage point negative impact, respectively, from foreign currency rate fluctuations, including the settlement of foreign currency hedging contracts, partially offset by lower manufacturing expenses.

Selling, General, and Administrative (“SG&A”) Expenses

SG&A expenses increased for the three and six months ended June 30, 2026, primarily due to higher headcount related expenses and commercial activities to support patient care. Foreign currency exchange rate fluctuations increased expenses by $6.0 million and $20.6 million during the three and six months ended June 30, 2026, respectively, primarily due to the weakening of United States dollar against the Euro.

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Research and Development (“R&D”) Expenses

R&D expenses increased for the three and six months ended June 30, 2026, primarily due to increased investments in implantable heart failure management and advanced technology innovation.

Certain Litigation Expenses

We incurred certain litigation expenses related to legal proceedings, intellectual property litigation and tax litigation of $6.3 million and $15.5 million during the three months ended June 30, 2026 and 2025, respectively and $43.4 million and $26.4 million during the six months ended June 30, 2026 and 2025, respectively (see Note 12 to the Condensed Consolidated Financial Statements).

Other Operating Income

Other operating income of $11.0 million and $25.2 million in the three and six months ended June 30, 2026, included income from transition services agreements of $11.5 million and $24.7 million, respectively (see Note 4 to the Condensed Consolidated Financial Statements).

Interest Income

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents the factors that had a material effect on our results of operations during the two years ended December 31, 2025. Also discussed is our financial position as of December 31, 2025, and our consolidated cash flows for 2025 compared to 2024. You should read this discussion in conjunction with the historical consolidated financial statements and related notes included elsewhere in this Form 10-K. For a discussion related to the results of operations for 2024 compared to 2023 and a discussion related to our consolidated cash flows for 2024 compared to 2023, refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on Form 10–K filed with the Securities and Exchange Commission on February 28, 2025.

Overview

We are the leading global structural heart disease innovation company, driven by a passion to improve patient lives. Through breakthrough technologies, world-class evidence, and meaningful partnerships with clinicians and healthcare stakeholders, our employees are inspired by our patient-focused culture to deliver life-changing innovations to those who need them most. We conduct operations worldwide and are managed in the following geographical regions: United States, Europe, Japan, and Rest of World. Our products are categorized into the following groups: Transcatheter Aortic Valve Replacement (“TAVR”), Transcatheter Mitral and Tricuspid Therapies (“TMTT”), and Surgical Structural Heart (“Surgical”).

On December 18, 2025, we completed the sale of a business that is not focused on implantable medical innovations for structural heart disease (the “non-core product group”). On September 3, 2024, we sold our Critical Care product group (“Critical Care”) to Becton, Dickinson and Company (“BD”). We concluded that the non-core product group met the criteria to be classified as held-for-sale in September 2024 and the Critical Care met the criteria to be classified as held-for-sale in June 2024. We determined that, when considered together, the conditions for discontinued operations presentation had been met with respect to each of Critical Care and the non-core product group (collectively, the “discontinued product groups”). As such, the historical financial condition and results of the discontinued product groups have been reflected as discontinued operations in our consolidated financial statements. Our discussion and analysis of our results of operations is reflective of our continuing operations. See Note 5 to the Consolidated Financial Statements for further information.

Financial Highlights and Market Update

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Financial Highlights

Our net sales for 2025 were $6.1 billion, representing an increase of $628.1 million over 2024, driven primarily by sales growth of our TAVR and TMTT products.

Our gross profit increased in 2025, driven by our sales growth. Gross profit as a percentage of sales decreased primarily due to higher operational expenses. The decrease in our net income and diluted earnings per share in 2025 was driven primarily by increases in personnel-related costs, one-time charges related to impairments on our investments, and increased certain litigation expenses. For further information, see Note 3, Note 9 and Note 20 to the Consolidated Financial Statements.

Healthcare Environment, Opportunities, and Challenges

The medical technology industry is highly competitive and continues to evolve. Our success is measured both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and innovations, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation. In 2025, we invested 18% of our net sales in research and development. The following is a summary of important developments since January 1, 2025:

•we received United States Food and Drug Administration (“FDA”) approval for the SAPIEN 3 platform for severe aortic stenosis patients without symptoms;

•we received FDA and CE Mark approval for the SAPIEN M3 mitral valve replacement system, launching in both Europe and the U.S. the first transcatheter therapy utilizing a transseptal approach for treatment of patients with symptomatic (moderate-to-severe or severe) mitral regurgitation who are deemed unsuitable for surgery or transcatheter edge-to-edge therapy;

•we received a CE Mark for and launched in Europe the KONECT RESILIA aortic valved conduit, the first ready-to-implant solution with RESILIA tissue specifically designed for bio-Bentall procedures;

•we announced new eight-year data showing that patients receiving aortic surgical valves treated with our proprietary RESILIA tissue technology have significantly improved long-term outcomes compared to those receiving non-RESILIA tissue bioprosthetic valves;

•we announced ENCIRCLE pivotal trial results demonstrating successful patient outcomes supporting our portfolio of mitral and tricuspid therapies;

•we completed enrollment in the CLASP IIF trial for the PASCAL transcatheter valve repair system;

•we announced seven-year data from the PARTNER 3 trial, reaffirming the early and sustained patient benefits of Edwards TAVR; and

•we announced our founding sponsorship of the American Heart Association’s Heart Valve Initiative, a national effort to improve care and outcomes for the more than 28 million people living with heart valve disease worldwide.

We are dedicated to generating robust clinical, economic, and quality-of-life evidence increasingly expected by patients, clinicians, and payors in the current healthcare environment, with the goal of encouraging the adoption of innovative new medical therapies that demonstrate superior outcomes.

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Results of Operations

Net Sales by Geographic Region

(dollars in millions)

Net sales outside of the United States include the impact of foreign currency exchange rate fluctuations, as further detailed in the discussion below. The impact of foreign currency exchange rate fluctuations on net sales is not necessarily indicative of the impact on net income due to the corresponding effect of foreign currency exchange rate fluctuations on international manufacturing and operating costs, and our hedging activities. For more information, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A.

Net Sales by Product Group

(dollars in millions)

Transcatheter Aortic Valve Replacement

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Net sales of TAVR products increased in 2025, driven by higher sales of the Edwards SAPIEN platform in 2025, primarily due to higher sales of the Edwards SAPIEN 3 Ultra RESILIA valve in the United States and Europe. In addition, foreign currency exchange rate fluctuations increased net sales outside of the United States by $26.7 million primarily due to the strengthening of the Euro against the United States dollar.

Transcatheter Mitral and Tricuspid Therapies

The increase in net sales in 2025 of TMTT products was primarily due to higher sales of our PASCAL transcatheter edge-to-edge repair system and EVOQUE tricuspid valve replacement system in the United States and Europe.

Surgical Structural Heart

Net sales of Surgical products increased in 2025 primarily due to higher sales of the INSPIRIS RESILIA aortic valve and the MITRIS RESILIA in the United States, Europe and Rest of World, and the KONECT RESILIA tissue valved conduit in the United States.

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Gross Profit

Our gross profit increased in 2025 compared to 2024, driven by our sales growth discussed above. Gross profit as a percentage of net sales decreased in 2025, primarily driven by higher operational expenses.

Selling, General, and Administrative (“SG&A”) Expenses

SG&A expenses increased in 2025 compared to 2024 primarily due to (a) higher field-based personnel-related costs in support of our growth strategy initiatives, primarily in the United States, (b) increased marketing expenses primarily related to TAVR, (c) increased performance-based compensation expenses, and (d) increased professional services costs to support the transition services agreement.

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Research and Development (“R&D”) Expenses

R&D expenses increased in 2025 compared to 2024 primarily due to increased investments in implantable heart failure management innovations.

Intellectual Property Agreement and Certain Litigation Expenses

We incurred certain expenses related to legal settlement and contingency, intellectual property litigation, and tax litigation of $325.4 million and $40.4 million during 2025 and 2024, respectively. For further information, see Note 3, Note 9 and Note 20 to the Consolidated Financial Statements.

Change in Fair Value of Contingent Consideration Liabilities, net

The change in fair value of contingent consideration liabilities resulted in gains of $12.5 million during 2025, primarily due to changes in projected probabilities of milestone achievements.

Restructuring Charges, Separation Costs, and Other

In 2025 and 2024, we recorded expenses of $13.1 million and $32.9 million, respectively, related to severance associated with realignment initiatives. In 2025 and 2024, we also recorded expenses of $8.5 million and $19.0 million, respectively, primarily related to costs incurred for professional advisory services associated with the sale of Critical Care to BD.

For further information, see Note 4 to the Consolidated Financial Statements.

Intangible Assets Impairment Charges

Intangible assets impairment loss of $40.0 million in 2025 related to certain developed technology assets. There were no intangible assets impairment charges recognized in 2024.

Other Operating Income, net

Other operating income, net of $67.2 million in 2025 primarily included income from the transition services agreement relating to the sale of Critical Care of $63.7 million. For further information, see Note 5 to the Consolidated Financial Statements.

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Interest Expense

Interest expense was $20.4 million and $19.8 million in 2025 and 2024, respectively. The increase in interest expense resulted primarily from lower capitalizable interest related to facilities construction.

Interest Income

Interest income was $168.8 million and $120.3

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