Mike Mussallem, CEO of Edwards Lifesciences (NYSE: EW)
A share of Edwards Lifesciences, a medical technology company, delivered 7,670% return since the start of trading on the top of dotcom bubble in March 2000. S&P 500 returned 153% for the same period.
Over the past 20 years CEO Mike Mussallem turned an obscure company, which was the worst performing business unit of Baxter at the time, into a global medtech leader focused on cardiovascular products and services. The magnitude of value created by Mussallem is astonishing - at the time when it was a part of Baxter, Edwards was valued at $230m. Today Edwards has market cap of $55B.
While Edwards developed many various products, the most transformative procedure introduced by Edwards was TAVR – Transcatheter Aortic Valve Replacement.
The story starts as a race to develop an alternative to open heart surgery for aortic valve stenosis. That’s a condition where the valve at the tip of the aorta — the body’s largest artery — narrows, often to the size of a pencil, impeding blood flow. It can cause fatigue, dizziness, shortness of breath, chest pain, congestive heart failure and sometimes death.
Cardiac care has made miraculous strides in recent decades, with surgeons able to cut out diseased valves and sew in artificial replacements made from cow and pig tissue.
But until TAVR, at least 100,000 patients in the U.S. were too old or frail to undergo the ordeal of having their chests cracked open, their hearts stopped, their blood flow taken over by a heart-lung machine, followed by open-heart surgery.
In the early 1990s, a Danish cardiologist floated the idea of snaking a collapsed artificial valve through the body’s veins from the leg into the heart, then inflating a balloon to wedge the new valve into the aorta. If it worked, many critically ill patients could be saved.
By the early 2000s, a French doctor, Alain Cribier, working with a team in Israel, was perfecting the technique. Edwards was among the competitors developing a rival procedure.
“We had a big debate whether we thought we were going to prevail or whether this little company that had 17 guys in Israel was going to prevail,” Mussallem said. “And we decided, let’s buy it.”
Taking on debt, Edwards paid $125 million to buy Cribier’s company in 2004.
“It was a heavy lift for us financially. But our attitude was if this could change the world, it has to be us. We’re the leaders, it has to be us. We couldn’t sleep otherwise.” 
Here is the video of this procedure:
Commercialization of TAVR as well as other innovative technologies led to 518% revenue growth between 2000 and 2019. Add margin expansion, share buybacks and multiple expansion – and you have a formula for 24% annualized return over 20 years.
One of the distinct elements of Mussallem’s strategy: commitment to innovation, which was reflected in R&D growth exceeding revenue growth during all but 4 years between 2000 and 2019.
Another interesting detail: Mike Mussallem has been consistently increasing his stake in the company since early years, although today it’s worth just $85m – surprisingly modest amount compared to the value he created.
As always, below are some noteworthy quotes from Mike Mussallem describing his work at Edwards Lifesciences.
On early career:
On starting his career in medical device industry: In 1979, I was a young engineer working in manufacturing at Union Carbine, making antifreeze and going to business school in the evenings because I was a little restless and not feeling like I was growing and developing. The industry I was in was a little too slow-moving and deliberate for my preference. I heard about the exciting, growing medical technology industry, sought out a new career direction and decided to join Baxter as a senior engineer doing process development for intravenous fluids. I have enjoyed many challenging assignments with Baxter, and Edwards, ever since. 
Early on I worked to try to pull myself up; I helped to pay for my education by working in the steel mills. At that time in my younger years, I was probably more focused on how big my paycheck was and how good the benefits were. It probably wasn't until I joined health care in 1979 that I started thinking about doing something that really mattered to people's lives. 
Beyond 2001, there are a number of aspirations that Edwards’ management and employees are motivated to achieve. Attaining double-digit sales growth is one of our most important long-term aspirations. To do this, we intend to introduce innovative products and technologies where we can enjoy a strong proprietary position. We expect this to have the added benefit of increasing our gross profit margin – another of our long-term aspirations. Over time, we also desire to increase the number of new product introductions and expect these new products to comprise an increasingly larger percentage of our annual sales. Finally, we aspire to sustain annual growth in profitability of at least 15 percent. These aspirations are ambitious but we believe they are attainable given the company’s inherent strengths. [AR 2000]
Our confidence for the future rests on several key strengths. First, we have a strong portfolio of outstanding products and leading brands, a powerful global presence with sales in more than 80 countries and a firm commitment to maximize the strength of our core franchises. Second, we have structured our organization to grow and thrive. Our company culture encourages engagement and innovation, and we have built in the flexibility to evaluate and pursue new strategic opportunities as they are brought forth by our employees, partners and clinicians. Third, we believe Edwards is sitting in the “sweet spot” in terms of its size and position. We are large enough to fund the pursuit of many growth initiatives and introduce new products on a global basis. Yet, we are focused and sufficiently agile to capitalize on niche opportunities. Finally, as a reflection of Edwards’ pioneering spirit, we continue to look to the future of advanced cardiovascular disease treatment. We are partnering with the cardiovascular community to focus on unmet clinical needs and the breakthrough ideas that will address them, with the goal of continuing to deliver innovative, differentiated cardiovascular products and technologies. [AR 2001]
When we established Edwards Lifesciences as an independent company in 2000, we set high goals. We aspired to be a company recognized for: transforming patient care through innovative technologies; excelling as a trusted partner and global leader through the quality of our work; attracting and engaging talented employees; strengthening our communities; and creating exceptional stockholder value. Each day we work to meet and exceed these aspirations by partnering with clinicians, patients and the communities where we live and work. Together, we strive to make a positive impact and find innovative solutions in the fight against advanced cardiovascular disease. [AR 2007]
We wholeheartedly believe that if we are doing good things for patients, we create value. We trust our innovation strategy and continue to believe that when we place patients’ needs at the forefront, our results will benefit not only the patient, but our customers, employees and shareholders as well. Edwards will continue to serve the unmet needs of patients around the world, including in emerging markets where we hope to make our therapies accessible to more patients in need. We know that evidence is increasingly expected of new technologies, and we plan to continue conducting studies that demonstrate clinical significance, as well as cost-effectiveness and quality of life improvement. [AR 2011]
Our focus has always been to differentiate ourselves through innovations that provide value. We’re dedicated to transforming patient care and generating the evidence that will demonstrate how our work makes a difference in the lives of patients and the broader healthcare community. Edwards will continue to operate in a responsible and ethical way, to continue producing high-quality products for clinicians and their patients around the world. [AR 2012]
Edwards’ long-term strategy is built around three core areas. First, we are patient focused. We are singularly dedicated to addressing the unmet needs of patients with structural heart disease or the critically ill. Second, we’re built on innovations – and not simply small iterations, but rather bold, transformative innovations. We dedicate significant resources to develop breakthrough technologies with superior clinical and economic evidence. Third, we like to lead by going first and continually strengthen our pioneering leadership position. Frequently, this means we are going down a road that no one has gone down before. This allows us to be in a privileged position of being able to learn fast and shape the direction of a therapy and perhaps change the practice of medicine. [AR 2016]
To fulfill our commitment to patients, we have carefully developed a focused innovation strategy that rewards our dedicated employees for performing at a very high level. We think about the long term, keeping a steadfast focus on enduring value creation. Our strategy is highly differentiated, yet not complex. We are focused on addressing large unmet needs of structural heart and critically ill patients, improving their quality of life, and responding to their desire for safer therapies and faster recoveries. We aggressively invest in breakthrough technologies supported by robust evidence, affording us the ability to make a meaningful difference for patients, clinicians and the healthcare system. We have a long history of pioneering achievements in our fields of expertise, while building trusted relationships and credibility. [AR 2017]
On staying focused:
Edwards is focused entirely on products and services to treat advanced cardiovascular disease. We are working more closely than ever with professionals in surgical and critical care teams to serve their patients. We are increasing our investments in research and development, challenging ourselves continuously and staying committed to our plan. [AR 2000]
Edwards’ focused strategy is becoming more unique within the field of medical technology. Our personal approach continues as we dedicate our energies and resources to solving the ongoing, immense challenges faced by the patients we serve. Our relentless focus allows us to make the long-term commitment necessary to demonstrate that our innovative medical technologies can deliver real value to patients. [AR 2015]
Today, we are an intensely focused company. We choose not to be as big and diversified as other companies; rather, we are dedicated to structural heart and critical care medicine. This focus means that we have a deeper understanding of the disease, as well as the patient, which results in unmatched expertise and unique capabilities for addressing the challenges they present.Innovating in structural heart disease is demanding, but critically important because the disease burden is heavy and growing. [AR 2018]
We are just very focused folks. We decided that we are going to stay focused on structural heart decease and critical care technologies. We are very happy doing just that. There are so many unmet needs for patients in those two spaces that we think we can grow for many years and contribute a lot to patients without having to acquire. We don’t necessarily think bigger is better. 
On investing in R&D and innovation:
Key to our company’s growth efforts is creating a more robust product pipeline. Using the flexibility afforded by our strong cash flow, we plan to supplement our product pipeline through a combination of internal research and development efforts, selected acquisitions, and investments in compelling technologies. We intend to build a sustainable and balanced portfolio of products in varying stages of development, giving us new products in the near-, mid- and long-term time frames. We also plan to exploit our core strengths to move into even more technologically advanced areas. Overall, we are committed to increase our R&D spending by 10 percent annually, and aspire to eventually be spending more than 10 percent of total sales on R&D each year. [AR 2000]
Overall, the future has never looked brighter for Edwards and we will continue to balance our investments in future technologies between those that defend and extend our core franchises, those that form the basis for new growth platforms, and those that represent exciting, transformational opportunities in cardiovascular care. [AR 2003]
Going forward, Edwards will seek to further extend growth and leadership in our chosen areas of emphasis: heart valve disease, critical care technologies and peripheral vascular disease. We will continue emphasizing differentiated, physician-preference products with leadership potential, further building upon the contributions we have been fortunate to make. We also expect to continue investing aggressively in innovative technologies — balancing disciplined growth with new platforms that will enable us to treat even more patients whose conditions are underdiagnosed or untreated. [AR 2005]
As we have done over the years, we continued to prioritize investments in 2006 and sharpened our strategic focus on opportunities that we believe can provide greater growth potential. During the year, we discontinued our cardiac laser ablation program and divested our remaining perfusion products business. Additionally, we sold our angiogenesis program and a small pharmaceutical product line. [AR 2006]
Extending our leadership position is largely dependent upon a robust product development pipeline and regularly introducing new products—and we are committed to doing both. Additionally, research we conducted during 2006 confirms that many patients with aortic stenosis who should receive surgery do not, and we believe this will expand the market for our products for years to come. [AR 2006]
We are dedicated to making long-term investments to strengthen our leadership in structural heart disease and critical care, and position Edwards for sustained growth for years to come. Additionally, we plan to continue to expand our presence in emerging markets, offering medical technologies to regions that previously have not benefitted from advanced care options. Edwards remains passionate about the highest standards of quality and accountability to ensure our work consistently reflects our company’s credo. Our steadfast commitment to our patients, clinicians, employees and shareholders will continue to drive our progress, and fuel innovative solutions, for years to come. [AR 2013]
Edwards has always been, and will continue to be, aggressive investors in innovation to better address patient needs through extensive internal eff orts and also by the identification of promising external ideas. The double-digit sales growth that we have experienced over the last five years is a direct byproduct of these eff orts. Our R&D investments will once again be substantial in 2015, as we continue to strengthen our leadership and position Edwards for sustained future growth. [AR 2014]
Our progress in 2015 laid the groundwork for our future. Our teams that are focused on new technologies continued to advance their efforts through partnerships, clinical experience and product enhancements. We continue to be proud of our substantial investment in research and development, which was 15 percent of sales, with a priority placed on investments in new product opportunities that address areas of significant unmet patient needs. We have made a lot of encouraging progress on R&D milestones, with innovations that should pay off years into the future. [AR 2015]
We like to focus on bold innovations, literally breakthrough technologies that are transformative to existing care. And when we get that right, we can add a lot of value for patients. 
We were, and continue to be, the leader in surgical heart valves, and TAVR was such a radical idea and most of our customers would discourage us. The rationale was that if someone was going to disrupt our core business, my feeling was that it must be us. We had to be the ones. No one else could pursue this radical idea. 
We believe in big, bold, breakthrough innovation. Be the leader. Go first. 
We don’t like to just take little steps, but to really do some of these transformational steps that change the way medicine is practised, that no-one has ever done before. And obviously those are difficult to do, but nothing is quite so rewarding as to get that right, fully knowing that what goes along with that is generating a tremendous amount of evidence to demonstrate that your solutions are safe, are effective, are cost-effective. 
Edwards’s product development approach does not focus solely on near- and medium-term results. As Mussallem explained, Edwards’s Advanced Technology (AT) unit, led by its Chief Scientific Officer, “helps us identify and define our future technologies at the outer horizons of our strategic planning time period.” As they have approached commercialization, some AT projects have been transitioned to the business units. 
On company culture:
At the time of our debut as a new public company, all of our employees around the world received company stock or options. This new ownership encourages all employees to apply their entrepreneurial skills to running the day-to-day business and enables them to share in the company’s success. Each employee-owner is creating an environment that better fosters ideas, decisiveness and accountability. What each of us does in this organization has significantly more impact than it ever did before. [AR 2000]
Above all, we are driven by the awareness that our work can make a difference in patients’ lives. Cardiovascular disease is the world’s leading killer, a complex and devastating condition that must be addressed by a host of players, and we are joined in this fight with other innovators, clinicians, public health and government regulatory agencies, medical institutions and patients. We are very proud of the contributions we have made thus far, but we recognize much more is yet to be accomplished. As we look to apply scientific breakthroughs to help improve the lives of people fighting cardiovascular disease, we remain guided by our Credo, which states, “Helping patients is our life’s work, and life is now.” [AR 2002]
Doing More with Less. For Edwards, helping patients is what we do, and in our drive to do more, we are also looking to do less. Less invasive therapies not only offer patients the promise of shorter hospital stays and faster recovery times, they have the potential to treat new groups of patients who may not be good candidates for conventional surgical procedures. [AR 2004]
At Edwards, we are committed to helping patients and being a company that physicians can trust. Working with our clinician partners, we focus on developing differentiated technologies that we believe have true leadership potential and may even change the way medicine is practiced. [AR 2006]
From the Book: Why Great Leaders Don't Take Yes for an Answer: Managing for Conflict and Consensus
One of Edwards’ aspirations is to be recognized as a company that transforms patient care through innovative technology. I am proud that our employees—more than 5,500 globally—all share this commitment and come to work every day knowing they are making a positive difference in the lives of cardiovascular patients around the world. [AR 2006]
As we grow, Edwards continues to attract talented people. We were fortunate to bring a large number of new employees on board this year and continue to expand our teams to meet our growing needs. We take pride in our employees who collectively make it possible to help critically ill patients and those affected by advanced cardiovascular disease worldwide. Our employees not only use their skills to help clinicians around the world save and enhance lives, but also demonstrate a strong commitment to making a positive impact on the communities in which we live and work. [AR 2011]
Culture of inspiration and dedication. A critical factor that contributes significantly to our success is our employees. We believe that employees are our greatest asset and, in 2012, we continued to build and strengthen our company through the development and engagement of our team. Additionally, we were able to add key talent worldwide. During the year, we hired several hundred new employees, and we are fortunate to be growing our company at a time when many companies are not. We are privileged to have a culture where employees are motivated to put patients first every day. Their hard work and dedication have created a team that is passionate about making a difference in the lives of patients. [AR 2012]
As a company, we are driven by a credo that reminds us every day the true significance of the work we do. We remain passionate about the highest standards of quality and accountability to ensure our work reflects this credo. We count it a privilege to serve patients, relentlessly focusing on delivering therapies that save, enhance and prolong lives. We trust our focused innovation strategy and continue to believe that when we place patients’ needs first, we will benefit not only the patient, but also our customers, employees and shareholders. [AR 2014]
Edwards’ employees are essential to our success as a company. We are privileged to have a culture where so many passionate individuals are motivated to put patients first each day. In 2014, we continued to encourage the development of our talent worldwide, and also recently welcomed new leaders to help guide and execute our focused innovation strategy. [AR 2014]
As Edwards has grown and advanced during the past decade, we consistently remain focused on our commitment to patients. The nearly 10,000 Edwards employees around the world come to work each day knowing their dedication can result in saving and enhancing lives and solving some of the world’s biggest healthcare challenges. This focus not only gives us a common direction, but it also keeps us humble and reminds us of the great responsibility we have to patients. To bring this to life, we regularly welcome patients to Edwards to meet our employees and learn about the careful work that goes into our heart valves and critical care devices that may have been used in their care. In 2015, we welcomed patients to many of our operations around the world, including our headquarters in Irvine, Calif., where we also hosted our first Patient Day. This was a powerful event for all involved. [AR 2015]
A Passionate, Patient-Focused Culture. We could not achieve any of what we did in 2016 without the dedication of our teams around the world. We have continued to invest significantly in our talent to ensure we have the bright minds we need to uncover the innovations today that will pave the path for our future. Our dedicated and passionate employees are focused on patients and quality. They thrive on discoveries that address unmet patient needs through breakthrough therapies. [AR 2016]
We have an unwavering patient-focused culture that motivates and guides our global team, a differentiated strategy that is based on focus, innovation and leadership. This has resulted in strong organic top-line growth that is significantly higher than the industry average. [AR 2017]
Impactful Team and Culture. Our 13,000 passionately engaged employees, executive team members and Board of Directors embody our patients-first culture and are vital to the success of our organization. This is why we strategically focus on our talent by providing ongoing training and development, and foster an inclusive culture. We believe the company is stronger when it incorporates diverse thoughts, perspectives, cultures and experiences. This variety is especially important to stimulate our innovation and it allows us to extend our reach and understanding of the world marketplace. [AR 2018]
Mussallem, chairman and CEO of Edwards Lifesciences Corp., knows the advancement is a bold step that was driven by innovation, something that wouldn’t have been possible without a corporate culture that encourages risk-taking and avoids the blame game. “In the past, we would have been working on making heart valves more durable or have more blood flow or be easier for the surgeon to implant but not on such a transforming procedure,” Mussallem says. “If people felt like they couldn’t take a risk or they felt like they would be blamed for reaching in a broad way, we wouldn’t be enjoying the kind of progress and success we’ve enjoyed so far in this program. I think there’s a direct correlation.” 
On ownership culture: It started out with an ownership culture in which we put stock in the hands of every employee. We asked employees to behave like owners, and we impressed on them the importance they have in the success of the company. Even though we were 5,000-plus employees here, it’s a lot different than being a 40,000- or 50,000-plus-person company. Each individual had so much more impact on the company, and driving that message of ownership was key. 
On hiring people: We find if people are passionate about the job that we’re asking them to do, and they’re passionate about the company, and they’re passionate about the impact they’re going to have on saving people’s lives, then it’s going to have a tremendous impact on their leadership, and we look for that. Even though someone might be technically the most perfect fit for a job, if we don’t feel like they have a passion for this, we don’t think they’re the right person for the job. 
Encouraging employees to take risks to achieve big advances means being not only willing to accept that there will be failures, but being able to handle them in a constructive way so as not to discourage future risk-taking. Mussallem adopted a slogan, “Don’t blame, learn,” to communicate the way the company should treat its failures.
“It’s so easy to shoot the messenger,” Mussallem says. “Somebody delivers the bad news or somebody shares an unpopular message or somebody doesn’t really believe in what we’re doing or where we’re going, they have the courage to stand up and be vocal about it. The way we handle that every single time is going to reinforce the notion that it’s safe and it’s appropriate to speak up.” Shooting the messenger can have a severe negative effect on the culture of a company that is trying to encourage innovation and open, creative debate. 
“We think it’s so important to have debate inside a company to make whatever ideas and strategies we have robust,” Mussallem says. “And it means that we need to create a culture where people are willing to speak up, where it’s safe for people to speak up, where you can have some mavericks that will fit in because regardless of your level or your function or your expertise, your voice will be heard. It means that if somebody puts a tough issue on the table, that the experienced people, as well as the inexperienced people, will speak up and listen, that the experienced people will make room for the beginners to share their views, because there’s so much value that comes out of that. We think it’s all part of creating the innovative culture.” 
When I talk to folks that are developing leaders, I strongly encourage people to find meaning in their work because it allows you to be your best and might even surprise you in terms of how much impact you can have. 
I learned a lot over the years by doing. More and more I found that having a great culture is what first and foremost underpins the success of the company, especially when the culture drives the real purpose of the company. I feel like it's the driver of a lot of our success, and it gives me great comfort that we are all aligned. 
It starts with a dream and a big commitment that can often end in failure. Risk-taking is critical to innovation. Occasionally we are just going to get up and walk away from projects it has made a large commitment to. The upside of being a leader is that you learn faster than others. 
I truly believe that culture eats strategy for breakfast, as they say. While of course it’s important that companies have a focused strategy and identify their roadmap for the next several years, I believe that none of that matters if you don’t have the right people and culture to implement it and make it successful. At Edwards, we focus on patients first. They are our North Star. When we have decisions to make, or we come to a critical juncture or challenge in one of our programs, we stop to think about how it would impact the patient based on different paths we take. We work to reinforce this focus regularly with our team through storytelling, videos, visits from patients who have benefitted from our therapies and recognition of employees who embody the cultural traits we celebrate at Edwards. We recognize that our work is very personal — that it impacts people individually — and we ensure that all our employees around the world understand this privilege and responsibility and take inspiration from it. 
If you want to learn more about Mike Mussallem, check the link below: