Edwards Lifesciences (EW), a major player in the field of heart valves, has filed its official response to the Centers for Medicare & Medicaid Services (CMS) on the proposed National Coverage Determination (“NCD”) for Transcatheter Aortic Valve Replacement (“TAVR”). In February this year, CMS had published a decision memo specifying the circumstances under which coverage should be provided.
Earlier, in September 2011, the CMS had decided to initiate the NCD process. This development resulted in inconsistent interpretations among the regional Medicare contractors, which in turn led to lower-than-expected sales of Sapien in the most recent quarter. The device provides surgeons the option to eliminate the possibility of open heart procedures.
Edwards is encouraged by CMS’ proposed flexible coverage for TAVR. However, the company noted its displeasure with the CMS proposal to limit coverage of clinical trials to “superiority trials” only, which would bereft many patient populations from benefiting from this specialized know-how. The company is in favor of credentialing of facilities and heart teams due to the team-centric procedures rather than traditional physician-based credentialing. Edwards also suggested the necessity of a TAVR center and the additional criteria for maintaining and improving outcomes of treated patients.
Additionally, the company also reviewed data from the Partner trial that demonstrated benefits of TAVR in patients with severe aortic stenosis. CMS is expected to issue its final NCD within approximately 60 days.
The penetration of Sapien is significant for Edwards and it enjoys the first mover advantage in the US with its November 2011 launch. However, the competitive landscape in Europe is tough with the presence of Medtronic‘s (MDT) CoreValve and recent launches of JenaValve and Acurate TA. Although economic uncertainty in Europe (Greece, Italy and Spain) adversely affected THV sales during the latest quarter, the situation is expected to improve gradually. For 2012, the company expects to record transcatheter heart valve sales of $560-$630 million, including $200-$260 million of sales in the US ($30-$40 million in the first quarter).
Meanwhile, current investor focus remains on the potential US approval of Sapien for Cohort A patients. The company expects FDA approval for Cohort A by the second quarter of 2012, which will be preceded by an FDA advisory panel.
We have a Neutral recommendation on Edwards. The stock retains a Zacks #3 Rank (“Hold”) in the short term.
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