Edwards Lifesciences Corporation (EW) expects to witness double-digit sales growth in 2011. This was announced during the company’s recently held investor conference. The company is a leading player in heart valve therapy. Its growth prospects are tied to the US launch of Sapien transcatheter heart valves (THV). It is encouraging to note that Edwards expects $300-$340 million of THV sales in 2011, way above the $200 million of sales projected for 2010.
Edwards expects to launch Sapien THV in the US during the fourth quarter of 2011, provided it receives approval from the US Food and Drug Administration (FDA). While the company expects to record $20-$25 million of US Sapien sales in the fourth quarter (after the launch), sales for the first four quarters post launch should be around $150-$200 million.
Edwards had presented encouraging data from the PARTNER trial (Cohort B) at the American Heart Association in Chicago in November. The trial is targeted at those patients for whom conventional open-heart valve surgery is considered risky. Earlier, in September, the company had presented key data on mortality rates from this study.
Recent data shows that the same patient population experienced a better quality of life on being treated with Edwards’ Sapien THV. The Cohort B was conducted on 358 patients who were not considered fit to undergo traditional open-heart surgery. Patients were randomized to receive either the Sapien THV or standard therapy. These patients were assessed after intervals of one month, six months and twelve months on various parameters such as symptoms, physical and social limitation or the quality of life.
Edwards projects $1.59-$1.67 billion in revenues for 2011, in line with the Zacks Consensus Estimate of $1.63 billion. However, EPS guidance (excluding special items) of $1.91-$1.97 is way below the Zacks Consensus Estimate of $2.12. This is primarily due to $40 million of investments, the company is planning to incur on the US launch of Sapien valve.
Within Heart Valve Therapy, Edwards expects the European launch of its Intuity valve system in the second half of 2011 which will expand minimally invasive options for patients. Banking on this launch and strong THV sales, the company expects an underlying growth of 16-20% for this segment.
Moreover, within the Critical Care segment, the company expects strong growth from its VolumeView system and EV1000 clinical platform. The GlucoClear hospital glucose monitoring system is slated for 2012 launch.
Recommendation
Edwards recorded strong revenue growth during the third quarter banking on robust performance by its Heart Valve Therapy products. Although the Sapien valve is not yet approved in the US, favorable data presented indicates that the approval is just a matter of time.
Since investors are awaiting the US approval of Sapien in 2011, any hiccup in the process will be a major dampener for the stock. Moreover, the company operates in a highly competitive environment with many big players such as Medtronic (MDT) and Boston Scientific (BSX) targeting a share of the THV segment.
We therefore remain Neutral on the stock which also corresponds to a Zacks #3 Rank (hold) in the short-term.
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