A leading player in the field of heart valves and hemodynamic monitoring, Edwards Lifesciences (EW), will be included in the S&P 500 index from April 1, 2011. Following this positive announcement, shares of the company edged up by 3.63% to close at $88.50 last Friday. The company believes that its solid performance over the past few quarters led to its inclusion in this august category.
Edwards in one of the leading players in the field of heart valve therapy which accounted for 59% of total revenues in the fourth quarter of fiscal 2010. Contribution from this segment has shown a steady pace in the past; from 47% in 2007 to 54% in 2009.
The company has a strong product portfolio with many of them having been launched in the recent past. Increased acceptance of these products and greater market penetration would lead to higher sales in the forthcoming period.
The successful launch of Sapien XT in Europe led to an 87.2% rise in transcatheter heart valve (THV) sales to $65.3 million during the fourth quarter of fiscal 2010. Edwards is expecting greater contribution from THV in the forthcoming period. Although Edwards has witnessed strong growth in the THV banking on the successful launch of Sapien products in Europe, the product is yet to receive approval in the US.
However, Edwards has been putting a lot of effort to get the Sapien products approved in the US and Japan. The company expects to launch Sapien THV in the US during the fourth quarter of 2011 and expects sales of approximately $20-$25 million.
In addition to the Heart Valve Therapy segment, new product launches in the Critical Care segment are also contributing to the growth. Although sales from the recently launched VolumeView and EV1000 were negligible during the quarter, these products have the potential to drive share gains going forward. The company expects to receive US approval for these products in the third quarter.
The market for THV is highly competitive with Medtronic (MDT) trying to get its CoreValve approved in the US. Moreover, Boston Scientific (BSX) will also emerge as a competitor in the Percutaneous Aortic Valves segment with its decision to acquire Sadra Medical.
We have a Neutral recommendation on the stock, which also corresponds to a Zacks #3 Rank (Hold) in the short-term.
EDWARDS LIFESCI (EW): Free Stock Analysis Report
Zacks Investment Research
