Edwards Lifesciences Corporation
) recently announced solid sales and earnings projections for
2013. This aided the company, which develops heart valves and
conducts hemodynamic monitoring, regain investors' confidence,
which had been dented by a dismal third quarter 2012
performance. Accordingly, the company's share price shot up
6% on Tuesday's closing.
The company expects strong double-digit sales and earnings
growth for the coming fiscal. The company anticipates underlying
sales growth of 13%-16% at constant exchange rate or CER,
representing revenue of $2.18-$2.23 billion (based on the 2012
guidance range of $1.90−$1.97 billion) in the year on the back of
the ongoing launch of Sapien transcatheter heart valve in the
U.S. and the growing market for the transcatheter heart valves
The current Zacks Consensus Estimate of $2.12 billion for 2013
remains below the expected range.
Moreover, for 2013, Edwards expects the adjusted earnings per
share (EPS) in the band of $3.21-$3.31,more than 25% higher than
the 2012 adjusted EPS guidance of $2.54−$2.58 as well as
ahead of the Zacks Consensus Estimate of $3.18 per share.
Besides, gross profit margin is expected to remain at 74%-76%.
Free cash flow is expected to remain strong at $300-$340
Edwards noted that its bottom-line growth projection
considered the anticipated impact of the medical device excise
tax and the expected cost to launch the Sapien XT transcatheter
heart valve in Japan.
The global sales for transcatheter valves are expected to
range from $710-$790 million in 2013, representing annualized
growth rate of 30%-45%. Also, transcatheter valve sales in
the U.S. are likely to be within $390-$440 million. More to that,
Surgical Heart Valve Therapy and Critical Care sales for 2013 are
expected in the range of $800-$840 million and $560-$600 million,
Reiterate 2012 Guidance
In addition, Edwards reiterated its fiscal 2012 guidance. The
company expects sales in 2012 to be at the bottom of the previous
range of $1.90−$1.97 billion, representing underlying growth of
more than 15%. The outlook for adjusted EPS stands at
The company expects the U.S. THV sales in the range of
$230−$240 million in 2012. Global THV sales outlook for the year
was $530−$560 million. Guidance for the surgical heart valve
Therapy segment stood at $775−$805 million (with $115 million
from cardiac surgery system sales). Sales in Total Critical care
is likely to be at the low end of the previous range of $550−$580
million, which includes approximately $50 million of vascular
Edwards remains optimistic about its fiscal 2013 performance
and strongly believes to achieve the targeted goal with ease. The
company expects to invest 15% of its sales research and
development during 2013. The company noted that the US clinical
and regulatory progress of the Sapien XT transcatheter valve
remains on track.
The company is currently working on the regulatory approval
and reimbursement for Sapien XT in Japan that is expected by the
end of 2013. The company is also progressing well with its
two new transcatheter valve platforms, Sapien 3 and Centera and
expects CE Mark approval for the Sapien 3 in 2013.
Under the surgical heart valve therapy group, the company
expects initiation of the European commercial launch of its
Intuity valve system. Moreover, the company wants to begin
the enrollment in the U.S. clinical study of GLX, its
next-generation tissue technology on a surgical heart
We are impressed with Edwards' encouraging 2013 revenues and
EPS outlook that sailed past our estimates. Despite the near-term
headwinds of Sapien in the form of challenges in Europe and
reimbursement issues,the several new research and developmental
strategies and other investment initiatives taken by the company
are expected to improve performance going ahead.
However we still remain concerned with the tough competitive
landscape for Edwards. The company's surgical heart valve therapy
sales in the US are adversely affected by the introduction of
St Jude Medical
) pericardial valve, Trifecta, last year.
Although Edwards has the first mover advantage in the U.S.
with its launch of Sapien in November 2011, the scenario in
Europe is challenging given the current economic challenges and
tough competition from
) CoreValve. Currently, Edwards retains Zacks #3 Rank (Hold) in
the short term.
EDWARDS LIFESCI (EW): Free Stock Analysis
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis
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