) reported disappointing third quarter 2012 results. The company
expects to report $448 million in sales (representing
year-over-year growth of 9% or 14% at constant currency), way below
the Zacks Consensus Estimate of $478 million. Third quarter
revenues also lagged Edwards' guidance of $465−$485 million
provided during the second quarter earnings.
The disappointing performance primarily came on the back of
lower-than-expected transcatheter heart valve ('THV') sales of $124
million, which included US sales of $55 million. Similar to the
second quarter, economic uncertainties in Europe continue to
adversely affect the company's sales in the third quarter.
With lower procedural volume due to austerity measures adopted in
several European countries, THV sales (at constant currency) in
Europe were flat compared to the year-ago quarter.
Edwards also noted that THV sales in the US were hampered by the
provisions of the National Coverage Decision, which did not provide
reimbursement for inoperable patients without femoral access. A
clinical protocol for reimbursement for these patients was expected
earlier, but got delayed. Moreover, the requirement of the presence
of a full heart team during each procedure was hampered during the
summer vacation. However, Edwards is progressing well with the
launch of Sapien THV in the US and imparting training to commercial
Despite a dismal third quarter performance by THV, Edwards is
confident of being able to meet the lower end of its global
($550−$600 million) and US ($240−$260 million) THV sales guidance.
However, we remain cautious as the persistent economic downturn in
Europe could lead to further disappointment. The company is
expecting US approval of Sapien for high-risk patients shortly,
which along with the approval of 29 mm Sapien XT valve in Europe
(in May 2012) should expand the targeted patient population.
Although Edwards has the first mover advantage in the US, the
European market is a lot more competitive with the presence of
) CoreValve and some other products. Moreover, any delay in the US
approval of Sapien for high-risk patients could make it difficult
for Edwards to achieve the low end of the guidance. We are,
nonetheless, optimistic about the company over the long term and
have a 'Neutral' recommendation. The stock retains a Zacks #3 Rank
(Hold) in the short term.
EDWARDS LIFESCI (EW): Free Stock Analysis
MEDTRONIC (MDT): Free Stock Analysis Report
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