We reiterate our Neutral recommendation on
Edwards Lifesciences Corporation
(
EW
) with a target price of $102.
Revenues and earnings during the company's first quarter
surpassed the Zacks Consensus Estimates. However, the company had
to lower its 2012 outlook due to economic uncertainties in Southern
Europe, unfavorable currency movement and delay in approval of
Sapien for high-risk patients.
While fiscal 2012 sales are now expected to be on the lower end
of the original range of $1.95−$2.05 billion, the outlook for
adjusted EPS was slashed by $0.12 on both sides to $2.58−$2.68.
We are nonetheless encouraged by the strong ramp-up in US Sapien
sales, which clocked $41 million in the first full quarter after
its launch. Since the launch of Sapien in US, in November 2011,
Edwards has imparted training at approximately 60 centers and is on
track to render training at 150-250 new commercial sites in the
first 12 months.
Although uncertainty related to reimbursement has caused some
centers to postpone their training, we expect the situation to
improve with the issue resolved at present. In May 2012, the
Centers for Medicare & Medicaid Services announced its decision
to reimburse transcatheter aortic valve replacement ("TAVR")
procedures for US patients with symptomatic aortic stenosis under
specified criteria.
Given the favorable recommendation from the US Food and Drug
Administration ("FDA") advisory panel for Sapien in high-risk
patients, the probability of final approval has brightened. The
favorable recommendation is significant for Edwards as approval for
high-risk patients will expand the targeted patient population.
We are encouraged by the company's focus on developing its
pipeline that should further strengthen its foothold in the TAVR
segment. The company recently received Investigational Device
Exemption ("IDE") approval from the FDA for the next-generation
tissue treatment platform, GLX. The GLX platform received CE Mark
approval in May 2012.
Clinical trials for two new transcatheter valve platforms −
Sapien 3 and Centera valve − are scheduled to begin in Europe in
2012. These two platforms are designed to facilitate multiple
interventional and surgical delivery approaches.
Edwards is also on track to initiate enrollment in the
PROTAVItrial shortly that will study the causes of strokes during
TAVR procedures as well as evaluate the Embrella device. We expect
that successful commercialization of these products should drive
the company's top line in the long term.
Meanwhile, operating margin continues to remain under pressure
as Edwards works on developing its pipeline and expanding the use
of Sapien in the US. The competitive landscape in Europe remains
tough with the presence of
Medtronic
's (
MDT
) CoreValve.
Our recommendation is backed by a Zacks #3 Rank (Hold) in the
short term.
EDWARDS LIFESCI (EW): Free Stock Analysis
Report
MEDTRONIC (MDT): Free Stock Analysis Report
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