Edwards '12 Looks Good with Sapien - Analyst Blog

Banking on the launch of the Sapien transcatheter heart ("THV") valve in US in November and other product developments, Edwards Lifesciences ( EW ) expects to record robust growth going ahead. The company discussed its current strategies and issued guidance for 2012 at the recently held Investor Conference.

Sales are expected to record 18−22% underlying growth to reach $1.95−$2.05 billion with adjusted EPS of $2.70−$2.80, in line with the Zacks Consensus Estimate. While the company expects to record free cash flow of $240−$260 million, based on a strong cash balance, R&D investment would increase by 14%. Edwards expects THV sales of $560-$630 million in 2012, representing underlying growth of 70%-90%, with $200-$260 million of sales generated in the US.

The year 2012 is going to be significant for Edwards. The company reiterated its expectation for US approval of Sapien (Cohort A) for high-risk patients in mid-2012. Besides, progress is being made in the Partner II trial that is studying the Sapien XT valve in an expanded patient population. While enrollment in Cohort B of this trial should be over in January 2012, US approval is expected in 2014. Moreover, enrollment is ongoing in Partner II Cohort A, which is studying patients with a lower risk profile than those enrolled in the Partner trial.

Edwards has planned further expansion of its THV portfolio to strengthen its position. Developments are currently ongoing for Sapien 3, a lower profile balloon expandable valve that further reduces paravalvular leak and Centera valve, a low profile, repositionable self-expanding valve, both of which will be delivered through 14-French eSheath delivery systems. European trials are expected to commence in 2012.

According to Edwards' estimates, approximately 500,000 people in US suffer from severe aortic stenosis with half of them having conditions that make them the targeted patient population. At present, about one-third of this population gets treated, which means there is a substantial market yet untapped.

In Europe, Edwards operates in a highly competitive environment with the strong presence of CoreValve from Medtronic ( MDT ). Moreover, Boston Scientific ( BSX ) and St Jude Medical ( STJ ) are working to enter the THV market with their respective Lotus and Portico valves.

We currently have a Neutral recommendation on Edwards, which corresponds to a Zacks #3 Rank (Hold) in the short term.

BOSTON SCIENTIF ( BSX ): Free Stock Analysis Report

EDWARDS LIFESCI ( EW ): Free Stock Analysis Report

ST JUDE MEDICAL ( STJ ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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