Healthy Sapien Sales for Edwards. Not to Mention that Other $750 Million

We don’t claim or indeed aim to exhaustively cover the quarterly financials of the medtech titans, but when there’s reason to do so, we’ll make an exception. Such is the case with Edwards Lifesciences on the back of the company’s deal with Medtronic, which has seen the conclusion of their lengthy intellectual property spat. The most recent quarter contains income from that settlement, but even without it Edwards is sounding punchy about transcatheter valve sales growth .

Background

Sales

Edwards Lifesciences has reported net sales for the quarter ended June 30, 2014 of $575.1 million, an increase of 11.2 percent compared with the same period last year. Underlying sales (excluding non GAAP items such as write-offs of Sapien stock in light of the Sapien XT launch plus foreign currency exchange fluctuations) grew 10.5 percent.

Sales by product illuminate what is really going on at Edwards. Sales of transcatheter heart valves (THV) of $219.7 million represent a 20.6 percent (underlying 18.8%) growth rate over the second quarter last year, driven once again by strong sales outside the U.S., which grew by 45.1 percent (34.7 percent underlying) due to strong growth in Europe and the SAPIEN XT launch in Japan.

The more traditional home turf of Surgical Heart Valve products saw sales for the quarter of $214.0 million, an increase of 4.8 percent (4.3% underlying) over last year. Surgical heart valve sales growth was driven by growth across all regions and was partially offset by a small price decline due primarily to regional mix. Premium valves drove stronger growth in both mitral and aortic units.

Finally, Critical Care product sales of $141.4 million were 8.1 percent (8.5% underlying) higher than a year ago. Edwards points to a double digit increase in enhanced surgical recovery product sales, aided by the recent introduction of the ClearSight noninvasive monitoring system.

 

Income

Net income for the quarter was, to say the least, somewhat impacted by the Medtronic settlement. At $547.0 million compared with $93.3 million a year ago that much is obvious. Factoring out this and other non GAAP elements results in an income figure of $94 million, compared with £96.7 million a year ago. 

Other

Elsewhere on the income statement, gross profit margin was 73.7 percent, mainly attributed to a negative impact from foreign exchange, as well as the smaller impact of the write-off of SAPIEN valves in the U.S. in connection with the company’s SAPIEN XT launch. Selling, general and admin expenses were up (215  million vs 186 million last year) as a result of greater transcatheter valve launch costs.

Research and development costs were $89.1 million, compared to $80.5 million in the prior year period. Heart valve clinical studies continue to be one of the largest drivers of the 10.7 percent increase.

And the big one, free cash flow for the quarter was $762.0 million, which translates as a nice $778 million payment from Medtronic, less capital spending of $16.0 million.

Outlook

Edwards says it now expects full year 2014 total sales to land at the high end of its previous $2.05 billion to $2.25 billion range, accompanied by raised guidance for its full year 2014 diluted earnings per share, excluding special items, to a range of $3.24 to $3.34. For the third quarter of 2014, the company projects total sales to be between $530 million and $570 million, and diluted earnings per share, excluding special items, to be between $0.66 and $0.72.

Company comments

“While our litigation settlement provided a large financial gain this quarter, we are particularly pleased that our sales were better than expected across all product lines, which drove strong bottom line results,” said Michael A. Mussallem, chairman and CEO. “Even as TAVR competition intensifies, with the increasing adoption of this therapy around the globe, we believe we are poised for continued strong sales growth in the second half of 2014.”

“In Europe, adoption of transcatheter valve therapy continues to be quite strong and we believe we gained share with SAPIEN 3,” said Mussallem. “Representing more than half of our European THV sales, SAPIEN 3 is being very well received by clinicians who appreciate its best-in-class low profile and paravalvular leak solution.

“The launch of SAPIEN XT in the U.S., which just got underway in June, enables treatment of an even broader group of patients, while helping to reinforce our leadership position in that growing region,” continued Mussallem. “Procedures with Edwards’ transcatheter valves in the U.S. increased sequentially, as well as compared to a year ago.”

Full press release here

Source: Edwards Lifesciences Corporation

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