Edwards rides strong TAVR sales to Q1 win, expects more growth ahead

Sapien 3 valve--Courtesy of Edwards Lifesciences

Edwards Lifesciences ($EW) counts on sales of transcatheter valve replacements (TAVR) to power its engine, and the products didn't disappoint in the first quarter. The company's TAVR sales shot up in Q1 thanks to strong global adoption of the devices, a trend that Edwards sees continuing.

Transcatheter heart valve therapy (THVT) sales rang in at $367.8 million during the first quarter, a 37% jump over Q1 2015. Edwards' THV devices brought in $215 million in the U.S., a 65% increase year-over-year.

The Irvine, CA-based company partly attributes the win to "continued strong therapy adoption" in the U.S. and globally for its devices, CEO Mike Mussallem said during Edwards' Q1 earnings call. Edwards recently launched its Sapien 3 product in the U.S. and more providers are switching to the device, Mussallem said.

Edwards seems confident that the gift of strong TAVR sales will keep on giving. The company expects full-year 2016 sales of between $2.7 billion and $3 billion, up from its previous guidance of $2.5 billion to $2.75 billion. The change is "due to the strong first quarter momentum, a planned earlier U.S. indication expansion for the Sapien 3 valve, and an anticipated impact from foreign exchange," Edwards said in a statement.

Edwards is eyeing new markets to boost its TAVR dominance. The company has said that the TAVR market will be worth more than $5 billion by 2021. It plans to tap into elderly and intermediate-risk patient populations to achieve its sales goals.

Data from clinical trials of its Sapien XT valve and Sapien 3 could help. Earlier this month, researchers presented data at the American College of Cardiology (ACC) showing that Sapien XT and Sapien 3 could treat intermediate-risk patients with aortic stenosis who are too frail for open-heart surgery.

Edwards Lifesciences CEO Mike Mussallem

"We are very proud of these robust data and believe they provide powerful evidence in favor of expanding the SAPIEN 3 technology to a broader population of patients with aortic stenosis," Mussallem said during the company's Q1 earnings call.

Analysts seem to think that Edwards is on the right track. The company had "another exceptionally strong quarter" with "remarkable" U.S. TAVR sales, Jeffries analyst Raj Denhoy wrote in a note to investors. Sales were strong "despite TAVR being launched over 8 years ago in Europe and four years ago in the U.S." and "before the company saw any benefit from the data at ACC," Denhoy pointed out.

Leerink analyst Danielle Antalffy agrees but is forecasting a more modest market for TAVR devices than Edwards. The market will grow to $4.8 billion by 2021, Antalffy wrote in a note to investors. Edwards' solid track record in TAVR and new, larger patient populations for its devices could spell out success in the years to come.

"We continue to see TAVR at the cusp of penetrating the much-larger intermediate risk patient population, which we believe is starting now in Europe & possible in the U.S. in 4Q16--positioning the global TAVR market for sustainably strong growth with meaningful potential for further outperformance," Antalffy said. 

But Edwards' mitral valves will "be the key to the stock continuing to work," Denhoy said. Companies such as Medtronic ($MDT), Boston Scientific ($BSX) and Abbott ($ABT) are eager to jump into the space, and Edwards is trying to stake its claim. The devicemaker has a feasibility trial underway in the U.S. for its mitral valve and is shooting for a formal CE mark trial later this year.

"The transcatheter aortic market is larger than previously thought and is developing faster than even our aggressive assumptions. However, this view is increasingly captured in the current share price and valuation … as we believe the market will continue to outpace expectations and as Mitral becomes a larger part of the story," Denhoy said.

Edwards was up 3% yesterday after announcing Q1 results and is up 38% for the year.

- read the Q1 call transcript from Seeking Alpha
- here's Edwards' earnings statement

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