Edwards Lifesciences reported its second-quarter earnings Thursday in which profits rose to $94.1 million, or 82 cents per diluted share in the quarter ended June 30, from $67.8 million, or 57 cents per share in the same period last year.
Sales rose 7.3% to $517 million in the quarter from $482 million in the second quarter of 2012.
All eyes were on how the market is adopting the Irvine, California company's Sapien transcatheter aortic valve replacement system. Edwards continues to be the only company with an approved TAVR device in the U.S. And earlier this month it had some welcome news when a German court ruled that Medtronic's CoreValve TAVR system infringes on Edwards' patents and must be withdrawn.
But Sapien sales, while 25% higher than sales from the second quarter of 2012, continued to show the difficulty in adoption in the U.S.
RBC Capital Markets' Glenn Novarro pointed out in a research note that U.S. sales of transcatheter heart valves at $90 million were once again, below Wall Street expectations - this quarter it was off by $2 million. But U.S. sales were offset by international sales of $92 million, which were $2 million above what Novarro expected.
Meanwhile, a note from Leerink Swann's Danielle Antalffy showed that she is viewing Sapien sales through a slightly different lens. Antalffy wrote investors had already dialed down their expectations of Sapien sales given misses in previous quarters, and that's why Edwards' Sapien performance was in-line with their expectations.
What is apparent is that while Edwards had created a scenario that TAVR sales would take off, the reality is that the process of adoption is harder. Hospitals need to be trained, hospital infrastructure has to be available and hospital economics need to eb addressed. Here is how Edwards' CEO, Michael Mussalem described it:
Overall, we continue to believe that TAVR economics and hospital capacities are not yet optimized at most sites, and there remains significant opportunity for improvement. Our U.S. team is now focused on educating sites on appropriate TAVR reimbursement and improving lengths of stay.
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