Edwards Lifesciences Issues Subdued Guidance After Rosy TAVR Forecast Misses

No where has the adage “underpromise and overdeliver” been more applicable than in the case of Edwards Lifesciences, the only company still to have an approved transcatheter aortic implantation system in the U.S.

The company’s mood was buoyant when it received FDA approval of its first Sapien transcatheter valve in the U.S. in November 2011. 2012 and 2013 were to be years when Edwards would cement its first-mover advantage over Medtronic, which is now expected to launch its rival TAVR product in early 2014. But turns out that Edwards Lifesciences’ rosy projections on Sapien sales have not materialized.

In an investor meeting Monday, the company’s’ management lowered 2014 Sapien sales guidance well below what many analysts had forecast into their models. Management now expects that in 2014, worldwide TAVR revenue will be in the range of $700 million to $820 million, of which $40 million to $50 million will be garnered in Japan. No U.S. sales guidance was offered, according to the transcript of the meeting.

Compare that to various analyst estimates. Glenn Novarro, of RBC Capital Markets had expected worldwide TAVR revenue of $802 million, with $348 million coming from U.S. sales and $44 million from Japaneses sales of various Sapien products. Analyst Danielle Antalffy of Leerink Swann had expected worldwide TAVR sales between $775 million to $850 million.

Previously, CEO Michael Mussallem pointed to the fact that some U.S. medical centers had postponed training after concluding the procedure was too expensive. Other hospitals had constraints in terms of personnel needed for th procedure.

On Monday, a transcript of the meeting from Seeking Alpha shows that Larry Woord, Edwards Lifescience’s corporate vice president of transcatheter heart valve acknowledged that things had not transpired as expected, but the opportunity still remains strong.

When we look at the transcatheter valve opportunity, I think everyone's aware that the U.S. has ramped a little slower than what we would have originally anticipated, but we think this opportunity remains very robust and we see a lot of growth in the future. When we look at the total market now, we now estimate this to be a $2.5 billion to $3 billion opportunity by 2019. And we see still a lot of growth and a lot of opportunity in this marketplace.

For 2014, the company expects to have revenue of $2.05 billion to $2.25 billion with an earnings per share of around $3 but a “wide range” around that number can be expected, management said. As a result, both Novarro and Antalffy are lowering their EPS estimates for Edwards. Antalffy reduced EPS to $2.98 per share while Novarro expects a slightly higher EPS of $3.01.

For Antallfy, the reduced estimates are not all bad.

“While guidance is clearly disappointing – particularly on THV (Transcatheter Heart Valves) and EPS – we believe EW has now set significantly more achievable goals that better position the company to deliver at least in-line results.

Still, 2014 is a clearly a year of competitive pressures. Medtronic goes live in the U.S. with its CoreValve product while Boston Scientific will ramp sales of its Lotus TAVR product which was approved in October in Europe.
Novarro estimates that every 5 points of market share that Edwards loses in terms of units sold will reduce sales by $20 million.

 [Image courtesy of Edwards Lifesciences]

-- By Arundhati Parmar, Senior Editor, MD+DI
[email protected]