On October 23, 2019 Edwards Lifesciences Corporation (NYSE: EW), the global leader in patient-focused innovations for structural heart disease and critical care monitoring, reported financial results for the quarter ended September 30, 2019 (Press release, Edwards Lifesciences, OCT 23, 2019, View Source [SID1234542458]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Third Quarter and Recent Highlights
Sales grew 21% to $1.1 billion; underlying1 sales grew 19%
TAVR sales grew 26%; underlying sales grew 27%
R&D spending up 21% versus prior year to 18% of sales
EPS was $1.30; adjusted1 EPS was $1.41
2019 adjusted EPS guidance raised to $5.50 to $5.65 from $5.20 to $5.40
$27 million charge related to TAVR strategy
FDA approved SAPIEN 3 and SAPIEN 3 Ultra systems indication expansion
"We are very pleased to report strong third quarter results, which reflected a large increase in the number of patients that were treated with transcatheter heart valve therapy," said Michael A. Mussallem, chairman and CEO. "Our results were significantly higher than expected this quarter following the strong PARTNER 3 trial evidence that led to the recent FDA indication expansion of our SAPIEN 3 and SAPIEN 3 Ultra systems. Additionally, at a recent clinical meeting it was exciting to observe new evidence that once again demonstrated significant quality of life improvements for patients that received SAPIEN valves."
Third Quarter 2019 Results
Sales for the quarter ended September 30, 2019 were $1.1 billion, up 21 percent over the prior year, or 19 percent on an underlying basis. Diluted earnings per share for the quarter were $1.30, while adjusted earnings per share grew 32 percent, higher than expected, to $1.41.
Transcatheter Aortic Valve Replacement (TAVR)
For the quarter, the company reported TAVR sales of $700 million, an increase of 26 percent over the third quarter last year, or 27 percent on an underlying basis. Global average selling prices remained stable, and the company estimates its global competitive position was consistent with the second quarter and prior year.
"The recent indication expansion approval of our SAPIEN 3 and SAPIEN 3 Ultra systems represents a significant milestone and allows all patients diagnosed with severe aortic stenosis to be considered for TAVR based on their individual needs," said Mussallem.
He added, "While still early in the 2020 forecasting process and difficult to predict, we are modeling a return to low double-digit global TAVR procedure growth next year, consistent with our estimate of a $7 billion opportunity in 2024."
Transcatheter Mitral and Tricuspid Therapies (TMTT)
The company made important progress in the third quarter in advancing its portfolio of technologies to bring important solutions to underserved mitral and tricuspid patients with few options today. Enrollment is ongoing in the CLASP IID and CLASP IIF Pivotal Trials. In September the company received FDA approval for the CLASP IITR Pivotal Trial to study the PASCAL system in patients with symptomatic severe tricuspid regurgitation. The company remains on track to initiate a U.S. pivotal trial of the SAPIEN M3 system before the end of the year. Third quarter sales in TMTT were $10 million, lifted principally by commercial sales of the PASCAL transcatheter mitral system in Europe. For full year 2019, Edwards now expects TMTT revenue to be below $40 million as the company continues a disciplined introduction and premium pricing strategy, which is moderating site activation.
Surgical Structural Heart and Critical Care
Surgical Structural Heart sales for the quarter were $204 million, up 11 percent compared to the third quarter last year, or up three percent on an underlying basis. Growth was lifted by the sales of premium products, particularly through adoption of the INSPIRIS RESILIA aortic valve, which drove an increasing share of surgical aortic valve procedures.
Critical Care sales were $180 million for the quarter, representing an increase of ten percent versus the third quarter last year, or up seven percent on an underlying basis. All product categories and geographies contributed to this performance, including our HemoSphere advanced monitoring platform.
Additional Financial Results
For the quarter, the company’s adjusted gross profit margin was 75.9 percent, compared to 75.5 percent in the same period last year. This improvement was driven primarily by the favorable impacts from foreign exchange and product mix, partially offset by spending in support of the new European device regulations and manufacturing variances.
Selling, general and administrative expenses increased 14 percent to $306 million for the quarter, driven by transcatheter structural heart field personnel related expenses, including expanding the TMTT field organization in Europe.
Research and development for the third quarter increased 21 percent to $196 million, or 18 percent of sales. This increase was primarily the result of significant investments in the company’s transcatheter structural heart programs, including generating clinical evidence.
During the quarter, the company recorded an additional $27 million charge, primarily inventory, related to last quarter’s strategic decisions regarding its transcatheter aortic valve portfolio.
Adjusted free cash flow for the third quarter was $319 million, defined as cash flow from operating activities of $437 million, less capital spending of $76 million, and excluding a $42 million tax benefit related to the company’s previously announced litigation settlement.
Cash, cash equivalents and short-term investments totaled $1.4 billion at September 30, 2019. Total debt was $594 million.
Outlook
For 2019, the company now expects total sales around the top of its previous $4.0 billion to $4.3 billion range. Additionally, the company raised its full year 2019 adjusted earnings per share guidance to $5.50 to $5.65 from $5.20 to $5.40.
"We are very pleased with our strong year-to-date performance. As patients and clinicians increasingly choose TAVR, we remain optimistic about the long-term growth opportunity. We are committed to aggressively investing in our future, consistent with our focused innovation strategy. We remain confident that the innovative therapies resulting from our investments will benefit a broader group of patients suffering from structural heart disease and continue to drive strong organic growth," said Mussallem.