On January 30, 2020 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 December 31, 2019 (Press release, Edwards Lifesciences, JAN 30, 2020, View Source [SID1234553719]).
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Fourth Quarter Results and Outlook
Q4 sales grew 20% to $1.2 billion; underlying1 sales grew 19%
Q4 TAVR sales grew 29%; underlying sales grew 30%
Q4 EPS was $1.32; adjusted1 EPS grew 25% to $1.46
Full year 2019 sales and earnings significantly exceeded original guidance
2020 guidance ranges increased: sales $4.6 billion to $5.0 billion; EPS $6.15 to $6.40
SAPIEN 3 transcatheter heart valve received low risk indication expansion in Europe
EVOQUE tricuspid early feasibility study receives FDA approval
"We are pleased to report robust fourth quarter performance that delivered 19 percent sales growth on an underlying basis, driven by our portfolio of innovative technologies. For the full year 2019, we reported 15 percent revenue growth on an underlying basis, with double-digit growth in each region," said Michael A. Mussallem, chairman and CEO. "Most importantly, I’m proud to report we’re poised to help even more patients benefit from Edwards’ life-saving technologies. We invested aggressively in transformative therapies in 2019 and this will continue in 2020 as our commitment has never been greater."
2019 Full Year Results
Sales for the year ended December 31, 2019 were $4.3 billion, up 17 percent over the prior year, or 15 percent on an underlying basis. Diluted earnings per share for 2019 were $4.93, while adjusted earnings per share grew 19 percent, to $5.57.
Transcatheter Aortic Valve Replacement (TAVR)
The company reported fourth quarter global TAVR sales of $763 million, a year-over-year increase of approximately 30 percent on both a reported and underlying basis with impressive strength in the U.S. Global average selling prices remained stable.
In the fourth quarter, the company estimates U.S. TAVR procedures grew approximately 40 percent on a year-over-year basis and Edwards’ growth was comparable. Outside the U.S., the company estimates that total TAVR procedures grew in the high-teens on a year-over-year basis and Edwards’ growth was comparable. As previously reported, Edwards became the first company to receive CE Mark for TAVR in Europe for the treatment of patients diagnosed with severe aortic stenosis who are at low risk for open-heart surgery.
Transcatheter Mitral and Tricuspid Therapies (TMTT)
TMTT is on track to achieve the milestones discussed at the company’s recent Investor Conference, including executing four pivotal studies. In addition, the company announced that the EVOQUE tricuspid replacement valve system has recently received U.S. Food and Drug Administration (FDA) approval for an Early Feasibility Study and a "breakthrough device" designation, a program intended to help patients receive more timely access to designated medical technologies.
Full year 2019 TMTT sales of $28 million came in below the original guidance of approximately $40 million as the company continued to execute a disciplined introduction and premium pricing strategy of the PASCAL system, which moderated European site activation. Fourth quarter sales of $7 million were negatively impacted by the voluntary PASCAL system field corrective action completed in the quarter. PASCAL clinical outcomes continue to be favorable and physician feedback remains positive. As the PASCAL system roll-out expands, the company will remain focused on procedural success and differentiated patient outcomes.
Surgical Structural Heart and Critical Care
Surgical Structural Heart sales for the quarter were $205 million, down one percent compared to the fourth quarter of 2018, and down three percent on an underlying basis. The sales decline was the result of lower surgical aortic valve procedures in the U.S. as TAVR adoption increased, partially offset by continued strong adoption of the company’s premium high-value technologies.
Critical Care sales were $199 million for the quarter, representing an increase of 12 percent versus the fourth quarter of 2018 or eight percent on an underlying basis. This performance was driven by strong demand for the HemoSphere advance monitoring platform and continued adoption of Smart Recovery. Growth in the quarter was led by sales in the U.S.
Additional Financial Results
For the quarter, the company’s adjusted gross profit margin was 75.8 percent, compared to 76.1 percent in the same period last year. This reduction was driven by spending in support of the new European medical device regulations and one-time costs associated with migrating Cardioband production from Israel to Ireland, partially offset by the benefit of a more profitable product mix.
Selling, general and administrative expenses increased 21 percent to $347 million for the quarter, driven by increased field clinical personnel to support TAVR cases in the U.S. and TMTT cases in Europe, as well as accelerated actions related to disease awareness and therapy adoption.
Research and development for the fourth quarter increased 19 percent to $194 million, or 16.5 percent of sales. This increase was primarily the result of continued investments in the company’s transcatheter structural heart programs, including spending on clinical trials.
Free cash flow for the fourth quarter was $328 million, defined as cash flow from operating activities of $399 million, less capital spending of $71 million.
Cash, cash equivalents and short-term investments totaled $1.5 billion at December 31, 2019. Total debt was $594 million.
Outlook
Overall, 2020 sales guidance for Edwards is now expected to be $4.6 to $5.0 billion versus the company’s previous range of $4.5 to $5.0 billion. Additionally, the company now expects full year 2020 adjusted earnings per share of $6.15 to $6.40 versus previous guidance of $6.05 to $6.30.
For the first quarter of 2020, the company projects total sales to be between $1.15 and $1.2 billion, and adjusted EPS of $1.49 to $1.59.
"We were very proud of the significant progress we made in advancing transformational therapies in 2019, as well as our strong financial performance. We are enthusiastic about the future of transcatheter-based technologies, and the promise of treating the many structural heart patients still in need, which positions us very well for 2020 and beyond. We firmly believe our patient-focused innovation strategy can transform care and bring value to patients, healthcare systems, and shareholders," said Mussallem.