Edwards Says Healthier Patients Will Drive $5 Billion Market

  • Opportunity to expand as lower-risk patients become eligible
  • Edwards forecasts $2.30 to $2.40 earnings per share for 2016

Technology pioneered by Edwards Lifesciences Corp. that allows doctors to repair damaged heart valves without surgically opening the chest is performing so well that it will be used in younger and healthier patients, creating a $5 billion market opportunity by 2021.

The technique, called transcatheter aortic valve replacement, was originally limited to patients with severe narrowing, or stenosis, of the aortic valve, a condition that prevents oxygen-rich blood from being pumped to the rest of the body. Edwards expects to win U.S. regulatory approval to sell its Sapien valves for patients at intermediate risk and will begin a study in even healthier patients next year, the Irvine, California-based company said at its investor day. 

The growing demand among lower-risk patients will help expand valve sales, Chief Executive Officer Michael Mussallem said. The company had earlier estimated a $3 billion opportunity by 2019. The market is currently dominated by Edwards and Medtronic Plc, the only two companies selling the devices in the U.S. Boston Scientific Corp., St. Jude Medical Inc. and others sell rival valves in Europe and are conducting clinical trials needed for U.S. approval.

“The transcatheter valve opportunity has been a great one, and we think we are early in that opportunity,” Mussallem said. “We have put out an estimate that it will exceed $5 billion by 2021, and we don’t think that’s the top of the bell curve.”

Open-Heart Surgery

While conventional surgery is very effective for severe aortic stenosis, it requires a long recovery time. Many patients with the condition can’t tolerate open-heart surgery, while others are at risk of dying on the operating table. In transcatheter aortic valve replacement, the new valve is threaded into the heart with a catheter.

Edwards forecast earnings per share of $2.30 to $2.40 for 2016, or $4.60 to $4.80 before its recent stock split, excluding certain items. The $4.79 average estimate of analysts surveyed by Bloomberg falls at the high end of that range. The company said it will remove amortization expenses from its adjusted earnings for the first time starting next year.

Chief Financial Officer Scott Ullem said the company, known for handily beating its forecasts, underestimated the amount of growth in the transcatheter market in 2015 and is confident about its 2016 numbers.

“Our intention was not to be conservative in guidance in 2015, we just got it wrong,” Ullem said. “Our guidance for 2016, especially as you look at the bottom line, I’ve heard some questions about: Are you being conservative or are you sandbagging your EPS guidance? That’s really not the intention.”

Edwards rose 1.3 percent to $161.99 at the New York close and has gained 21 percent in the past year.

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