Edwards Lifesciences’ (EW) Sapien transcatheter heart valve (THV) will be reviewed by an Advisory Panel of the US Food and Drug Administration (FDA) on July 20, 2011. Although the FDA is not required to follow the panel’s recommendation, it generally does so. A favorable recommendation from the panel could provide easy access to the final approval from the agency.
The company had submitted a pre-market approval (PMA) application in October 2010 for Cohort B of the PARTNER trial. Under Cohort B, patients with severe aortic stenosis and those deemed unfit for surgery were randomized for standard therapy or the Sapien THV. Results from this study carried out on over 358 patients, were published in The New England Journal of Medicine in September 2010.
At the American College of Cardiology (ACC) annual conference in New Orleans in April, Edwards had presented data that revealed the cost effectiveness of Sapien from the Cohort B arm of the PARTNER trial. It was observed that the cost of treating inoperable patients with severe aortic stenosis was well within the range of other commonly utilized cardiovascular technologies.
The guidance provided by Edwards for 2011 assumes $20-$25 million of THV sales in the US. Following its potential approval in the US, the company will try to receive reimbursement for the product. Approval of the device in the US or Japan should boost revenues of the company in the long term.
During the first quarter of fiscal 2011, Heart Valve Therapy recorded an annualized growth of 24.5% to $244.9 million. Sales of surgical heart valves grew 9.2% to $172.2 million and THV recorded an 85.7% growth to reach $72.7 million. Although Sapien is yet to receive approval in the US, it is available in Europe and is recording robust growth.
Recommendation
Edwards recorded strong revenue growth during the first quarter banking on robust performance of its Heart Valve Therapy products. Apart from Heart Valve Therapy, the strong growth recorded by Critical Care is also encouraging. Moreover, the company’s strong balance sheet enables it to target suitable acquisitions.
However, the company operates in a highly competitive environment with many big players such as Medtronic (MDT) and Boston Scientific (BSX) targeting the THV business. Since investors are watching the development of the Sapien portfolio in the US keenly, which is expected to be approved in 2011, any hiccup in the process will be a major dampener for the stock.
We have a Neutral recommendation on the stock which corresponds to the Zacks # 3 Rank (Hold).
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