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New Valve Continues To Drive Gains for Edwards

Edwards Lifesciences Corp.’s Wall Street run is expected to continue into 2010.

The Irvine maker of heart valves and related devices has been one of the county’s 2009 stock stars. Its shares are up about 50% for the year with a recent market value of about $5 billion.

Edwards’ gain easily outpaced the 20% rise for Standard & Poor’s 500 index in 2009.

“It is not lost on us that shares have recently run up,” said Sean Lavin, an analyst with New York-based investment bank Lazard Capital Markets LLC.

Much of Edwards’ gain has come since September, with the stock up nearly 40% in the past four months.

Expectations for a new type of heart valve that doesn’t require major surgery have fueled Edwards’ surge.

The company’s Sapien valve, which is inserted via a catheter instead of open heart surgery, has been sold in Europe since late 2007.

A U.S. clinical trial is under way with the prospect of Food and Drug Administration approval and sales here starting in 2011.

Edwards’ key rival in catheter valves is Minnesota’s Medtronic Inc., which has operations in Irvine and Santa Ana.

Medtronic entered the market with its early 2009 buy of Irvine’s CoreValve Inc. for $700 million. It sells its CoreValve device in Europe.

Lavin called catheter valves “one of the most compelling new medical technologies since the launch of robotic surgery.”

Timing will be key for Edwards, Lavin said. Any hiccup in regulatory or second-generation development timelines “is likely to result in a considerable sell-off” of the stock, he said.

During an analyst day earlier this month at Edwards’ headquarters, executives laid out some of their expectations for the U.S. launch of Sapien.

The company expects domestic sales of Sapien to come in at $125 million to $250 million in the first 12 months after it’s launched, according to Larry Wood, a corporate vice president who oversees the catheter valve program.

That’s based on 200 to 400 sites implanting three to five patients per month at an assumed price of $30,000 each, Wood said.

Edwards also upped its outlook for 2010, helped in part by expectations for Sapien in Europe.

The company could see a 2010 profit of $208 million to $214 million, according to a Business Journal extrapolation based on the company’s expected shares outstanding next year.

That figure is below Wall Street’s forecast of $210 million at the low end but above expectations at the high end.

Sales for 2010 are seen as coming in at $1.43 billion to $1.5 billion, up 10% to 13% from 2009 and topping analysts’ projections of $1.42 billion.

Edwards said it expects Sapien sales to come in at $170 million to $190 million next year, up from a projected $110 million for 2009.

2010 is “setting up to be a potentially catalytic year” for Sapien, said Jason Mills, an analyst with Vancouver, British Columbia-based Canaccord Adams, in a report released after Edwards’ presentation.

Next year, data is expected from Sapien’s U.S. trial, according to Mills. The company is set to release a second-generation Sapien XT valve in Europe in the first quarter. It also plans to enroll patients in a U.S. trial for Sapien XT.

By the time Sapien starts selling in the U.S., Edwards is expected to have salespeople in place and details of insurer coverage of the device worked out, Mills said.

Edwards anticipates U.S. approval for Sapien XT, a thinner version of the current valve, by 2013, the company’s Wood said.

When Sapien XT starts selling here, Edwards should widen its catheter valve market lead, said Larry Biegelsen of Wells Fargo Securities.

Medtronic’s CoreValve isn’t expected to get U.S. approval before 2012.

More competition is expected. Besides Medtronic, other large device makers are sniffing around the market.

In early 2009, Abbott Laboratories, the suburban Chicago-based owner of Santa Ana eye device maker Abbott Medical Optics Inc., bought Menlo Park-based Evalve Inc., maker of a device used in minimally invasive valve surgeries.

Johnson & Johnson of New Brunswick, N.J., and Minneapolis-based St. Jude Medical Inc. also have indicated interest in catheter valves.

Analyst Lavin said he expects Edwards to “garner the interest of some of the large cardiology conglomerates,” but didn’t name any potential suitors.

Other analysts have suggested that Johnson & Johnson could be interested in buying Edwards as Sapien progresses.

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