Buzz about Irvine-based heart valve maker Edwards Lifesciences Corp.’s future is starting up again as a regulatory decision approaches on its much-anticipated less-invasive heart valve.
Reuters recently mentioned Edwards as “an often-rumored takeover target” in a story about New Brunswick, N.J.-based Johnson & Johnson’s interest in adding heart valves to its product lines as it reworks its medical device portfolio.
At a recent Morgan Stanley & Co. global healthcare conference, Johnson & Johnson Chief Financial Officer Dominic Caruso said the company sees attractive opportunities in the cardiac device market. He said it could enter the field through an acquisition or by developing its own de-vices.
Heart valves, along with left ventricular assist devices—which are implanted in patients who are awaiting heart transplants–were tabbed by Caruso in his talk.
“Both are interesting,” he said. “We are interested in looking at them.”
The Right Price
Johnson & Johnson would consider buying a maker of heart valves or pumps—at what the company considers the right price.
“Whenever we acquire businesses, we like to do so when they are not entirely overvalued by you, the investment community,” Caruso said. “Unfortunately, many of those businesses, in our opinion, are entirely overvalued today so there is no point in entering … that way today until those valuations come more in line.”
Caruso didn’t name any specific companies.
Edwards didn’t return a call for comment on this story.
FDA
The device maker is awaiting a Food and Drug Administration decision on Edwards Sapien, a replacement heart valve that is implanted with a catheter without major surgery.
Edwards has said that Edwards Sapien sales in the U.S. could come in at $150 million to $200 million in the first year after it’s approved.
Sapien is on the market in Europe and accounted for $85.3 million in second-quarter sales, up 60% from a year earlier.
Reuters noted that Edwards—along with Thoratec Corp. of Pleasanton, and Fram-ingham, Mass.-based Heartware Inter-national Inc.—have seen their share prices benefit from new products in development, such as Edwards Sapien.
Over the past few years, Edwards’ stock has been one of the best performers among Orange County-based public companies.
In 2010, it nearly doubled, mainly on anticipation of Edwards Sapien.
Edwards’ shares are down 3% this year, with a recent market value of $8.6 billion.
The cooling on the shares has come on concerns about potential stroke risks with Sapien and general market turmoil in re-cent months.
Edwards nevertheless got a recent tout from Jim Cramer, host of CNBC’s “Mad Money” program, in an article on investor website Seeking Alpha.
Edwards “is the kind of stock that is going to be hard-pressed to stay independent over the next two years, it’s that good,” Cramer said. “I’d be surprised to see this company stay independent.”
Portfolio Reshaped
Johnson & Johnson has been reshaping its medical device portfolio. In June, the company said it planned to exit its coronary stent business by the end of 2011.
Stents are used to open up clogged arteries.
Caruso said the company is leaving that market because stents have become a commodity business and subject to pricing wars.
He said patients are well-served with stents already available, and the market is not rewarding device makers for innovations in the area.
Analyst Bruce Jackson of Morgan Jo-seph TriArtisan LLC, a New York investment bank, said that Johnson & Johnson already has an investment in a privately held transcatheter heart valve developer, Direct Flow Medical Inc. of Santa Rosa.
On the Circuit
Edwards officials have been hitting the investment bank circuit giving updates on Sapien. Donald Bobo, Edwards’ corporate vice president for heart valve therapy, made a presentation at a recent conference put on by Chicago brokerage William Blair & Co. LLC.
Edwards Sapien is “probably one of the most dramatic platforms that we have been involved with,” Bobo told the gathering.
His talk also touched on Edwards’ domestic trials for Sapien, including recent concerns about stroke risks.
“As we’ve conducted these studies, we’ve learned a lot and we’ve identified areas for improvement,” Bobo said.
Particularly, “we had complications in vascular access and stroke that we think were very reasonable compared to the efficacy of the product, but these are areas we continue to invest heavily (in so) we can improve performance,” he said.
Edwards is also in discussions with the Centers for Medicare & Medicaid Services over reimbursement issues, Bobo said.
