Edwards Lifesciences Corp. still is the king of heart valves. But it has to defend its throne this year.
The Irvine-based company is the No. 1 heart valve maker with 40% of the overall market and a 60% piece of the more lucrative market for tissue valves.
Now rival St. Jude Medical Inc. of Minnesota is turning up the heat on Edwards. The company is getting ready to release a valve that Wall Street expects to give Edwards trouble.
“Valve sales continue to (be) impacted by competitive inroads,” said Timothy Lee, a San Francisco-based analyst with Caris & Co., a San Diego investment bank.
Edwards is gearing up to fight back.
“We are focused on improving our performance in this region in 2008 by introducing new products, promoting minimally invasive valve procedures and leveraging our recently expanded field sales organization,” Chief Executive Michael Mussallem said on the company’s fourth-quarter conference call.
Edwards recently shifted sales representatives from the company’s discontinued angina treatment to heart valves.
Edwards expects $570 million to $590 million in heart valve sales this year, up from $515 million in 2007, said Thomas Abate, the company’s chief financial officer.
Heart valves make up 47% of Edwards’ $1.1 billion in yearly revenue.
Global sales, helped in part by the weak dollar, are seen leading Edwards’ growth this year, as they did in 2007.
With stepped up U.S. competition from St. Jude, “We are forecasting a zero to 2% growth rate in the U.S.,” Mussallem said.
St. Jude received Food and Drug Administration approval for its Epic tissue valve in November and plans to release the device in the first half of the year.
“Market dynamics are likely to get more difficult for Edwards with (the) upcoming launch of Epic,” analyst Lee said.
St. Jude has about 23% of the market for all types of heart valves, according to figures from Credit Suisse analyst Kristen Stewart.
Medtronic, which has a plant in Santa Ana, has about 20% of the market. Italy’s Sorin SPA, which used to have its North American base in Irvine and now is in Vancouver, British Columbia, is a distant No. 4 with 10% of the market.
In tissue valves, Edwards is more dominant at three of every five sold. Medtronic has about a quarter of the market. St. Jude and Sorin are at about 5% each.
This year, Edwards plans to come out with its Perimount Magna mitral replacement heart valve as well as Physio II, a ring used to repair heart valves.
The company also is working on a new type of valve that doesn’t require major surgery. Edwards expects about $20 million in European sales this year of its valve, which is implanted via a catheter.
Edwards got into less-invasive valves in late 2003 when it spent $125 million for Percutaneous Valve Technologies Inc., a New Jersey company.
The valve still is some years away from U.S. approval, but it’s seen as a major source of future business for Edwards.
Growth in the U.S. heart valve market “is being restrained by the absence of any recent paradigm-shifting technologies that could otherwise facilitate market expansion,” said Venkat Rajan, an analyst with Frost & Sullivan Inc. of San Antonio, in a report issued last year.
That could change as Edwards and some rivals, including CoreValve Inc. of Irvine, push valves that don’t require open-heart surgery.
Less-invasive valves could grow into a $1 billion yearly market by themselves, Mussallem has said.
Heart valves and related products today are a $1.2 billion yearly market, according to Credit Suisse.
