The rollout of a new type of heart valve is helping to spur Edwards Lifesciences Corp. on Wall Street.
The Irvine-based company’s stock is up 20% so far this year with a market value of $3.2 billion last week.
Analysts are pointing to several reasons for Edwards’ run-up, including a well-received launch of the company’s less-invasive Sapien heart valve in Europe.
Edwards came out with Sapien in Europe at the end of 2007 and has built upon it, including coming out with a catheter to insert the valve at the EuroPCR 2008 conference last week.
The company is the leading maker of heart valves that are inserted during open-heart surgery. Edwards’ Sapien valve doesn’t require major surgery and is inserted via an artery.
The less-invasive valves are seen grabbing a bigger share of surgeries in coming years.
For now, Sapien is a small part of Edwards’ business. Sales totaled $8.1 million in the first quarter, out of $147 million in total valve sales.
Edwards is “very encouraged by the steady increase in both sale and implants” of heart valves in Europe, said Patrick Verguet, the company’s corporate vice president of Europe, during a first-quarter conference call.
Edwards projects its less-invasive valve sales should come in at more than $35 million this year, compared to an earlier forecast of $20 million.
European heart surgeons are implanting some 75 less-invasive valves a month, Verguet told analysts and investors.
Edwards felt there would be rewards from the Sapien launch in Europe sooner than its planned 2011 U.S. launch, Chief Executive Michael Mussallem said.
“The Street was skeptical. In the first quarter, we demonstrated the demand is, in fact, substantial,” Mussallem said.
Sapien could become Edwards’ major driver of its heart valve business, analyst Joshua Zable of Natixis Bleichroeder said in a report.
“As sales roll in and visibility increases, we believe investor interest will be enhanced,” the analyst said.
The company is ahead of rivals with a “significant” market opportunity, Zable said.
Sapien “is one of the few breakthrough products in the medical technology industry’s pipeline right now,” Eric Crigler, a portfolio manager with Skyhawk Capital Management in Memphis, Tenn., said in a recent Barron’s article. Skyhawk owns Edwards shares.
Edwards still faces challenges.
One of them: Reviving slowing domestic valve sales in the wake of pressure from rivals, particularly St. Jude Medical Inc. and Medtronic Inc., both of suburban Minneapolis.
“As we anticipated, U.S. (heart valve) revenue was flat for the first quarter due to competitive product launches,” Mussallem said.
Earlier this year, the company forecast zero to 2% growth in the U.S. in the wake of stepped-up competition from St. Jude, which is releasing its Epic tissue valve this year.
In the past, Mussallem has said the overall market for heart valves that don’t require major surgery could reach $1 billion in yearly sales. Edwards now has yearly sales of about $1 billion total.
The company became a player in the less-invasive valve market some four years ago when it spent $125 million for Percutaneous Valve Technologies Inc. of Fort Lee, N.J.
Other companies making less-invasive valves include Medtronic, which makes heart valves in Santa Ana, CoreValve Inc. of Irvine and 3F Therapeutics Inc. in Lake Forest, now part of Minnesota-based ATS Medical Inc.
Edwards holds some 40% of the overall heart valve market and a 60% piece of the more lucrative market for valves made from animal tissue. n
