What does a one-year, 35% jump in shares look like?
For Edwards Lifesciences Corp., $10.2 billion.
That’s its market cap growth over 12 months.
They did it the year before, too.
The Irvine-based company (NYSE: EW) now trades at about $39.7 billion, up from $19.9 billion in 24 months.
It’s the only Orange County-based public company with a valuation topping $20 billion, let alone pushing $40 billion, although as of last week newcomer Chipotle Mexican Grill Inc. (NYSE: CMG) is nipping at that first number (see story page 18).
Edwards in two years has added more to its market capitalization than the value of any other firm on the Business Journal’s annual list of local public companies (see page 21).
Startup Mentality
Michael Mussallem, the only chief executive Edwards has known since it was spun out of Baxter International Inc. in 2000, said the company was like a startup in those early days.
“We were about ten times smaller than Baxter,” he said.
Now Baxter (NYSE: BAX) has a $41.6 billion market cap and said its annual sales will grow less than 1% to $11.2 billion in 2019. Edwards projects it will grow sales 11% to 15%, to between $4.13 billion and $4.28 billion this year.
Edwards is growing by crafting products for a needed industry. The need was highlighted loudly last week by Rolling Stones’ front man Mick Jagger’s heart valve procedure, scheduled for Friday, which postponed the band’s planned whirlwind tour.
Open-heart surgery is being supplanted by minimally invasive heart valve replacement.
According to BMO Capital Markets analyst Joanne Wuensch, the debate has shifted to, “Why should anyone still receive surgery?”
FDA Awaiting
The rising importance of minimally invasive heart valve replacement is seen financially in Edwards’ 2018 results.
While its transcatheter heart valve unit grew sales 13% to $2.29 billion, revenue at its surgical heart valve therapy unit fell 5.6% to $762 million. A third unit, critical care, which provides monitoring services, saw sales rise 12% to $675 million.
Edwards leads in transcatheter aortic valve replacement, followed by Medtronic PLC (NYSE: MDT), according to a 2018 report from iData Research. The U.S. cardiac surgery device market, estimated at around $5.7 billion, should exceed $10 billion by 2024, iData said.
Edwards is betting the procedures—during which doctors insert a catheter into a patient’s leg or chest to guide a valve into the heart—will be prominent.
“We are committed to maintaining our leadership” in transcatheter products, Mussallem said on a January earnings call, with a slightly more modest take on the market that, “we estimate will double in size and reach approximately $7 billion by 2024,”
The company’s first transcatheter aortic heart valve received European approval in 2007, followed by the FDA in 2011 and Japan in 2013.
Edwards’s Sapien 3 transcatheter aortic valve is currently approved by the FDA for intermediate and higher risk patients. The company received approval for high-risk patients in 2015, and intermediate-risk patients in 2016.
The option has been primarily reserved for the very sick for whom traditional open-heart surgery is not optimal. It expects later this year to receive Food and Drug Administration approval for the valve to treat patients with a low-risk indication of severe aortic stenosis. Such patients are typically candidates for open-heart surgery.
Low-Risk
Edwards last month said a study of 1,000 people showed positive results for this effort. Patients could get either non-surgical replacement with Sapien 3 or surgery with any commercially available surgical valve and were monitored at least one year.
They showed better recovery with the less-invasive approach, including “less time in the hospital and the ability to resume their everyday lives more quickly,” Larry Wood, Edwards’ corporate vice president of transcatheter aortic valve replacement, said.
The non-surgical approach “should be considered the preferred therapy in low surgical risk aortic stenosis patients,” said Dr. Martin Leon, director of the center for interventional vascular therapy at New York-Presbyterian/
Columbia University Medical Center.
Medtronics reported its own study showing similar positive results for transcatheter heart valve replacement.
Results from both should help drive transcatheter aortic valve replacement volume, BMO analyst Wuensch said.
“Our physician conversations lead us to believe that the benefit from the Low Risk patient population will roll out over the next several quarters,” she wrote, noting an even “more immediate benefit … from the Intermediate Risk patients.”
The data will support Edwards’ U.S. expansion by year-end, Stifel Financial Corp. analyst Rick Wise added in a note to investors. He said FDA approval for the low-risk indication for Sapien 3 is likely this summer.
Approval means eligible patients would no longer be determined solely by risk for surgery; instead, factors such as patient’s lifestyle and preferences could be considered.
Next Frontier
And Edwards continues to invest in new technologies: it increased R&D in 2018 by 17% to $622 million.
The next frontier for less-invasive efforts are transcatheter mitral and tricuspid therapies; Edwards estimates work involving the two valves is virtually untapped: less than 2% of some 4.5 million patients with mitral and tricuspid regurgitation are treated.
It estimated the global opportunity tripling from $1 billion by 2021 to $3 billion by 2024.
Edwards in February took a step in this direction, receiving CE Mark approval for its Pascal transcatheter valve repair system for patients with mitral regurgitation.
Edwards employs 4,777 at its OC headquarters, up 2.3% compared to a year ago and about a third of the company’s 13,338 global total workforce.
“We are hiring across the board,” Mussallem told the Business Journal.
Edwards has a significant expansion planned at its 26-acre Irvine campus. Its eight buildings have 660,475 square feet, including offices, lab and manufacturing facilities and it’s filed plans with the city to build two new offices, laboratories, an employee amenities facility, and a parking structure on a 7.6-acre lot next to its Red Hill Avenue headquarters.
Get ready for another $10 billion.
