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Edwards Lifesciences Corporation (EW - Analyst Report) recently disclosed the approval of Japan's Central Social Insurance Medical Council (Chuikyo) to provide reimbursement for the Edwards Sapien XT transcatheter aortic heart valve in the country. The reimbursement in Japan will be effective from Oct 1, 2013.

Notably, Edwards gained reimbursement approval for Sapien XT within its expected timeframe (before the end of 2013). The expert review panel at the Japanese Ministry of Health, Labor and Welfare (MHLW) recommended the establishment of reimbursement for Sapien XT. Earlier, in June, the company had won the regulatory clearance for the Sapien XT valve.

Following the approval, Chuikyo established a reimbursement of 4.53 million yen (roughly $4,600 at current exchange rate) for the use of Sapein XT valve in patients with severe symptomatic aortic stenosis. Generally, the reimbursement rate in Japan covers the cost of the medical device and associated taxes, certain hospital fees as well as the distribution expenditure.

As reported earlier, Edwards plans to begin the complete launch of the product following the reimbursement approval. This makes Sapien XT the foremost commercially available transcatheter aortic heart valve in Japan. The launch should bolster the company’s foothold in the country. Edwards expects Sapien XT to significantly leverage top line going forward.

Other Updates on Sapien XT

While Sapien XT is still under regulatory review in the U.S., it is the leading transcatheter aortic heart valve in the European market. Positive data from post-approval studies across Europe continues to demonstrate the clinical competency of the Sapien XT valve. Meanwhile, the company continues to enroll patients in the intermediate risk cohort (Cohort A) of The Partner II Trial in the U.S. The enrollment is expected to complete in October.

With submission of Cohort B clinical results from The Partner II Trial for the U.S. Food and Drug Administration (FDA) pre-market approval in late April, Edwards envisages the U.S. approval to come through in mid-2014.

Our Take

Considering that aortic stenosis is a potentially fatal disease and mostly remains untreated in patients, we expect Edwards to meaningfully expand its addressable market with the market launch of Sapien XT. According to findings, the incidence of the disease is higher in older populations. With a sizeable aging population in Japan, we believe that the country presents a lucrative market for Edwards’ valve.

We note that Edwards reported poor sales performance in Japan in the most recent quarter. Sales in Japan in the second quarter of 2013 decreased 0.6% (at constant exchange rate) to $59.3 million. We believe that the company can turn around its performance in Japan following the commercialization of Sapien XT and other such product launches. Moving forward, the company should gain momentum in the country.

Currently, the stock carries a Zacks Rank #3 (Hold). While we remain on the sidelines for Edwards, other medical stocks such as Gilead Sciences Inc. (GILD - Analyst Report), Affymetrix Inc. (AFFX - Analyst Report) and Alere Inc. (ALR - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy), are worth considering.
 

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