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Edward's Perimount Mitral in China

MDT STJ EW

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Edwards Lifesciences Corporation (EW - Analyst Report), a leading developer of heart valves and hemodynamic monitoring, recently received China State Food and Drug Administration’s ("SFDA") approval for its Carpentier-Edwards Perimount Mitral Heart Valve. After a challenging third quarter performance with lower-than-expected heart valve sales, the latest approval came as a major boost for this $10 billion company.

Since its introduction for clinical use, 28 years back, the Perimount Mitral Heart Valve has played a vital role in replacing the mitral pericardial heart valve in patients who cannot afford the lifelong blood-thinning medication required to support mechanical heart valves. This product works with the Carpentier-Edwards ThermaFix process, Edwards’ proprietary advanced tissue treatment developed to mitigate the calcification of tissue heart valve leaflets. The Carpentier-Edwards ThermaFix process was co-developed by cardiothoracic surgeon Prof. Alain Carpentier. In 2000, the Carpentier-Edwards Perimount Mitral Heart Valve was first approved in the U.S. for commercial distribution. It also received CE mark for the European Union countries.

Apart from this approval, which is expected to expand the company’s footprint in the international arena, we are also encouraged by the company’s focus on developing its pipeline that should strengthen its foothold in the transcatheter aortic valve replacement ("TAVR") segment. Edwards is making progress on the development of Centera valve (a low profile, repositionable self-expanding valve with a motorized delivery system for stable deployment and single operator use), Sapien 3 (a lower profile balloon expandable valve, designed to further reduce paravalvular leak), among others. Successful commercialization of these products should drive the company’s top line in the long term.

Moreover, we are encouraged to note that there has been a ramp up in the US Sapien sales following the approval of Sapien (for the treatment of certain inoperable patients with severe symptomatic aortic stenosis) in November 2011. Although a later-than expected approval led the company to lower its 2012 outlook, over the long term the company should benefit as the targeted patient population expands. Besides, with the resolution of uncertainties related to reimbursement of the procedure, sales of Sapien should pick up in the forthcoming quarters. Meanwhile, the company is working on regulatory approval and reimbursement for Sapien XT in 2013.

However, over the last few quarters, surgical heart valve sales have been struggling due to lower-to-flat procedure volume resulting from the economic uncertainty. Moreover, sales in the US were adversely affected due to the introduction of St Jude Medical’s (STJ - Analyst Report) pericardial valve, Trifecta, last year. Despite the expectation of improving sales in the fourth quarter as prior year comparisons moderate, we remain skeptical due to the persisting macroeconomic conditions.Moreover, the scenario in Europe is competitive with the presence of Medtronic (MDT - Analyst Report) and some other players. Currently, Edwards retains a Zacks #3 Rank (Hold) in the short term.

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