Structural heart disease-focused device firm, Edwards Lifesciences Corp., has acquired privately held Harpoon Medical Inc., which specializes in mitral valve repair devices while the heart is beating. The agreement will begin with an initial cash payment of $100 million and up to $150 million in milestone payments over the next decade.
Irvine, Calif.-based Edwards first entered into a structured investment in Harpoon in 2015 – a deal which included an exclusive option for acquisition. Harpoon's investigational device allows for echo-guided repair of degenerative mitral regurgitation (DMR) achieved through affixing the mitral valve leaflet which has prolapsed in order to restore function of the valve.
"We believe the addition of Harpoon's technology and team will enable even more opportunities to help patients with degenerative mitral regurgitation," said Bernard Zovighian, corporate vice president, surgical heart valve therapy, Edwards. "The unique beating-heart repair procedure for mitral valve patients complements Edwards' comprehensive portfolio of treatments for structural heart disease and reinforces our commitment to innovation in cardiac surgery."
Acquisition was expected
"Based on the positive CE mark Tracer data at Transcatheter Cardiovascular Therapeutics in October, we had anticipated Edwards would exercise its option to buy the company," said Larry Biegelsen, senior analyst, equity research, Wells Fargo Securities LLC. "We expect Harpoon to receive CE mark approval later this year. Harpoon will provide Edwards with the broadest range of minimally invasive treatment options for mitral regurgitation (MR). In addition to Harpoon, Edwards is developing Pascal, Cardioband, Cardiaq, and Sapien M3 for MR. Edwards also has rights to Mitraltech's Cardiovalve, which is expected to start human implants this year."
James Gammie, chief of cardiac surgery, University of Maryland School of Medicine in Baltimore and chairman of Edwards' scientific advisory board, shared data on the Tracer study of Harpoon's mitral valve device at the 2017 Transcatheter Cardiovascular Therapeutics meeting in Denver in November. (See BioWorld MedTech, Nov. 2, 2017.) Research evaluated the device for repair of mitral valve chords through PTFE-coated anchor which affixes the valve to the outer heart wall, and avoids aortic valve cross-clamping and sternotomy. Results from 30 patients at six sites in Europe indicated 85 percent of enrollees experience no worse than mild regurgitation at the six month mark, and technical success was achieved in 93 percent of cases, with failures based on imaging limitations. Of the 28 successful procedures, there were eight serious adverse events, including pleural effusion (two) and operative conversion (two), but reoperation, thromboembolism, late stroke or death did not occur.
Edwards shared their outlook for the coming year during a Dec. 7 investor call, including confirmation of its October 2017 guidance. Global sales for 2018 are projected at $3.5 to $3.9 billion, indicating growth of 9 to 10 percent, and adjusted estimated earnings per share to increase from $4.10 to $4.30.
"Our global growth is being driven by our transcatheter aortic valve therapies, and continued advancement in each of our product lines," said Michael Mussallem, chairman and CEO. "In 2018, we are projecting strong financial results while we continue to invest aggressively to provide breakthrough therapies for patients in need. During the year, we expect to achieve a number of meaningful clinical milestones that will serve as indicators of our progress in advancing multiple transcatheter mitral and tricuspid programs."
Transcatheter mitral and tricuspid products are anticipated to represent a more than $3 billion potential by 2025, according to the company. "Edwards plans to launch at least one transformational therapy in Europe each year in 2018, 2019 and 2020 led by its Cardioband and Pascal programs," shared the firm.
Analysts weighed in on Edwards' 2018 outlook for its transcatheter valve business. "We believe investors will be encouraged by Edwards' initial framework for 2018, which is in line with our forecasts and likely conservative," said Joshua Jennings, Equity research, Cowen. "For THVT, the company forecasts 2018 sales of $2.1 billion to $2.4 billion, which reflects underlying growth of 11-15 percent vs our 12-17 percent target and includes roughly $15 million of TMTT product sales. It is unclear if management baked in any contribution from the potential absence of BSX's Lotus TAVR platform from the U.S. and OUS markets, which could provide a 100- to 200-bp tailwind to the Edwards THVT franchise's growth trajectory.
Analysts' view on Edwards
"On the bottom line, Edwards projects EPS of $4.10 to $4.30, which compares to our $4.15 to $4.30 assumption and avoids the weaker scenarios some had forecast for the year," said Jennings. "Given that the Street consensus is $4.15 and that Edwards plans to spend aggressively in R&D to fuel further growth in transcatheter valve therapies, including its mitral and tricuspid programs, we believe these targets will be well-received by investors. Edwards has a solid track record for exceeding its initial guidance, so we think today's forecasts will be viewed as encouraging starting points for 2018."
"Edwards provided what we view as positive, first-time 2018 financial guidance while also reaffirming its previous 2017 outlook," said Rick Wise, Stifel. "In addition, and also for the first time we can recall, Edwards sized the mitral and triscupid opportunities. The company believes these two "beyond-TAVR" opportunities, combined, will be "more than $3B" by 2025. To us, this seems a reasonable starting point given how early these opportunities are both commercially and in some cases, clinically."
However, Biegelsen commented the projections varied slightly from expectations for the market. "For 2018, Edwards expects sales of $3.5 to $3.9 billion and 9 to 10 percent underlying growth. This compares to consensus of $3.712 billion and 9.5 percent underlying growth (we're at $3.768 billion and 10.6 percent, respectively). For transcatheter heart valves (THV), Edwards expects '18 sales of $2.1 to 2.4 billion or 11 to 15 percent underlying growth versus our $2.300 billion or 15 percent growth. This includes $15 million for mitral and tricuspid products. We will be interested to see what Edwards' assumption is for BSX's Lotus in 2018. For surgical heart valves (SHV). Edwards continues to expect the global transcatheter aortic valve replacement (TAVR) market to exceed $5B in 2021." Sapien 3 Ultra, and Centera are expected to launch in 2018, data on Partner 3 is expected in early 2019, said Biegelsen.
On Dec. 7, Edwards also reported its board approved a new share repurchase to garner as much as $1 billion in outstanding common shares. Also in the fourth quarter, the company repurchased about $100 million worth of common stock. In November, the firm entered an accelerated share repurchase agreement for $150 million in common stock, which also included receipt and retirement of an initial 1.1 million shares.
Investors rated Edwards' stock as outperform and indicated the additional stock repurchase was a positive sign for future growth. "Edwards provided multiple share repurchase program updates, which we believe underscore management's high-level of confidence in the near- and long-term outlook," said Wise.
Early-stage venture fund Epidarex Capital, of Bethesda, Md., provided funding in developments stages of Harpoon's technology, leading a series A and participating in series B financing. Epidarex also was involved in the $100 million sale of Confluence Life Sciences Inc. to Aclaris Therapeutics Inc. in August.