Edwards Lifesciences Corp. has been unstoppable so far this year, driven by the rapidly expanding adoption of transcatheter heart valve therapy. It beat expectations in its third-quarter earnings report, drawing praise and even higher expectations from Wall Street analysts. The Irvine, Calif.-based company recently received an expanded FDA indication for its Sapien 3 and Sapien 3 Ultra TAVR systems to treat surgical low-risk patients with severe aortic stenosis. (See BioWorld MedTech, Aug. 19, 2019.)

This helped drive TAVR sales up 26%, as compared to the same quarter a year ago, and overall sales up by 21% to $1.1 billion. Its share price (NYSE:EW) has been on a tear this year, up by more than 50%, making it one of the top-performing large-cap med-tech companies. Edwards' valuation has climbed to almost $47 billion, up from about $30 billion at the start of 2019. Shares climbed about 2% on the earnings news.

TAVR low-risk bolus

"As you heard at last month's TCT (Transcatheter Cardiovascular Therapeutics conference), clinical trial results were presented, demonstrating early and sustained quality-of-life advantages for severe AS patients at low surgical risk treated with SAPIEN 3," noted Edwards chairman and CEO Michael Mussallem on the earnings call regarding the recent TAVR sales growth surge that is expected to cool next year.

"Taken together with the clinical superiority demonstrated in the PARTNER III trial, these quality-of-life findings further support the use of TAVR in these patients. In summary, given the strength of our year-to-date performance, we're raising our full year TAVR guidance," he concluded. "We now expect underlying growth of nearly 20% vs. our previous expectation of around 15%. In addition, while still early in the 2020 forecasting process and difficult to predict, we are modeling a return to low double-digit growth TAVR procedures globally next year. This is consistent with our estimate of a $7 billion opportunity in 2024."

Wall Street analysts embraced the raised TAVR growth guidance, as well as the earnings beat. Consensus third-quarter revenue expectations had been $1.037 billion, while Edwards came in at $1.094 billion. The $1.41 EPS for the quarter also came in well above the $1.22 that was anticipated.

But there was some caution around the sense that the TAVR growth this year is a bounce based on a bolus of low-risk patients that will be gone next year. In addition, Edwards also adjusted downward 2019 sales expectations for transcatheter mitral/tricuspid therapies (TMTT), which have long been expected to offer the next big wave of innovation and sales at the company. But those could ramp up more quickly next year, driven by the Pascal transcatheter valve repair system, which is a competitor to Abbott Laboratories' Mitraclip in mitral regurgitation. (See BioWorld MedTech, Sept. 27, 2019.)

"While not issuing guidance for 2020, management did provide some high-level comments on next year. First, management now believes that 2020 TAVR growth will be low double-digits," noted Larry Biegelsen of Wells Fargo.

"Edwards does not believe the market is 'slowing' but more so that many of the procedures may have been pulled forward due to the awareness expansion of TAVR and low risk approval creating a 'bolus' of procedure growth in 2019," he continued. "As a result, the second half 2020 comparables will be a difficult hurdle. Second, management believes that TMTT revenue will double in 2020 compared to 2019 (guidance for less than $40 million), the bulk of which will be Pascal."

TAVR sales were $700 million last quarter, up 26% from the same period a year earlier. The company estimates that its growth was in line with the global TAVR procedure growth rate that was also in the mid-20% range.

U.S. TAVR procedures grew a bit faster at about 30%, which was also comparable to Edwards growth driven by TAVR treatments after the FDA indication expansion. "This approval represents a significant milestone which allows all patients diagnosed with severe aortic stenosis to be considered for TAVR based on their individual needs and anatomical considerations vs. traditional risk warning," summed up Mussallem.

Pressure on mitral

On the strength of this quarter, Edwards updated its 2019 guidance toward the higher end of its previous guidance of $4 billion to $4.3 billion. It also raised its 2019 EPS guidance to $5.50 to $5.65 from $5.20 to $5.40.

Still, analysts worried a bit at the downgrade from TMTT revenue to below $40 million from the prior estimate of about $40 million. "Slightly pressuring fiscal 2019 guidance is management's expectation for TMTT revenue to be below $40 million as the company continues to pursue a disciplined introduction and premium pricing strategy for the Pascal transcatheter mitral system in Europe," said Joshua Jennings of Cowen in a note.

Edwards attributed the slightly downgraded TMMT guidance to pricing issues for Pascal in Europe. "In transcatheter mitral tricuspid therapies, or TMTT, we made important progress in the third quarter in advancing our portfolio of technologies to bring meaningful solutions to underserved mitral and tricuspid patients with few options today. In the third quarter, global revenue was $10 million. The bulk of this was commercial sales of Pascal in Europe."

"We are pleased with the disciplined rollout of Pascal focusing on physician training, procedural success and patient outcomes," he continued. "While we continue to receive positive physician feedback on this differentiated therapy, our premium-price strategy was a contributor to the slightly lower-than-expected revenue."

Despite not expecting to hit its prior guidance in TMMT this year, Edwards still anticipates that this segment will see sales that double in 2020 from the initial base this year.

Edwards is conducting a pair of pivotal, noninferiority studies, CLASP IID and CLASP IIF, that are pitting Pascal against Mitraclip in degenerative mitral regurgitation (DMR) and functional mitral regurgitation (FMR), respectively. The company recently started enrollment in CLASP IIF – and is continuing enrollment in CLASP IID, which is slated to complete by year end with data reporting in late 2020.