Edwards Lifesciences Corp. reported better-than-expected results when it released its second quarter earnings late July 23, with revenue down 15% to $924 million, from $1.1 billion in the same period of 2019. The results beat Wall Street consensus of $797.5 million, and reflected an uptick in surgical procedures that had been delayed by the COVID-19 pandemic.
The Irvine, Calif.-based company sustained a net loss of $121.9 million, or $0.20 per share, based on generally accepted accounting principles (GAAP), a sharp drop from $242.3 million, or $0.38 per share, in the same quarter last year. However, adjusted earnings looked brighter at $0.34 per share.
TAVR, TMTT ticking back up
Transcatheter aortic valve replacement (TAVR) sales declined 11% year over year to $594 million, largely due to the coronavirus. “Sales were severely depressed in April, as providers turned their attention to the pandemic response,” said Edwards CEO Michael Mussallem. “However, we were encouraged by the steady improvement in procedure volumes through May and June when approximately 90% of our active sites performed TAVR cases.”
Cowen’s Joshua Jennings greeted the news, noting management’s guidance forecasting a return to normal TAVR trends in the fourth quarter of 2020 now appears within range. With a worldwide decline of just 11%, “EW’s crown jewel franchise experienced one of the strongest recoveries of any device in our coverage,” he wrote.
Mussallem pointed to several developments that strengthen the outlook for TAVR. The U.S. FDA recently removed a precaution on the Sapien 3 labeling, in response to safety information submitted by the company. In addition, Edwards secured recent approvals in China and Australia for Sapien 3 in patients with severe aortic stenosis. And Mussallem noted positive clinical feedback on improved paravalvular leak performance with Sapien 3 Ultra. The system accounted for about 40% of U.S. and European TAVR volumes, up from 30% at the close of the first quarter.
Edwards’ transcatheter mitral and tricuspid therapies (TMTT) also beat expectations at $6 million, which included $3.5 million in Pascal sales and $400,000 in Cardioband.
During the quarter, the company snagged CE mark approval for the Pascal transcatheter valve repair system for patients with tricuspid regurgitation. It also is seeing signs of recovery from a temporary pause in new enrollments in active mitral and tricuspid pivotal trials. According to Mussallem, more than half of trial sites have reactivated and are starting to treat patients.
“We anticipate enrollment in our three class studies will continue to ramp up in the third and fourth quarter, and we’re still targeting U.S. approval of Pascal DMR [degenerative mitral regurgitation] in 2022,” he said.
The quarter also saw Edwards and Abbott Laboratories settle outstanding patent disputes related to
TMTT products. Under the agreement, all pending cases or appeals were dismissed and the companies agreed not to litigate patent disputes with each other in the area of TMTT products for 10 years.
Jennings said the settlement was a surprise, given Abbott’s track record of early wins in litigation. The result it “removed a major overhang for the stock by freeing EW from any market injunctions that could have disrupted Pascal’s evolution into a meaningful growth driver.”
Structural heart, critical care
The picture was worse in structural heart products, which dropped 26% to $161 million, vs. the prior year. Edwards attributed the decline to COVID-19-related impacts as well as adoption of TAVR devices, which came at the expense of structural heart sales. As Wells Fargo’s Larry Biegelsen noted, Edwards’ Inspiris valve “continues to drive incremental share of SAVR [surgical aortic valve replacement] procedures and is leading SAVR value in U.S. and Japan.”
The company also cited initial commercial cases with its Harpoon mitral valve system in Europe during the second quarter.
COVID-19 also took a toll on critical care products, which declined 10% year over year to $164 million. Despite strong demand for Truwave disposable pressure monitoring devices in intensive care units during the quarter, it was not enough to offset the COVD-19 impact on smaller orders in surgical recovery products, Edwards said.
Looking ahead, the company believes the worst of the COVID-19 financial impact is behind it.
While the ups and downs of the pandemic will be felt for the foreseeable future, there is growing awareness that valve therapy should not be delayed, Mussallem said.
The company maintained its full-year 2020 guidance of $4 billion to $4.5 billion and upped its earnings outlook to between $1.75 and $1.95 per share. For the third quarter, Edwards estimates sales will be in the $1 billion to $2 billion range.
“Big picture, EW expects a gradual recovery in 2H with sales in Q3 returning to 2019 levels and Q4 returning to growth,” Biegelsen said.