Edwards looks bullish on TAVR market as it releases 2016 guidance

Edwards Lifesciences (NYSE:EW) yesterday released financial strategies and guidance for the fiscal year 2016, raising expectations for the transcatheter heart valve market as a whole, as well as its stake in it over the coming years.

The company upped its estimation for the global TAVR market opportunity to $5 billion by 2021. That number is up from an earlier estimate of over $3 billion by 2019, Leerink Partners’ Danielle Antalffy wrote in a letter to investors.

The increase comes based on possible expanded product indications, as Edwards said it hopes for a late 2016 approval of its Sapien 3 valve for treating intermediate risk patients in the U.S. and plans to initiate a trial in 2016 to study patients with an even lower risk indication.

“A late 2016 expected approval of Sapien 3 in intermediate risk patients is the primary driver of this now-higher TAM, as we believe intermediate risk alone doubles the addressable patient population. But even beyond intermediate risk, EW also laid out a pathway to attaining a low risk indication, which would again double the addressable patient population. In 2016, EW plans to initiate a low risk trial in patients with STS scores of 0-4/5 randomized 1:1 to surgery. While a low risk indication isn’t likely until later in EW’s 2021 market estimate timeframe, we view this pathway to approval as encouraging and highly validating for the potential in intermediate risk,” Antalffy wrote in a letter to investors.

Edwards said it expects its transcatheter heart valve therapy biz to bring in $1.2 to $1.4 billion in 2016, signifying a 10 to 18% growth rate.

Antalffy said they believe the increased estimate leaves “significant upside potential to both 2016 $4.60-$4.80 EPS guidance (which excludes ~ $0.05 of amortization impact) and long-term estimates.”

Edwards set financial guidance for 2016, expecting to see sales of between $2.5 and $2.75 billion with sales growth of 7 to 11%.

The company said it forecasts a 74 to 75% gross profit margin with diluted earnings per share between $2.30 and $2.40, or $4.60 to $4.80 pre-stock split.

“We expect another year of strong performance for Edwards Lifesciences in 2016 led by growth in Sapien 3 valve sales and continued leadership in our core businesses. Despite foreign exchange headwinds, we are projecting solid financial results next year while we continue to invest aggressively to provide breakthrough therapies for patients in need,” CEO Michael Mussallem said in a press release.

Edwards said that starting in 2016, the company’s adjusted EPS will exclude amortization expenses.

“We also expect to continue our significant R&D investment at approximately 16% of sales to expand patient access to TAVR and pursue our focused innovation strategy.  This positions Edwards to deliver longer term growth and greater shareholder value,” Mussallem said in prepared remarks.

Edwards shares have lifted slightly in response, rising 2% yesterday to close at $162.01.

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