Edwards Lifesciences Corporation Reports Strong Second Quarter Results

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IRVINE, Calif., July 29, 2014 /PRNewswire/ -- Edwards Lifesciences Corporation (NYSE: EW), the global leader in the science of heart valves and hemodynamic monitoring, today reported net income for the quarter ended June 30, 2014 of $547.0 million, or $5.09 per diluted share, and non-GAAP net income of $94.0 million, or $0.88 per diluted share.  Net income for the same period a year earlier was $93.3 million, or $0.81 per diluted share, and non-GAAP net income was $96.7 million, or $0.84 per diluted share. 

Edwards Lifesciences logo.

Net sales for the quarter ended June 30, 2014 increased 11.2 percent to $575.1 million compared to the same period last year.  Underlying1 sales grew 10.5 percent.  U.S. and international segment sales for the second quarter were $242.0 million and $333.1 million, respectively.

"While our litigation settlement provided a large financial gain this quarter, we are particularly pleased that our sales were better than expected across all product lines, which drove strong bottom line results," said Michael A. Mussallem, chairman and CEO.  "Even as TAVR competition intensifies, with the increasing adoption of this therapy around the globe, we believe we are poised for continued strong sales growth in the second half of 2014."

Sales Results

For the second quarter, the company reported sales of transcatheter heart valves (THV) of $219.7 million, a 20.6 percent growth rate over the second quarter last year.  On an underlying basis, THV sales grew 18.8 percent. These results were driven once again by strong sales outside the U.S., which grew by 45.1 percent, or 34.7 percent on an underlying basis due to strong growth in Europe and the SAPIEN XT launch in Japan. 

"In Europe, adoption of transcatheter valve therapy continues to be quite strong and we believe we gained share with SAPIEN 3," said Mussallem.  "Representing more than half of our European THV sales, SAPIEN 3 is being very well received by clinicians who appreciate its best-in-class low profile and paravalvular leak solution.

"The launch of SAPIEN XT in the U.S., which just got underway in June, enables treatment of an even broader group of patients, while helping to reinforce our leadership position in that growing region," continued Mussallem. "Procedures with Edwards' transcatheter valves in the U.S. increased sequentially, as well as compared to a year ago."

Surgical Heart Valve Therapy product group sales for the quarter were $214.0 million. Sales increased 4.8 percent over the second quarter last year, or 4.3 percent on an underlying basis. Surgical heart valve sales growth was driven by growth across all regions and was partially offset by a small price decline due primarily to regional mix. Premium valves drove stronger growth in both mitral and aortic units.

Critical Care product group sales were $141.4 million for the quarter, representing an increase of 8.1 percent, or 8.5 percent on an underlying basis.  Growth was driven by a double digit increase in enhanced surgical recovery product sales, aided by the recent introduction of the ClearSight noninvasive monitoring system.

Additional Operating Results

For the quarter, Edwards' gross profit margin was 73.7 percent, compared to 76.1 percent in the same period last year.  This reduction was driven principally by a negative impact from foreign exchange, as well as the smaller impact of the write-off of SAPIEN valves in the U.S. in connection with the company's SAPIEN XT launch. 

Selling, general and administrative expenses were $215.5 million for the quarter, or 37.5 percent of sales, compared to $186.6 million in the same period last year.  The largest component of the increase was transcatheter valve launch-related expenses.

Research and development investments for the quarter were $89.1 million, or 15.5 percent of sales, compared to $80.5 million in the prior year period.  Heart valve clinical studies continue to be one of the largest drivers of the 10.7 percent increase.  

Free cash flow for the quarter was $762.0 million, which included proceeds from the recent litigation settlement. Free cash flow is defined as cash flow from operating activities of $778.0 million, less capital spending of $16.0 million.

Cash, cash equivalents and short-term investments totaled $1.48 billion at June 30, 2014.  Total debt was $598.0 million.

Six-Month Results

For the six months ended June 30, 2014, the company recorded net income of $607.3 million, or $5.63 per diluted share, compared to $237.2 million, or $2.05 per diluted share, for the same period in 2013.  Net income growth for the six months was 156.0 percent and diluted earnings per share increased 174.6 percent over last year, or 2.5 percent excluding special items in both periods.

Net sales for the first six months of 2014 increased 8.2 percent to $1.1 billion.  Sales growth was 9.2 percent on an underlying basis.

U.S. and international segment sales for the first six months of 2014 were $464.4 million and $633.1 million, respectively.

During the first six months of 2014, the company repurchased approximately 4.4 million shares of common stock for $300.6 million.

Adjustments to GAAP Results

During the quarter, the company recorded four adjustments that provided a $4.21 net benefit to its GAAP EPS, but which are excluded from its non-GAAP EPS:

  • a special net pre-tax gain of $747.4 million related to the previously announced global litigation settlement,
  • a special charge of $50.0 million for a contribution to the Edwards Lifesciences Foundation,
  • a benefit of $6.2 million resulting from the release of tax reserves, and
  • a $6.1 million reduction to pretax earnings related to the THV sales return reserve.

Share Repurchase Authorization

In July, the company's board of directors authorized a new share repurchase program to acquire up to an additional $750 million of the company's outstanding common shares.  This supplements the approximately $200 million remaining of its current share repurchase program, as of June 30, 2014.

Clinical Leader to Join Edwards

Edwards also announced today that it has appointed Dr. Martyn Thomas to the newly created position of vice president of medical affairs for transcatheter heart valves.  He is currently the clinical director of cardiovascular services at St. Thomas' Hospital in London and a global leader in transcatheter heart valve research.

Outlook

The company now expects full year 2014 total sales at the high end of its previous $2.05 billion to $2.25 billion range.  The company also raised its guidance for full year 2014 diluted earnings per share, excluding special items, to a range of $3.24 to $3.34.  For the third quarter of 2014, the company projects total sales to be between $530 million and $570 million, and diluted earnings per share, excluding special items, to be between $0.66 and $0.72.

"As we reflect on our first half results, we are very pleased with the performance we have achieved across all of our product lines and believe our future remains bright," said Mussallem.  "Overall, we are confident in our outlook for continued strong organic sales growth, reflecting our focused innovation strategy, and our commitment to helping patients."

About Edwards Lifesciences

Edwards Lifesciences is the global leader in the science of heart valves and hemodynamic monitoring. 

To read full press release, please click here.

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