Edwards Lifesciences
(NYSE: EW)
is continuing its M&A run with two more major deals.
The cardiac device company announced yesterday evening that it will spend $1.2 billion to acquire two companies: JenaValve Technology and Endotronix. The news came at the same time that the cardiac device company reported a second-quarter revenue miss and reduced TAVR guidance. As of midday today, EW shares had plummeted more than 26% to $63.85 apiece; MassDevice‘s MedTech 100 Index was down slightly.
Edwards officials were upbeat about the two companies’ technologies. They said the JenaValve Trilogy Heart Valve System to treat aortic regurgitation could win FDA approval in late 2025. Meanwhile, the Endotronix Cordella implantable pulmonary artery pressure sensor received FDA approval last month, with a CMS national coverage determination slated for early next year. (Listen to Endotronix CEO Harry Rowland discuss the company’s technology on this week’s DeviceTalks Weekly podcast)
“These acquisitions expand our opportunities to address the unmet needs of aortic regurgitation and heart failure patients around the world,” Edwards CEO Bernard Zovighian said in a news release. “We are pleased to enter these structural heart therapeutic areas with innovation, world-class science and clinical evidence to provide access to life-saving technologies for patients around the world.”
Edwards Lifesciences had mixed Q2 results — and scaled back TAVR guidance
Irvine, California–based Edwards earned $365 million, or 61¢ per share, off of $1.39 billion in revenue for the quarter that ended June 30, 2024. The bottom line was up 44% and the top line was up 7% year-over-year.
Adjusted to exclude one-time items, Edwards saw EPS of 70¢. That’s a penny ahead of the 69¢ expected on the street. However, revenue missed the $1.65 billion consensus.
Edwards Lifesciences is seeing sales momentum this year for its transcatheter mitral and tricuspid therapies (TMTT), which has the company now predicting full-year sales guidance for TMTT in the higher end of the previous $320 million to $340 million range.
However, the bulk of the company’s sales come from transcatheter aortic valve replacement, an area where the company is reducing its guidance for the full year based on how TAVR sales have been trending. Edwards now expects TAVR sales to grow 5 to 7% this year, versus the previous 8 to 10% projection.
“Edwards is well-positioned to deliver sustainable TAVR growth in 2025 and beyond, driven by advancements in our leading Sapian platform, indication expansions to much larger populations of patients, and improving patient access to this important therapy,” Zovighian said. “Our vision for TMTT is becoming a reality, and our strategic commitment has developed into a growth portfolio of differentiated technologies. We are confident in Edwards’ strategy in structural heart supported by the broadening TAVR opportunity, accelerating contributions of our TMTT therapies, and our expanding portfolio of structural heart innovations that addresses the unmet needs of millions of patients around the world.”
Analysts say it was an unexpected step backward for Edwards Lifesciences
The success of TMTT, however, could be eating into Edwards’ TAVR revenue, according to Truist analysts. Richard Newitter, Ravi Misra and Benjamin Goldstein at Truist reported that Edwards Lifesciences management said hospital workflow pressures from adopting other fast-growing structural heart therapies (such as tricuspid repair/replacement) are hurting TAVR volumes. The Truist analysts downgraded their rating of EW shares to Hold due to what they saw as a step backward in Edwards’ quest to accelerate revenue growth.
Marie Thibault and Sam Eiber at BTIG kept their Neutral rating on Edwards stock: “With TAVR growth faltering, TMTT still in relatively early days of ramp, and M&A not expected to contribute substantial sales near-term, we expect EW’s margin profile to reflect higher spend.”
Meanwhile, William Blair analysts stuck with their Outperform rating on EW shares, saying they saw the hospital workflow issues around TAVR as transient. They said the dynamic may take a few quarters to play out.
Edwards is getting cash to spend on M&A
Edwards Lifesciences announced last month that it had a deal to sell its Critical Care business to BD for $4.2 billion in cash. Edwards previously planned to spin off the business. The deal is expected to close late in Q3 2024.
About a month after the news of the sale, Edwards started making deal announcements as it sought to diversify its cardiology device offerings.
Last week, Edwards said it would acquire mitral valve company Innovalve for $300 million. A week before that, it entered into a series of deals with Affluent Medical, agreeing to pay $16.3 million for licensing and development efforts involving Affluent’s Kalios adjustable mitral annulus and mitral valve technology.
This story originally ran on the evening of Wednesday, July 24, 2024. Updated July 25 with next-day stock price and analyst comment.
