Edwards Lifesciences Corp (EW.N) on Tuesday lowered its 2013 outlook due to sluggish sales at the start of the year for its less-invasive replacement heart valves, and its shares plunged 15 percent after hours.
U.S. first-quarter sales of the company's Sapien transcatheter heart valves were $83 million, below the $89 million to $90 million that analysts had expected.
Edwards pioneered development of the transcatheter heart valve, an alternative to open-heart surgery for valve replacement that involves threading the new valve into place through an artery via a catheter. Doctors expect such minimally invasive valve procedures eventually to replace open-heart surgery as the standard of care.
"The potential is certainly there. It just seems to be taking a bit longer for the early adoption to play out," said Jefferies & Co analyst Raj Denhoy.
The Irvine, California-based company said it now expects full-year sales of $2.0 billion to $2.1 billion and earnings per diluted share, excluding special items, of $3.00 to $3.10.
Analysts had been looking for full-year earnings of $3.27 per share, on sales of $2.13 billion.
The company began to roll out the Sapien valve in the United States in late 2011, but the launch has been slower than expected as doctors took time to familiarize themselves with the procedure and some hospitals questioned the economics of the expensive technology.
Edwards Chief Executive Michael Mussallem said the company's long-term view of the U.S. market opportunity has not changed.
"Although in the near term there may be some capacity constraints, and there may be some economic conditions for some sites that might be limiting in the near term, our expectation about the treatment opportunity hasn't changed at all," Mussallem said on a conference call with analysts.
Edwards reported its first-quarter net earnings more than doubled, boosted by a large gain from patent litigation with Medtronic Inc (MDT.N). Net income rose to $144.9 million, or $1.24 per share, from $65.1 million, or 55 cents per share, a year ago. The company recorded a special gain of $83.6 million for the patent infringement payment.
Total sales of the Sapien valve for the quarter, including sales in Europe, were $169.7 million.
Excluding special items, Edwards reported a profit of 72 cents per share, below the average analyst estimate of 76 cents per share according to Thomson Reuters I/B/E/S. First-quarter net sales rose 8.2 percent to $496.7 million, missing analysts' average estimate of $518.6 million.
Sales of Edwards' surgical heart valves and critical care products fell in the quarter, compared with a year ago.
A number of healthcare companies have reported a slowdown in patient demand at the start of the year, after signs of a pickup late last year.
"The favorable healthcare utilization trends we saw in Q4 did not continue in Q1," Mussallem said.
For the second quarter, Edwards projected total sales of $500 million to $530 million and diluted earnings per share, excluding special items, between 75 and 79 cents per share.
Patients who receive replacement heart valves have aortic valve stenosis, a condition in which calcium deposits clog the valve and reduce blood flow, which can lead to heart failure or cardiac arrest. A replacement valve helps restore normal blood flow.
Edwards is testing a smaller, easier-to-implant valve called Sapien XT and is preparing to seek U.S. regulatory approval for the device. On the call, Mussallem said the company will submit more data on the device to U.S. regulators next week and expects the product to be approved sometime next year.
Edwards shares fell 15 percent after hours to $70.00 on Tuesday, after closing at $82.81 on the New York Stock Exchange.
(Reporting by Susan Kelly in Chicago; Editing by Leslie Adler)