UPDATE 3-Edwards Lifesciences beats estimates but outlook cautious

Thu Jul 25, 2013 7:21pm EDT

* U.S. 2nd-quarter sales of Sapien heart valves at $90 mln

* Third-quarter profit outlook below analyst expectations

* Reaffirms full-year earnings, sales forecasts

* Shares rise 1.5 percent in after-hours trading

By Susan Kelly

July 25 (Reuters) - Edwards Lifesciences Corp on Thursday reported a stronger-than-expected second-quarter profit on solid sales of its replacement heart valves, and its shares rose in after-hours trading.

But the medical device maker also forecast a third-quarter profit below Wall Street expectations and left its full-year outlook unchanged, despite exceeding analysts' estimates for the second-quarter.

Edwards pioneered development of the transcatheter heart valve as a less-invasive alternative to open-heart surgery for the replacement of diseased heart valves. The U.S. rollout of the Sapien valve, which began in late 2011, has been slower than expected due to the weak economy and other factors.

"U.S. Sapien sales were in line to a tad below the Street, as the U.S. launch continues to decelerate. Guidance for next quarter was below consensus, so investors are going to continue to be nervous on this name," J.P. Morgan analyst Mike Weinstein said.

Investors were worried after Edwards reported disappointing first-quarter results due to a slowdown in valve sales that sent the company's shares plunging. The medical device industry in general has struggled as consumers have stayed away from doctors due to unemployment or higher out-of-pocket costs with their insurance coverage.

Edwards' Sapien valve launch also was slowed as doctors took time to familiarize themselves with the procedure and some hospitals questioned the economics of the technology.

Edwards Chief Executive Michael Mussallem, on a conference call with analysts, said the company is now focused on educating hospitals on reimbursement policies for the device and improving patients' recovery periods.

Irvine, California-based Edwards said second-quarter net income rose to $94.1 million, or 82 cents per share, from $67.8 million, or 57 cents per share, a year earlier.

Analysts on average expected 76 cents per share, according to Thomson Reuters I/B/E/S.

Second-quarter sales increased 7.3 percent to $517 million.

Sales of transcatheter heart valves, which are threaded into place through an artery via a catheter, climbed 25 percent to $182 million. U.S. sales of the Sapien transcatheter heart valve were $90 million.

For the third quarter, Edwards is forecasting earnings excluding special items of 63 cents to 67 cents per share on total sales of $475 million to $505 million.

Analysts on average were looking for 72 cents per share on sales of $494 million.

Edwards reaffirmed its full-year outlook for earnings in a range of $3.00 to $3.10 a share, excluding special items, on sales of $2.0 billion to $2.1 billion. The outlook excludes any favorable impact from a court ruling that bars competitor Medtronic Inc from selling its CoreValve product in Germany.

Edwards is developing a smaller, easier-to-implant valve called Sapien XT. The company said it expects U.S. approval for the new valve in mid-2014, followed by a rapid market introduction. The company said it gained approval to sell Sapien XT in Japan during the quarter, making it the first transcatheter valve available in that country.

Edwards' shares rose 1.2 percent after hours to $71.50, after closing at $70.68 on Thursday on the New York Stock Exchange.

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