Edwards Earnings: TAVR Growth Settles in Low Double Digits While New Data Pressures Shares

Edwards Lifesciences EW posted third-quarter results that largely met our top- and bottom-line expectations, and we’re leaving our $86 fair value estimate unchanged. With quarterly sales of transcatheter aortic valve replacements, or TAVR, up 10% in constant currency, the firm is on track to meet our full-year estimates. Shares appear moderately undervalued—unusual for this narrow-moat company that has historically traded above our intrinsic value.

Outside the usual speculation that the pool of patients for TAVR has been exhausted, we think new five-year data among low-risk patients on the Sapien device may also be pressuring shares. On one hand, the five-year Partner 3 data demonstrated that Sapien performed just as well as surgical valve replacement, or SAVR, on most measures. Importantly, Sapien hemodynamics were highly comparable with that of the gold standard, SAVR, which we think goes a long ways to alleviating concerns about Sapien’s durability. On the other hand, there was numerically higher—though not statistically higher—all-cause mortality among the TAVR group after the first year postimplantation. This finding was startling because previously the TAVR group was significantly lower on this metric at one year than the SAVR patients. We aren’t particularly concerned by this latest finding because, upon closer inspection, the number of cardiovascular deaths were similar in each group, while there were more other-cause deaths (for example, cancer) in the TAVR group. However, it may take some time for the market to digest these details.

We’re eager to see one-year data on Pascal for degenerative mitral valve regurgitation, which is expected this week. If favorable, as we anticipate, it could spur more practitioner interest in trying out Pascal, as centers in the United States are currently being trained. We continue to think the mitral valve repair market is highly underpenetrated and that there’s room for another competitor to Abbott’s MitraClip.