Double-Digit Sales Growth Drives Strong Fourth Quarter Results for Edwards Lifesciences

23-02-2011

 

 

  • Transcatheter Heart Valve Sales Increased to $65 Million
  •  PARTNER II Cohort B IDE Being Approved
  •  Special Charge and Income Tax Benefit Recorded

 

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 December 31, 2010 of $64.8 million, or $0.54 per diluted share, compared to net income of $47.6 million, or $0.40 per diluted share(1), for the same period in 2009. Fourth quarter diluted earnings per share increased 35.0 percent over last year. Excluding special items from both years, detailed in the reconciliation table below, fourth quarter diluted earnings per share grew 31.0 percent over last year to $0.55.

 

Fourth quarter net sales increased 13.2 percent to $392.4 million. Underlying(2) sales growth was 13.7 percent.

 

Today the company received conditional IDE approval for Cohort B of The PARTNER II Trial. This trial will study the next generation Edwards SAPIEN XT transcatheter heart valve with the NovaFlex delivery system in non-operable patients in the U.S. The company expects enrollment to commence soon and be completed by year-end.

 

"The fourth quarter capped a very strong year of financial results and progress on our exciting new technologies," said Michael A. Mussallem, Edwards Lifesciences' chairman and CEO. "We are proud of the many achievements in our transcatheter heart valve program during 2010, which strengthened our leadership position in this emerging field. The powerful clinical results seen in The PARTNER Trial remind us of the importance of this therapy to the many patients who are not suitable candidates for open heart surgery."

 

Sales Results

For the fourth quarter, the company reported Heart Valve Therapy sales of $226.2 million, representing 20.1 percent growth over last year. Underlying sales grew 21.8 percent. Transcatheter heart valve sales were $65.3 million, an 87.2 percent increase over 2009, and grew 99.1 percent over last year on an underlying basis. These sales were driven by the launch of SAPIEN XT and aided by some stocking orders. On an underlying basis, surgical heart valve sales grew approximately 5 percent over last year, led by the global adoption of the company's Magna valve platform and Physio II rings.

 

Critical Care sales were $127.5 million for the quarter, representing 5.5 percent growth over last year. Underlying sales grew 3.7 percent over prior year. Strong sales of the company's advanced monitoring products, led by FloTrac, continued to drive growth. Cardiac Surgery Systems sales increased to $25.2 million for the quarter. Underlying sales growth was 5.9 percent over last year.

 

Vascular sales were $13.5 million, a decline from $13.7 million in the same quarter last year. Domestic and international sales for the fourth quarter were $144.5 million and $247.9 million, respectively.

 

Additional Operating Results

For the quarter, Edwards' gross profit margin was 71.1 percent compared to 70.7 percent in the same period last year. This improvement was driven mainly by foreign exchange.

 

"For 2011, we expect our gross profit margin to be between 71 and 73 percent, with the first three quarters at the low end of the range, and the fourth quarter at the high end of the range," said Thomas M. Abate, Edwards Lifesciences' corporate vice president, CFO.

 

Selling, general and administrative expenses were $142.4 million for the quarter, or 36.3 percent of sales, compared to $132.3 million in the prior year. This increase was driven primarily by transcatheter heart valve sales and marketing expenses.

 

Research and development expenses for the quarter grew 15.7 percent to $55.9 million, or 14.2 percent of sales. This increase was primarily the result of additional investments in the company's transcatheter valve program.

 

Free cash flow for the quarter was $72.3 million, calculated as cash from operating activities of $94.0 million, minus capital expenditures of $21.7 million.

 

Total debt at December 31, 2010 was $41.8 million. Cash and cash equivalents were $396.1 million at the end of the quarter, resulting in net cash of $354.3 million.

 

Special Items

During the fourth quarter, the company recorded a pre-tax $10.5 million special charge comprised of two items: a global realignment charge of $7.2 million, primarily related to severance costs, and a $3.3 million write-down to market value of two minority investments. Additionally, during the quarter the company recorded a $7.9 million income tax benefit primarily related to a new international tax ruling regarding transfer pricing.

 

Twelve-Month Results

For the twelve months ended December 31, 2010, the company recorded net income of $218.0 million, or $1.83 per diluted share, a 6.2 percent decrease over last year. Excluding special items detailed in the reconciliation table below, diluted earnings per share grew 21.1 percent to $1.84 per diluted share.

 

Net sales for the twelve months of 2010 increased 9.5 percent to $1.45 billion. Underlying sales growth was 12.7 percent.

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