Edwards Lifesciences Corporation’s (EW) first-quarter 2013 adjusted earnings per share (EPS) came in at 72 cents, up 35.8% year over year, but lagging the Zacks Consensus Estimate of 76 cents. Adjusted EPS were also below the company-guided range of 74–78 cents. However, including a pre-tax gain of $83.6 million, an initial payment from Medtronic, Inc. (MDT) related to the ongoing U.S. Anderson patent litigation, the company reported a 125.5% year over year increase in EPS to $1.24.
Revenue Details
The company reported sales at $496.7 million, up 8.2% year over year (up 10% at constant exchange rate), but 4.1% below the Zacks Consensus Estimate of $518 million. Domestically, sales were $227.9 million, while internationally sales were $268.8 million. The reported sales figure was also below the previously guided range of $505–$530 million. This was primarily due to sluggish surgical heart valve and critical care segments’ performance, which counterbalanced in the transcatheter heart valves segment’s growth.
Segments
In the first-quarter 2013, surgical heart valve therapy product group reported sales of $198.1 million, down 2.7% year over year (down 0.8% at constant currency). The slowdown in the segments sales is attributable to tougher comparison and the effect of a competitor’s introduction in Japan. In spite of a decline in revenues, the company expects the segment to register underlying sales growth in the range of 2%–5% for the full year.
Globally, transcatheter heart valves (:THV) product group reported sales at $169.7 million, up almost 40% year over year. Revenues of this product group were mainly driven by the U.S. launch of the SAPIEN valve. Including the net stocking orders of $6.0 million and clinical sales of $6.7 million, domestic sales stood at $83.0 million. Internationally, THV sales increased 7.6% year over year. For fiscal 2013, the company expects the THV underlying sales to increase in the range of 25% – 30%.
Critical care product group sales were $128.9 million, down 3.9% year over year (down 0.2% at constant currency rate). The downside in sales is attributable to the reduction in distributor inventories in China. The company expects sales growth to be between 2% and 4% on an underlying basis in fiscal 2013.
Margins
In first-quarter 2013, gross margin expanded 310 basis points (bps) to 75.4%. The expansion in the gross margin was a result of strong THV product sales and positive impact of foreign exchange.
Selling, general and administrative expense increased 4.5% year over year to $185.2 million (or 37.3% of sales), primarily driven by the U.S. Medical Device Excise Tax and U.S. transcatheter valve expenses.