Aortic stenosis is a type of heart disease involving a narrowing of the valve between the left ventricle of the heart and the aorta, or the aortic valve. According to the American Heart Association, about 0.4% of Americans have aortic stenosis, and the frequency of cases increases with age. About 2.8% of Americans aged 75 and older have moderate to severe aortic stenosis. Of those with severe symptoms, around 40% undergo some form of aortic valve replacement.
The most common form of aortic valve replacement involves a dangerous open heart surgery to replace the valve. For anumber of reasons, patients are unable or unwilling to have their chest cut open and heart stopped to have a valve replaced. This is where transcatheter aortic valve replacement (TAVR) comes it.
The biggest player in the TAVR market is easily Edwards Lifesciences Corp (NYSE:EW). Its overall transcatheter heart valve segment reported first-quarter 2013 sales of $169.7 million, up 39.7% from the first quarter of 2012. Net income jumped 123% over the same period, from $65.1 million in the first quarter of 2012 to $144.9 million in the first quarter of 2013.
Despite seemingly positive results, the company’s share price plummeted about 22% after Edwards issued full year 2013 earnings-per-share guidance of about $3.05. The figure was about 7% below the average analyst estimate of $3.27.
Overreaction equals opportunity
If you’re thinking overreaction, you’ve got something in common with Edwards Lifesciences Corp (NYSE:EW)’s Chairman and CEO Michael Mussallem. He wasn’t too bothered with the plunge. On May 15, he bought 70,283 shares of Edwards on the open market at $71.14 per share. I imagine his steadfast faith in the company was bolstered by positive post-approval results to be released a week after the earnings announcement.
Positive results
On May 21, Edwards released one-year data from the European post-approval study of its Sapien XT transcatheter aortic heart valve. The data included 2,688 consecutively enrolled patients at 93 TAVR capable medical centers across Europe.
The results show one-year survival rates of TAVR patients using the Sapien XT valves are similar to those of open-heart valve replacement. The important takeaway is that doctors should be just as if not more likely to recommend a TAVR using an Edwards device as they would an open heart valve graft.
Edwards Lifesciences Corp (NYSE:EW) sales of transcatheter heart valves grew 39.7% year on year from $121.5 to $169.7 million during the three months ended March 31. That figure should continue to grow provided the company receives further regulatory approvals for various surgical methods and patient profiles.
The competition
Medtronic, Inc. (NYSE:MDT) is hot on Edwards’ heels with its CoreValve devices. Edwards has tried to slow the Minneapolis-based company’s encroachment into its territory with patent infringement lawsuits. So far just one suit has been successful. According to Medtronic, Inc. (NYSE:MDT)’s first-quarter 2013 10-Q, it “recorded an expense of $245 million related to probable and reasonably estimated damages for this matter in the second quarter of fiscal year 2013, of which $84 million was paid on February 28, 2013.”
It’s difficult to say just how far Medtronic’s CoreValve sales are digging into Edwards’ piece of the TAVR pie. The company hasn’t presented sales figures of the device, but its Structural Heart division recorded sales of $272 million for the three months ended Jan. 25, 2013. That includes the CoreValve and several other products. That figure may soon rise based on a recent, and novel decision by EU regulators.
A niche within a niche
Recently, Medtronic, Inc. (NYSE:MDT) won CE Mark approval in the EU for the CoreValve to replace previously implanted bioprosthetic valves that are failing. This is the world’s first valve-in-valve treatment to win regulatory approval. This niche market monopoly could be just what Medtronic needs to pull ahead of Edwards Lifesciences in the TAVR space.
Impending threat
Another threat to Edwards Lifesciences Corp (NYSE:EW)’s dominance of the TAVR market comes from Boston Scientific Corporation (NYSE:BSX) and its Lotus Valve System. The not-yet-approved valves have a patented “Adaptive Seal” designed to prevent leaking, and so far the results have been exciting. Unlike devices from Edwards and Medtronic, the Lotus Valve is repositionable after being fully deployed. This means that surgeons can use a bit of trial-and-error during surgery to be sure they have deployed the device in the best location possible.
Don’t get rattled just yet
If the Boston Scientific device wins approval throughout the EU later this year as the company expects, it could take a bite out of Edwards’ slice of the TAVR pie. Before you go dumping your Edwards shares, there are two important reasons not to get too excited by the Lotus Valves’ early success. Implantation of the device often requires a pacemaker, and in the US the device is still in a Phase 3 clinical trial that is still in its first year.
If you’re considering a long position in Edwards Lifesciences and/or Medtronic, Inc. (NYSE:MDT) based on their TAVR dominance, a little patience could save you a bundle. Implanted valve leakage is strongly associated with patient mortality. I would wait to see if Boston Scientific’s Lotus Valve continues to show such impressive results in larger clinical trials. If it does, I suggest scaling back or exiting a long position in Edwards Lifesciences Corp (NYSE:EW).
Cory Renauer has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic.
The article Recent Aortic Valve Events that You Should Understand originally appeared on Fool.com.
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