Edwards Lifesciences Corporation (NYSE: EW), the global leader in the science of heart valves and hemodynamic monitoring, today reported financial results for the quarter ended September 30, 2015.
Highlights for the third quarter of 2015 as compared to the third quarter of 2014:
- Global sales grew 1.3% to $615.5 million, and underlying sales were up 13.6%.
- Global THV sales grew 10.8% to $296.1 million, and underlying sales were up 29.4%.
- The U.S. rollout of the Edwards SAPIEN 3 transcatheter heart valve is on track.
- Diluted EPS was $1.07, an increase of 23.0%, or 33.8% on a non-GAAP basis.
- 2015 THV underlying sales guidance raised to between $1.1 billion and $1.2 billion.
- 2015 non-GAAP EPS guidance increased to between $4.43 and $4.53.
"Strong third quarter results were driven by total underlying sales growth of 14 percent," said Michael A. Mussallem, chairman and CEO. "Adoption of our SAPIEN 3 transcatheter valve system continued to propel our growth, which exceeded our projections. Furthermore, the growing body of compelling clinical outcomes gives us confidence that with expanded evidence, larger populations of patients suffering from aortic stenosis will be eligible for TAVR."
Third Quarter 2015 Results
Net sales for the quarter ended September 30, 2015 were $615.5 million. U.S. and international segment sales for the third quarter were $323.1 million and $292.4 million, respectively. The strong U.S. dollar continued to have a significant negative impact on reported sales. On an underlying basis, sales grew 13.6 percent. Net income for the quarter ended September 30, 2015 was $118.1 million, or $1.07 per diluted share.
For the third quarter, the company reported Transcatheter Heart Valve Therapy (THV) sales of $296.1 million, a 10.8 percent growth rate over the third quarter last year, or 29.4 percent on an underlying basis. Strong global sales were led by the company's market-leading products in both the U.S. and Europe.
In the U.S., THV sales for the quarter were $166.4 million. On an underlying basis, sales were $167.6 million and grew 33.1 percent compared to the prior year period. Outside the U.S., THV sales were $129.7 million, representing 4.7 percent growth, or 25.1 percent on an underlying basis.
"Our THV performance was driven by strong procedure growth and the on-going SAPIEN 3 launch, which is on track, and clinicians are rapidly adopting our best-in-class technology," said Mussallem. "Based on our year-to-date results and the strong demand for SAPIEN 3, we now expect our underlying THV sales in 2015 to be at the high end of our previously estimated 25 to 35 percent growth rate."
Surgical Heart Valve Therapy product group sales for the quarter were $187.9 million. Reported sales decreased 7.6 percent compared to the third quarter last year, and increased 0.2 percent on an underlying basis. Against a tough year over year comparison, global surgical heart valve units grew, but were mostly offset by the continued exit of non-strategic products.
Critical Care product group sales were $131.5 million for the quarter, representing a decrease of 3.8 percent versus last year, or an increase of 5.0 percent on an underlying basis.
For the quarter, the company's gross profit margin was 76.2 percent, compared to 72.3 percent in the same period last year. The year over year increase resulted primarily from favorable foreign exchange and favorable product mix. Assuming foreign exchange rates remain at current levels, the company expects its gross profit rate in the fourth quarter to be approximately 75 percent.
Selling, general and administrative expenses decreased to $212.0 million for the quarter, or 34.4 percent of sales. This decrease was driven primarily by the favorable foreign exchange impact on expenses outside the U.S.
Research and development investments for the quarter increased to $101.0 million compared to $87.6 million in the prior year period. This increase was primarily a result of continued investments in the company's valve programs, including the recent acquisition of CardiAQ.
Cash flow from operating activities for the quarter was $202.5 million. After capital spending of $26.0 million, free cash flow was $176.5 million.
Cash, cash equivalents and short-term investments totaled $1.3 billion at September 30, 2015. Total debt was $604.9 million.
Nine-Month Results
For the nine months ended September 30, 2015, the company recorded net income of $354.2 million, or $3.22 per diluted share, compared to $701.9 million, or $6.49 per diluted share, for the same period in 2014. The year-ago period included a $750 million payment to Edwards from a litigation settlement. Diluted earnings per share decreased 50.4 percent over last year, or increased 36.6 percent, excluding special items.
Net sales for the nine months of 2015 grew 6.9 percent to $1.8 billion. On an underlying basis, sales grew 17.4 percent.
U.S. and international segment sales for the nine months of 2015 were $909.3 million and $913.3 million, respectively.
During the nine months of 2015, the company repurchased approximately 1.3 million shares of common stock for $180.1 million.
Outlook
The company continues to expect full year 2015 total sales to be between $2.3 billion to $2.5 billion. The company is increasing its guidance for full year 2015 diluted earnings per share, excluding special items, to a range of $4.43 to $4.53, from its previous range of $4.30 to $4.40. For the fourth quarter of 2015, at current foreign exchange rates, the company projects total sales to be between $620 million and $660 million, and diluted earnings per share, excluding special items, to be between $1.11 and $1.21.
"Our strong year-to-date financial performance demonstrates the strength of our market-leading product portfolio," said Mussallem. "We believe our strategy of focused innovation can transform patient care and drive value to the healthcare system and to shareholders. In light of the impressive body of clinical evidence, we are enthusiastic about the continued expansion of transcatheter-based therapies for the many structural heart patients still in need, which positions us for a bright future."
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