Edwards Lifesciences Corporation (NYSE: EW), the global leader in patient-focused innovations for structural heart disease and critical care monitoring, today reported financial results for the quarter ended December 31, 2015.
Fourth Quarter and Recent Highlights:
- Global sales grew 8.6% to $671.1 million, and underlying sales were up 15.1%.
- Global THV sales grew 25.0%, and underlying sales were up 32.4%.
- Results reflect 2-for-1 stock split completed in December 2015.
- GAAP EPS was $0.64, an increase of 28.0%, and non-GAAP EPS grew 18.9% to $0.63.
- 2016 THV sales guidance raised $100 million to $1.3 billion to $1.5 billion.
- 2016 Adjusted2 EPS guidance increased to $2.57 to $2.67.
- Received U.S. approval for expanded indication study of SAPIEN 3 valve.
"We are very pleased to report strong fourth quarter results, which exceeded our expectations and contributed to another successful year, both in financial performance and progress on important new therapies," said Michael A. Mussallem, chairman and CEO. "These positive results were due to continued demand for transcatheter aortic valve replacement therapy, and the strong performance of all product lines this quarter. We were also pleased to receive FDA approval for our PARTNER 3 Trial to study patients determined to be at low surgical risk, which may eventually enable heart teams to offer a choice of therapies to a broader group of patients."
Fourth Quarter 2015 Results
Net sales for the quarter ended December 31, 2015 were $671.1 million. U.S. and international segment sales for the fourth quarter were $353.6 million and $317.5 million, respectively. The strong U.S. dollar continued to have a significant negative impact on reported sales. On an underlying basis, sales grew 15.1 percent over the fourth quarter last year. Net income for the quarter ended December 31, 2015 was $140.7 million, or $0.64 per diluted share.
For the fourth quarter, the company reported Transcatheter Heart Valve Therapy (THV) sales of $334.3 million, a 25.0 percent growth rate over the fourth quarter last year, or $329.8 million and 32.4 percent growth on an underlying basis. Strong global sales were led by the impact of the SAPIEN 3 valve in the U.S. and double-digit underlying sales growth across all regions.
In the U.S., THV sales for the quarter were $193.9 million. On an underlying basis, sales were $189.4 million and grew 49.8 percent compared to the prior year period.
"Our THV performance was driven by strong overall procedural growth," said Mussallem. "Based on our momentum and expectation of continued therapy adoption, we now expect our underlying THV sales growth in 2016 to be in the range of 15 to 25 percent."
Surgical Heart Valve Therapy product group sales for the quarter were $196.2 million. Reported sales decreased 4.8 percent compared to the fourth quarter last year, up slightly over the prior year on an underlying basis. Globally, sales growth was lifted by higher surgical heart valve units, but was lowered by the company's planned exit of non-strategic products.
Critical Care product group sales were $140.6 million for the quarter, representing a decrease of 2.6 percent versus last year, and an increase of 3.6 percent on an underlying basis.
For the quarter, the company's gross profit margin was 73.8 percent, compared to 74.0 percent in the same period last year. Results were driven by higher manufacturing expenses, as well as benefits from a favorable product mix and foreign exchange.
Selling, general and administrative expenses decreased to $222.3 million for the quarter, or 33.1 percent of sales. The modest decrease from the prior year was driven by the favorable foreign exchange impact on expenses outside the U.S., largely offsetting higher sales and marketing expenses related to transcatheter valves.
Research and development investments for the quarter increased to $98.2 million compared to $84.0 million in the prior year period. This increase was primarily a result of continued investments in the company's transcatheter mitral and aortic valve programs, including spending on clinical trials.
Cash flow from operating activities for the quarter was $103.8 million and included a $33.0 million tax payment related to a previously reported litigation settlement. After capital spending of $37.5 million, free cash flow was $66.3 million.
Cash, cash equivalents and short-term investments totaled $1.2 billion at December 31, 2015. Total debt was $599.9 million.
Twelve-Month Results
For the twelve months ended December 31, 2015, compared to the prior year:
- Net sales grew 7.4 percent to $2.5 billion, and underlying sales were up 16.8 percent.
- U.S. and international segment sales were $1.3 billion and $1.2 billion, respectively.
- Diluted earnings per share of $2.25 decreased 39.8 percent (2014 results included a $750.0 million payment to Edwards from a litigation settlement).
- Non-GAAP earnings per share of $2.29 increased 30.9 percent.
- Repurchased approximately 3.9 million split-adjusted shares of common stock for $280.1 million.
Outlook
For the full year 2016, the company now expects its total sales to be between $2.60 billion and $2.85 billion. Primarily as the result of increased expectations for sales, the company is raising its adjusted earnings per share guidance to between $2.57 and $2.67. The company expects a minimal positive impact to 2016 earnings resulting from the recently implemented two-year suspension of the U.S. medical device excise tax, and is evaluating opportunities to accelerate existing growth programs or initiate new ones.
For the first quarter of 2016, at current foreign exchange rates, the company projects total sales to be between $640 million and $680 million, and adjusted earnings per share to be between $0.64 and $0.70.
"We are very proud of Edwards' performance in 2015 and the momentum we bring into 2016," said Mussallem. "Our focused innovation strategy can transform patient care and drive value to both the healthcare system and shareholders. 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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