Investors Heart Edwards Lifesciences – WSJ

Edwards Lifesciences

EW -2.60%

has sent pulses racing recently, but only in a good way.

Shares of the cardiovascular-focused medical-device company have surged over 40% this year due to major advances the company has made in caring for heart ailments.

Edwards is a leader in a procedure called transcatheter aortic valve replacement, or TAVR. The procedure allows for patients with aortic stenosis to have a heart valve replaced via a catheter, thereby avoiding full open-heart surgery. That enables shorter recovery times, which is a clear benefit for patients. It also can result in lower total health-care costs since hospital stays are shorter. The pool of patients who could conceivably benefit is large: More than five million U.S. adults have aortic valve disease.

TAVR isn’t a new procedure, but its availability to patients is expanding.

TAVR is approved in the U.S. for patients with severe, symptomatic aortic stenosis with an intermediate or high risk of death from surgery. It has yet to be approved for the treatment of low-risk patients, though that could soon change. The company expects a fresh approval from the Food and Drug Administration as soon as this quarter. Clinical data from 1,000 patients presented in April showed a 46% reduction in events including death, stroke or hospitalization from patients who had traditional valve-replacement surgery after one year.

The improved convenience, meanwhile, is another selling point for the procedure. “Traditionally there is a trade-off between safety and efficacy versus invasiveness,” explains

Larry Wood,

who runs the company’s TAVR business. “In this case, there’s not.” About 70% of TAVR patients in the Edwards study were awake during the procedure.

That suggests a heady long-term growth profile for the business. Analysts expect Edwards to book $6.1 billion in annual revenue by 2023, up from $4.2 billion this year, according to FactSet. Operating cash flow is projected to more than double over that period to reach $2 billion annually.

Edwards doesn’t have this market to itself, though; giants including



Boston Scientific

have competing programs. But these companies have much larger top lines that won’t rise as quickly as the market develops.

And it isn’t as if Edwards has stopped looking for new opportunities; research-and-development spending amounted to 17% of sales in the second quarter.

There are risks, to be sure. The sharp rally in Edwards shares means that new buyers aren’t quite getting in on the ground floor. The stock now trades at 38 times forward earnings estimates.

But companies with strong sales growth continue to attract investor interest across the market. And medical-device stocks have been largely insulated from pricing scrutiny in Washington that has pinched drug companies.

These vital signs are worth paying up for.

Write to Charley Grant at

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