(By Balachander) Atleast two brokerages have lowered their price targets on Edwards Lifesciences Corp. (NYSE:EW) after the company slashed its third-quarter sales outlook, citing lower-than-expected transcatheter heart valve sales.
On Tuesday, shares plunged nearly 20 percent in early trade following the preannouncement.
Irvine, California-based Edwards Lifesciences provides heart valve therapy products, including tissue heart valves and repair products. The company also offers critical care products comprising hemodynamic monitoring systems.
Late Monday, the company said it expects
total sales of $448 million for the three months ended Sept. 30, down from $465 million to $485 million projected earlier and below consensus of about $477 million. It estimates global transcatheter heart valve sales of $124 million, including U.S. sales of $55 million.
RBC Capital Markets, which reduced price target on the stock to $102 from $105, said the majority of the miss came from U.S Sapien sales ($55 million versus
consensus $68 million).
"We are surprised by the U.S. Sapien miss, as we have always felt that the transfemoral opportunity was large enough to drive better than expected sales for several years," wrote RBC analyst Glenn Novarro. "Thus, while seasonality and lack of transapical reimbursement are legitimate reasons for lower sales, we still believe that U.S. sales should have been stronger."
Novarro, who has an "Outperform" rating on the stock, noted that management cited lack of reimbursement for inoperable patients for transapical access owing to a delay in approval for the CMS protocol/registry. This protocol/registry should be approved soon, but the delay prevented TA implants in 3Q. Moreover, a Cohort A approval, which would have added TA/TF implant volume in surgery eligible patients, has not occurred.
In addition, management noted that seasonality (summer vacations) affected the ability of hospitals to fulfill the full Heart Team requirement. "In Europe, EW reported TAVR sales of $69 million, $6 milliom below our estimate due to soft procedural volumes (austerity)," the analyst said.
In the near term, the analyst believes that investors will once again question the size of the U.S. market and the U.S. launch trajectory. "In the past, this concern has created a good buying opportunity. We believe that the TCT conference in Miami (Oct. 22–26) will provide an appropriate setting to evaluate the ramp of Sapien and its market opportunity," said Novarro.
Meanwhile, Piper Jaffray reduced price target on the stock to $105 from $118 and maintained its "Overweight" rating.
The stock, which has been trading in the 52-week range of $61.59 to $110.79, shed $19.70 or 18.38 percent to trade at $87.71 on Tuesday.