10-KPeriod: FY2018

Edwards Lifesciences Corp Annual Report, Year Ended Dec 31, 2018

Filed February 15, 2019For Securities:EW

Summary

Edwards Lifesciences Corporation reported solid performance for the fiscal year ended December 31, 2018, with total net sales increasing by 8.4% to $3.72 billion. The company's Transcatheter Heart Valve Therapy (THVT) segment was the primary growth driver, with sales up 12.8%, largely attributable to the strong adoption of the Edwards SAPIEN 3 valve. Surgical Heart Valve Therapy (SHVT) experienced a slight decline in sales, primarily due to a sales return reserve related to a change in inventory models, though underlying demand for surgical aortic tissue valves remained positive. Operational efficiency was also a focus, with gross profit margin improving due to a favorable product mix. The company continued to invest heavily in research and development, with 16.7% of net sales dedicated to innovation, including advancements in transcatheter mitral and tricuspid therapies. Significant events during the year included regulatory approvals for the SAPIEN 3 Ultra system and the Acumen Hypotension Prediction Index, and a settlement agreement for patent disputes with Boston Scientific in early 2019. The company also managed its capital structure effectively, repurchasing shares and maintaining a strong liquidity position.

Financial Statements
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Key Highlights

  • 1Net sales grew 8.4% to $3.72 billion, driven by strong performance in Transcatheter Heart Valve Therapy (THVT).
  • 2THVT sales increased 12.8%, primarily due to the widespread adoption of the Edwards SAPIEN 3 valve.
  • 3Surgical Heart Valve Therapy (SHVT) sales decreased 5.6%, mainly due to a sales return reserve related to a consignment inventory model conversion.
  • 4Gross profit margin improved due to a more favorable product mix, with THVT products leading the way.
  • 5Research and Development (R&D) spending represented 16.7% of net sales, underscoring the company's commitment to innovation.
  • 6The company settled patent disputes with Boston Scientific for $180 million in early 2019, a charge recorded in 2018.
  • 7Edwards Lifesciences maintained a solid financial position with $714.1 million in cash and cash equivalents and no outstanding borrowings on its credit facility at year-end.

Frequently Asked Questions

The primary driver of Edwards Lifesciences' revenue growth in 2018 was the Transcatheter Heart Valve Therapy (THVT) segment, which saw a 12.8% increase in sales, largely due to the strong adoption of the Edwards SAPIEN 3 valve across all regions.

Surgical Heart Valve Therapy (SHVT) sales decreased by 5.6% in 2018. This decline was primarily attributed to the establishment of sales return reserves in the United States related to the company's conversion to a consignment inventory model for surgical valves.

Edwards Lifesciences demonstrated a strong commitment to innovation by investing 16.7% of its net sales in Research and Development (R&D) during 2018. These investments were focused on developing new products and enhancing existing technologies, particularly in the areas of transcatheter structural heart therapies and critical care monitoring.

The company's net income in 2018 was impacted by several factors. While operating performance improved, there were charges related to a litigation settlement ($180 million for the Boston Scientific dispute, recorded in 2018 for the settlement paid in 2019) and impairment of intangible assets ($116.2 million). The company also benefited from reduced U.S. corporate tax rates and tax audit settlements.