01—Abstract
Summary
Summary of the 10-K filed February 12, 2021. Cited figures are marked; the original filing is the authoritative source.
Edwards Lifesciences Corporation reported net sales of $4.386 billiona for the fiscal year ended December 30, 2020, representing a slight increase of 0.9% compared to 2019.
This growth was primarily driven by the Transcatheter Aortic Valve Replacement (TAVR) segment, which saw a 4.4% increase in sales, bolstered by the adoption of the SAPIEN 3 Ultra System. Despite the global COVID-19 pandemic impacting procedure volumes and clinical trial enrollments, the company demonstrated resilience, maintaining operations and supplying its life-saving technologies. The company also settled a significant patent litigation with Abbott in July 2020, incurring a pre-tax charge of $367.9 millionb.
Financially, Edwards Lifesciences maintained a strong balance sheet with total assets of $7.237 billionc and total stockholders' equity of $4.574 billion. The company reported diluted earnings per share of $1.30 for 2020, a decrease from $1.64 in 2019, largely due to the aforementioned litigation settlement.
Research and development spending increased by 1%d to 17% of net sales, reflecting continued investment in innovation, particularly in the transcatheter mitral and tricuspid therapies pipeline. The company's strategic focus on minimally invasive solutions for structural heart disease positions it well for future growth in a dynamic healthcare market.
02—Key points
Key Highlights
- Net sales for 2020 reached $4.386 billion, a 0.9% increase over 2019, driven by TAVR product sales.
- The TAVR segment continues to be the largest contributor to net sales, accounting for 65% of the total.
- The company settled significant patent litigation with Abbott for $367.9 million (pre-tax charge), impacting 2020 earnings.
- Research and Development (R&D) expenses increased by 1% to $760.7 million, representing 17.3% of net sales, with a focus on TMTT and TAVR programs.
- The COVID-19 pandemic impacted procedure volumes and clinical trial enrollments, though manufacturing and supply operations remained robust.
- Edwards Lifesciences ended 2020 with a strong liquidity position, holding $1.183 billion in cash and cash equivalents.
- The company's stock performance showed a cumulative total return of 346.53% from 2016 to 2020, outperforming the S&P 500 and S&P 500 Health Care Equipment indices.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Edwards Lifesciences kept $0.19.
- Revenue$4.39B100.0%
- Cost of revenue−$1.08B24.6%
- Gross profit$3.31B75.4%
- Operating costs−$2.41B54.9%
- Operating income$897.6M20.5%
- Interest, other & tax−$74.2M1.7%
- Net income$823.4M18.8%
Where FY2020 revenue went
$4.39B- SG&A: $1.23B, 28% of revenue
- Cost of revenue: $1.08B, 25% of revenue
- Net income: $823.4M, 19% of revenue
- R&D: $760.7M, 17% of revenue
- Other operating costs: $419.0M, 9.6% of revenue
- Interest, other & tax: $74.2M, 1.7% of revenue
Kept 19% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 12, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $4.39B$4.35B | +0.9% |
| Cost of Revenue | $1.08B$1.11B | −3.0% |
| Gross Profit | $3.31B$3.23B | +2.2% |
| R&D Expenses | $760.70M$752.70M | +1.1% |
| SG&A Expenses | $1.23B$1.24B | −1.1% |
| Operating Income | $897.60M$1.15B | −21.7% |
| Interest Expense | $15.80M$20.70M | −23.7% |
| Net Income | $823.40M$1.05B | −21.3% |
| EPS (Basic) | $1.32$1.68 | −21.4% |
| EPS (Diluted) | $1.30$1.64 | −20.7% |
| Shares Outstanding (Basic) | 622.60M624.80M | −0.4% |
| Shares Outstanding (Diluted) | 631.90M636.70M | −0.8% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic affect Edwards Lifesciences' performance in 2020?
The COVID-19 pandemic significantly impacted Edwards Lifesciences' business in 2020. Procedure volumes for TAVR and Surgical products experienced substantial drops starting in March 2020 due to patient and physician concerns about COVID-19. Clinical trial enrollments were also paused and subsequently negatively affected by resurgences of the virus. However, the company's manufacturing and supply operations remained operational, and demand for Critical Care products, particularly pressure monitoring systems, increased due to COVID-19 hospitalizations.
What was the significance of the litigation settlement with Abbott?
In July 2020, Edwards Lifesciences settled all outstanding patent disputes with Abbott Laboratories related to transcatheter mitral and tricuspid repair products. This settlement resulted in a significant pre-tax charge of $367.9 million recorded in 2020, which impacted the company's net income and diluted earnings per share. Additionally, the settlement includes royalty payments through May 2024.
What is the company's strategy for future growth?
Edwards Lifesciences' growth strategy is focused on patient-focused medical innovations for structural heart disease and critical care monitoring. Key initiatives include continued investment in research and development for transcatheter mitral and tricuspid therapies, expansion of its TAVR offerings with next-generation technologies like the SAPIEN 3 Ultra System, and enhancing its critical care monitoring capabilities. The company aims to transform patient care by providing less invasive and more effective treatment options.
How does the company manage its financial health and liquidity?
Edwards Lifesciences maintains a strong financial position, with significant cash and cash equivalents and access to credit facilities. The company generated $1.054 billion in cash from operating activities in 2020. It also engages in share repurchases, having repurchased $614.7 million of its common stock in 2020, and has a $750 million credit agreement with no outstanding borrowings as of December 31, 2020. The company's policy is to retain future earnings for use in its business rather than paying dividends.
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