10-QPeriod: Q3 FY2007

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 9, 2007For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported its third-quarter and nine-month results for the period ending September 30, 2007. The company demonstrated solid top-line growth, with total net sales increasing by 5.7% to $261.4 million for the quarter and 3.5% to $798.1 million for the nine months, year-over-year. This growth was primarily driven by strong performance in the Critical Care and Vascular segments, with notable contributions from the FloTrac system and LifeStent products. Profitability showed mixed results. While gross profit margin improved slightly, driven by a favorable product mix and foreign currency impacts, operating expenses, particularly SG&A and R&D, increased due to strategic investments in new product launches and pipeline development, including the Edwards SAPIEN Transcatheter Heart Valve (THV) in Europe and the PARTNER trial. Net income for the quarter was $29.1 million, a modest increase from $27.8 million in the prior year, but diluted earnings per share decreased slightly to $0.48 from $0.51, reflecting the increased share count and higher expenses. The company also completed a $150 million convertible debt offering during the quarter, reclassifying it as a current liability due to its near-term redemption option for holders.

Key Highlights

  • 1Net sales increased by 5.7% to $261.4 million in Q3 2007 and by 3.5% to $798.1 million for the first nine months of 2007 compared to the same periods in 2006.
  • 2Critical Care and Vascular product lines showed significant growth, with Critical Care sales up 13.7% quarterly and 11.4% year-to-date, and Vascular sales up 27.3% quarterly and 18.2% year-to-date.
  • 3Gross profit margin improved to 65.3% in Q3 2007 from 64.7% in Q3 2006, benefiting from a favorable product mix and foreign currency impacts.
  • 4Research and Development expenses increased by $2.8 million in the quarter and $4.6 million year-to-date, reflecting investments in transcatheter valve and Critical Care programs, including the PARTNER trial.
  • 5Selling, General, and Administrative (SG&A) expenses increased by $11.5 million in the quarter and $22.6 million year-to-date, driven by investments for the Edwards SAPIEN THV launch and higher sales-related spending.
  • 6The company issued $150 million in convertible senior debentures, which are now classified as a current liability due to the May 2008 put option.
  • 7Edwards Lifesciences ended the quarter with $175.7 million in cash and cash equivalents and continued its share repurchase program, announcing a new $250 million authorization.

Frequently Asked Questions

Edwards Lifesciences reported a 5.7% increase in net sales for the third quarter of 2007, reaching $261.4 million, up from $247.4 million in the same period of 2006.

The Critical Care and Vascular segments demonstrated the strongest growth. Critical Care sales increased by 13.7% driven by products like the FloTrac system, while Vascular sales surged by 27.3%, primarily due to LifeStent product sales.

Gross profit margin improved slightly to 65.3% from 64.7% year-over-year. However, net income saw a modest increase to $29.1 million from $27.8 million, and diluted earnings per share decreased to $0.48 from $0.51, impacted by increased operating expenses related to strategic investments and a higher share count.

The company increased R&D spending to support its transcatheter valve and Critical Care development programs, including the PARTNER trial for the Edwards SAPIEN THV. SG&A expenses rose due to investments for the European launch of the Edwards SAPIEN THV and increased sales support across key product lines.

Edwards Lifesciences issued $150 million in convertible senior debentures in May 2003, which are now classified as a current liability due to the holders' option to redeem them in May 2008. The company also has an unsecured revolving credit facility of up to $500 million, with $61.2 million outstanding as of September 30, 2007.