10-QPeriod: Q3 FY2008

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 7, 2008For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported a solid third quarter for 2008, demonstrating year-over-year growth in net sales and income. Net sales increased by 16.1% to $303.6 million, driven by strong performance in Heart Valve Therapy and Critical Care segments, with notable contributions from the Edwards SAPIEN transcatheter heart valve and the FloTrac monitoring system. The company's strategic focus on core businesses is evident with the divestiture of the LifeStent product line, which contributed to a special charge but streamlined operations. Despite some market uncertainties, the company maintained a healthy gross profit margin and managed its operating expenses effectively, with research and development investments continuing to fuel future growth, particularly in transcatheter valve technologies. Financially, Edwards Lifesciences maintained a healthy liquidity position, with a significant increase in cash and cash equivalents. The company also completed the redemption of its convertible senior debentures and continued its share repurchase program, indicating confidence in its financial health and commitment to shareholder value.

Key Highlights

  • 1Net sales increased by 16.1% year-over-year to $303.6 million for the third quarter of 2008.
  • 2Heart Valve Therapy and Critical Care segments were key growth drivers, with sales up 20.8% and 14.3% respectively.
  • 3The divestiture of the LifeStent product line was completed in January 2008, resulting in a pre-tax loss of $8.1 million.
  • 4The company's R&D spending increased to support advancements in transcatheter and surgical heart valve programs.
  • 5Cash and cash equivalents increased significantly, ending the quarter at $202.4 million.
  • 6The company redeemed its $150.0 million convertible senior debentures in June 2008.
  • 7A new stock repurchase program of up to $250.0 million was authorized, with $214.5 million remaining authorization as of September 30, 2008.

Frequently Asked Questions

Net sales growth was primarily driven by strong performance in the Heart Valve Therapy segment, boosted by the launch of the Edwards SAPIEN transcatheter heart valve in Europe and sales of pericardial tissue valves like the Carpentier-Edwards PERIMOUNT Magna Ease. The Critical Care segment also contributed significantly, driven by the FloTrac minimally invasive monitoring system and pressure monitoring products.

The divestiture of the LifeStent product line was completed in January 2008. While it resulted in a pre-tax loss of $8.1 million in the nine-month period due to the write-off of goodwill and net book value of assets, it aligns with the company's strategy to focus on core businesses. The company continues to provide transition services, including manufacturing, for the buyer.

Edwards Lifesciences continues to invest significantly in R&D, with a particular focus on transcatheter heart valve programs. The company is progressing with its PARTNER trial for the Edwards SAPIEN transcatheter heart valve, expanding its delivery systems (Ascendra, RetroFlex II), and developing next-generation valves like the Edwards SAPIEN XT. Progress is also being made on the transcatheter mitral valve repair program (MONARC).

The company maintains a healthy liquidity position, with cash and cash equivalents increasing to $202.4 million. It has access to a $500 million revolving credit facility and has been actively managing its debt, including the redemption of its convertible senior debentures. The company also has a share repurchase program in place and generated positive cash flow from operations.