10-QPeriod: Q2 FY2013

Edwards Lifesciences Corp Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 6, 2013For Securities:EW

Summary

This 10-Q filing for Edwards Lifesciences Corporation (EW) for the quarter ended June 30, 2013, shows a company experiencing solid top-line growth, primarily driven by its Transcatheter Heart Valves segment, notably the Edwards SAPIEN valve. Financially, the company reported increased net sales and improved gross profit margins compared to the prior year period. This growth was accompanied by higher operating expenses, particularly in R&D and SG&A, reflecting investments in clinical studies and new product development. A significant one-time event was the receipt of $83.6 million from Medtronic related to a patent litigation award, which positively impacted operating income but also incurred a substantial tax expense. The company maintained a healthy cash position and active share repurchase program, signaling confidence in its future prospects. Investors should note the strong performance of the Transcatheter Heart Valve segment and the company's continued investment in innovation. While facing competitive pressures and ongoing legal matters, particularly patent disputes with Medtronic, Edwards Lifesciences appears to be executing well on its growth strategy.

Financial Statements
Beta

Key Highlights

  • 1Net sales increased by 7.3% to $517.2 million for the three months ended June 30, 2013, and by 7.7% to $1,013.9 million for the six months ended June 30, 2013, compared to the prior year periods.
  • 2Transcatheter Heart Valves segment was a key growth driver, with net sales increasing by 24.9% and 31.6% for the respective periods, largely due to the Edwards SAPIEN and SAPIEN XT valves.
  • 3Gross profit margin improved to 75.8% for the quarter and 75.6% for the year-to-date, up from 73.1% and 72.7% respectively, driven by a favorable product mix and the absence of voluntary recalls seen in the prior year.
  • 4The company received an $83.6 million litigation award from Medtronic in February 2013, positively impacting net income for the period, though it also resulted in a significant tax expense.
  • 5Research and Development expenses increased, reflecting continued investment in clinical studies and new product development for the Transcatheter Heart Valve program.
  • 6The company repurchased $245.0 million of its common stock in the first six months of 2013 and had $752.6 million of remaining authority for future repurchases.
  • 7The company amended its credit facility, increasing the aggregate borrowings available to $750.0 million, and had $227.3 million in borrowings outstanding as of June 30, 2013.

Frequently Asked Questions

The primary driver of revenue growth is the Transcatheter Heart Valves segment, particularly the sales of the Edwards SAPIEN and SAPIEN XT transcatheter heart valves, which saw significant increases in both the United States and international markets.

Edwards Lifesciences received an $83.6 million litigation award from Medtronic in February 2013. This award positively impacted operating income. However, it also incurred a substantial tax expense of $31.3 million, affecting the net income.

The company's sources of liquidity, including cash from operations, cash on hand, and available credit facilities, are considered sufficient to meet its current and future needs. They also have significant remaining authority for stock repurchases, indicating confidence in their financial flexibility.

The company is involved in ongoing patent litigation with Medtronic, including a German court ruling that temporarily enjoined the sale of Medtronic's CoreValve and Evolut systems in Germany. While management believes current pending lawsuits will not have a material adverse effect on the company's financial position, results of operations, or liquidity, these legal matters introduce uncertainty.