01—Abstract
Summary
Summary of the 8-K filed July 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Edwards Lifesciences reported second-quarter 2024 results for continuing operations with net sales of $1,385.9 milliona, up 7% reported and 8% on a constant-currency basis.
GAAP diluted EPS was $0.61b and adjusted EPS was $0.70, which included a $0.04 benefit from a lower-than-expected adjusted tax rate of 8.4%. The standout was Transcatheter Mitral and Tricuspid Therapies (TMTT), with sales of $83.0 million, up 75%, driven by PASCAL and early EVOQUE adoption. TAVR, the core franchise, grew only 5% (6% constant currency) to about $1.04 billion, and management cut full-year TAVR growth guidance to 5-7% from 8-10%.
Adjusted gross margin was 77.1%, down from 77.7%, while adjusted SG&A and R&D rose as a percentage of sales to fund TMTT and TAVR field expansion and clinical trials. The company also announced two structural heart acquisitions: JenaValve, a developer of a transcatheter aortic regurgitation valve with FDA approval anticipated in late 2025, and Endotronix, a heart failure sensor company that recently received FDA approval for Cordella. The combined upfront cash price is about $1.2 billion, plus up to $445 millionc in milestone payments, and both deals remain subject to closing conditions including antitrust and foreign investment approvals.
Management expects minimal revenue from these deals in 2025. Separately, the previously announced $4.2 billiond sale of the Critical Care business is on track to close in late Q3 2024. Liquidity remains solid, with $2.0 billion in cash and short-term investments against roughly $600 million of total debt.
For investors, the key tension is between a strong TMTT growth engine and a weaker-than-expected TAVR franchise. The TAVR guidance cut is the most important operating signal, since TAVR is the largest revenue driver.
The acquisitions add long-term optionality in aortic regurgitation and heart failure but carry integration and execution risk, and the Critical Care divestiture will reshape the reported revenue base in the second half of the year. The company guided Q3 2024 sales of $1.56-1.64 billion, including Critical Care for the full quarter, and EPS of $0.67-0.71.
02—Key points
Key Highlights
- Q2 2024 net sales from continuing operations of $1,385.9M, up 7% reported and 8% constant currency; GAAP diluted EPS $0.61 versus adjusted EPS $0.70
- TMTT sales of $83.0M, up 75%, led by PASCAL and early U.S./European launches of EVOQUE; full-year TMTT guidance raised to the high end of $320-340M
- TAVR sales of about $1.04B, up 5% (6% constant currency); full-year TAVR growth guidance cut to 5-7% from 8-10% on lower-than-expected growth
- Adjusted gross margin of 77.1% versus 77.7% a year ago; adjusted SG&A rose to 31.2% of sales and adjusted R&D to 18.6%, reflecting TMTT/TAVR field expansion and trial spending
- Agreed to acquire JenaValve (transcatheter aortic regurgitation) and exercised option to acquire Endotronix (heart failure sensor, Cordella FDA-approved); about $1.2B upfront cash plus up to $445M in milestones
- Critical Care divestiture for $4.2B expected to close late Q3 2024; Q3 2024 sales guidance of $1.56-1.64B and EPS guidance of $0.67-0.71 include Critical Care for the full quarter
- Balance sheet remains strong, with $2.0B in cash and short-term investments and about $600M in total debt as of June 30, 2024
03—Questions
Frequently Asked Questions
Why did Edwards lower its full-year TAVR growth guidance?
Management said second-half TAVR growth is expected to track the first-half year-over-year rate, which lowers full-year TAVR growth to 5-7% from 8-10%. The release cites lower-than-expected growth, regional competitive pressure, and a non-meaningful change in global competitive position, while pricing was maintained. TAVR remains the company's largest franchise, so this is the most important operating change in the report.
How significant is the TMTT growth, and what is driving it?
TMTT sales of $83.0M grew 75% year over year, driven by the PASCAL repair system and early commercial introduction of EVOQUE in the U.S. and Europe. Management raised full-year TMTT guidance to the high end of $320-340M. Coverage for EVOQUE is still pending, and the company is engaged in a CMS National Coverage Determination process for transcatheter tricuspid valve replacement, which management believes could move quickly.
What are the financial terms and risks of the JenaValve and Endotronix acquisitions?
The combined upfront cash price is about $1.2B, with up to an additional $445M payable on milestones. Both deals are subject to closing conditions, including antitrust and foreign investment approvals. Management expects minimal revenue contribution in 2025. Risks listed in the filing include failure to close, transaction costs, integration and execution risk, and disruption to management and customer relationships. JenaValve's valve is anticipated to receive FDA approval in late 2025, and Endotronix's Cordella awaits a CMS coverage determination expected in early 2025.
How will the Critical Care sale affect Edwards' reported results?
Critical Care is presented as discontinued operations and generated $246.4M in Q2 2024 sales, up 5%. The $4.2B sale is expected to close in late Q3 2024. Edwards' Q3 guidance includes Critical Care for the full quarter, and the company will provide pro forma Q4 2024 information reflecting the divestiture and the new acquisitions. Investors should expect continuing-operations revenue to look materially different after the sale closes.
What does the gap between GAAP and adjusted EPS tell investors?
Q2 GAAP diluted EPS was $0.61 versus adjusted EPS of $0.70. The adjustments included $79.7M of separation costs tied to the Critical Care sale, $8.1M of litigation expenses, and $2.0M of intangible amortization. Adjusted EPS also benefited $0.04 from an unusually low 8.4% adjusted tax rate, so part of the EPS beat reflects tax timing rather than operations. Investors should weigh GAAP results alongside these non-GAAP adjustments.
04—Continue