Third Quarter Highlights:
- Sales grew 11 percent; or an underlying1 13 percent
- Global THVT sales grew 17 percent; adjusted sales increased 20 percent
- THVT U.S. sales grew 20 percent; OUS sales grew 13 percent, or an underlying 21 percent
- EPS grew 22 percent; adjusted EPS grew 24 percent
- Reaffirmed 2017 adjusted sales and EPS guidance
- Introduced SAPIEN 3 Ultra System
"We are pleased to report strong third quarter performance that delivered double-digit overall organic growth driven by robust sales of innovative therapies. Sales were in line with our expectations and were lifted by 20 percent global underlying growth in TAVR. And, we continue to aggressively pursue breakthrough structural heart therapies with the potential to drive significant future growth and help an even broader group of patients," said Michael A. Mussallem, chairman and CEO. "While we are assisting a number of our employees who were personally affected by the recent natural disasters, we were fortunate to have experienced minimal business impact."
Third Quarter 2017 Results
Sales for the quarter ended September 30, 2017 were $821.5 million, up 11.1 percent. Including the consumption of $17.0 million of stocking inventory in Germany, adjusted sales were $838.5 million, up 12.9 percent over the third quarter last year. Net income for the quarter ended September 30, 2017 was $170.1 million, or $0.79 per share. Adjusted EPS grew 23.5 percent to $0.84. Adjusted EPS would have been $0.88 this quarter based on the excess tax benefit estimated in previous guidance.2
For the quarter, the company reported Transcatheter Heart Valve Therapy (THVT) sales of $481.2 million, a 17.3 percent growth rate over the third quarter last year. Adjusted THVT sales were $498.2 million, up 20.5 percent on an underlying basis. Growth was strong both inside and outside the U.S. driven by continued therapy adoption and is consistent with the company's expectation of a $5-plus billion opportunity by 2021. The company recently introduced its CE Mark-pending SAPIEN 3 Ultra System at the PCR London Valves meeting. This system features advancements designed to help TAVR heart teams simplify procedures, save time and reduce potential complications.
In the U.S., THVT sales for the quarter were $311.6 million, a 20.1 percent growth rate over the third quarter last year. "Strong therapy adoption continued to fuel an increase in procedures broadly across our network of hospitals, led by our best-in-class SAPIEN 3 valve," said Mussallem.
Surgical Heart Valve Therapy sales for the quarter were $195.6 million, up 2.4 percent compared to the third quarter last year, or up 2.2 percent on an underlying basis. Growth was driven by strong performance of the INTUITY Elite valve system and solid growth in core products outside the U.S. This growth was partially offset by the continuing shift from the company's surgical aortic valves to SAPIEN 3 valves in the U.S. and Europe.
Critical Care sales were $144.7 million for the quarter, representing an increase of 4.5 percent versus last year, or 5.2 percent on an underlying basis. This performance was driven by solid growth of core products and the Enhanced Surgical Recovery program, particularly in the U.S. and Asia Pacific.
For the quarter, the company's gross profit margin was 74.0 percent, compared to 72.8 percent in the same period last year. This improvement primarily reflects the benefit of a more profitable business mix, led by growing sales of TAVR, as well as a favorable comparison of supply chain expenses. Partially offsetting these benefits were expenses associated with flooding from Hurricane Maria in Puerto Rico and the planned closure of the company's manufacturing plant in Switzerland.
Selling, general and administrative expenses increased 6.5 percent to $244.6 million for the quarter. This increase was driven by personnel and sales related expenses primarily in support of the transcatheter heart valve therapy product line.
Research and development investments for the third quarter increased 26.5 percent to $142.9 million. This increase was primarily the result of continued investments in mitral and aortic transcatheter valve programs.
Cash flow from operating activities for the third quarter was $310.8 million. After capital spending of $42.3 million, free cash flow was $268.5 million.
Cash, cash equivalents and short-term investments totaled $1.4 billion at September 30, 2017. Total debt was $1.0 billion.