Edwards sees Q1 income dip, despite 13.5% sales jump
The Irvine, Calif.-based company reported a net income for the quarter, ending March 31, 2012, of $65.1 million, compared with a net income of $63.9 million for the same period in 2011. First quarter net sales increased 13.5 percent to $459.2 million compared with the same period last year.
As previously announced, the company has begun reporting sales this year in three new product groups—surgical heart valve therapy, which combines surgical heart valves and cardiac surgery systems; transcatheter heart valves (THV); and critical care, which includes vascular.
"Although the near term THV sales outlook has lowered our overall 2012 expectations, we remain as optimistic as ever about the long-term growth opportunity represented by transcatheter valves," said Michael A. Mussallem, chairman and CEO of Edwards, in a statement.
For the first quarter, the company reported surgical heart valve therapy sales of $203.6 million, which included $27.6 million of cardiac surgery systems sales. Sales growth was 2.7 percent over first quarter last year. Surgical heart valve sales grew 2.2 percent over the prior year period. Edwards said the growth outside the U.S. of 6.6 percent was driven primarily by penetration of its products in Europe and Japan.
THV sales were $121.5 million for the quarter, a 67.2 percent increase over first quarter last year. These results were driven by the U.S. launch of the Sapien valve, with sales of $41 million. Outside the U.S., sales growth was approximately 18 percent.
"For 2012, we are lowering the range of our projected overall THV sales by $30 million given an estimated one quarter delay in the expected approval of Sapien for high-risk surgical patients in the U.S., current market dynamics in Europe, and the effect of current foreign exchange rates," Mussallem said. "For the full year, we now expect THV sales in the range of $530 million to $600 million, and an underlying growth rate over last year that is still likely to exceed 70 percent. In the U.S., we now estimate sales of $200 million to $240 million."
Critical care product group sales were $134.1 million for the quarter, including vascular sales of $12.5 million. Sales of this product group were consistent with the prior year period. Critical care sales were $121.6 million with growth of 0.9 percent. The company said that growth was driven by advanced monitoring products in Europe and the U.S., offset by a $4.3 million decline in discontinued products from the prior year period. Domestic and international sales for the first quarter were $186.6 million and $272.6 million, respectively.
For the quarter, selling, general and administrative expenses were $177.2 million for the quarter, or 38.6 percent of sales, compared to $150.3 million in the same period last year. This increase was driven primarily by U.S. transcatheter valve launch-related investments, according to Edwards. Research and development expenses for the quarter grew 16.3 percent to $68.6 million, or 14.9 percent of sales. The company said the increase was primarily the result of additional investments in clinical studies and new product development efforts in the company's transcatheter valve programs.
Total debt at March 31, 2011 was $179.4 million, Edwards reported. Cash and cash equivalents and short-term investments were $409.5 million at the end of the quarter, resulting in net cash of $230.1 million. During the quarter, the company repurchased approximately 1.21 million shares of common stock for $100.3 million.
“At current foreign exchange rates, we now expect full year sales at the low end of our original range of $1.95 billion to $2.05 billion, which is approximately 20 percent underlying growth,” said Mussallem. “For the second quarter 2012, we project total sales of $470 million to $500 million.”