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Original Source: FD (FAIR DISCLOSURE) WIRE
. David Erickson, Edwards Lifesciences Corporation, VP, IR . Mike Mussallem, Edwards Lifesciences Corporation, Chairman & CEO . Corinne Lyle, Edwards Lifesciences Corporation, Corporate VP & CFO . Stan Rowe, Edwards Lifesciences Corporation, President, Percutaneous Valve Interventions
4Q04 gross profit margin of 61.5% was higher than 3Q04 and significantly higher than 4Q03. On a reported basis, total sales increased 5.8% to $237m driven by strong heart valve therapy sales. 4Q04 SG&A expenses of $82.7m were 34.9% of sales. Q&A Focus: New programs, trials, & guidance.
A. Key Data From Call 1. 4Q04 SG&A expenses = $82.7m. 2. 4Q04 R&D investment = $23.4m. 3. 4Q04 interest expense = $3.5m. 4. 4Q04 free cash flow = $38m.
S1. Results (M.M.) 1. 2004 Highlights: 1. EW had a great year on its largest and most profitable franchise, Heart Valve Therapy, where it achieved double-digit growth globally led by the rapid adoption of Perimount Magna in the US. 1. Strong sales of these high-margin products helped lift the Co.'s GM by more than 200 BP. 2. EW continued to invest in important near term growth drivers. 1. Peripheral stents and minimally invasive monitoring.
3. With 2004 total sales of approx. $932m, EW achieved its
$915-940m goal. 1. This accomplishment is all the more significant considering the fact that in Japan, a difficult reimbursement environment and the return of a heart valve competitor resulted in essentially flat YoverY sales. 4. R&D investment in 2004 was 20% higher than 2003 level, exceeding the Co.'s sales growth rate. 5. Net income, when adjusted for special items, achieved EW's 13-15% growth target. 6. Free cash flow of $138m for 2004 substantially exceeded the goal of $90-95m. 7. EW is realigning its Japan operations to sharpen its focus and lift the growth rate of this business. 1. This decision was prompted by the changing reimbursement environment and shifts in market trends for some of the Co.'s lower-margin distributed products. 2. Most notably, EW is divesting its Japan perfusion products business by $10-20m based on the achievement of certain milestones over the next 1.5 year. 3. EW will also exit its pacemaker distribution business by the end of 1Q05. 8. In conjunction with the above actions, the Co. is restructuring its Japan operations. 1. This will include the transfer or elimination of approx. 60 full-time positions resulting in a special charge of $6-9m in 1Q05. 2. The net result of the realignment will reduce annual earnings by approx. $3m. 9. These actions will result in increased sales growth rate and higher gross profit. 10. EW received conditional FDA approval to begin clinical trials for its percutaneous aortic valves. 2. 4Q04 Results: 1. On a reported basis, total sales increased 5.8% to $237m driven by strong heart valve therapy sales. 1. Highlights were 10% sales growth in the US and emerging
markets, and nearly that in Europe. 2. EW also generated a higher gross profit margin and strong cash flow. 3. Sales In Detail (Heart Valve Therapy): 1. On a reported basis, sales of Heart Valve Therapy products grew 13.8% in 4Q04 and 14.4% for the year led by the new Perimount Magna valves. 2. FX contributed $2.8m of growth for 4Q04. 3. Globally, underlying Heart Valve Therapy growth once again exceeded 10% for 4Q04, driven by share gains in the US and Europe. 1. This was despite a nearly 30% decline in Porcine valve sales. 4. For the full year, underlying Heart Valve Therapy growth also exceeded 10% and growth was strong in every region except for a slight decline in Japan.
5. Globally, sales of the Co.'s market leading Perimount valves
grew 15% for 4Q04 and full year. 1. Based on their superior performance, Perimount valves continue to be preferred over Porcine valves and today represent 95% of EW's total worldwide tissue valve sales. 6. Strong market adoption of Magna, EW's newest generation
Perimount valves has driven sequentially stronger sales growth
every qtr. in 2004, resulting in 2004 sales of more than $70m,
exceeding the original estimates. 1. Magna's unsurpassed clinical attributes are continuing to drive growth and command a 20% price premium over EW's leading aortic Perimount valve. 2. Based on its strong momentum, EW now expects Magna to become the leading tissue valve in the US, as early as the end of 2005.
7. In the US, total Perimount sales grew nearly 20% in 4Q04, led
by Magna aortic valves and Tricentrix mitral valve systems.
8. Strong Perimount and valve repair sales also led the growth in Europe. 9. In Japan, quarterly valve sales were down vs. 2003, and for the full year, down about $1.5m. 10. In March, EW will reach the anniversary of its competitor's reentry into Japan, at which time, EW expects its sales growth rate to return to double digits. 11. EW's Prima Plus valve received both regulatory clearance and reimbursement approval in physicians they have already begun using it. 1. Prima Plus expands the Co.'s product offering into the niche stentless valve market and strengthens the market leading position in this region. 12. EW's ThermaFix anticalcification process which offers a significant improvement in calcium reduction beyond EW's current market leading tissue treatment was introduced at last week's Society of Thoracic Surgeons meeting. 1. Magna with ThermaFix was introduced on a limited basis in 2004. 1. In 2005, the availability will be expanded. 2. EW expects this proprietary product enhancement to generate a modest price premium and drive further adoption among
younger patients. 13. Global heart valve repair sales grew approx. 10% for the full year. 1. EW is continuing to strengthen its leadership position in this area with new technologies and plan another new product introduction for 2H05 focused on an indication-specific
design. 14. The Co. will also drive repair market growth by building
awareness and focusing on clinician education. 4. Sales In Detail (Critical Care): 1. Reported sales grew 5.3% in 4Q04 and 8.4% for the year, led primarily by strong share gains in the US and emerging global markets. 2. FX contributed $2.3m of the growth for 4Q04. 3. Underlying growth for 4Q04 and full year was due primarily to robust pressure monitoring sales resulting from market share gains and sales of advanced technology catheters.
4. Growth was partially offset by this year's reimbursement
changes in Japan and the ongoing decline in base catheter
products. 5. For more than 30 years, EW has maintained its leadership
position in critical care by continually introducing enhancements to its …