Original Source: FD (FAIR DISCLOSURE) WIRE
. David Erickson, Edwards Lifesciences, Investor Relations . Michael Mussallem, Edwards Lifesciences, Chairman, CEO . Corinne Lyle, Edwards Lifesciences, CFO
Management announced 3Q03 sales grew 24% vs. a year ago. Detailed guidance will be given at the Dec. investor relations conference. Q&A Focus: pipeline, restoring sales growth to double-digits, and competition.
A. Key Data From Call 1. 4Q03 total sales guidance is to be above current First Call consensus revenue estimates based on current foreign exchange rates. 2. 2004 underlying sales growth guidance is 6-9%. 3. 3Q03 SG&A was $70.5m or 34.2% of sales. 4. 3Q03 R&D nearly $17m. 5. 3Q03 debt-to-cap ratio was 34%. 6. 3Q03 inventory was $125m.
S1. 3Q03 Overview (M.M.) 1. Heart Valve Growth Rate: 1. Disappointed with US heart valve sales growth rate. 2. Confident market fundamentals remain sound. 3. Have a plan to get back on track for double-digit growth. 2. New Products and Product Pipeline: 1. Gives EW high degree of confidence that co. can accelerate overall growth rate in 4Q and beyond. 3. Financial Goals: 1. EW remains on track to achieve other financial goals in 2003.
S2. 3Q03 Sales Results (M.M.) 1. 3Q03 Sales Results: 1. Drivers to results were: 1. Cardiac surgery and critical care products.
2. Offset by vascular profusion and distributed product lines.
2. 3Q03 sales grew 24% vs. a year ago, including impacts of:
1. Impact of Japan consolidation. 2. Profusion divestiture.
3. Foreign exchange. 3. Adjusting for Japan consolidation and profusion divestiture, 3Q03 sales growth was 7.5%. 1. Foreign exchange contributed 3.7%. 4. 3Q03 total underlying sales grew $7m or 3.7% vs. last year. 5. YTD total sales increased 27%. 1. Excluding the Japan consolidation and profusion divestiture,
YTD sales growth rate was over 10%. 2. Foreign exchange contributed approx. half that resulting in a YTD underlying sales growth of 5%.
3. Declines in less strategic product lines were large enough
to reduce sales growth rate substantially, but will have diminishing impact as sales of new initiatives begin to accelerate. 6. Japan Consolidation Update: 1. Oct. 1 marked one-year anniversary.
2. Beginning in 4Q, will no longer need to adjust growth rates
to account for transaction. 3. EW total full-year sales will now be more than $850m. 7. Cardiac Surgery Sales Results: 1. 3Q03 cardiac surgery sales grew 16% vs. last year. 2. Excluding Japan consolidation, 3Q growth was 11% and 14.5% YTD. 3. On underlying basis, cardiac surgery sales grew $7m or 7.5% in 3Q and $27m or 9.5% YTD. 4. Drivers were sales of paramount heart valves and repair products. 5. Offsets included 15% decline in porcine valve sales. 8. Japan Sales Results: 1. Growth continues to be strong at 20+%. 2. Partially offset by 5.4% cardiac surgery growth rate in US in face of aggressive competition. 3. Continue to drive market's rapid conversion away from mechanical valves.
4. Competitors continued absence gives opportunity to further
cement strong customer relationships. 5. Continuing to pursue regulatory approval of new valve in Japan. 9. US Sales Results:
1. Largest heart valve market globally. 2. 3Q03 results fell short of goals due to: 1. Greater than expected porcine declines. 2. Slower growth of pericardial valves. 3. Porcine valves account for less than 10% of EW valve sales. 3. Actions by competitors: 1. Resulted in greater porcine declines than expected. 2. Have caused confusion in US market about superiority of paramount valve data.
4. Paramount valve growth was below normal double-digit growth
rates. 5. YTD world-wide paramount sales are up 10%. 2. Heart Valve Market Overview: 1. Confident heart valve market fundamentals remain same. 1. Saw sharp decline in number of procedures in Aug. that rebounded in Sept. 2. Resulted in more pronounced seasonal impact than normally see in 3Q. 2. Expect overall annual growth rate for heart valves to be approx. 5%. 3. Mechanical valves continue to lose share to tissue valve due to negative side effects and complications. 4. Shift is driving overall annual growth rate in tissue valves double the market growth rate.
5. Paramount heart valve data attests to superiority of product.
1. Efforts are underway to ensure superiority of paramount heart valve is understood throughout medical community. 6. Tricentrix (phonetic) launched in US in late 3Q. 1. Proprietary holder system for paramount mitral tissue valve. 2. Clinician enthusiasm for product is growing. 3. Believe will boost penetration into mechanical and porcine valve market. 7. European mitral valve products doing well. 8. Expect FDA approval of Magna (phonetic) valve later this year. 9. Regulatory approval for Thermafix (phonetic) also expected
before year-end. 1. Plan to apply Thermafix to premium valves once approval received. 10. Endovascular Valve Repair Treatments: 1. Sales remained healthy and will continue to grow as introduce new repair technologies. 2. Announced sale of new ischemic ring earlier in month. 11. Endovascular repair program for mitral valve: 1. Is making good pre-clinical progress.
2. On track to begin clinical trials in 2004. 12. Endovascular aortic valve replacement initiative: 1. Progressing well.
2. Expect to launch human trials next year. 13. Emblux Embollic (phonetic) Management System: 1. Launched in quarter. 2. First and only product of its kind for use during cardiac surgery.
14. CO2 TMR showed strong sales growth in quarter. 1. Reached milestone 10,000 patients treated. 15. Shipped first units of Optimase(phonetic) surgical oblation system. 1. Atrial fibrilation treatment market continues to grow. 2. Expect it to grow to more than $100m over next few years. 16. Cardiac Surgery Sales Guidance: 1. 2004 cardiac surgery sales growth guidance is 10%. 2. Expect to make progress in 4Q toward achieving that goal. 3. Critical Care Results: 1. 3Q03 sales grew 24% vs. last year. 2. Excluding Japan consolidation, growth was 8.5%, half driven by foreign currency. 3. On underlying basis, 3Q03 critical care sales $3m or 4.3%, consistent with low to mid-single digit growth rate.
4. Increase due to solid sales growth in most product categories
with particular strength in developing countries. 5. Off-sets to growth included decline in base catheter products as shift customers to higher technology alternatives. 6. Precep (phonetic) sales continue to build. 7. Critical Care Sales Guidance: 1. Expect low to mid-single digit sales growth rates this year and next. 4. Vascular Sales Results: 1. 3Q03 vascular sales grew 2.3% on reported basis. 2. On an underlying basis, which excludes Japan consolidation and foreign exchange, sales declined $1m or 7.3%. 3. International and Lifepath AAA (phonetic) Sales Results:
1. Strong results offset by declines in base vascular products
and residual US distributor issue. 2. Lifepath implant sales in Europe are building, while US sales were down slightly due to Phase III clinical trial limits. 3. Will file PMA in 1Q04.
4. Expect US approval late next year. 5. Patent Infringement Lawsuit: 1. Filed against Medtronic, Cook, and Gore related to patent for endovascular graft technology. 2. Part of patent asset protection initiative. 3. Lifestem products were launched in US and Europe in 3Q. 1. Developing US sales team and have completed initial training. 2. Will leverage existing vascular sales channel in Europe. 4. Self-expending stent mfg. transfer to EW going smoothly. 1. Should be fully functioning in 4Q.
2. Plans to transfer balloon-expandable stent mfg. are on track.