Edwards Lifesciences And The Booming Heart Valve Business

| About: Edwards Lifesciences (EW)
This article is now exclusive for PRO subscribers.

Edwards Lifesciences (NYSE:EW) stock is riding high on the sales of its innovative Sapien aortic heart valve replacement.

Sapien was approved by the FDA in November 2011 for patients with severe aortic stenosis who were too sick to undergo open-heart surgery. In June 2012, an FDA panel recommended that the agency approve the procedure also for patients who face a high risk if they underwent open-heart surgery, which is a wider market. In May, Medicare agreed to cover Sapien's cost.

At some point in July 2012, shares of Edwards reached an all-time high.

Heart valve replacement

Currently, open-heart surgery is the standard treatment for diseased aortic valves.

In an open-heart surgery, the patient's breastbone is cut open and the heart temporarily stopped.

But not everybody is candidate for open-heart surgery. Approximately 30 percent of patients with aortic stenosis are unable to have the traditional surgery because of advanced age, frailty or multiple medical problems.

The American Heart Association estimates that nearly 1.5 million people in the United States have aortic stenosis, the hardening or narrowing of the aortic valve caused by a buildup of calcium on the flaps of the valve. About 500,000 have a severe form of the disease, and half of those have severe shortness of breath, extreme fatigue, chest pain and fainting. Many cannot even walk enough to perform their daily activities.

Once symptoms of senile aortic stenosis occur, more than half of patients die within two years, without intervention. To restore normal blood flow, patients with severe aortic valve stenosis need open-heart surgery to replace the diseased valve.

Until recently the prognosis for patients who cannot be operated on, was poor.

But in the last few years, interventional cardiologists and heart surgeons have developed nonsurgical methods of replacing diseased valves. The procedure involves inserting an artificial valve by snaking a catheter through an artery. The artery may be accessed through small incision in either the patient's groin or chest.

The procedure, known as transcatheter aortic valve replacement (TAVR), is currently being used to replace only the narrowed aortic valves of the heart's 4 valves. Similar approaches may one day be used to fix the problems of the mitral and pulmonary valves too.

Sapien vs CoreValve

The only TAVR procedure currently approved in the U.S. is Edwards Lifesciences' Sapien system.

Medtronic's (NYSE:MDT) CoreValve is still undergoing clinical trials in the U.S.

But in Europe, the CoreValve has been approved since 2007 and is competing with Sapien.

The Sapien THV (Transcatheter Heart Valve) is made of cow tissue and polyester supported with a stainless steel mesh frame. To replace the diseased valve, the Sapien THV is compressed into the end of a long, thin, tube-like device called a delivery catheter.

The delivery catheter, which is slightly wider than a pencil, and the Sapien THV are inserted into the femoral artery through a small cut in the leg and threaded to the site of the diseased valve.

The valve is expanded by the balloon to fill the space of the old valve and it literally crushes the aortic valve out of the way, leaving a new valve in its place. The new valve is immediately functional.

While the outcomes in survival and symptom improvement are similar between comparable patient groups with either the CoreValve or Edwards Sapien Valve, there are notable differences in features.

The structure and design of the CoreValve allows for the valve to be more easily delivered and repositioned during delivery.

In contrast to the Sapien Valve, which requires either a large 22 French or 24 French sheath for delivery, the CoreValve is able to be delivered through a smaller 18 French sheath.

Since the anatomy of many patients cannot accept a 22 or 24F sheath, the CoreValve can be a good alternative for them.

Also: the ability to adjust the positioning of the valve during delivery gives the CoreValve a distinct advantage over the Sapien Valve. Due to the self-expanding nature of the Nitinol frame, the CoreValve can be deployed in stages allowing for subtle adjustments in position during deployment.

The Sapien Valve on the other hand, is rapidly deployed with a single balloon expansion that does not allow for repositioning during or after deployment.

In contrast to the Sapien valve which uses stainless steel, the CoreValve is a self-expanding valve with a Nitinol frame.

The choice of nitinol as opposed to stainless steel gives the CoreValve system the ability to be loaded onto a catheter delivery system that does not require a balloon.

Nitinol, a metal alloy of nickel and titanium, has unique properties.

At warmer temperatures, including body temperature, nitinol forms a very strong crystal structure referred to as austenite with a high radial strength.

At colder temperatures, however, such as when placed in an ice water bath, nitinol transforms into a complex monoclinic crystal structure known as martensite.

At this lower temperature, nitinol exhibits superelasticity, giving it 10 to 30 times the elasticity of ordinary metal, enabling the CoreValve metal stent frame to be tightly compressed within the small delivery sheath required for the TAVR procedure.

Also, nitinol has the unique property of shape memory.

The nitinol valve is given its shape at high temperatures by the manufacturer. Then it is cooled down to a small enough size so that it can fit the catheter which delivers it through the artery to the heart. Once in the body, the body temperature warms it up again and the nitinol "remembers" its original shape which it will regain.

Investor notes

A new report by the Millennium Research Group is projecting that the transcatheter aortic valve replacement procedure will be the single-most dominant force driving the U.S. market for heart valves and it will reach more than $1.5 billion in 2016.

That compares to a market value of $610 million in 2011, a nearly 146 percent jump in five years.

Edwards Sapien valve costs about $30,000 per patient in the US, not counting doctor and hospital fees.

Edwards reported its 2012 second-quarter revenue from transcatheter heart valves climbed to $145.8 million worldwide, and U.S. Sapien revenue totaled $61.4 million.

Edwards total sales of transcatheter heart valves show a 71 percent increase from the second quarter of 2011. That is the kind of growth that medical device companies can only dream about these days.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.