Dive Brief:

• Edwards Lifesciences forecast another year of growth in 2022 behind double-digit sales growth for its transcatheter aortic valve replacement business and a strong jump for the transcatheter mitral and tricuspid valve unit.
• Overall, the company projected a range of $5.5 billion to $6 billion for sales in 2022, representing low-double-digit growth. CFO Scott Ullem said Wednesday during Edwards' annual investor conference that the projections are dependent on how the pandemic will impact its businesses next year. "Our plan is based upon the assumption that we have a gradual recovery from COVID, and we're assuming no significant impact from new variants," Ullem said. However, he warned that a longer-than-expected recovery or a significant impact from omicron or other variants "would be a negative to the guidance that we're providing."
• Edwards' growth in 2022, and beyond, is largely expected to come from its transcatheter units: TAVR and the transcatheter mitral and tricuspid therapies, or TMTT. The company projects its TAVR business to bring in $3.7 billion to $4 billion in sales next year, representing year-over-year growth of 12% to 15%. While TMTT will not make up a large percentage of overall sales next year, the unit is projected to nearly double, once again, to between $140 million to $170 million.

Dive Insight:

Edwards, much like other procedure-dependent medtechs, has had an up-and-down last two years as the pandemic forced hospitals to shut down non-emergent care and limit normal operations. However, Edwards is also rather unique in the industry as its primary business line, TAVR procedures, can be more critical for patients than procedures like orthopaedic surgeries.

While the company has seen volumes limited throughout the pandemic, 2021 is still expected to end up largely where the company projected at last year's analyst day, even with the emergence of the omicron variant over the last several weeks.

Edwards said Wednesday that it will hit the full-year guidance provided in October of $5.2 billion to $5.4 billion in sales.

While J.P. Morgan wrote the update was a good sign for Edwards, the analysts added that there still may be a need for caution early next year.

"We view this update as an overall positive signal for trends into 4Q21 for both Edwards and the broader MedTech space, especially given the company's relatively early 3Q21 reporting date (10/27) before Omicron even began hitting headlines in November," J.P. Morgan analysts wrote. "It's important to remember that the company's guide was already fairly conservative, so we still think a cautious stance is worthwhile heading into the New Year for more impacted procedures."

SVB Leerink analysts wrote that Edwards is better positioned for a rebound than other medtechs as "TAVR will see a fast and sharp recovery post-COVID [versus] other procedures."

Edwards stock price was up 3.4% when the market closed Wednesday and slightly up Thursday morning.

2022 & beyond

Edwards' success going forward will be primarily dependent on its TAVR business, which will account for roughly two-thirds of sales this year. After TAVR sales grow by about 20% in 2021 — although the comparison is to a pandemic-pressured 2020 — Edwards is projecting another year of double-digit growth for the unit next year.

The company's confidence in continuing growth for TAVR is due to a market that is still not full tapped. According to Edwards, the TAVR market is going to double in the next six years, growing from $5 billion today to $10 billion by 2028.

TMTT is another key growth area for Edwards despite being the company's smallest business segment. While TAVR has taken off over the last 10 years, transcatheter procedures for mitral and tricuspid have recently gained steam as companies like Edwards and Abbott Laboratories are focusing on the two valves.

The opportunity for transcatheter mitral valve replacement market is projected to be much larger than TAVR. Mitral regurgitation, when the valve leaks blood back into the atrium of the heart, is the most common type of valvular disease and impacts about 2% of the global population, according to the National Center for Biotechnology Information.

Bernard Zovighian, corporate vice president for Edwards' TMTT business, said Wednesday that there are about 4 million potential patients in the U.S. alone and adoption within that population is minimal. 

Much like TAVR, Edwards sees significant growth for the mitral and tricuspid market over the next six years. According to the company, the TMTT market will grow from about $1 billion today to $5 billion by 2028. Even with the projected growth, Zovighian said market adoption will just be 5% by 2028.

TMTT sales will still be below $200 million in 2022 even if the unit hits the high end of Edwards' projections, compared to the multi-billion dollar TAVR business. However, William Blair analysts wrote that TMTT could one day reach similar heights as the market grows to the $5 billion mark.

"If Edwards only captures a third of this market (something we think is relatively conservative given its early leadership and broad portfolio), it could add another $1.5 billion in annual sales, demonstrating how transformational the TMTT market could prove for long-term growth," the analysts wrote.

Any significant contributions are likely years away, however. Edwards has multiple products expected to be approved in both Europe and the U.S. later next year, which is likely to delay any revenue additions until 2023 and beyond. TMTT's sales growth next year will primarily be made up of sales for the Pascale valve system in Europe.

BTIG analysts were less bullish on the mitral opportunity, writing that they see "the TMTT market as highly promising but believe it requires more clinical evidence, awareness, and added imaging expertise to expand more rapidly." As far as any boost for the company overall, the analysts added that "we feel that EW's market cap already prices in many of the things going right and bakes in a successful mitral program."

Ongoing pandemic pressure

Even though Edwards outlined growth across the company in 2022, there are still challenges that could impact its performance over the coming quarters.

The omicron variant, and any future variants, add more uncertainty into an already complex environment of fluctuating procedure volumes. Furthermore, issues like hospital staffing shortages are impacting medtechs across the industry, limiting the ability of healthcare facilities to treat or accept normal patient volumes.

Daveen Chopra, Edwards' corporate vice president for surgical structural heart, said that staffing shortages are the "number one thing I hear from my customers in the U.S. and Europe." Chopra was confident that more life-threatening conditions, like cardiac conditions, would be prioritized but still acknowledged that shortages could impact procedure volumes.

"It's tight. It's very tight. They feel the pressure," Chopra said.

Larry Wood, corporate vice president of TAVR at Edwards, said that hospitals are being "really aggressive about trying to solve this" but was unable to say when or if the problem would be taken care of.

William Blair analysts wrote that the staffing shortages could limit how many TAVR procedures that have been backlogged due to delayed or canceled surgeries Edwards can work through.

"Given the difficult environment with staffing shortages, we would not expect a bolus of these patients in any given quarter, but the deadly nature of this disease should bring patients back into the funnel for treatment, offering a gradual tailwind for growth and potentially upside to next year's expectations," the analysts wrote.