Dive Brief:

• Edwards Lifesciences' transcatheter aortic valve replacement sales increased by around 50% in the second quarter as an unanticipated backlog of patients fueled growth.
• Despite hospital heart teams not reporting significant backlogs, Edwards said more patients were flowing through the system than ever in the quarter, driving U.S. volumes to well above pre-pandemic levels.
• Edwards responded to the quarter by resetting its full-year TAVR growth guidance to 20%, versus 15% to 20% previously. Even so, the target assumes a deceleration in the second half, in part because of the assumption physicians and patients will vacation over the summer.

Dive Insight:

Edwards has said little about the potential for pent-up demand for TAVR in the past. Unlike hip and knee surgeries, TAVR cannot be deferred without raising the risk of morality. According to analysts at Evercore ISI, "most investors thought that given higher mortality amongst TAVR patients, there wouldn't be a meaningful backlog of patients similar to ortho." Edwards' results suggest that view was misguided.

"While hospital heart teams have not been reporting significant backlogs, we believe that procedure rates in Q2 were lifted because patients who previously postponed their doctor visits returned and were treated," Edwards CEO Mike Mussallem told investors on the quarterly results conference call.

Second-quarter TAVR sales came in at $902 million, up 48% on an underlying basis and up 14% on a two-year compounded annual basis. The results show TAVR was up versus the pre-pandemic period, most notably in the U.S. where Mussallem said volumes were "well above" historical levels. 

Edwards revised its guidance but the new forecast implies a sequential decline in the third quarter. Management forecast the decline despite exiting the second quarter with "strong momentum" and seeing patient flow outside the U.S. improve throughout the reporting period. 

"We are mindful of the fact that we probably got some help in Q2 from some of these patients coming off the sideline," Mussallem said. "We think there is going to be a pronounced seasonality associated with people both in the healthcare system and patients themselves wanting to get away and take a vacation."

Despite that warning, analysts see scope for Edwards to beat its forecast.

The team at Evercore said "it is tough to assume why backlog conversion would temper down in 2H." Similarly, analysts at William Blair said they think the TAVR guidance is conservative, "especially given the segment's improving momentum, underpenetrated market (especially low-risk), and peer medical device commentary for improving trends through the remainder of the year despite some pockets of COVID volatility."

Edwards provided an update on its effort to make transcatheter mitral and tricuspid therapies a key growth driver. Second-quarter sales totaled $22 million, beating expectations and driving Edwards to add $20 million to the top end of its full-year guidance. The Evercore analysts said the growth, which was "well above" expectations, "bodes well for the U.S. approval in 2H22."

Edwards, which is going up against Abbott Laboratories in the space, expects the TMTT market to be worth $3 billion by 2025.

The topic of the highly contagious delta variant didn't come up on the investor call, according to the transcript. CFO Scott Ullem did acknowledge "flare-ups of COVID in various regions" but downplayed any impact on the company's business.