Following positive news from trials that could significantly expand demand for its heart valves, Edwards Lifesciences (NYSE:EW) shares sky-rocketed. The trials show that the company's transcatheter heart valves work as well (and sometimes better) than traditional open heart surgery in patients at intermediate risk. The study could lead to Edwards Lifesciences heart valves becoming more widely used, giving it a valuable edge in its battle for market share with medtech Goliath Medtronic (NYSE:MDT).

First, a bit of background
1.5 million American patients suffer from aortic stenosis, or the narrowing of their aortic valve, a life-threatening condition that can lead to heart failure. In order to prevent heart failure, patients undergo surgical aortic valve replacement (SAVR), a procedure in which the narrowed aortic valve is removed and replaced with a mechanical valve or a tissue valve.

However, SAVR may not be the best option for elderly, or otherwise frail and high-risk patients. In these cases, a less invasive replacement procedure called transcatheter aortic valve replacement (TAVR) is done that inserts a valve within the existing, narrowed aortic valve.

Because baby boomers are living increasingly longer lives and valves can fail over time, the number of TAVR procedures will likely grow over the coming decade. TAVR procedure growth will come from both newly diagnosed patients and the need to replace failing valves in patients who have previously received a replacement valve in a SAVR procedure.

If that's true, then Edwards Lifesciences and Medtronic could benefit most because both of these companies make replacement valves that are used in TAVR procedures. Edwards Lifesciences makes the Sapien XT and Sapien 3 and Medtronic makes the CoreValve.


TAVR procedures are already driving significant sales growth at Edwards Lifesciences, where they account for more than half of trailing 12-month revenue.

Last quarter, revenue from valves used in transcatheter heart valve procedures (THV) grew 25% year-over-year to $334.4 million. After adjusting for currency conversion, underlying sales growth for Edwards Lifesciences' THV devices was 32.4%. 

Momentum for THV sales is expected to continue for Edwards Lifesciences this year. Edwards Lifesciences forecasts that THV procedures will grow by an additional 15% to 25% this year, fueling total top-line sales of between $2.6 billion and $2.85 billion and bottom-line EPS of between $2.57 and $2.67, up from $2.29 in 2015.

Expanding use
Currently, TAVR procedures are only done in patients deemed too high-risk for open heart surgery, a patient population that, by number, is the smallest patient population in this indication.

Roughly half of all patients diagnosed with narrowing aortic valves are deemed to be at low risk for open heart surgery and between 30% and 40% of patients are categorized as intermediate risk. The remainder are categorized as too high risk for the open heart procedure and thus, are candidates for TAVR.

However, results from key studies by Edwards Lifesciences suggest that TAVR may be appropriate in some non high risk patients.

Earlier this week, Edwards Lifesciences reported results from a head-to-head study of TAVR procedures versus open heart procedures in intermediate risk patients. In this study, patients receiving Edwards Lifesciences valves through TAVR did as well, and sometimes better, than patients who underwent open heart surgery.

Specifically, the rate of all cause mortality or stroke in Sapien XT TAVR patients was 19.3% versus 21.1% for open-heart surgery patients at the two-year mark. Patients receiving the Sapien XT transfemorally did even better, with an event rate of 16.3%.

Edwards Lifesciences also reported that transcatheter aortic valve replacement, or TAVR, with its Sapien 3 valve was superior to open-heart surgery in intermediate-risk patients.

The results could lead to more intermediate risk patients being treated via TAVR, rather than SAVR, significantly expanding Edwards Lifesciences target market. According to Medtronic, the TAVR market will reach $4 billion by 2020, and based on Edwards Lifesciences success, Edwards Lifesciences appears well positioned to capture a big share of that market opportunity.

Looking ahead
Edwards Lifesciences study results may give it an edge against Medtronic's CoreValve, however, Medtronic is also conducting studies evaluating CoreValve in the intermediate risk population. Results from Medtronic's intermediate study should be available later this year and if results are similar to Edwards Lifesciences' trials, then the battle will shift to proving TAVR's non-inferiority in low-risk patients.  

Edwards Lifesciences plans include enrolling patients in its head-to-head study of TAVR versus open heart surgery in low risk patients soon, and Medtronic launched its low risk patient study in February. Given that both companies could have results available from these studies in 2018, it would seem that this battle is far from over.