Edwards Lifesciences UPDATE BUY

EW : NYSE : US$80.27

Target: US$86.00

Edwards Lifesciences manufactures minimally invasive
medical devices for the cardiovascular market. Its
primary product line is centered on heart valve therapy
and includes tissue valves, mechanical valves, and repair
products. It has a large offering for critical care, with key
products for hemodynamic and pressure monitoring.

Life Sciences — Biomedical Devices and Services
Investment recommendation
We expect the lively bull-bear debate to continue following EW’s Q1 results
given that the company’s performance gave both camps ample ammunition
to voice their positions. Bulls should focus on the strong OUS TAVI results,
imminent XT approval, bullish SAPIEN 3 prospects and TMVR potential.
Bears will focus on TAVI shares losses in US. In the end, we see more “risk”
to the upside – both in terms of upside potential to current estimates and
positive news catalysts (IP litigation, royalty/injunction, XT approval); thus
recommend investors take a long bias.
Q1 turned out pretty much as expected, i.e. the opportunities remain intact
and the challenges (US TAVI share shifts) remain. Overall, recent events
may tip the scales in favor the bull argument — the growing body of clinical
evidence supporting TAVI therapy (CoreValve data could lift all TAVI boats),
coupled with the imminent approval of XT in U.S. Moreover, the potential
for a material royalty from MDT in light of EW’s recent patent wins are not
factored into consensus models, in our view.
We would accumulate EW shares and recommend investors continue to
focus on accelerating EPS growth potential in 2015/2016, when we see new
products accelerating revenue growth and operating margin expansion. We
maintain our BUY rating and raise our price target to $86 from $84.
Investment highlights
 Total sales grew 5% Y/Y to $528.4M (+5%), above our $519M estimate
but below the Street’s $525M.
 WW TAVI sales of $189.2M (+11.5% Y/Y) were above our $181.1M
estimate and the Street’s $188.1M. U.S. TAVI sales of $78M (-6% Y/Y)
were below estimates, while OUS TAVI $111M (+36%) blew past




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