Though a bit expensive, I have recently upped my holding in Edwards to what may now be a full position owing to a full price and the plainly very high competition risk. Boston Sci, MDT and Abbott are all in the game, which is non-invasive heart valve replacement via artery from the groin. EW is a purer play than the other big companies and still (I think) highly-regarded. (I believe I have seen contributions from a cardiologist on the board and perhaps he could weigh in.)

My notes show the shorts under 1%, LTD/cap. ~ 24, RS OK, PS 8.3, P/FCF about 50 so FCFY < 2 but margin 16, OM 26 and history OK, ROIC 19 and history OK. I put in growth at 15%. 55% of sales are outside the US.

I may have bought a few more only because of the dearth of opportunity; usually, er always, a bad idea! With this one, a big market fall to get a decent price would be required. EW fell a bit more than others yesterday but I could find no news: one to put on the watchlist if you like risk maybe. With an aging population, the potential is enormous.


I like their valve. However, as you have stated, there is a lot of competition. I believe that CoreValve is my preferred at this time. It’s just easier and the data is just as good if not better than that for Edwards’ Sapien. Boston’s Lotus valve has the potential to be great as well. They’ve had some issues so it’s behind the others but given that is is fully deployable (put the sucker where you think it needs to be) and actionable (still tethered but the valve works like it normally would) and can still be retrieved at that point and redeployed if you decide you don’t like where it is and want to re-position.

I will also say that Medtronic is just easier to deal with when it comes to TAVR/TAVI (in my area at least). Edwards thinks their sh!t don’t stink sometimes and it really irks me.

Again, there is a lot of competition here which brings about my bigger point. Anyone investing in Edwards or the like needs to know that hospitals make almost no money off of these procedures. On many of them they lose money because the valves are very expensive and the reimbursement is just OK. The hospitals are investing in this procedure for two reasons. Patient’s want it and they want the patients. If they don’t do it, the patients will go elsewhere and get it and then they will lose all of that ancillary revenue and good press. Second, and most importantly, this IS the future. Cracking a chest to do a bypass or valve replacement in 20 years will be very uncommon as stent technology advances and the valve technology continues to improve. That said, this is about future revenue for hospitals not revenue today. As competition grows, pricing pressure will as well and these valves are going to get cheaper and cheaper which will depress margins for companies like Edwards. I would not be a player in Edwards beyond 2-3 years for that very reason but that is just me. Probably a very good shorter term play (1-2 years). Hope that helps.



Just musing on statements by HeartMD:

Is this what we saw in the stent market? How long did the “party” last for stent makers? What were their obstacles? How / why did the (current) big players survive?

Thank you MC for your expert opinion which was extremely interesting.

I am using IHI to play most of the field (MDT 11.5%) in a very general way but EW seems attractive owing to its reputation, as it is a purer play in this growth area, originally came through my screens and DD and still seems to be doing well. However, your comments show it will be necessary to keep a close eye on margins etc. Thank you.


It is eerily similar to the stent market. There are a lot of different factors in play. The stent market growth was just tremendous once drug coated technology came about. However, because of drug coated technology (which decreased the need for future procedures) the market became stagnant. This and the multiple players (Cordis, BS, Medtronic, etc.) created intense pricing competition that resulted in what was once a $3600 stent to now being anywhere from $800-$900 over the course of about 10 years (the price remained very high for about 2-3 years after the tech came available in 2003). Oh, and despite having the best drug (sirolimus) Cordis gave up making drug coated stents a few years ago because they didn’t believe it was worth future investment. But there were idiots running that show so that’s a whole other issue.

Now, the valve wont have the same issue with killing itself (the drug coated stents created fewer future procedures) like the stents did but what is the TAM here? I’ve not researched it but aortic valve replacements are not as common as placing a stent so the TAM is much smaller. Maybe someone who has put the time in can chime in on that.


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But is not the TAM (new acronym to me, had to google to get definition!) enormous owing to simple demographics and the likelihood of TAVR replacing open-heart surgery not only in qualifying cases, but completely?

I predict the days when surgeons cranked open the sternum and rummaged around with their hands will be the subject of great amusement to future medical students, while the market will take care of the demand/price factor for valves relative to stents, i.e. the op. will cost more. The patient is discharged after two or three days of observation and is ‘good to go’ (or I was) so big savings on convalescence.


Is there a group out there that sells the razor and blades for these valves?

Meaning, is there some sort of universal kit for them that you can use regardless of brand? This as the valve replacement market grows, the razor/blades company would take off regardless of price pressure on the valves themselves?

(Asking, I don’t actually know if this exists or not)