Edwards Lifesciences (EW), an Irvine, Calif.-based biomedical company that specializes in developing heart valves and catheters, plows money into innovation and uses it as a competitive edge.
Edwards’ example shows that making innovation a priority demands patience, a long-term view and supportive management. Many companies have cut back on R&D due to economic pressures.
Edwards Lifesciences CEO Mike Mussallem talks with engineer Ian Cruz at the company lab in Irvine, Calif. View Enlarged Image
Ben Andrew, medical technology research analyst at Chicago-based William Blair and Co., says Edwards Lifesciences is on a roll due to its ability to innovate. In 2010 its sales rose to $1.45 billion, a 12% jump from the previous year. Its first-quarter revenue hit $404.5 million, beating analysts’ estimates by $20 million.
2011 sales are expected to surge in three of Edwards’ four main product lines: heart valve therapy up by a minimum 16%, cardiac surgery systems 9% and critical care 5%. Only vascular sales are expected to be flat.
Lucrative Heart Valve
Edwards has been an innovator in designing heart valves for decades, Andrew says. He says its Sapien transcatheter heart valve, which helps patients who are too high risk for open-heart valve replacement, has been a "valuation driver." Sapien has already generated $206 million in global — mostly European — sales in 2010, double that of 2009. Sapien is expected to win regulatory approval in the U.S. in October 2011.
"As they’ve gained a reputation for quality, they’ve taken market share," Andrew said. Edwards competes against companies such as Medco Health Solutions (MHS), Boston Scientific (BSX) and St. Jude Medical (STJ).
In his 2011 quarterly report on Edwards, Andrew says it "is continually developing innovative products to contribute to the company’s future growth." He cites positive clinical trials on a new eSheath system that reduces vascular complications and GlucoClear, a new glucose technology.
CEO Sets Pace
CEO Mike Mussallem encourages innovation. "Mussallem sets the strategic direction, encourages innovation, without micromanaging," Andrew said.
Mussallem says that innovation spurs Edwards’ growth. "We’re a patient-focused company. When we do something that affects the way medicine is practiced or innovating therapy, we create value," he said.
Not only does Edwards focus on patients, but Mussallem says it has learned that innovation requires patience as well. In the past biomed firms would throw out an idea, experiment, and see if the market would bite. Now the regulatory market demands evidence and long clinical trials, taking up time.