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Morningstar | New TAVR Clinical Data Provides More Potential for Medtronic and Edwards Lifesciences

We were impressed, although not necessarily surprised by the favorable clinical data supporting the use of transcatheter aortic valves in low-risk patients revealed in late-breaking sessions at the annual American College of Cardiology meeting. For both Medtronic and Edwards Lifesciences, we had already assumed penetration of its TAVR products in this patient segment. As a result, we are leaving our fair value and wide moat for Medtronic intact. However, we plan to raise our fair value for narrow-moat Edwards Lifesciences after incorporating our projections for transcatheter mitral and tricuspid products into our valuation, as some of these emerging technologies have secured regulatory approval in Europe. We may also consider turning Edwards’ moat trend positive, as it makes progress developing and commercializing its range of transcatheter mitral technologies.

Consistent with data from intermediate-risk patients, TAVR is at least comparable to surgical valve replacement among the low-risk population. Medtronic’s CoreValve Evolut demonstrated non-inferiority to surgery, which we think paves the way for this additional indication. Edwards went one step further and demonstrated that Sapien is superior to traditional surgical valve replacement among low-risk patients, based on the rates of deaths, strokes, and rehospitalization after one year. We expect the strength of this latest Sapien data to translate into substantial penetration of the low-risk patient pool. We also think the data will reinforce Edwards management’s current strategy to hold its price, which over the last year resulted in some erosion of market share. Conversely, the clinical results may put more pricing pressure on Medtronic as it seeks to protect market share. We believe the growing amount of consistently favorable clinical data for Edwards could also make it more difficult for Boston Scientific to break out of third place, once it relaunches Lotus this year.