Edwards Lifesciences (EW, Financial) reported exceptionally strong results for the final quarter of 2019, with U.S. transcatheter aortic valve replacement (TAVR) revenues accelerating to +40% growth, driven by approval for use in low-risk populations. In addition, Edwards benefited from some share take from its second largest TAVR competitor, Medtronic, which had problems meeting the rapid increase in TAVR demand. However, Edwards stock sold off as investors were disappointed that management maintained conservative growth guidance for 2020 and, subsequently, the spread of COVID-19 began disrupting the normal operation of non-emergency procedures at hospitals and cardiac catheterization labs. We do not think many TAVR or SAVR procedures can be postponed longer than a few weeks or months, as the prognosis for severe aortic stenosis is quite dire, so the revenue risk to Edwards should be mostly related to short-term timing. As such, Edwards’ valuation has become increasingly attractive and we will look to opportunistically add to positions.
From David Rolfe (Trades, Portfolio)'s Wedgewood Funds first-quarter 2020 shareholder letter.
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