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Animal-Tissue Valves at Heart of Edwards' Success

Medical devices: The Irvine company is capitalizing on new technology to capture a burgeoning market.


In a scene that mingles stark old-world slaughterhouses with high-tech surgeries, thousands of pig hearts and hundreds of cow tissue pieces are unloaded daily at Edwards Lifesciences Corp. and transformed into life-saving heart valves.

For the Irvine medical device maker, the unsightly animal parts constitute precious cargo. Animal-tissue heart valves, especially those made with more malleable and longer-lasting bovine flesh, are gaining favor here and abroad over mechanical ones as surgeries to repair coronary valves burgeon.

Edwards is the only company with federal approval to sell cow-based valves in the U.S. and is a major provider of such products overseas. Worldwide, sales of cow tissue valves are growing at a 15% clip, analysts say, and Edwards is parlaying its bovine monopoly to make itself the world's dominant maker of heart valves--an $825-million market last year.

"With the population growing and heart valves increasing their penetration in developing nations, like India and China, I see this market growing solidly for at least the next five to 10 years," said Bud Leedom, an analyst with Wells Fargo Van Kasper.

And Edwards is in an excellent position to capitalize on its technology, said Tim Nelson, an analyst with US Bancorp Piper Jaffray.

The company also has caught the attention of Wall Street, where investors boosted Edwards stock to a 52-week high of $28 a share during trading Friday. The stock settled a bit to close at $27.78 a share, up 82 cents, on the New York Stock Exchange.

But competitors are gearing up.

In March, Medtronic Inc. in Minneapolis, the largest maker of heart pacemakers, bought the cow-based valve business of VenPro Corp. in Irvine. The VenPro product already is approved in Europe to correct congenital malformations of certain heart valves in children. Medtronic also introduced several new pig-tissue valves recently.

St. Jude Medical Inc. in St. Paul, Minn., the world's biggest maker of mechanical valves, has a bovine valve in European clinical trials, said company spokesman Peter Gove. It also is improving its mechanical valves to compete better against the more popular tissue products, he said.

Mechanical valves, co-invented by Edwards founder Miles "Lowell" Edwards 41 years ago, typically are used now in younger patients because they last a lifetime.

Patients, though, must take blood thinners for life to stop clots from forming, and such medicine tends to make patients bruise more easily and bleed from cuts more profusely, drawbacks that make some people less active.

No such drugs are needed for valves made of animal tissue. But those valves don't last a lifetime; they eventually stiffen and calcify and must be surgically replaced. Pig tissue lasts about 10 years; cow tissue 15 years. Cow tissue also is more flexible, making it easier for surgeons to sew in.

Dr. Lawrence Cohn, a Harvard Medical School professor of cardiac surgery, has congenital heart problems that forced him to undergo surgery to replace his aortic valve four years ago. A surgeon who has implanted scores of heart valves, he wanted an Edwards cow-tissue valve for himself.

"I'm living a completely normal lifestyle. I'm playing golf, tennis and traveling around the world," said Cohn, 60.

That's what a growing older population wants, industry experts say. They are used to being active and don't want diseased or worn-out heart valves to limit their lifestyle. Their demand helped create a market that has grown 13% in three years.

Last year, new valves or valve parts were implanted in more than 300,000 patients worldwide--about 90,000 in the U.S.--and the number is expected to grow by at least 5% a year, analysts say. Edwards has about 32% of the worldwide market for all valves, followed by St. Jude with 31% and Medtronic with 18%, analyst Nelson estimates.

"It's a neck-and-neck race," but Edwards should pull ahead to control 35% by the end of the year, he said.

Porcine valves were introduced in 1975, and Edwards received U.S. approval in 1991 to use bovine products as aortic valve replacements, which account for about 60% of heart valve surgeries.

Last year, the company won U.S. approval to use cow-valve products to replace the mitral, or bicuspid, valve in the right atrium of the heart. Those valves represent 39% of the surgeries. Two other valves in the heart rarely need to be replaced.

To make the devices, Edwards employees, clad in sterile gowns and gloves, peer through magnifying glasses and microscopes to trim porcine organs or stitch flat strips of bovine flesh together.

Those products, Chief Executive Michael Mussallem says, are the future of Edwards. But getting the company this far took some doing after it was spun off 15 months ago from Baxter International Inc.

Edwards "inherited a whole pile of junk," analyst Nelson said, along with $520 million in debt from Baxter.

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