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Investing.com -- Moody’s Ratings has affirmed Edwards Lifesciences Corporation’s Baa2 ratings while revising the outlook to positive from stable, the credit rating agency announced Wednesday.
The rating affirmation reflects Moody’s expectation that Edwards will maintain its leadership position in medical devices for structural heart diseases while keeping low financial leverage. Despite increasing competition in transcatheter aortic valve replacement (TAVR), the company’s newer offerings in transcatheter mitral and tricuspid therapies (TMTT) are creating fresh growth opportunities.
The positive outlook change stems from potential significant expansion in the TAVR treatment population based on recent clinical data, along with Edwards’ growing success in its TMTT portfolio. These factors are creating upward pressure on the credit rating, despite rising competition and a recent regulatory setback in Edwards’ planned acquisition of JenaValve Technology, Inc.
Moody’s highlighted Edwards’ position as the world’s leading manufacturer and distributor of heart valves and related cardiovascular products. The agency expects the company’s TAVR business to continue solid growth over the next few years as adoption rates rise. A recent study supports TAVR use in non-symptomatic patients with severe aortic stenosis, with ongoing studies potentially expanding use to less severe patients.
The credit profile benefits from Edwards’ very low financial leverage, which Moody’s anticipates will remain below 1x debt-to-EBITDA absent large acquisitions.
The rating is constrained by Edwards’ narrow product focus, with TAVR expected to comprise the majority of sales for the foreseeable future. This creates vulnerability to competition from larger global companies making inroads with TAVR offerings. The company also faces execution risk as it acquires smaller companies, some at development stage.
Factors that could lead to an upgrade include high growth in TAVR procedures, successful clinical trials, increasing diversity through strong TMTT business growth, and continuation of conservative financial policies.
Conversely, a downgrade could result from material erosion in TAVR market share, unexpected disruptions in manufacturing or quality assurance, or a shift toward more aggressive financial policies. Quantitatively, ratings could be downgraded if debt/EBITDA is sustained above 2.0x.
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