Shareholders Sue Edwards Lifesciences Over Sapien Claims

Investors have filed suit against Edwards Lifesciences, accusing the company of lying about heart valve sales and misleading stockholders about demand for its Sapien devices.

In April, Edwards Lifesciences lowered its full-year sales projections by about 5 percent “to reflect a slower start to the year,” CEO Michael Mussallem said. The move caused Edwards’ stock price to plummet more than 20 percent. The lawsuit, filed Sept. 18 in U.S. District Court in central California, has been filed on behalf of investors who owned stock between April 25, 2012 and April 23, 2013; stakeholders are demanding monetary damages, interest and legal fees.

According to the complaint, Edwards well knew that physician adoption of the Sapien valve would be sluggish but forecasted phenomenal sales to inflate its share price. The company traded as high as $110.79 per share in October 2012, when it estimated to generate roughly $790 million from Sapien valves, but its share value eventually fell 41 percent after adjusting its outlook, according to the suit.

“During the launch of Sapien in the United States, the company consistently offered positive assessments of the extent to which U.S. hospitals were adopting Sapien,” the suit reads. “These statements describing strong enthusiasm in the medical community formed a crucial basis for the company’s projections relating to sales, earnings and the number of hospitals that Edwards Lifesciences was training to perform Sapien implants. On Oct. 8, 2012, Edwards Lifesciences issued a press release announcing weak preliminary financial results for the quarter ended Sept. 30, 2012, stating in relevant part, that ‘transcatheter heart valve sales were below expectatiions.’ Michael A. Mussallem…attributed these surprisingly poor results to austerity measures in Europe and reimbursement uncertainty and physicians’ summer vacations in the United States.”

The lawsuit uses Mussallem’s comments against him, noting the CEO painted a rosy picture of Sapien sales after first-quarter 2012 sales totals were tallied. Mussallem said the first quarter (ended March 31, 2012) was highlighted by “impressive Sapien commercialization” and tied the period’s 67 percent sales increase in transcatheter heart valves to the Sapien’s U.S. launch. When asked by an analyst to describe the level of enthusiasm surrounding the Sapien valve, Edwards’ CEO responded, “Well, the level of enthusiasm continues to be very high from hospitals,” according to the lawsuit.

In Mussallem’s defense, however, he does warn stockholders about possible tepid sales, noting “although the near-term THV [transcatheter heart valve] sales outlook has lowered our overall 2012 expectations, we remain as optimistic as ever about the long-term growth opportunity represented by transcatheter valves.” When discussing first-quarter sales, the CEO said overseas proceeds were “somewhat tempered by market dynamics in Europe and the $2-$3 million in 29 mm stocking orders last year.”

Edwards executives have declined to discuss the litigation.

April’s stock plunge was part of a rough spring for the Irvine, Calif.-based company. In May, Edwards launched a $750 million stock buyback to reaffirm investor confidence, with Mussallem contributing $5 million of his own money. That effort pushed its shares up about 14.5 percent from their lowest point, but a late-May U.S. Food and Drug Administration warning letter over problems at the company’s Utah facility spooked investors yet again.

Since then, Edwards has a charted a smoother path, winning Japanese approval and reimbursement for the Sapien XT valve and beating out rival Medtronic in a German patent dispute.

Edwards develops heart valves and hemodynamic monitoring solutions.