NEW YORK (AP) -- Shares of Edwards Lifesciences Corp. dropped more than 20 percent Wednesday after the company cut its forecast for sales of its Sapien heart valve.
THE SPARK: The Irvine, Calif., company reported its first-quarter results after the market closed on Tuesday. Its adjusted income of 72 cents per share was 4 cents less than analysts expected, according to FactSet, and Edwards' $497 million in revenue also was short the average estimate by about $22 million.
Sales of the Sapien valve rose 40 percent to $169.7 million in the first quarter, but Edwards said it now expects sales to grow 25 to 30 percent for the full year. That implies a total of $670 million to $750 million — below its previous forecast of 30 to 45 percent growth, or $710 million to $790 million in Sapien sales.
THE BIG PICTURE: Sapien is designed to replace diseased heart valves. Doctors can guide the valve through an artery in the leg, making for a less complicated and risky procedure than open-heart surgery. The Food and Drug Administration approved Sapien in November 2011 for patients who couldn't have open heart surgery. In October, the agency expanded that approval to cover patients for whom surgery was considered high-risk.
Although Sapien sales account for about a third of Edwards' total revenue, they are an important part of the company's growth. The company's shares slumped in October after the company issued a disappointing third-quarter guidance that included weaker-than-expected Sapien sales.
Edwards said revenue from surgical heart valve therapy products and critical care products both fell during the first quarter.
THE ANALYSIS: UBS analyst Rajeev Jashnani maintained a "Sell" rating on Edwards stock and cut his price target to $64 per share from $82.
"The U.S. market is developing slower than expected, ex-U.S. pricing increased and major new competitors are coming over the next six to 18 months," he said.
SHARE ACTION: Shares of Edwards Lifesciences sank $18.23, or 22 percent, to $64.58 in afternoon trading. Earlier the stock fell to $63.50, its lowest price since November 2011. As of Tuesday, Edwards had lost 23 percent of their value since early October.