Edwards Lifesciences Corporation

EW Details

Clearance from US FDA: Edwards Lifesciences Corporation (NYSE: EW) is focused on innovations in structural heart disease and critical care monitoring in patients. The market capitalization of the company as on 30 June 2021 stood at ~$64.38 billion. As per a recent update, the company has announced that it has got clearance for Acumen Hypotension Prediction Index (HPI) software for non-invasive Acumen IQ cuff, from the US FDA. This will enable the company to use machine learning to alert clinicians if a patient is inclining towards hypotension or low blood pressure.

Update on German Litigation: As per a recent update, Neovasc Inc. has reported that the Higher Regional Court in Munich, Germany has upheld the first instance judgment that Edwards Lifesciences LLC had made a part contribution in the invention of the Tiara. It awarded Edwards’ co-entitlement rights to the disputed Tiara European patent application.

Q1FY21 Financial Performance: During the period, the company’s sales grew by ~8% to $1.2 billion, with TAVR sales increasing by 7% to ~$792 million. It received approval for a US trial for TAVR in moderate AS patients. The EPS (earnings per share) stood at $0.54, compared to $0.50 in the pcp. Free cash flow during the quarter was at ~$195 million. It ended the period with cash and investments amounting to $2.1 billion as of 31 March 2021, and with a total debt of ~$595 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company's line of business exposes it to prudent regulatory purview, which might have an impact on its sales and profitability.

Outlook: It has provided full-year sales guidance to be between $4.9 to $5.3 billion and has raised its adjusted earnings per share to $2.07 to $2.27 from $2.00 to $2.20. It anticipates the global opportunity of TAVR to exceed ~$7 billion by 2024, reflecting a compounded annual growth rate in the low double digits.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has recently confirmed positive results for Bicuspid Patients when treated with Edwards SAPIEN 3 TAVR. The stock of EW is trading close to its 52-weeks’ high levels of $105.58. The stock of EW gave a positive return of ~49.86% in the past one year and a positive return of ~23.82% in the past three months. On a technical analysis front, the stock of EW has a support level of ~$88.96 and a resistance level of ~$105.58. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price with a correction of mid-single-digit (in % terms). We believe that the company can trade at slight premium to its peer median P/E (NTM trading multiple), considering the improvement in sales, decent cash position and upgraded earnings guidance. For this purpose, we have taken peers such as ICU Medical Inc (NASDAQ: ICUI), ABIOMED Inc (NASDAQ: ABMD), Boston Scientific Corp (NYSE: BSX), to name a few. Considering the current high trading levels and indicative valuation, recent rally in the stock price and decrease in ROE, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the closing price of $103.57, down by ~0.02% as on June 30, 2021.

EW Daily Technical Chart, Data Source: REFINITIV

CRISPR Therapeutics AG

CRSP Details

Collaboration with Capsida Biotherapeutics Inc: CRISPR Therapeutics AG (NASDAQ: CRSP) is a gene-editing company that is focused on developing gene-based medicines for serious diseases by using its proprietary CRISPR/Cas9 platform. The market capitalization of the company as on 30 June 2021, stood at ~$13.00 billion. As per a recent update, CRSP and Capsida Biotherapeutics Inc., a biotechnology company has announced a strategic partnership to research, develop, manufacture and commercialize in vivo gene editing therapies with engineered AAV vectors for the treatment of familial amyotrophic lateral sclerosis (ALS) and Friedreich’s ataxia. The collaboration is expected to leverage the expertise of both companies to develop life-changing treatments for severe neurological diseases.

Q1FY21 Results Update: The company reported total collaboration revenue of $0.2 million in Q1FY21. There was an increase in R&D expenses to $90.6 million in Q1FY21, compared to $54.2 million in the previous corresponding period. The net loss during the period stood at $113.2 million. There was an uptick in the cash, equivalents and marketable securities to $1,806.2 million as of 31 March 2021, from a level of $1,690.3 million as of 31 December 2020.

Rise in Cash and Short-Term Investments (Source: Analysis by Kalkine Group)

Key Risks: The company has increased its R&D expenditure and any failure to get product approval or regulatory challenges might pose a risk to the profitability of the company.

Outlook: The company has reported that the enrolment and dosing in the clinical trials for CTX 001 has been ongoing, and more than 30 patients have been dosed with CTX001. It expects the completion of enrolment in both trials in 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: On 06 May 2021, the company has announced a strategic partnership with Nkarta, Inc. to research, develop, and commercialize CRISPR/Cas9 gene-edited cell therapies for cancer. The stock of CRSP is trading above its 52-weeks’ average levels of $220.20-$68.85. The stock of CRSP gave a positive return of ~120.28% in the past one year and a positive return of ~36.98% in the past one month. On a technical analysis front, the stock of CRSP has a support level of ~$118.32 and a resistance level of ~$175.44. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at some premium to its peer average EV/Sales (NTM trading multiple), considering the recent strategic partnerships and uptick in cash position. For this purpose, we have taken peers such as Precision BioSciences Inc (NASDAQ: DTIL), Sangamo Therapeutics Inc (NASDAQ: SGMO), Global Blood Therapeutics Inc (NASDAQ: GBT), to name a few. Considering the current high trading levels and indicative valuation, recent rally in the stock price and continued net losses, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $161.89, up by ~7.58% as on June 30, 2021.

CRSP Daily Technical Chart, Data Source: REFINITIV

Note: Purple Color Line Refers to Momentum Oscillator Relative Strength Index - RSI (14) Period

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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