Edwards Lifesciences CorporationEW

Edwards' efforts to focus on efficiency and higher-margin products have paid off, as gross margins increased from 47% in 2000 to 74% in 2012.

Cardiothoracic surgeons tend to be fairly conservative and like to stick with proven devices and brands. As a pioneer in heart valves, Edwards continues to be seen as the gold standard.

Edwards should benefit from an aging population, which experiences problems with heart valves and congestive heart failure with greater frequency.

Edwards has correctly read the market trends and has a robust pipeline of minimally invasive projects for aortic valve replacement and valve repair. Success in these areas could give Edwards a big leg up on the competition.

Excitement about transcatheter valve technology has dominated the discussion and presentations at cardiovascular conferences over the last few years. We think interventional cardiologists and cardiac surgeons are eager to climb the learning curve on these products. Read more 

Edwards' ambitions to diversify into minimally invasive medical technologies place the firm in direct competition with much larger competitors, such as Medtronic and St. Jude Medical. Deep-pocketed rivals can easily bid up prices for emerging technologies that Edwards, with its smaller budget, couldn't match.

Edwards must navigate a delicate path with its Sapien transcatheter valve, as the device straddles the specialties of cardiac surgeons and interventional cardiologists, who are still sensitive to how the introduction of stents used by interventionalists cut severely into traditional bypass procedures done by surgeons. Although Edwards historically has built strong relationships with surgeons, it is seeking to establish new ones with interventionalists without alienating surgeons.

If Sapien pricing remains high even after the entrance of rival Medtronic, practitioners and payers may opt for traditional surgical valve repair among the high-risk patients.

The relatively-tightly defined limits for Medicare reimbursement on Sapien this could cut into the technology's potential and slow adoption.

Paravalvular leaks following the implantation of Sapien continue to affect a sizable minority of patients. Edwards needs to address this side effect, especially as Medtronic and St. Jude pursue their own valves that could minimize this issue. Read more