Edwards Lifesciences Shares Rise in First Day of Trading as Spinoff

Shares of Edwards Lifesciences Corp. edged up Monday during the Irvine company’s first day of trading after being spun off from medical device maker Baxter International.

The stock closed at $13.75, up 19 cents a share, after moving in a narrow range throughout the day on the New York Stock Exchange. Nearly 2.9 million shares changed hands.

Before Monday’s spinoff, the stock had traded at about $16 on a when-issued basis, according to a company official.

Baxter International announced three months ago that it planned to spin off its cardiovascular unit, which makes human heart replacement valves. The unit had been the only Baxter division not to generate double-digit growth, largely because product innovation was insufficient, said Edwards Lifesciences Chief Executive Mike Mussallem.

Edwards Lifesciences expects to boost net earnings 20% this year by focusing on sales in emerging markets and investing more in product development. Mussallem said the company will spend 10% more this year on research and development, which accounts for about 6.5% of the company’s revenue.

Edwards’ lackluster performance as a Baxter unit was attributed to lack of innovative technology.

“This is very much a business driven by innovation. Investments in research and development are one of the key elements to lifting and accelerating our top-line growth,” Mussallem said.

Edwards Lifesciences earned $41 million in 1999 as a unit of Baxter International and logged revenue of $800 million.

As a separate company with a focus on developing treatments for late-stage cardiovascular disease, Edwards Lifesciences’ goal in 2000 is to generate cash flow of $70 million, Mussallem said.

Edwards’ strategy includes boosting sales outside the U.S. in emerging economies where health care spending is on the rise.

Sales outside the U.S. account for about 35% of Edwards Lifesciences revenue. In general, the largest markets for medical devices are the U.S., Europe and Japan.

But foreign markets are growing faster in their treatment of cardiovascular disease, Mussallem said. That trend will eventually trickle down to emerging nations where health care spending is increasing and infectious diseases are coming under control, he added.

Under terms of the spinoff, Baxter International distributed one share of Edwards Lifesciences for every five shares of Baxter on March 31 to shareholders of record on March 29.

Baxter, which isn’t retaining a stake in Edwards Lifesciences, expects to take a charge of $19 million in the fourth quarter on the spinoff, and to transfer $550 million in debt to the new company.

Baxter’s stock, which also trades on the New York Stock Exchange, moved up $2.25 to $62.19 a share.