Morgan Stanley Overweight Edwards Lifesciences, Potential Product Markets Are Enormous

In a report published Monday, Morgan Stanley analyst David R. Lewis upgraded the rating on

from Equal-Weight to Overweight, while raising the price target from $135 to $168. The analyst believes that the aortic valve market has the potential to grow five-fold over the next 10 years, while the mitral market could be even larger than that. "In 2014, the TAVR market was worth about $1.5 billion, with about $630 million coming from the US, $40 million from Japan, and the remainder from Europe and rest of world regions. We see a 15+ percent CAGR over the next ten years to drive market expansion to nearly $7.5 billion by 2025," Lewis said. Given that the mitral market is twice the size of the TAVR market, it could potentially be worth $2.2 billion by 2025. According to the Morgan Stanley report, "Timeline and clarity remains higher on intermediate risk than low risk approval. In the US, we expect intermediate risk approval to come as soon as late 2016 when the PARTNER 2 results support an intermediate risk indication for Sapien 3.The path to low risk approval is admittedly much cloudier… we do not expect low risk approval and material use until 2018." Given the earlier approval of Sapien 3, the analyst expects to see greater visibility into the market expansion path, along with EPS upside and sustainable top line growth till the end of the decade. "Highly profitable TAVR sales are approaching an inflection as the company leverages recent heavy investments in R&D and TAVR commercial infrastructure," Lewis added.