May 4, 2020


HEALTHCARE: $45B firm continues with manufacturing

RICK REIFF, Editor at Large, Orange County Business Journal

Heart valve maker Edwards Lifesciences Corp. is a global company fighting the worldwide pandemic on many fronts.

"I've had a 40-year career in medical technology and dealt with a lot of issues, but never anything like this—the sheer global scale, the fact that it has touched so many people in such profound ways and with so many unknowns," said Edwards Chief Executive Michael Mussallem.

Irvine-based Edwards (NYSE: EW) is Orange County's largest med-tech employer—about 4,500 workers here, 14,000 worldwide, and by far OC's most valuable public company, sporting a $45 billion market value as of late last week.

It also has been in the thick of the coronavirus battle, owing to its life-saving products and global reach—plants and labs in seven countries, offices in 35 and patients in more than 100.

Edwards field clinicians have been taking the same safety risks as other front-line healthcare workers as they assist with heart surgeries, and sometimes join in to help with COVID-19 patients. The company has reworked its supply channels to maintain stocks of everything from animal tissues for heart valves to face masks for employees.

Edwards has given $3 million worth of its critical care monitors to the relief group MAP International and increased by $1 million its safety net grants in Orange County and other places where it has facilities.

In late January, when COVID-19 was still an abstraction for most Americans, Edwards' China team donated surgical gloves and masks to overwhelmed hospitals in Wuhan.

Quick Switch

The company has transitioned—"almost overnight" per Mussallem—to virtual platforms. And despite a COVID-19-induced slowdown in artificial heart valve orders, Edwards' manufacturing employees, including 1,200 in Irvine, have stayed busy.

"We're fortunate that Edwards is a strong company and our priorities have been to focus on keeping our employees safe and helping patients and customers in need," Mussallem told the Business Journal last week.

He also praised the "agility, resourcefulness and passion" of Edwards workers.

Revenue has dropped sharply since the onset of COVID-19, as hospitals have shifted their resources to combating the virus, while many heart patients, fearful of contracting coronavirus, have put off surgery anyway.

Citing the coronavirus, Edwards has suspended its clinical trials for new therapies.

Mussallem said the virus has forced heart patients and their doctors into a life-and-death choice: Proceed with an operation or try to wait out the virus despite deteriorating health. "As the world has turned our attention to COVID, it's not a great set of conditions for structural heart patients," he said.

Yet outside of New York and some other hard-hit areas, hospitals that stopped elective procedures and cleared beds have not experienced the feared surge in COVID-19 cases.

With revenue falling, and aware that cancer, heart disease and many other sicknesses are killers too, "the healthcare system is ready to pivot back to doing things they've always done," Mussallem said.

But while he expects most heart valve surgeries to get rescheduled, it will be too late for some: "We know about some patients already, anecdotally, who have passed away on the waiting list."

Remote Workforce

Mussallem said there are no plans for layoffs and the company continues to recruit; it's optimistic about a rebound later this year. Construction continues at its Irvine campus, where a massive expansion to its facilities is underway.

COVID-19 has increased demand for Edwards' critical care monitoring equipment, a small revenue offset to the drop in heart valve demand. Overall, the company has lowered its projected revenue range for 2020 by about a half a billion dollars, or roughly 12%.

Necessity has become the mother of invention in the Edwards workplace.

"We're a company that likes to get together—all-employee meetings, conference rooms reserved. This (COVID-19) has really changed all that," Mussallem said.

Now an estimated 90% of Edwards' non-manufacturing employees are working remotely. Clinicians are monitoring and guiding some surgeries online. "We are all becoming expert on using video calls and other remote tools," he said.

On April 27, Mussallem held the first virtual companywide meeting. This week's annual meeting will also be virtual.

Those who need to work in the office wear company-provided masks and socially distance. Signs are posted to remind employees to wash their hands frequently. The Irvine campus is being cleaned more often, and with a stronger disinfectant than before.

The dining room is closed, and all cafeteria food is being packaged and provided for free. Office workers eat at their desks and manufacturing employees can use spaced-out seating in the atrium.

Here, too, Edwards is demonstrating its philanthropy, with kitchen staff in the now under-used cafeteria preparing 400 meals a day for local food banks.

Manufacturing Continues

Meanwhile, it's been business as usual in the cleanrooms, where workers sit next to each other as they painstakingly sew and assemble the marshmallow-sized valves. The company said strict social distancing isn't necessary because the rooms are kept sterilized. Workers have always worn masks, gloves and gowns, washed their hands regularly and practiced other hygiene. A filtration system removes contaminants from the air and rooms are scrubbed with strong solutions.

Mussallem said it's been difficult to restock gloves, gowns, face coverings, hand sanitizer and other protective gear, a challenge being met by finding new suppliers, and paying up.

Mussallem said he wants to do routine diagnostic testing of employees, but can't right now: "The supplies of reliable tests are not available on scale and to the extent they are, they are being used in hospitals."

Only a small fraction of Edwards employees have been diagnosed with the coronavirus—about 70 cases, or about 0.5% of its workforce.

The company assigns a case manager to assist each employee who has COVID-19 and also to do contact tracing and alert other employees who may have been exposed. One foreign employee has died from COVID-19, Mussallem said.

Encouraging Signs

A fast-growing medical innovator, Edwards charged into 2020. Its stock price hit an all-time high last November after doubling in two years. Its 2019 sales and profits reached a record $4.3 billion and $1.1 billion, respectively, and Drucker Institute ranked Edwards 25th on its list of America's best-run companies. The sales momentum continued until mid-March, when the virus hit with full force.

The company's stock price, trending with the broader market, last week was down roughly 10% from its November high.

The epidemic will pass "in due time," Mussallem said.

"I'm encouraged by the recent indications of plateauing and even declining infection rates and deaths from COVID-19 in many areas around the world," he said.

Updated May 4, 2020