WHRT World Heart Corp. (MM)

We reiterate our Outperform rating on Abiomed Inc. (ABMD). Its fourth quarter fiscal 2012 adjusted (excluding one-time items except stock-based compensation expenses) earnings per share of 7 cents beat the Zacks Consensus Estimate of 6 cents per share. Revenues soared 31% year over year to $37.3 million (quarterly record), beating the Zacks Consensus Estimate of $35 million.

Abiomed is enjoying strong demand for its Impella products. This is evident from a 37% record year-over-year growth in global Impella sales in fiscal 2012. The U.S. contributed roughly 93% of worldwide Impella sales. The company believes that the record growth during the quarter and fiscal 2012 was attributable to the inclusion of the Impella products in the ACCF/AHA/SCAI 2011 Guidelines (which was released in November 2011), the established CMS DRG reimbursement and the pending CPT codes for physician reimbursement. The company opened 26 new U.S. Impella 2.5 sites in the most recent quarter, to end with a total of 631 customer sites.Moreover, the company intends to foray into the Japanese market with its Impella products in 2013. Based on these tailwinds, the company expects global Impella sales to rise by roughly 30% in fiscal 2013. 

Abiomed recently announced CE Mark approval for its new Impella product dubbed “Impella cVAD” in the European Union. It is expected to become commercially available in Europe soon. Also, Abiomed announced the first successful human use of its percutaneous Impella cVAD heart pump outside the U.S. The device can pump up to 4 liters of blood in one minute.

The company has adopted a number of strategies to further boost Impella’s utilization. Abiomed, in March 2012, made a number of presentations on the Impella device at the American College of Cardiology Scientific Sessions. One of the presentations included the first human use of the Impella RP heart pump outside the U.S., for treating right-sided heart failure.

Abiomed’s strategy focuses on heart recovery as the goal for all acute cardiac attacks. Abiomed’s products are designed to enable the heart to rest, heal and recover. We believe this niche product line feeds a growing trend towards procedures that are either minimally invasive or assist the body to recover more naturally. Minimally invasive surgery helps the patient overcome the trauma faced in open surgery. It is becoming increasingly popular in helping patients reduce recovery time, thereby saving hospitalization costs.

However, Abiomed faces the risk of third-party reimbursement for its devices. The company’s products are reimbursed by the Center for Medicare and Medicaid (“CMS”) and commercial payers. Third-party reimbursement programs in the U.S. and abroad, both government-funded and commercially insured, are presently developing different ways of controlling healthcare costs that include prospective reimbursement cuts with careful review of medical bills. Any reimbursement cut in future will negatively impact sales of Abiomed’s products and subsequently the company’s top line.

While we are upbeat about the prospects of Impella, we remain cautious about the intensely competitive environment. Abiomed faces competition from organizations developing permanent heart assist products including Thoratec Corporation (THOR), Jarvik Heart, World Heart Corporation (WHRT) and MicroMed Technology.

 
ABIOMED INC (ABMD): Free Stock Analysis Report
 
THORATEC CORP (THOR): Free Stock Analysis Report
 
(WHRT): ETF Research Reports
 
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