Abiomed Breathes Easy as DOJ Ends Impella Suite Probe - Analyst Blog
In a major relief to Abiomed Inc ABMD, the U.S. Department of Justice (DOJ) recently closed investigations into the company’s marketing and labeling practices related to Impella 2.5 device, without taking any enforcement action.
Impella is Abiomed’s flagship product line, which accounted for 92.4% of total revenues in fiscal 2015. The Impella product suite comprises Impella 2.5, Impella 5.0, Impella LD, Impella CP and Impella RP.
Impella 2.5 is primarily used by interventional cardiologists to support patients in the cardiac catheterization lab (cath lab) for partial circulatory support for up to six hours. In Oct 2014, the FDA approved Impella 2.5 for use in the indication of high-risk percutaneous coronary intervention (PCI).
In Mar 2015, Impella 2.5 heart pump received FDA Pre-Market Approval (PMA) for use in high risk PCI procedures. Notably, Impella 2.5, the world's smallest heart pump, is the first hemodynamic support device to be permitted for such an indication.
The FDA sanction enhanced Impella 2.5’s growth opportunities by expanding its total addressable patient base. Reportedly, about 100,000 patients suffering from cardiac problems in the U.S. are declared unfit for heart surgery due to extreme risks associated with the procedures. The Impella 2.5 pump obliterates such risks to a large extent, which accounts for its popularity among a broad range of patients.
Hence, it is explicable that DOJ’s decision to close the investigation comes as a huge relief for Abiomed, as an adverse decision would have marred the company’s top line to a considerable extent.
Following the Impella 2.5 approval, Abiomed plans to submit the Impella 5.0 and Impella CP as PMA supplements. Timely approval of these devices will further expand the company’s addressable market. The Impella RP received Humanitarian Device Exemption (HDE) approval in Jan 2015, which will be a key growth catalyst in our view. Also, the approval now allows the company to sell the device in the U.S., which opens up another source of revenues.
Reportedly, Abiomed is mulling a vast expansion, in terms of employee and space, to elevate its manufacturing capabilities, which is prudent keeping in mind the growing demand for Impella products. According to Boston Business Journal, Abiomed is looking forward to expand its headquarters at Danvers, MA. The company expects the expansion to cost more than $5 million over the next 5–10 years.
The headquarters extension is expected to support Abiomed’s growth in terms of operational support and infrastructure, which is a positive in our view. However, intensifying competition will continue to hurt pricing power. Moreover, the company’s significant international presence exposes it to fluctuations in currency exchange rates which might impact top-line growth going forward.
Zacks Rank
Currently, Abiomed has a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical instruments sector that warrant a look are RTI surgical RTIX, Masimo Corp MASI and Accuray ARAY. RTI surgical and Masimo sport a Zacks Rank #1 (Strong Buy) while Accuray carries a Zacks Rank #2 (Buy).
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