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Abiomed Beats 2Q Ests, Profit Jumps

Zacks Equity Research

Leading cardiac assist devices maker, Abiomed Inc. (ABMD), reported second quarter fiscal 2013 adjusted earnings per share of 13 cents, beating the Zacks Consensus Estimate of 5 cents and surpassing the year-ago adjusted earnings of 3 cents. Adjusted earnings exclude one-time items other than stock-based compensation charges.

On a reported basis, the Massachusetts-based company registered a profit of $5.5 million (or 13 cents per share), almost nine fold higher than the year-ago quarter. Robust sales of its popular Impella cardiac pumps led to growth in profits.

However, the company revealed that the U.S. Attorney’s Office for the District of Columbia is investigating the marketing and labeling of the company’s key product, the Impella 2.5. Following the announcement of this news, Abiomed’s share prices plunged more than 30% to $13.61 on November 1.

Revenue
 
Revenues jumped 27% year over year to $37.4 million, marginally beating the Zacks Consensus Estimate of $37 million. Growth was led by solid sales of Impella heart pumps.
 
Globally, Impella sales soared 32% year over year to $32.8 million in the second quarter. U.S. Impella sales grew 33% to $30.8 million. Abiomed opened 30 new U.S. Impella 2.5 sites in the quarter to end with a total of 695 customer sites.
 
Margins
 
Gross margins inched down to 80.8% from 81.2% a year ago. Operating margin was 15.9% compared to 2.6%
 
Selling, general and administrative expenses were lower at 49.3% of sales versus 55.4% in the year-ago quarter. Research and Development expenses, as a percentage of sales, fell to 15.6% from 21.9%.
 
Balance Sheet
 
Abiomed exited the quarter with cash and cash equivalents and short-term marketable securities of $89 million, 46.4% higher than the previous year. The company had no debt.
 
Guidance
 
The company reiterated its revenue guidance for fiscal 2013. Abiomed forecasts revenues to grow 23%-24% to $155 million and $157 million. Global Impella sales are expected to increase more than 30%.
 
Recent Developments

In September, Abiomed received U.S. Food and Drug Administration (:FDA) approval for its new Impella product dubbed Impella CP (Cardiac Power). It is known as the Impella cVAD outside the U.S. The percutaneous heart pump can successfully pump roughly 4 liters of blood in one minute. The device is now available in limited numbers in top heart hospitals in the U.S.

In addition, the American Medical Association approved three new Category I Current Procedural Terminology (CPT) codes for the Impella procedures, to be effective from January 1, 2013.

The company also published the PROTECT II study in Circulation, a journal of the American Heart Association.

Further, the company presented an update on the Symphony clinical trial at the Transcatheter Cardiovascular Therapeutics (“TCT”) conference in October 2012. The Symphony synchronized heart pump is currently undergoing clinical trials in France and Canada and is not yet clinically approved for sale in the U.S.

Our Take

Abiomed is enjoying strong demand for its Impella products. Impella utilization continues to grow at a healthy pace, as is evident from the increasing number of patients being treated with the device. The company is hopeful that the FDA 515 Program Initiative, concerning the Impella products will be held soon in the near-term by the regulatory body.

However, we are wary of negative sentiments amongst investors regarding the Impella 2.5 investigation process. Its competitors such as Thoratec Corporation (THOR) might take advantage of the situation and gain market share. Our ‘Neutral’ recommendation on the stock carries a short-term Zacks #4 Rank (Sell) rating.

Read the Full Research Report on THOR

Read the Full Research Report on ABMD

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