Thoratec Acquires Irish Implant Systems Maker

Thoratec Corp. (THOR) revealed that it has acquired Ireland-based maker of implant systems and devices, Apica Cardiovascular Limited, in order to strengthen the market position of its HeartMate product line as the latter supplies products customized for ventricular assist device (:VAD) procedures.

THOR acquired Apica for an upfront cash payment of $35 million and potential future clinical and sales milestones of up to $40 million. Apica has facilities both in Ireland and the U.S., which will be transferred to THOR as per terms of the acquisition.

Apica’s Lineup

Apica offers a VAD Surgical Implant System (“SIS”) and the Apica Access Stabilization and Closure (“ASC”) device for use in transcatheter aortic valve replacement (“TAVR”) and transcatheter mitral valve replacement (“TMVR”) procedures that are performed with a transapical (through an incision in the chest between the ribs) method.

Apica’s implant systems provide uniform access to the heart in transapical procedures without significant interoperative and post-operative blood loss and with a secure permanent closure that eradicates the need for sutures. On the other hand, Apica’s VAD SIS is capable of supporting less invasive and off-pump implantation of HeartMate products.

Due to the acquisition, the ongoing development and commercialization of Apica’s VAD SIS and ASC devices will be undertaken by THOR. The ASC device received CE Mark approval in 2013 but it is in limited commercial launch throughout Europe. Over time, THOR also plans to develop the VAD SIS technology to optimize its application for VAD implants prior to starting human clinical trials.

Impact of the Acquisition

THOR expects that the acquisition will increase operating expenses by roughly $3 million for the rest of 2014 and $6 to 7 million in the next year, mainly due to research and development.

Further, Apica being an Ireland-based company, THOR’s tax rate will increase modestly during the developmental phase of the VAD SIS program due to the loss of U.S.-based expense deductions. However, the company expects to enjoy long-term tax benefits from the acquisition.

These apart, THOR will recognize transaction-related expenses (including the amortization of intangible assets) in the second and third quarter results following the completion of the purchase price allocation for the transaction.

Recent Development

Recently, THOR kicked off its CE Mark clinical trial for HeartMate III with the first human implant at Hannover Medical School in Hannover, Germany. HeartMate III is the next-generation continuous flow left ventricular assist device (:LVAD).

THOR continues to do well in overseas markets, especially in its HeartMate lineup. Despite being flat year-over-year, THOR’s earnings and revenues surpassed the Zacks Consensus Estimates in the 2014-first quarter.

Currently, THOR retains a Zacks Rank #3 (Hold). Some better-ranked medical instrument companies that are worth considering at the moment include Cepheid (CPHD), Hologic Inc. (HOLX), and Navidea Biopharmaceuticals, Inc (NAVB). All these stocks carry a Zacks Rank #2 (Buy).

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