Thoratec Corp. (THOR) reported first-quarter 2013 adjusted (excluding one-time items other than stock-based compensation expenses) earnings per share of 34 cents missing the Zacks Consensus Estimate of 40 cents.
Net income from continuing operations dropped to $18.2 million (or 31 cents per share) from $25.5 million (or 43 cents per share) in the year-ago quarter. Net income included one-time items.
Revenues dropped 7% year over year to $117.7 million in the first quarter, missing the Zacks Consensus Estimate of $123 million. Geographically, domestic sales dropped 11.2% year over year to $92.3 million, while overseas sales increased 10.9% to $25.4 million.
By product, HeartMate sales dropped 7.9% to $102.9 million. Sales of the paracorporeal ventricular assist device (:PVAD) and implantable ventricular assist device (:IVAD) declined 34.5% to $3.8 million, while CentriMag blood pump sales rose 19.5% to $10.4 million. The Other category was stagnant at $0.6 million.
Thoratec pump sales were down 9% year over year to $84.3 million, while non-pump revenues dropped 2.4% to $32.8 million. Unit sales of pumps in the U.S. decreased 14.6% year over year to 716 units, while overseas sales were stagnant at 219 units.
Margins and Expenses
On an adjusted basis, gross margin improved to 72.1% from 71.6% in the prior-year quarter. Adjusted operating expenses shot up 15.5% year over year to $52.8 million partly on account of increased expenditure on product and market development.
The company exited the quarter with cash and investments of $262.1 million, up 0.7% year over year.
Thoratec reaffirmed its financial forecast for 2013. The company continues to expect revenues between $490 million and $510 million. For 2013, earnings per share (on a reported basis) continue to be projected in the range of $1.32 to $1.42, while adjusted earnings continue to be expected in a band of $1.76 and $1.86.
Thoratec enjoys a first-mover advantage in the market it serves. With HeartMate II, Thoratec enjoys a monopoly in the U.S. market since it has developed the only device of its kind for the destination therapy indication (for heart failure patients who are not eligible for heart transplant). Favorable adoption trend of the device is expected to support revenue growth moving forward. However, its dominance in the bridge-to-transplant (BTT) indication has ended following the FDA approval of HeartWare International’s (HTWR) Ventricular Assist System in Nov 2012.
Despite limited visibility and periodic setbacks, we are optimistic about Thoratec successfully expanding its sales on the back of its HeartMate II product line. The company continues to do well in overseas markets despite economic turmoil in Europe. It received reimbursement approval in Japan on April 1, 2013, which enables it to commercialize the HeartMate II as a BTT for victims of advanced heart failure. Thoratec commercialized the Pocket Controller in Europe in Mar 2013. This offering is yet to receive the FDA nod in the U.S.
Thoratec currently retains a Zacks Rank #3 (Hold). We are more positive about ABIOMED, Inc. (ABMD) and Accuray Incorporated (ARAY) which carry a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively.
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