Abiomed Beats on EPS, Profit Dips - Analyst Blog
Leading cardiac assist devices
maker, Abiomed Inc. (ABMD), reported third-quarter
fiscal 2013 adjusted earnings per share (EPS) of 7 cents (up 16.7%
year-over-year), beating the Zacks Consensus Estimate of 6
cents.
However, the Massachusetts.-based company registered a profit of
$2.7 million (or 7 cents per share), down roughly 7%. Profit
declined on account of higher expenses, which led to a contraction
in gross margin. However, a share repurchase program helped to
leverage the bottom line in this quarter.
Revenues
Revenues climbed 19% year over year to $38.3 million, roughly
in-line with the Zacks Consensus Estimate of $38 million. This
marked the 13th straight quarter, in which Abiomed recorded
year-over-year double-digit growth. Growth was led by solid sales
of the Impella heart pumps. Additionally, the company posted record
patient utilization of the Impella device in the quarter.
Globally, Impella sales soared 21% year over year to $33.5 million
in the third quarter. U.S. Impella sales grew 22% to $31.1 million.
Abiomed opened 23 new U.S. Impella 2.5 sites in the quarter to end
with a total of 718 customer sites.
Margins
Gross margins declined to 78.7% from 80.5% a year ago, reflecting
increased expenses associated with capacity expansion and
manufacturing costs of the new Impella CP device. However,
operating margin was 7.7% compared with 7.0% in the prior-year
quarter.
Selling, general and administrative expenses were at 54.6% of sales
versus 53.4% in the year-ago quarter. Research and Development
expenses, as a percentage of sales, fell to 16.4% from 18.9%.
Balance Sheet
Abiomed exited the quarter with cash, cash equivalents and
short-term marketable securities of $85.7 million, 23.1% higher
than the previous year. Free cash flow in the quarter amounted to
$7.3 million. The company had no debt.
In an effort to leverage its bottom line, the company repurchased
0.8 million shares in the quarter for $10.7 million as a part of
its repurchase program to buy back up to $15 million of its common
stock.
Guidance
The company reiterated its revenue guidance for fiscal 2013.
Abiomed forecasts revenues to grow 23%—24% to $155 – $157 million.
Global Impella sales are expected to increase more than 30%.
Recent Developments
Abiomed had initiated a controlled launch of its Food & Drug
Administration (FDA) approved Impella product, Impella CP (Cardiac
Power), in the U.S. (also known as Impella cVAD outside the U.S.)
in Sep 2012. The device was sold to 34 top hospitals, ending with a
total of 46 customer sites.
Moreover, Abiomed achieved a major milestone by winning the
Investigational Device Exemption (IDE) clearance from the FDA for
the use of Impella RP (Right-side Percutaneous) in a clinical trial
called “Recover Right”. The study is intended to gather information
on the safety and efficacy of the Impella RP device. Results from
the study will be used by Abiomed to apply for a Humanitarian
Device Exemption (HDE) approval, for which the company has already
received a HUD (Humanitarian Use Device) approval on Jul 13,
2012.
In December 2012, the 515i FDA panel recommended a Class III status
for Abiomed’s Impella devices and stated that all future temporary
ventricular assist devices will require Post Market Approval (PMA).
Meanwhile, the company will continue to sell its Impella products
under the 510(k) clearance and is working with the regulatory body
to submit the required clinical data under the PMA application
process.
Our Take
Abiomed is enjoying a 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. We are impressed by the company’s efforts to achieve
clinical as well as operational excellence.
However, we are wary of negative sentiments amongst investors
regarding the Impella 2.5 investigation process. Moreover, the
company must control its expenses to enhance profitability and
growth.
The company has a Zacks Rank #2 (Buy). Other medical stocks such as
IDEXX Laboratories, Inc. (IDXX), Natus
Medical Inc. (BABY) and Cyberonics (CYBX)
with a Zacks Rank #2 (Buy) appear impressive.
ABIOMED INC (ABMD): Free Stock Analysis Report
NATUS MEDICAL (BABY): Free Stock Analysis Report
CYBERONICS INC (CYBX): Free Stock Analysis Report
IDEXX LABS INC (IDXX): Free Stock Analysis Report
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