Shares of Danvers, MA-based Abiomed Inc. (ABMD) surged as much as 27.13% or $10.48 in after hours trading following the release of impressive third-quarter fiscal 2015 financial numbers as well as the receipt of an FDA HDE approval for its Impella RP System.
Abiomed announced that the FDA approved its Impella RP (Right Percutaneous) System under a Humanitarian Device Exemption (HDE). Notably, this makes Impella RP the first percutaneous single access heart pump designed for right heart support to receive regulatory clearance.
Per the third-quarter results, both earnings and revenues crushed their respective Zacks Consensus Estimates and also showed remarkable year-over-year growth. Details of the quarter are provided below.
Third-Quarter Highlights
Third-quarter earnings of 30 cents per share cruised past the Zacks Consensus Estimate of 3 cents and exceeded the year-ago equivalent of 11 cents, riding on strong revenue growth.
Revenues in the quarter grossed $62 million, easily outpacing the Zacks Consensus Estimate of $53 million. Revenues surged nearly 34.2% year over year driven by robust performance from the Impella product line.
Globally, Impella revenues grew 37% to $57.4 million in the quarter. U.S. Impella revenues grew 38% to $51.9 million while outside the U.S., Impella revenues shot up 28% to $5.5 million.
Abiomed revealed that an additional 21 hospitals purchased Impella heart pumps during the quarter, bringing the installed customer base to 931 sites. As part of Abiomed's continued Impella CP(R) launch, 76 hospitals purchased Impella CP during the quarter, bringing the total number of Impella CP U.S. sites to 583.
Gross margin expanded 460 basis points (bps) to 84.1%, primarily owing to fewer placements of the AIC consoles, which totaled 93 in the quarter compared to 178 in the year-ago quarter. Margin improvement was also led by higher volume with a corresponding modest increase in manufacturing expenses.
Costs and expenses, as a percentage of revenue, contracted 12% year over year to 78%. This was primarily due to 460 bps, 330 bps and 410 bps decline in cost of products, research & development (R&D), and selling, general & administrative (SG&A) expenses, respectively.
Consequently, operating margin surged 12% on a year-over-year basis to 22% on lower expenses.
Abiomed had cash, cash equivalents and marketable securities of $113.4 million as of Dec 31, 2014, slightly higher than $111.9 million as of Sep 30, 2014. The company had no debt at the end of the quarter.
Outlook
Abiomed raised its fiscal 2015 revenue guidance. The company now expects revenues in the range of $223–$226 million (up from the earlier guided $209–$212 million). The upgraded guidance reflects year-over-year revenue growth of 21% to 23%. Zacks Consensus Estimate for the same is currently pegged lower at $211 million.
Abiomed also increased its fiscal 2015 operating margin guidance to the band of 9% to 11% from the previous range of 1% to 4%.
Currently, the company is estimating fiscal 2016 revenue in the range of $260–$270 million. It will provide a formal guidance upon completion of the fourth quarter. Zacks Consensus Estimate for the same currently stands lower at $249 million.
FDA Green light for Impella RP
Abiomed’s Impella RP is a percutaneous heart pump designed to provide temporary ventricular support to patients with right heart failure. The device does not require a surgical procedure for insertion, and it provides up to four liters per minute of hemodynamic support.
Abiomed completed the HDE submission for Impella RP in Sep 2014 following the completion of the Recover Right clinical trial, which demonstrated a 73% survival rate in the overall patient population.
The company secured CE Mark Approval for Impella RP in Apr 2014, following which it was launched in Europe. With the HDE approval, Abiomed plans a controlled U.S. launch of the device after each site completes in-house training at the company.
As part of the HDE approval, Abiomed is required to conduct two post approval studies for the Recover Right in order to monitor the post-market safety and probable benefit of the Impella RP device.
Our Take
Abiomed reported better-than-expected fiscal third-quarter results. The company’s Impella utilization is growing at a remarkable pace with an increasing number of hospitals and customer sites purchasing the same. Additionally, the HDE approval for Impella RP enables the company to provide support for patients with right sided heart failure, thus offering more treatment options for patients and hospitals.
We believe that the anticipated Pre-Market Approval of the Impella 2.5 by Feb/Mar 2015 will serve as a significant growth catalyst for the company. The company also raised its fiscal 2015 revenue guidance which is another positive in our view.
Zacks Rank
Currently, Abiomed carries a Zacks Rank #2 (Buy).
Some other well-placed stocks in the medical instruments industry are Inogen (INGN), Synergetics USA (SURG) and Edwards Lifesciences Corp. (EW). While both Inogen and Synergetics USA sport a Zacks Rank #1 (Strong Buy), Edwards Lifesciences Corp. carries the same rank as Abiomed.
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