Thoratec Corp. THOR recently announced that it has received a conditional approval from the Food and Drug Administration (FDA) for a U.S. IDE clinical trial to investigate the use of its HeartMate PHP product in the treatment of heart diseases. A final approval for the trial is expected in the coming months after routine formalities.
Following the announcement, shares of this Pleasanton, CA-based company increased nearly 1.1% (50 cents) to close at $45.48 on May 26.
The clinical trial – SHIELD II – will be aimed at exploring the use of the HeartMate PHP acute catheter-based heart pump in patients undergoing a high risk percutaneous coronary intervention (PCI). It will randomize up to 425 patients at about 60 sites across the country.
HeartMate PHP is designed to provide partial left heart circulatory support. The expandable catheter technology of HeartMate PHP can generate average blood flow of four to five liters in a minute.
The primary endpoint will measure non-inferiority based on a number of unfavorable events at 90 days of follow-up.
Although the conditional approval has paved the way for immediate start of the trial, enrollment is expected to commence in the third quarter of 2015, after site selection and training. Outside the U.S., Thoratec expects CE Mark approval for HeartMate PHP, also during the third quarter.
The conditional approval for the U.S. trial on HeartMate PHP follows a series of positive developments within the company’s flagship product line in the last month.
Notably, the HeartMate product line contributed 87% of total revenues in 2014.
Last month, the ROADMAP Study affirmed the benefits of Thoratec’s HeartMate II LVAD in ambulatory heart failure patients. Thoratec also presented positive data for its HeartMate II device from the ENDURANCE destination therapy trial.
Earlier in April, Thoratec received the final approval from the FDA to ramp up enrollment for its HeartMate III U.S. IDE clinical trial, which was initiated in September last year. With this approval, Thoratec can now extend the trial at up to 60 sites across the U.S. from the initial limited enrollment phase at 5 sites.
Notably, Thoratec completed enrollment in the HeartMate III CE Mark study in late 2014 and expects a commercial approval and a subsequent launch in the European markets by late 2015.
We feel positive clinical data from the HeartMate II, HeartMate III and HeartMate PHP studies will drive substantial growth at Thoratec in the near future.
However, though the company is making significant clinical progress with its pipeline products, its revenues from the flagship HeartMate II were disappointing in the last reported quarter. Shipments of the HeartMate pumps took a hit due to strong competition and adverse market dynamics throughout Japan (Thoratec’s largest international market).
Moreover, accelerated clinical trial activity, targeted commercial investments and product development costs will tend to ramp up the company’s operating expenses. In the last reported quarter, adjusted operating margin contracted to 16.7% from 23.2%. We believe this trend will continue to prevail as a near-term headwind and hurt the company’s bottom-line growth.
Zacks Rank
Currently, Thoratec has a Zacks Rank #3 (Hold). Better-ranked medical stocks at the current moment include AMN Healthcare Services AHS, Cancer Genetics CGIX and INC Research Holdings INCR. All the stocks sport a Zacks Rank #1 (Strong Buy).
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