Thoratec Corp. (THOR), a leader in mechanical circulatory assistance devices, recently revealed that its board of directors has approved the repurchase of as much as $150 million of its common stock. The earlier authorization lapsed earlier this month.
Under the new authorization, Thoratec has inked an Accelerated Share Repurchase deal for $75 million with JPMorgan Chase & Co. (JPM) to be launched as soon as possible. The remainder of the program may be utilized by Thoratec any time before the end of 2013.
As per the Accelerated Share Repurchase deal, Thoratec will get about 1.5 million shares at the start. The final count of shares purchased by the company will rely on the end settlement using an applicable formula.
During the first three quarters of the current year, Thoratec produced $109 million of operating cash flow, up 25% year over year. It had cash and investments of $308 million as of September 29, 2012.
Ventricular Assist Devices represent a multi-billion dollar market opportunity. It is estimated that, in addition to the bridge-to-transplant (BTT) market, the Destination Therapy (DT) market in the U.S. may eventually attain a significant size. Until HeartMate II came up as a viable option, the only treatment was heart transplant surgery.
HeartWare International Inc. (HTWR), a global provider of miniaturized ventricular assist devices (VAD) for diagnosis of advanced heart failure, disclosed on November 20, 2012, that the U.S. Food and Drug Administration (FDA) has granted clearance for its HeartWare Ventricular Assist System as a bridge to heart transplantation device for patients with end-stage heart failure. The FDA approval was eagerly awaited ever since HeartWare submitted its Premarket Approval (PMA) application in December 2010. The company obtained European CE Mark for the HeartWare system in 2009 and Australian Therapeutic Goods Administration (TGA) approval in 2011.
However, there is no imminent competitive threat from HeartWare in the DT segment, as its product is not expected to be launched till 2015. We believe that DT will account for the major part of growth in the Ventricular Assist Device (VAD) market.
Despite less visibility, Thoratec has expertise in product development. The company is currently developing its next generation HeartMate III. At the same time, HeartWare is expected to close the technological gap. The company continues to do well in overseas markets despite economic turmoil in Europe.
The stock currently retains a Zacks #1 Rank, which translates into a short-term “Strong Buy” rating.
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