Zacks_Analysts' Blog : Neutral View on Abiomed - Analyst Blog

We maintain our Neutral recommendation on cardiac assist devices maker Abiomed (ABMD). The company’s first-quarter fiscal 2012 adjusted loss per share of 11 cents was higher than the Zacks Consensus Estimate of a loss of 5 cents. However, solid sales from its popular Impella cardiac pumps helped Abiomed narrow its losses in the quarter. Revenues propelled 25% year over year to $27.4 million, but narrowly missed the Zacks Consensus Estimate.

Abiomed is enjoying strong demand for its Impella products. Impella utilization continues to grow at a healthy pace as borne out by the increasing number of patients being treated with the device. Revenues from these devices surged 33% in the first quarter. The company, in April 2011, filed a regulatory application for the approval of Impella in Japan.

Abiomed has a broad portfolio of products that are life-sustaining in nature. The company’s strategy focuses on heart recovery as the goal for all acute cardiac attacks. Abiomed’s products are designed to enable the heart to rest, heal and recover. We believe this niche product line feeds a growing trend towards procedures that are either minimally invasive or assist the body in healing more naturally.

However, Abiomed remains a loss-making entity and operates in an intensely competitive environment and faces significant reimbursement risk. Competition among providers of treatments for the failing heart is intense and subject to rapid technological changes and evolving industry requirements and standards. Abiomed competes with organizations developing permanent heart assist products including Thoratec Corporation (THOR). Moreover, the company’s legacy non-Impella franchise continues to shrink. 

Nevertheless, the Massachusetts-based company has reaffirmed its revenue guidance for fiscal 2012 anticipating year-over-year growth of 20%-24%. Multiple clinical data updates (including additional data from the Protect II study) on Impella through the remainder of fiscal 2012 may support the device’s utilization. Our recommendation is backed by a short-term Zacks #3 Rank (Hold).