) reported fiscal 2014 second-quarter earnings per share of 3
cents per share, down by a whopping 76.9% from the year-ago
adjusted earnings of 15 cents per share. However, EPS was in line
with the Zacks Consensus Estimate.
On a reported basis, the Massachusetts-based company registered a
profit of $1.1 million, down 80% from the year-ago adjusted level
of $6.1 million. Expenses associated with legal matters coupled
with the newly implemented medical device excise tax
significantly dampened bottom-line growth in the quarter.
Revenues for the fiscal second quarter surged 19% to $44.3
million, in line with the Zacks Consensus Estimate. This marked
the 16th straight quarter of Abiomed's year-over-year revenue
growth in double digits. The improvement was led by record
patient utilization of the Impella device in the quarter.
Globally, Impella revenues rose 23% to $40.2 million in the
quarter. U.S. revenues for the device grew 21% to $37.0 million
with a 24% year over year increase in usage. ABMD opened 30 new
U.S. customer sites for Impella 2.5 in the quarter, taking the
total count to 805 sites. Moreover, with 65 new hospitals having
adopted the latest Impella CP, there are now 237 customer sites
in the U.S.
Gross margin declined 120 basis points (bps) to 79.6% from 80.8%
a year ago. The company's gross margin is sensitive to the number
of consoles placed for new site openings, expanded use needs, and
AIC upgrades. In the quarter under review, 172 Impella consoles
were placed against 114 in the prior-year quarter.
Research and Development expenses (R&D) were up 31.9% to $7.3
million, primarily on account of expenses related to regulatory
filings in the U.S. and Japan as well as ongoing product
development and clinical initiatives. Selling, general and
administrative expenses (SG&A) increased 42.1% to $26.2
million due to expanded sales and marketing initiatives and
customer support centers in the U.S.
Additionally, Abiomed incurred $1.9 million as legal expenses
related to the Department of Justice (DoJ) subpoena and medical
device tax of $0.7 million. As a result, operating income
declined to $1.4 million in the reported quarter from $5.9
million in the comparable year-ago period. Operating margin
plunged 1270 bps to 3.2% from 15.9% reported in the second
quarter of fiscal 2013.
Abiomed had cash, cash equivalents, short and long-term
marketable securities of $96.9 million as of Sep 30, 2013, up
10.0% from $88.1 million as of Mar 31, 2013. The company had no
debt and did not repurchase shares in the quarter.
ABMD reiterated it revenue guidance for fiscal 2014. Management
forecasts revenues to grow 14 to 17% to $180-$185 million for the
year. Global Impella sales are expected to increase by 20% and
reported operating margin is forecasted in the range of nil to
Abiomed has enrolled more than 50% of the required patients in
the RP Recover Right study. Hence, management expects HDE
approval in February 2015.
The U.S. Department of Veterans Affairs has included Abiomed in
its authorized Veteran's Administration (VA) Federal Supply
Schedule, providing the Impella platform to VA medical
facilities, Department of Defense (DOD) hospitals and other
Although we are impressed with the robust Impella utilization,
higher expenses are a cause of concern. Abiomed's engagement in
legal issues is adversely affecting its operating margin. The
company must control its expenses to enhance profitability and
growth going forward.
However, ABMD continues to enjoy a strong demand for its Impella
products. Impella utilization is growing at a healthy pace, as is
evident from the increasing number of patients being treated with
Abiomed currently has a Zacks Rank #3 (Hold). Some well-placed
medical instruments stocks such as
Natus Medical Inc.
) are worth considering. All of them carry a Zacks Rank #1
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