) reported third quarter 2012 adjusted (excluding one-time items
other than stock-based compensation expenses) earnings per share
of 44 cents. It easily surpassed the Zacks Consensus Estimate of
33 cents as well as the year ago earnings of 34 cents per share.
Net income from continuing operations soared 27.7% year over year
to $24.3 million (or 41 cents per share) while net income climbed
35.1% year over year to $24.3 million (or 41 cents per share) in
Revenues improved 15% year over year to $117.8 million in the
third quarter, beating the Zacks Consensus Estimate of $112
million. Revenues improved on the back of higher volume of
HeartMate II product line (up 27% year over year) as well as the
development of Destination Therapy (DT) in the domestic market in
which Thoratec enjoys market monopoly. Geographically, domestic
sales surged 16% year over year to $97.5 million, while overseas
sales increased 9% to $20.3 million.
By product, HeartMate sales jumped 21% to $105.9 million. Sales
of the paracorporeal ventricular assist device (PVAD) and
implantable ventricular assist device (IVAD), dipped 47% to $3.8
million while CentriMag blood pump sales edged up 4% to $7.5
million (includes $0.9 million contribution from the Levitronix
Thoratec pump sales were up 17.7% year over year to $85 million
while non-pump revenues ascended 8.1% to $32.2 million. Unit
sales of pumps in the U.S. increased 17.4% year over year to 781
units while overseas sales were up 10.6% to 208 units.
Margins and Expenses
On an adjusted basis, gross margin decreased to 71.4% from 71.6%
in the prior-year quarter on account of foreign currency
fluctuations. Operating margin was 27.8% in the quarter compared
with about 27% in the year-ago quarter.
Adjusted operating expenses shot up 19% year over year to $43.2
million partly on account of increased expenditure on product and
The company exited the quarter with cash and investments of
$307.9 million, up 32.4% year over year.
Thoratec has revised its financial forecast for 2012. The company
expects revenues between $477 million and $483 million compared
with the prior guidance of $460 million and $470 million. The
updated guidance includes higher sales estimates for HeartMate II
product line and solid expansion of the ventricular assist device
For 2012, earnings per share (on a reported basis) are now
projected in the range of $1.40 to $1.44 compared to the prior
guidance of $1.28 to $1.34 while adjusted earnings are expected
to be in a band of $1.79 and $1.83 compared with the prior
guidance of $1.67 and $1.73.
Thoratec enjoys a first-mover advantage in the market it serves.
With HeartMate II, Thoratec enjoys a monopoly in the U.S. market
since it has developed the only device of its kind for the
destination therapy indication (for heart failure patients who
are not eligible for heart transplant). Favorable adoption trend
of the device is expected to support revenue growth moving
However, its dominance in the bridge-to-transplant (BTT)
indication will be challenged following the prospective approval
) Ventricular Assist System later this year. Australian heart
pump maker HeartWare is expected to close the technology gap with
the launch of its next generation VAD product.
Despite limited visibility, we are optimistic about Thoratec
successfully expanding its sales on the back of its HeartMate
product line. The company continues to do well in overseas
markets despite economic turmoil in Europe. It expects regulatory
approval in Japan later in the fourth quarter of 2012. After the
reimbursement approval in Japan, the company will be able to
serve one of the largest focus markets for its products.
We currently have a long-term 'Outperform' recommendation on
Thoratec. The stock retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
HEARTWARE INTL (HTWR): Free Stock Analysis
THORATEC CORP (THOR): Free Stock Analysis
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