) second quarter 2012 adjusted (excluding one-time items other than
stock-based compensation expenses) earnings per share of 36 cents
missed the Zacks Consensus Estimate of 42 cents and fell short of
the year-ago earnings of 41 cents per share.
Profit (as reported) declined 4.5% year over year to $20.8
million (or 35 cents per share) in the quarter.
Revenues increased 6.7% year over year to $118.6 million in the
second quarter, trailing the Zacks Consensus Estimate of $122
million. Revenues improved on the back of growth in HeartMate II
product line as well as the development of the Destination Therapy
(DT) in which Thoratec enjoys market monopoly.
Geographically, domestic sales edged up 4.4% year over year to
$97.1 million, while overseas sales climbed 18.1% to $21.5
By product line, HeartMate sales were up 8.8% to $106.2 million.
Sales of the paracorporeal ventricular assist device (PVAD) and
implantable ventricular assist device (IVAD), fell 50% to $3.8
million while CentriMag blood pump sales increased almost 51% to $8
Pump sales were up 10.2% year over year to $85.7 million while
non-pump revenues declined 1.2% to $32.3 million. Unit sales of
pumps in the U.S. increased 2.7% year over year to 773 units while
overseas sales were up 9.8% to 212 units.
Margins and Expenses
On an adjusted basis, gross margin improved to 72.1% from 71.2%
in the prior-year quarter on account of gains from volume-oriented
benefit and the Levitronix takeover, slightly negated by volatile
fluctuation of foreign currency. Operating margin came in at about
26% in the quarter, compared with 30.8% in the year-ago
Adjusted operating expenses were up 22.9% year over year to
$46.1 million partly on account of increased expenditure on product
and market development, as well as higher operating expenses
associated with the Levitronix acquisition.
The company ended the quarter with cash and investments of
$279.8 million, down 6.3% year over year.
Thoratec has revised its financial forecast for 2012. The
company expects revenues between $460 million and $470 million
compared with the prior guidance of $452 million and $467
The updated guidance includes higher sales estimates for the
HeartMate product line, in the range of $10 million to $15 million,
partially offset by lower sales estimates for the PVAD product line
and foreign exchange impact of $7 million.
Thoratec forecasts adjusted gross margin of 71.5% for 2012. This
resonates the improvement in utilization on the back of growth of
the HeartMate II product line.
For 2012, earnings per share (on a reported basis) are projected
in the range of $1.28 to $1.34 compared with $1.24 to $1.34
earlier, while adjusted earnings are expected to be between $1.67
and $1.73, compared with the prior guidance of $1.62 and
Thoratec enjoys a first-mover advantage, and the growing number
of HeartMate II centers indicates increasing acceptance. The
company has shown expertise in product development. VAD represents
a substantial market opportunity for Thoratec with a significant
number of eligible heart failure patients globally.
With HeartMate II, Thoratec has developed the only devices of
its kind for 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
However, Australian heart pump maker
) is expected to close the technology gap with the launch of its
next-generation VAD product. Currently, the company is awaiting
approval from the U.S. Food and Drug Association (FDA) for its
Ventricular Assist System for a Bridge-to-Transplant
We currently have a long-term Outperform recommendation on
Thoratec. The stock retains a Zacks #2 Rank, which translates into
a short-term Buy rating.
HEARTWARE INTL (HTWR): Free Stock Analysis
THORATEC CORP (THOR): Free Stock Analysis
To read this article on Zacks.com click here.