) reported first-quarter 2013 adjusted (excluding one-time items
other than stock-based compensation expenses) earnings per share
of 34 cents missing the Zacks Consensus Estimate of 40 cents.
Net income from continuing operations dropped to $18.2 million
(or 31 cents per share) from $25.5 million (or 43 cents per
share) in the year-ago quarter. Net income included one-time
Revenues dropped 7% year over year to $117.7 million in the
first quarter, missing the Zacks Consensus Estimate of $123
million. Geographically, domestic sales dropped 11.2% year over
year to $92.3 million, while overseas sales increased 10.9% to
By product, HeartMate sales dropped 7.9% to $102.9 million.
Sales of the paracorporeal ventricular assist device (PVAD) and
implantable ventricular assist device (IVAD) declined 34.5% to
$3.8 million, while CentriMag blood pump sales rose 19.5% to
$10.4 million. The Other category was stagnant at $0.6
Thoratec pump sales were down 9% year over year to $84.3
million, while non-pump revenues dropped 2.4% to $32.8 million.
Unit sales of pumps in the U.S. decreased 14.6% year over year to
716 units, while overseas sales were stagnant at 219 units.
Margins and Expenses
On an adjusted basis, gross margin improved to 72.1% from
71.6% in the prior-year quarter. Adjusted operating expenses shot
up 15.5% year over year to $52.8 million partly on account of
increased expenditure on product and market development.
The company exited the quarter with cash and investments of
$262.1 million, up 0.7% year over year.
Thoratec reaffirmed its financial forecast for 2013. The
company continues to expect revenues between $490 million and
$510 million. For 2013, earnings per share (on a reported basis)
continue to be projected in the range of $1.32 to $1.42, while
adjusted earnings continue to be expected in a band of $1.76 and
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
forward. However, its dominance in the bridge-to-transplant (BTT)
indication has ended following the FDA approval of
) Ventricular Assist System in Nov 2012.
Despite limited visibility and periodic setbacks, we are
optimistic about Thoratec successfully expanding its sales on the
back of its HeartMate II product line. The company continues to
do well in overseas markets despite economic turmoil in Europe.
It received reimbursement approval in Japan on April 1, 2013,
which enables it to commercialize the HeartMate II as a BTT for
victims of advanced heart failure. Thoratec commercialized the
Pocket Controller in Europe in Mar 2013. This offering is yet to
receive the FDA nod in the U.S.
Thoratec currently retains a Zacks Rank #3 (Hold). We are more
) which carry a Zacks Rank #1 (Strong Buy) and Zacks Rank #2
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