We maintain our recommendation for
) at Outperform. Thoratec reported third quarter 2012 adjusted
earnings per share of 44 cents. It easily surpassed the Zacks
Consensus Estimate of 33 cents.
Net income from continuing operations soared 27.7% year over
year to $24.3 million (or 41 cents per share).
Revenues improved 15% year over year to $117.8 million in the
third quarter, beating the Zacks Consensus Estimate of $112
million. Sales picked up 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.
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.
Ventricular Assist Devices represent a multi-billion dollar
market opportunity. It is estimated that, in addition to the
bridge-to-transplant (BTT) market, the Destination Therapy (DT)
market in the U.S. may eventually attain a significant size.
Until HeartMate II came up as a viable option, the only treatment
was heart transplant surgery.
HeartWare International Inc.
), a global provider of miniaturized ventricular assist devices
(VAD) for diagnosis of advanced heart failure, disclosed on
November 20, 2012, that the U.S. Food and Drug Administration
(FDA) has granted clearance for its HeartWare Ventricular Assist
System as a bridge to heart transplantation device for patients
with end-stage heart failure. The FDA approval was eagerly
awaited ever since HeartWare submitted its Premarket Approval
(PMA) application in December 2010. The company obtained European
CE Mark for the HeartWare system in 2009 and Australian
Therapeutic Goods Administration (TGA) approval in 2011.
However, there is no imminent competitive threat from
HeartWare in the DT segment, as its product is not expected to be
launched till 2015. We believe that DT will account for the major
part of growth in the Ventricular Assist Device (VAD) market.
Despite less visibility, Thoratec has expertise in product
development. The company is currently developing its next
generation HeartMate III. At the same time, HeartWare is expected
to close the technological gap. The company continues to do well
in overseas markets despite economic turmoil in Europe.
The stock currently retains a Zacks #1 Rank, which translates
into a short-term Strong Buy rating.
HEARTWARE INTL (HTWR): Free Stock Analysis
THORATEC CORP (THOR): Free Stock Analysis
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