We have recently upgraded our long-term recommendation for
Thoratec Corp.
(
THOR
), provider of mechanical circulatory support devices to Outperform
from Neutral with a target price of $40.00. We believe that
Thoratec through its attractive prospects and pipeline; is poised
to enhance its global reach in the growing mechanical circulatory
support devices market. Moreover, the company recently posted
better-than-expected first-quarter 2012 results.
The company's first quarter fiscal 2012 adjusted earnings per
share of 48 cents easily beat the Zacks Consensus Estimate of 36
cents per share. Revenues improved 27.4% year over year to $126.8
million in the reported quarter, surpassing the Zacks Consensus
Estimate of $112 million.
The company enjoys the first-mover advantage in the market it
serves. Following the FDA's approval for HeartMate II (for DT) in
January 2010, Thoratec to date enjoys a monopoly in the U.S. market
with the only device of its kind. In the U.S. DT market, Thoratec
faces no near-term competitive threat even though Australian heart
pump maker
HeartWare International
(
HTWR
) is closing in on the technology gap. The near-term advantage is
that Heartware's HVAD is not expected to be launched before 2015 or
so.
Thoratec has continued with its solid performance in the
international market. The contagion of economic problems in Europe
has not had any significant impact on the most recent quarter's
performance. Thoratec registered healthy growth in HeartMate II
implants in Germany as well as in France. Additionally, the company
expects regulatory approval in Japan later, in the second half of
2012. After the reimbursement approval in Japan, the company will
be able to serve one of the largest focus markets for its
products.
Thoratec has undertaken continuous efforts to achieve its
strategy of margin expansion. The company's gross margin improved
in successive quarters on the back of favorable volume, mix and
acquisitions. Management expects this trend to continue as it
benefits from the growth momentum. It forecasts adjusted gross
margin to be in the range of 71% to 71.5% for fiscal 2012.
However, the small size of the company may restrict its ability
to raise resources. The absence of strategic alliances may hinder
its ability to develop new products. The single product line of the
company and lack of product diversification are related areas of
concern. Lack of pipeline visibility and relative lack of
milestones represent another concern.
HEARTWARE INTL (HTWR): Free Stock Analysis
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THORATEC CORP (THOR): Free Stock Analysis
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