We upgrade our recommendation for
) to Outperform. HeartMate II unit sales rose 22% in the six months
ending June 30, 2012 wrapping up a robust half year.
HEARTWARE INTL (HTWR): Free Stock Analysis
THORATEC CORP (THOR): Free Stock Analysis
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Heart failure is a terminal degenerative condition afflicting more
than 20 million victims globally. More than five million Americans
are survivors of the condition and over half a million more cases
are identified each year.
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.
) has filed a Pre-Market Approval (PMA) for a similar device, which
will end Thoratec's dominance in the BTT segment later in the
fourth quarter of 2012, leaving it more dependent on the DT market.
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. 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.
The stock retains a Zacks #1 Rank, which translates into a
short-term Strong Buy rating.