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Thoratec Corporation (THOR)

Barclays Global Healthcare Conference

March 14, 2013 8:00 am ET


Taylor C. Harris - Chief Financial Officer, Principal Accounting Officer and Vice President


Matthew Taylor - Barclays Capital, Research Division


Matthew Taylor - Barclays Capital, Research Division

Thanks for joining us for the morning session of Day 3 of the Barclays Conference. We're really pleased to have Thoratec with us this morning and Taylor Harris, the CFO. As I'm sure you know, Thoratec is the market leader in the VAD space and it's a market that we're really excited about. We think there's a lot of room for increases in penetration and technology innovation to drive growth in this market. And I want to hear a lot about that and Thoratec's pipeline. So with that, let me turn it over to Taylor to give you an update and then we'll do some Q&A.

Taylor C. Harris

Thanks, Matt, and thanks, everyone, for joining us here and on the webcast. Before I start, just to remind you that I will be making some forward-looking statements, which are subject to uncertainty and risks. You can find out more about those risks in our SEC filings.

So we would agree with some of the comments of that Matt made in terms of the market opportunity for LVADs. Our mission at Thoratec is to lead the use of the MCS, mechanical circulatory support, which is a device-based therapy, in order to serve the needs of advanced-stage heart failure patients. We have 2 lines of business: one in chronic circulatory support, the other in acute.

On the chronic side, our lead product is HeartMate II. We believe there's roughly a -- approaching a $600 million market right now for chronic circulatory support devices. Over the 5-year time period 2010 to 2015, we've said we think that the market will expand in the mid- to upper-teens range, 15% or more. And really, the underlying reason behind that is that there's this large pool of patients in Class IV heart failure, 50,000 to 100,000 or so whose needs are not being met right now by current therapies. They're not able to get a heart transplant. They're not optimally served by drug therapy. That's the opportunity for chronic MCS devices.

On the acute side, our product line is the CentriMag and PediMag. And there's a market opportunity currently of about $150 million. We think that is also a double-digit growth market for the -- for our core product line, like CentriMag. What we have in development, though, is a novel product called the PHP for percutaneous support that we think could unlock an even larger opportunity for us.

If you look just over the last 5, 6 years, our revenues and earnings have grown well at a strong rate. We were approaching $500 million of revenue in 2012, non-GAAP EPS of $1.83. So strong historical performance. And then looking ahead to 2013, we have 3 main goals. The first is to continue driving growth in the overall market on a worldwide basis, both for chronic and acute support.

Secondly, would be to solidify our competitive position and there are handful of ways that we're planning on doing that but really focused on clinical differentiation. There's a fair amount of clinical data that we can bring to bear, as well as the level of support and service that we provide to the field, which we think is a competitive advantage.

And then lastly, moving our next-generation pump platforms into pivotal clinical trials. I'll talk more about that later. We think it's going to be a very interesting year in terms of pipeline progress at Thoratec.

So the 2 main thrusts of the company's efforts right now are in market development and product development and I'll just spend a minute on each of those. In terms of market development, I would focus you on the 2 top left boxes on this slide, referral generation and center capacity development. As I mentioned, there's a large number of patients who aren't currently being treated by VAD therapy. They are not being treated at the implant centers. They're out in the community, being served by community cardiologists. And so a big effort, in fact, the main effort that we face in developing the market is really spreading education, awareness of this therapy option more broadly through the community. And we do that through a dedicated team of people, through outreach events where we partner with implanting centers to get out into the community and by a number of other programmatic efforts. But then at the same time, we have to continue to work with the implanting centers to build their capacity to support increasing numbers of VAD patients. And so we have a number of initiatives aimed at that. That's the core of our market development efforts. We're doing that on a global basis but it's all, obviously, supported by an ongoing, continued, sharp focus on the clinical outcomes, the benefit to patient and on generating data to support the utilization.

Then lastly, our product development pipeline. In terms of the HeartMate II platform, we're still evolving that platform. This year, you should see the launch of the Pocket Controller, our next-generation controller, which we're excited about. That's still on track on a worldwide basis for launch in the first half of the year. The U.S., we're still waiting on FDA regulatory approval and anticipate a second quarter launch in the U.S. So we think that will be a very nice -- the controller is obviously -- that and the batteries or what the patient interacts with the most. So having the latest and greatest of those devices, we think, is very important.

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