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Thoratec (THOR)

Q1 2014 Earnings Call

May 06, 2014 4:30 pm ET


Neil Meyer -

Gerhard F. Burbach - Chief Executive Officer, President and Executive Director

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


Lawrence Biegelsen - Wells Fargo Securities, LLC, Research Division

Matthew Taylor - Barclays Capital, Research Division

Suraj Kalia - Northland Capital Markets, Research Division

Christopher T. Pasquale - JP Morgan Chase & Co, Research Division

David H. Roman - Goldman Sachs Group Inc., Research Division

Kaila Krum

Jason R. Mills - Canaccord Genuity, Research Division

Brooks E. West - Piper Jaffray Companies, Research Division

Danielle Antalffy - Leerink Swann LLC, Research Division

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

Matthew J. Keeler - Crédit Suisse AG, Research Division

Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division



Good day, and welcome to the Thoratec Corporation Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Neil Meyer, Director of Investor Relations. Please go ahead, sir.

Neil Meyer

Good afternoon, and thank you for joining us today. With me is Gary Burbach, President and Chief Executive Officer; and Taylor Harris, Vice President and Chief Financial Officer. Gary will discuss highlights from the first quarter of 2014, and Taylor will review the financial results for the quarter, as well as our 2014 outlook. We will then open the call to your questions.

Before turning the call over to Gary, I want to remind you that during the course of today's conference call and the question-and-answer session that follows, we may make projections or other forward-looking statements that are subject to the Safe Harbor provisions of the securities laws regarding future events or the financial performance of the company. We caution you that these statements are only predictions and that actual results may differ materially. We also alert you to the risks contained in our documents we filed with the Securities and Exchange Commission, such as our annual and quarterly reports on Forms 10-K and 10-Q. We do not undertake any obligation to update or correct any forward-looking statements. Gary?

Gerhard F. Burbach

Thank you, Neil, and good afternoon. Thoratec's results for the first quarter of 2014 demonstrated continued growth despite known headwinds that we expected would impact the first half of 2014. We continue to make operational and financial progress during the quarter with continued growth in HeartMate II and exceptional growth in our CentriMag acute product line.

And I'm particularly excited by the potential for our new products, HeartMate III and HeartMate PHP, to advance the field and drive further market expansion. With respect to our financial results for the first quarter, Thoratec generated revenues of $125.7 million, a 7% increase over revenues of $117.7 million in the first quarter of 2013. HeartMate II revenues also increased 7% year-over-year, while CentriMag reported strong growth of 25%, and PVAD revenue declined $1.5 million compared with the prior year.

In terms of geographic breakdown, we reported revenues of $95.6 million in the United States, an increase of 4% compared with the prior year. Meanwhile, international revenues increased 19% to $30.1 million compared with $25.4 million last year. Changes in foreign currency positively impacted total revenue growth by 50 basis points compared with the first quarter of 2013.

Earnings per share on a non-GAAP basis were $0.41, consistent with the first quarter of 2013. Taylor will discuss the first quarter results and our 2014 guidance further in his financial review.

During the first quarter, we shipped 964 HeartMate II pumps, an increase of 8% compared with the first quarter of 2013. International pump growth of 28% benefited from a larger than anticipated distributor order in Japan. We estimate that international unit volume increased approximately 9% compared with the prior year, excluding the unexpected stocking in Japan during the quarter. We have historically seen order patterns vary over time throughout all of our distributor markets, and our Japanese distributor ordered units to satisfy demand in future periods. As a result, the possibility exists that we will realize no sales of HeartMate II units in Japan during the second quarter of 2014 as implant volume is satisfied by units purchased earlier in the year. HeartMate II units in the U.S. increased by 2% compared with the prior year. We believe U.S. growth in the quarter was constrained by the high-profile concerns over adverse events in the media and medical journals, which we discussed in our last earnings call and incorporated into our 2014 guidance.

As a reminder, we recently disclosed, that beginning in the current period, we no longer include PVAD sales in our quarterly pump unit numbers, which now reflect only HeartMate products. PVAD unit volume continued to decline during the first quarter as use of this product has become limited primarily to BiVAD applications.

While we will not be discussing specific PVAD volumes going forward, Thoratec remains committed to supporting the product for patients in need of this specific lifesaving therapy.

Revenues for our CentriMag acute product line were $13 million during the first quarter, an increase of 25% compared with the prior year. Strong worldwide pump unit growth of CentriMag and PediMag drove our results, with particularly strong demand in the United States supported by double-digit unit growth in Europe as well. Growth was particularly strong within our top accounts and transplant centers where we are seeing greater adoption of the technology, along with an increase in CentriMag equipment revenue throughout our customer base. We also continue to increase the number of centers using CentriMag, and our worldwide customer base now includes over 550 hospitals.

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