Thoratec Corporation (THOR)
Q3 2011 Earnings Call
November 1, 2011 04:30 pm ET
Taylor Harris - Senior Director, IR and Business Development
Gary Burbach - President & CFO
Roxanne Oulman - Interim CFO
Larry Biegelsen - Wells Fargo
Jason Mills - Canaccord
Bob Hopkins - Bank of America
Chris Pasquale - JPMorgan
Thomas Gunderson - Piper Jaffray
Rajeev Jashnani - UBS
Matt Taylor - Barclays Capital
Jayson Bedford - Raymond James
Bruce Nudell - Credit Suisse
Suraj Kalia - Rodman & Renshaw
Duane Nash - Wedbush Securities
Chris Sassouni - Eagle Asset Management
Previous Statements by THOR
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Thank you. Good afternoon and thank you for joining us today. With me are Gary Burbach, President and Chief Executive Officer; and Roxanne Oulman, the company's Interim Chief Financial Officer. Gary will discuss the key events of the company since our last call and Roxanne will review the financial results for the quarter and provide an update on guidance for 2011. 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 the documents we file 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?
Thank you, Taylor, and good afternoon, everyone. Thoratec’s third quarter was highlighted by continued double-digit growth year-over-year in both pump units and revenues, strong new center activity, gross margin performance above our expectations and continued execution on our product and market development strategies. We experienced a sequential decline from our strong second quarter revenue performance and based on a few factors that we will described later, we are reducing our full-year revenue outlook by 1% to 2%. That said, we believe that the VAD market remains healthy and on track for sustained longer-term growth.
Additionally, based on our strong profitability results year-to-date, we are raising our 2011 guidance for gross margin and earnings per share. With respect to our financial results for the quarter, Thoratec generated revenues of $102.6 million, a 13% increase over revenues of $91.0 million in the third quarter of 2010. This increase was driven by a strong growth in pump revenues of 15%, with non-pump revenues continuing to expand at a slower pace due largely to the comparison against last year’s HeartMate external peripherals upgrade cycle.
Revenues moderated on a sequential basis reflecting the seasonality we typically see in the third quarter as well as the particularly strong performance in the second quarter of this year. In terms of geographic breakdown for the third quarter, we recorded revenues of $83.9 million in the United States versus $76.4 million in the prior year, an increase 10%. While international revenues were $18.7 million versus $14.6 million a year ago, representing an increase of 28% or 8% excluding both the positive $1.5 million impact of FX versus the third quarter of 2010 as well as the incremental international revenues associated with the Levitronix Medical acquisition.
Revenues from the HeartMate product line in the quarter were $87.6 million versus $80.6 million a year ago for an increase of 9%. Revenues from our acute surgical support line which includes CentriMag and PediMag were $7.2 million compared with $3.7 million a year ago. This strong performance include a growth in the core US CentriMag business of close to 50% as well as $1.6 million of incremental revenues recorded as a result of the Levitronix Medical transaction completed during the quarter.
Revenues from the Thoratec product line, the PVAD and IVAD were $7.2 million versus $6.2 million a year ago or an increase of 16%.
We experienced solid year-over-year unit growth in the quarter selling 853 pumps, an increase of 11% versus 766 pumps in the third quarter a year ago. In terms of pump shipments by geography, we shipped 665 pumps in the United States, an increase of 10% over 605 pumps a year ago and 188 internationally, an increase of 17% versus 161 a year ago.
Within the US, HeartMate II drove year-over-year unit growth with the large majority of growth continuing to come from the centers that adopted HeartMate II following the clinical trial.
On a sequential basis, all groups of centers in the US experienced a similar seasonal patterns with respect to HeartMate II volume.
As for Destination Therapy, just over 40% of our US HeartMate II implants during the third quarter were for the DT indication in line with the second quarter. In International markets, the PVAD franchise was the primary catalyst of year-over-year unit growth with the HeartMate II up modestly.
With respect to new center development, we added six HeartMate II centers in the US and two internationally during the quarter, bringing the total number of HeartMate II centers in the US to 141 and 139 internationally. This compares to 130 and 124 respectively at the end of 2010, and we believe we are on track to meet or exceed our previously stated 2011 target for new centre additions.
There are currently 99 centers in United States that have received vaccination therapy certifications from the joint commission. Eleven centers have submitted their applications to the joint commission and five have surveys scheduled before year end. I would now like to provide an update on our market development and educational programs.
Activities of medical conferences, clinical data publications and the roadmap study all of which is supporting the growing adoption of the HeartMate II. With respect to our market development programs we have spoken in previous calls about our wide range of initiatives designed to broaden awareness within the referring cardiology channel. The increased capacity in implanting centers and continue to improve clinical outcomes.