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Thoratec (THOR)

Q3 2012 Earnings Call

November 01, 2012 4:30 pm ET


Taylor C. Harris - Chief Financial Officer and Vice President

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


Danielle Antalffy - Leerink Swann LLC, Research Division

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

Jason R. Mills - Canaccord Genuity, Research Division

Lawrence Biegelsen - Wells Fargo Securities, LLC, Research Division

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

Robert A. Hopkins - BofA Merrill Lynch, Research Division

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

Narendra Nayak - Crédit Suisse AG, Research Division

Daniel Sollof - Barclays Capital, Research Division

Brooks E. West - Piper Jaffray Companies, Research Division



Good day, and welcome to the Thoratec Corporation Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Taylor Harris, Chief Financial Officer. You may begin.

Taylor C. Harris

Thanks, Matt. Good afternoon, and thank you for joining us. With me today are Gary Burbach, President and Chief Executive Officer; and Roxanne Oulman, Vice President of Finance. Gary will discuss highlights from the third quarter of 2012, and I will review the financial results for the quarter in more detail. 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.


Gerhard F. Burbach

Thank you, Taylor, and good afternoon. Thoratec continued to generate excellent financial and operational results in the third quarter, highlighted once again by Heartmate II, where we achieved year-over-year unit growth of 27% during the third quarter and 23% for the first 9 months of 2012.

We remain encouraged by the overall strength of the mechanical circulatory support market, both in the U.S. and abroad, and we continue to drive forward our market development activities, targeted sustainable long-term growth of the Destination Therapy indication.

While we continue to focus energy on supporting the competitive position and market opportunities for Heartmate II, we're also making solid progress with our product pipeline, where we remain on track to begin pivotal CE Mark clinical trials for both HeartMate III and PHP during 2013.

With respect to our financial results for the third quarter, Thoratec generated revenues of $117.8 million, a 15% increase over revenues of $102.6 million in the third quarter of 2011. Overall revenue growth was led by robust performance in the HeartMate product line, which grew 21% during the third quarter, offset by the continued decline of the PVAD and IVAD franchise.

In terms of geographic breakdown, we recorded revenues of $97.5 million in the U.S. versus $83.9 million in the prior year, an increase of 16%, while international revenues were $20.3 million versus $18.7 million a year ago, representing an increase of 9%.

Excluding the effect of foreign exchange, which was unfavorable by $2 million, as well as acquisition-related revenue, year-over-year international revenue growth was 15%.

Earnings on a non-GAAP basis were $0.49 per share, an increase of 19%. Through the first 9 months of the year, results have been similarly strong. Worldwide revenues of $363.2 million have grown 16% versus the net first 9 months of 2011, or 15% excluding the impact of foreign exchange and acquisitions.

Our HeartMate product line has driven a strong performance, with year-to-date growth of 19%, offsetting a 39% decline in our PVAD franchise.

We've also been pleased with the CentriMag business, which has grown 7%, excluding the impact of the acquisition of Levitronix Medical, which reached its 1 year anniversary during the third quarter.

Overall, revenue growth from this period was relatively balanced across geographies, with U.S. revenues increasing 15% and international revenues increasing 17%, excluding foreign exchange and acquisitions.

Earnings on a non-GAAP basis were $1.45 per share during the first 9 months of 2012, an increase of 23%. Unit growth of Heartmate II has remained strong, driving our overall financial performance, both in the third quarter and the first 9 months of 2012.

For Q3, we had a less challenging year-over-year comparison than we faced last quarter, and Heartmate II unit growth rebounded to an impressive 27%, comprised of 25% growth in the U.S. and 36% growth internationally.

This performance brought worldwide unit growth for Heartmate II on a year-to-date basis to 23%, including 21% domestically and 33% internationally.

Outside the U.S., Heartmate II and the VAD market as a whole have continued to enjoy a robust growth through the first 3 quarters of 2012, as new markets have layered additional growth opportunities on top of solid ongoing performance in Western Europe.

In the U.S., the Destination Therapy indication has driven HeartMate II's result in recent periods, with DT implants currently approaching 50% of our domestic HeartMate II sales.

Looking forward, we continue to expect the DT indication to account for the vast majority of growth in the VAD market, and that emerging VAD programs at smaller transplant and open-heart centers will grow at a strong pace and contribute an increasing percentage of our overall HeartMate II business.

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