Abiomed plunges 30% on growth concerns; HeartWare says key trial likely to resume soon

An illustration of the Impella 2.5 pump in the heart--Screenshot courtesy of Abiomed

Temporary heart pump maker Abiomed ($ABMD) reported 47% annual revenue growth to $51.9 million and net income up 103% to $7.7 million, and yet CEO Michael Minogue found himself defending the company's growth prospects during the company's earnings call on the heels of a 30% plunge in the share price.

The CEO explained that "multiple triggers" will drive growth as the company aims for $1.2 billion in sales by 2020, including future PMA approvals and the launch of devices in markets overseas, most notably Japan.

Leerink analyst Danielle Antalffy said in a research note that the selloff was "driven by ramping fears that the company's implied mid-20% sales growth guidance in the back half of the year suggests that its $1.2B 'base-case' FY2020 sales vision is unattainable," but said the apparent panic among investors is unwarranted because the slowing growth is "largely driven by increasingly difficult y/y comps," and believes the company is on track to meet or exceed the $1.2 billion goal. Jefferies' Raj Denhoy concurred with Antalffy's analysis.

After all, Abiomed estimates its device are treating 5% of the addressable U.S. market of 221,000 patients.

A current growth driver is an expanded indication from the FDA for the Impella 2.5 heart pump to include so-called Protected PCI procedures, or high-risk percutaneous coronary interventions. Protected PCI procedure volume increased 70% during the quarter. The Impella enables the revascularization procedure by facilitating blood circulation during the intervention.

Abiomed's growth has been driven by the absence of a strong competitor in the temporary ventricular assist device arena, but that's likely to change soon with the expected launch of St. Jude Medical's ($STJ) CE-marked HeartMate PHP, inherited with the just-completed $3.4 billion takeover of Thoratec.

Minogue said Abiomed has filed a patent infringement suit against St. Jude that will impact the bigwigs' ability to sell the PHP, whose European launch is scheduled for 2016.

In addition, Minogue pooh-poohed the recent PHP's clinical trial results, saying "the results highlighted some concerns around adverse events associated with the use of this device. And for our investors to understand what the product is, it's a catheter pump that's 13 French, as compared to our 9 French, and the median estimated flows that they reported is very Impella 2.5-like, median flows were 2.3 liters per minute."

Abiomed is awaiting word from the FDA on its PMA supplement application for the Impella 5.0 in hopes staying ahead of St. Jude.

Meanwhile, fellow heart pump maker HeartWare ($HTWR) had a busy earnings call, aimed at calming investor anxiety about the recent suspension of its CE mark trial for the next-generation MVAD, which is significantly smaller than the current HVAD, making it easier to implant.

MVAD pump--Courtesy of HeartWare

It appears the delay to the MVAD trial could be minor, leading to a restart early next year.

"Their own internal investigation has led them to believe that tightening manufacturing specifications could be enough to improve pump performance and prompt a trial restart. CEO Doug Godshall noted that, as of right now, he does not believe any design change or tweak is warranted, which jives with our recent MEDACorp physician checks. With HTWR now expected to submit data in mid-December to support a controller software change, the company could restart the CE Mark (trial) shortly thereafter," Antalffy wrote.

As expected, company officials defended the unpopular plan to acquire Valtech Cardio, which has earned the open disapproval of activist investor Engaged Capital. The deal isn't popular with other investors either, for HeartWare shares quickly shed about 20% on the acquisition news when the planned transaction was disclosed.

But company officials touted Valtech's recent CE-mark approval of its Cardioband transcatheter mitral valve repair device. "This novel device is well-positioned to be a leading technology in the mitral repair market and represents a safe and clear selection of first line treatment for the largest segment of a mitral regurgitation patients, those with functional MR," said Heartware CEO Douglas Godshall.

Overall, the company reported a loss of $29.9 million, on a 5% sales decline to $65.2 million. The stock price is down about 2% since the earnings release.

- read Abiomed's earnings release
- here are HeartWare's earnings