Five days after Abiomed ($ABMD) ended its 2012 fiscal year in the black with record revenue, investors apparently responded to rumors of potential reimbursement problems with the company's Impella heart pump by driving its share price down by as much as 7%. (As Reuters reports, the stock eventually rebounded a bit.) The stock closed at $22.44 at the end of trading for the day but dropped an additional 6% in Wednesday morning trading.
This all started when Lazard Capital Markets downgraded the company's stock from "buy" to "neutral," according to the story. Reuters quotes Lazard analyst Sean Lavin as writing about a risk that the U.S. Centers for Medicare & Medicaid Services could reconsider reimbursement, even though Abiomed has said it doesn't know of any issue here. Basically, he noted, the issue comes down to recent changes in how the U.S. healthcare reimbursement procedure takes place (thank you, health reform law), which has left reimbursement for medical devices less than a sure thing. (Among the many changes: Medicare patients in at least 7 states, for example, will have to gain prior authorization to use some medical devices and equipment, including pacemakers and defibrillators.)
This is where medical devices enter dicey territory. Devices, such as the Impella pump, often depend on government insurance coverage to recoup their costs and generate revenue. With that in mind, even speculation that the reimbursement system in place is in jeopardy could push investors away. Fueling the anxiety, Lavin wrote that Impella could be moved into a new diagnosis-related group for CMS insurance classification, which could affect the overall reimbursement rate, according to the story. (Another potential jolt could come from Thoratec, which, as Reuters points out, is developing a competing device.)
Of course, the reimbursement anxiety clashes with Abiomed's own prediction that Impella revenue will jump 30% in fiscal 2013, as Reuters notes. And it offers a downbeat note after the Danvers, MA company ended fiscal 2012 with a record $126 million in revenue and $1.5 million in net income, making it its first profitable fiscal year in about 15 years.
- read the Reuters story