Abiomed stock surge could ripen the possibility of acquisition

Cardiac device maker Abiomed ($ABMD) surged on the Street over the last month, with eager investors pushing the company's stock price up more than 34% since October. The Massachusetts outfit's continued success growing its heart pump revenue is helping to drive the trend, ripening its desirability as a takeover target.

What a difference a month makes. At the close of trading on Oct. 22, 2013, Abiomed's stock hit $20.18. From there it has steadily climbed with rarely a dip in sight. The price hit $28.03 in late-morning trading on Nov. 21, up more than 2.7% for the day.

A core element driving investor interest here is a nearly uninterrupted string of stellar financial results. Earlier in November, Abiomed released its fiscal 2014 second-quarter financials, and to say they were positive is an understatement. Its revenue reached $44.3 million, up 19% from $37.4 million in revenue booked over the same period in fiscal 2013.  Net income was down, but still in positive territory: $1.1 million, versus $5.5 million over the same period last year.

That drop included $1.9 million in extra charges relating to a U.S. Justice Department subpoena last year involving allegations that the company's execs inflated the stock price through improper marketing of the Impella 2.5 heart pump. Undaunted, investors kept pushing the stock price up anyway as they focused on other 2014 Q2 positives: Impella patient usage is up 24% versus the prior year, clinical studies involving next-generation products are advancing, and the U.S. Department of Veterans affairs will now provide Impella products to VA medical facilities, Department of Defense hospitals and other federal agencies. Abiomed said it now has 805 customer sites for its Impella 2.5 heart pump, and Abiomed Chairman, President and CEO Michael Minogue said in a statement that the company has reached quarterly records for Impella utilization.

Beyond 2014's Q2, Abiomed has enjoyed a number of promising quarters, save for a blip in the fiscal 2014 first quarter when it lost $1.7 million due to the Department of Justice investigation and a shareholder lawsuit that followed. Investors at the time initially drove the stock down 30%, but they've clearly flocked back as Abiomed's solid results have overshadowed everything else. In other words, they're looking at the big picture and are clearly happy with what they see.

With that in mind, Abiomed's growth and its success in the growing heart pump and cardiac assist space make it a takeover target, another element that can drive a stock price higher in a short amount of time. Seeking Alpha speculated as much in early 2012, noting that the company's revenue growth, its presence in a growing medical device space and even aging baby boomers (a growing customer base) make it a viable target.

There are other heart pump makers out there--Thoratec ($THOR) has had great success with its HeartMate device. Over the summer, it agreed to fork over up to $56.5 million more for Terumo's investigational DuraHeart II, a clear investment in growing more of a presence in the heart pump space. Abiomed offers an opportunity for another med tech company to jump in quickly with a lot of the growth and expansion plans already in place.

- read Seeking Alpha's previous assessments here and here
- recap Abiomed's recent Q2 2014 financial results

Related Articles:
Abiomed swings to loss on legal costs
Abiomed kicks off FDA-targeted trial for new Impella
Abiomed gets out from under FDA's Impella warning letter

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