Abiomed swings to loss on legal costs

Abiomed ($ABMD) has ended its latest fiscal quarter in the red for the first time in a while. Here's what's largely to blame: legal costs associated with allegations that execs inflated the company's stock price through improper marketing of the Impella 2.5 heart pump.

The Massachusetts cardiac device company disclosed that it lost $1.7 million during its fiscal 2014 first quarter, compared to a $3.1 million profit over the same period a year ago. In its earnings report, Abiomed said the loss mostly stems from more than $2.6 million of "incremental legal expenses" over last year's Department of Justice subpoena in the case, plus a shareholder lawsuit and "derivative action" that followed. On a much smaller scale, execs also blame the loss on higher stock compensation expenses and extra costs related to the 2.3% medical device tax.

Last November, the company disclosed that the U.S. Attorney's Office for the District of Columbia was investigating the matter. Investors initially fled, causing a stock drop of more than 30%. And shareholder lawsuits have followed in subsequent months. Investors were calmer this time in their response to Abiomed's financial news. The company's stock traded at $23.06 late afternoon today, down 4.5%.

Abiomed's remaining financial news is generally positive. Revenue during the 2014 first quarter reached $42.7 million, a 10% hike over the $38.8 million booked during the fiscal 2013 first quarter. Those gains come largely through the continued U.S. and global adoption of Impella-related devices. Abiomed said 27 additional hospitals bought Impella 2.5 during the quarter, and 66 more hospitals bought in to the company's Impella CP. Impella 2.5 is now at 775 customer sites, with Impella CP now at 172 U.S. sites, Abiomed said.

The loss, however, shows how medical device companies on the cusp of generating more significant revenue can be damaged by outside factors ranging from added taxes to unexpected legal costs. A giant like Johnson & Johnson ($JNJ), can, and has, handled far more expansive legal costs with much less proportional impact to the bottom line.

One bit of good news on the legal front: Abbott reminded investors that in June, the U.S. District Court of Massachusetts dismissed "the derivative lawsuit" relating to the Impella 2.5 marketing controversy.

- read the earnings release