Abiomed Earnings Rise, Tops Estimates

Abiomed Inc. (ABMD) posted an increase in net earnings to $4.4 million or 11 cents per share for the third quarter of fiscal 2014 from $2.7 million or 7 cents per share in the comparable quarter of prior fiscal year. With this, earnings per share trounced the Zacks Consensus Estimate by 7 cents. Following the earnings release, share price went up 2.7% to $26.93 after the market closed yesterday.

Revenues in the year rose 21% to $46.2 million, in line with the Zacks Consensus Estimate. Thanks to the highest worldwide growth in Impella revenues since the second quarter of fiscal 2013.

Globally, Impella revenues surged 25% to $42.0 million from $33.5 million in the same quarter of the prior fiscal year. U.S. Impella revenue rose 21% to $37.7 million. Outside the U.S., Impella revenues soared 76% to $4.3 million, driven by strong demand in Europe, mainly Germany.

An additional 31 hospitals purchased Impella 2.5 during the quarter, bringing the total customer sites to 836. Further, an additional 75 hospitals purchased Impella CP, bringing the total number of Impella CP U.S. sites to 312 in the quarter.
 
Gross margin went up 80 basis points (bps) to 79.5% from 78.7% in the year ago period. The increase was largely attributable to higher production volumes and improved yields.
 
Research and Development expenses rose 24.3% to $7.8 million mainly in order to support ongoing product development and clinical initiatives, including the Impella RP trial, as well as regulatory filings in the U.S. and Japan.

Operating income surged 57.4% to $4.6 million while operating margin increased 240 bps to 10.0% from 7.6% in the prior year period.

Abiomed had cash, cash equivalents, short and long-term marketable securities of $79.6 million as of Dec 31, 2013, up from $76.7 million as of Mar 31, 2013. The company had no debt at the quarter-end.

ABMD reiterated its revenue guidance for fiscal 2014. Management forecasted revenues to grow between 14 and 17% to $180–$185 million for the year. The Zacks Consensus Estimate of $184 million lies within the guided range. Global Impella sales are expected to increase by 20% and reported operating margin is forecasted in the range of nil to 5%.

Although we are impressed with the robust Impella utilization, higher expenses are a cause of concern. However, ABMD continues to enjoy a strong demand for its Impella products. Impella utilization is growing at a healthy pace, as is evident from the increasing number of patients being treated with the device.

Abiomed currently has a Zacks Rank #3 (Hold). Some better-ranked medical instruments stocks include Natus Medical Inc. (BABY), AngioDynamics Inc. (ANGO), and Cepheid (CPHD). Natus Medical carries a Zacks Rank #1 (Strong Buy), while both AngioDynamics and Cepheid carry a Zacks Rank #2 (Buy).

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