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Abiomed (ABMD) Down despite Q4 Earnings & Revenue Beat

Shares of Abiomed Inc. ABMD fell for the second consecutive session on May 4, after the release of the company’s fourth-quarter 2016 results and fiscal 2017 guidance, which disappointed investors. Shares declined 4.1% to close on $94.89, reflecting a year-to-date return of 5.1%.

Abiomed reported earnings of 24 cents per share, which beat the Zacks Consensus Estimate by 6 cents. The company had reported earnings of $2.24 per share in the year-ago quarter which included $86.5 million of valuation allowance.
 

 

Revenues increased 39.1% year over year to almost $94 million, outpacing the Zacks Consensus Estimate of $90 million. The year-over-year upside was supported by robust performance by the Impella heart pump product line. On a constant currency (cc) basis, revenues increased 36%.

Revenues rose 43% to $329.5 million, while earnings were 85 cents per share in full-year 2016. Abiomed had reported earnings of $2.65 per share in full-year 2015.

Quarter Details

Globally, Impella revenues grew a strong 40% to $88.6 million in the quarter. U.S. Impella revenues improved 42% to $57.7 million while outside the U.S., revenues shot up 21% at cc to $6.9 million. In the U.S., Impella patient usage soared 45% driven by the growing adoption of protected PCI and emergent support.

Patient utilization of protected PCI surged 58%, while emergent support grew 48% in the reported quarter. U.S. reorder rate grew 49% year over year to $76.9 million.

Worldwide-service revenues increased 19% to $4.4 million.

Abiomed revealed that an additional 19 hospitals purchased Impella 2.5 heart pumps during the quarter, taking the installed customer base to 1,039 sites. As part of Abiomed's continued Impella CP launch, 38 new hospitals purchased the device during the quarter, reaching the Impella CP U.S. site count to 826.

Abiomed noted that an additional 9 sites made initial purchases of Impella RP, bringing the total number of Impella RP U.S. sites to 80 at the end of the quarter.

Gross margin expanded 40 basis points (bps) to 84.4%, primarily led by favorable euro exchange rate, as well as strong product volume and yields.

Operating expenses, as a percentage of revenues, decreased 240 bps to 63.3%. Research & development (R&D) expenses increased 60 bps, while selling, general & administrative (SG&A) expenses decreased 300 bps.

The upside in R&D expenses was a result of continued investments in products and manufacturing technologies. The rise in SG&A expenses was driven by sales team expansion, which the company expects to continue in the near term.

Operating margin expanded 280 bps on a year-over-year basis to 21.1%.

FDA Approval/Product Details

On Apr 7, 2016, Abiomed announced the receipt of the FDA pre-market approval (PMA) for Impella 2.5, Impella CP and Impella 5.0 heart pumps for treating patients who suffer cardiac shock after heart attack or heart surgery. Impella is now the only percutaneous hemodynamic support device that is FDA-approved safe and effective for this population. In the current indication, Impella devices will help the heart pump blood, allowing the left ventricle to rest while a surgeon performs the surgery.

In fiscal 2017, Abiomed plans to complete the Impella RP post-market study and file for a PMA approval in fiscal 2018. Meanwhile, Abiomed will continue its controlled Impella RP launch.

Abiomed expects Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) to give approval by June this year, and reimbursement approval in the next four months. The company expects to launch the devices at selected top hospitals during the Oct 2016 quarter. Meanwhile, the company continues to build its local team, establish training capabilities, and has also selected the first 10 hospital sites. To date, 20 Japanese physicians have attended training and observed cases at U.S. hospitals.

Guidance

Abiomed forecasts revenues in the range of $430 million to $445 million, up 30%--35% over fiscal 2016 levels. Apart from the gradual launch of the RP program, the company expects to open 10 new sites every quarter in the fiscal.

Abiomed expects no significant revenue contribution from Japan in fiscal 2017. Most of the benefits from the recent FDA approval are expected to occur in the second half of the fiscal year. Usually, the back-half contributes 54% to total revenues, which is expected to occur again in fiscal 2017.

Operating margin is forecasted in the band of 18% to 20%. The company expects lower margins in the first half of the year and improved margins in the second half with a rise in revenues.

Abiomed plans to add 10 employees per quarter to its commercial team throughout fiscal 2017.

Zacks Rank & Other Key Picks

Currently, Abiomed carries a Zacks Rank #2 (Buy).

Other favorably ranked stocks in the broader medical industry are Edwards Lifesciences EW, IRadimed Corporation IRMD and Baxter International BAX. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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