Abiomed: Hearts, and more
Founded in 1981, Abiomed Inc. (Nasdaq: ABMD) is hardly a start-up. But the maker of heart assist and replacement systems has the promise of one.
Since its inception, Abiomed has claimed its mission is nothing less lofty than making real the day when heart failure need not mean the end of life or the ability to enjoy life.
With each decade, the Danvers, Mass.-based company has made progress on its goal. And any day now, Abiomed could receive clearance from the U.S. Food and Drug Administration to advance on the road to approval of its Impella 2.5 product, a “minimally invasive” catheter pump. That’s why analysts’ median target price on the stock is $22, compared with a close on Thursday of $13.61. The 52-week low of $9.95 was set a month ago, while the year-high of $16.19 was established nearly a year ago.
This week alone, the stock climbed 33% after the company announced it was moving forward in the regulatory process for Impella by providing a formal written response to questions from the FDA on the device. In a conference call on Thursday, AbioMed CEO Michael R. Minogue said of the anticipated approval, which he said could take place between September 2007 and March 2008: “In essence, the clock is ticking.”
The firm also said it expects to generate revenue by getting reimbursed from the Centers of Medicare and Medicaid Services for Impella as it continues conducting clinical trials.
Abiomed has perhaps been best known for its experimental artificial heart, AbioCor. After one of the longest reviews ever, Abiomed finally got the green light from the FDA in September 2006 to market the self-contained, implantable artificial heart. In approving the AbioCor, the FDA described it as the first totally implanted artificial heart for patients with advanced heart failure involving both pumping chambers of the heart.
The AbioCor is designed for people who are not eligible for a heart transplant and who are unlikely to live more than a month without intervention. The FDA called it a “significant advance” in artificial heart technology. Abiomed is currently working on the development of AbioCor II and should be seeing its first revenue from the original device in the second half of 2007.
Another one of Abiomed’s products, the Abiomed BVS 5000 also represented a “first” in the world of heart technology. In the 1980s, the BVS 5000 was the first heart assist device approved by the FDA for the support of all patients with reversible heart failure.
Since that time, the BVS 5000 has reportedly gained a 70% market share by sustaining hundreds of patients and is responsible for generating a good chunk of Abiomed’s revenue.
But what really has analysts paying attention to Abiomed these days is its Impella device, the aforementioned catheter pump that can support the heart with up to 5.5 liters of blood per minute.
Any time now, Abiomed could receive 510K clearance, or special approval, from the FDA for this product. This means that Abiomed could be poised to launch the device in the United States by year’s end or early 2008.
Specific medical devices, as identified by the FDA, require such (510K) clearance prior to being marketed in the United States. The Impella has already been approved in Europe and Canada.
Dr. Alex Arrow, medical technology analyst for Lazard Capital Markets, says his firm's “optimism for the future of Abiomed is linked largely to Impella.” Lazard has a “Buy” rating and a price target of $22 on the stock.
The Impella, a miniature left ventricular assist device (LVAD), fits on the end of a catheter and is snaked up to the patient’s heart through an aorta. It is considered to be much less invasive than thoracic surgery. It is so easy to implant, according to Arrow, that it can serve as a temporary support device for five days for patients suffering from acute cardiogenic shock, or when their heart is not pumping enough blood.
A full-blown LVAD costs about $75,000, Arrow notes, whereas the Impella would run about $15,000 and help physicians decide whether a traditional LVAD is truly needed.
In fiscal 2007, Abiomed notched revenue of $50.6 million on a loss of $1.03 per share. Lazard estimates that the firm will post revenue of $67.1 million on a loss of $0.57 per share in fiscal 2008, which ends March 31, 2008. The Impella alone is worth about $7 a share, according to Lazard.
Susquehanna Financial Group LLLP shares Lazard’s enthusiasm for Abiomed. The firm has a “Positive” rating on the stock and estimates fiscal 2008 revenue of $63.1 million on a net loss of $21 million, or $0.75 per share.
Says Susquehanna analyst Dr. Amy Stevens: “…They (Abiomed) can capitalize in a very obvious way on the trend toward targeting recovery for patients with cardiogenic shock rather than putting them on life support or cardiac support in expectation for a transplant.”
For the first quarter of fiscal 2008, the company on Thursday announced a $0.26 loss per share, or $8.3 million, on record revenue $14.1 million. Five analysts polled by Thomson First Call had predicted a loss of $0.20 per share on revenue of $14.17 million. Still, the positive news on Impella appeared to make up for the wider-than-anticipated loss in investors’ eyes, as the stock rose more than 7% on Thursday alone.
And so the waiting game goes on. If indeed Abiomed gets FDA approval for Impella, the company might finally be on the road to profitability after nearly 30 years in business.
