WHRT World Heart Corp. (MM)

We reiterate our Neutral recommendation on cardiac assist devices maker Abiomed (ABMD). The company’s fourth quarter and full-year fiscal 2011 results beat the Zacks Consensus Estimates. Revenues for both the periods surged at a healthy double-digit clip, buoyed by solid contribution from its Impella cardiac pumps.  

However, the Massachusetts-based company swung to a loss in the fourth quarter as the prior-year quarter’s results were bolstered by gains on sale of its stake in ventricular assist devices maker World Heart Corp (WHRT). Nevertheless, losses narrowed 38% year over year in fiscal 2011 on the back of Impella boost.

Abiomed is enjoying strong demand for its popular Impella pumps, which are used for the support of acute pre-shock patients or for prophylactic support of patients undergoing high-risk percutaneous coronary intervention. Revenues from these devices cruised 34% in the fourth quarter driven by strong utilization. Patients treated with Impella in the U.S. surged 41% year over year in the quarter.

Abiomed has a broad portfolio of products that are life-sustaining in nature. The company’s strategy focuses on heart recovery as the goal for all acute cardiac attacks. Abiomed’s products are designed to enable the heart to rest, heal and recover. We believe this niche product line feeds a growing trend towards procedures that are either minimally invasive or assist the body recover more naturally.

However, Abiomed remains a loss-making entity and operates in an intensely competitive environment and faces significant reimbursement risk. Competition among providers of treatments for the failing heart is intense and subject to rapid technological changes and evolving industry requirements and standards. Moreover, Abiomed’s legacy non-Impella franchise is shrinking and it envisions revenues from this business to decline 25% in fiscal 2012.

Nevertheless, based on an upbeat Impella outlook, Abiomed has issued a solid revenue guidance for fiscal 2012. The company expects strong Impella utilization trend to continue in 2012 as it forecast revenues from these products to grow roughly 20%-35% during the year. Our recommendation is supported by a short-term Zacks #3 Rank (Hold).

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