2 top players in implantable heart devices

The companies are rumored to be takeover targets. Is this space heating up?

By Stock Traders Daily Feb 13, 2013 12:07PM
Insurance Money Comstock Images JupiterimagesBy Barry S. Cohen, Stock Traders Daily

Perhaps there's no better time than around Valentine's Day to examine affairs of the heart, specifically the performance and prospects for the two companies making implantable devices to treat heart failure: Thoratec (THOR) and its chief rival Heartware International (HTWR). Thoratec just reported fourth quarter results, and Heartware is scheduled to follow suit on February 15.

Heart failure occurs when the heart muscle degenerates, reducing the pumping power of the heart. This, in turn, causes the heart to become too weak to pump blood at a sufficient level to meet the body's demands.

Heart failure is a major issue. It's estimated that nearly 6 million people in the U.S. alone suffer from the disease and more than 600,000 new cases are diagnosed each year. About 300,000 Americans die of heart failure every year.

Drugs help manage the disease, but the only true salvation for those people in the late stages of heart disease is a transplant. And there is a shortage of good hearts available for transplant. While it's sometimes good to follow your heart when investing, you might want to take a more scientific approach and learn more by consulting our real time trading reports.

Thoratec of Pleasanton, Calif. is the world market leader, with the broadest product portfolio to treat the full range of clinical needs for patients suffering from advanced heart failure. The company's products include the HeartMate LVAS and Thoratec VAD ventricular assist devices, with more than 20,000 devices implanted in patients suffering from heart failure. Thoratec also manufactures and distributes the CentriMag and PediMag / PediVAS blood pumps product lines.

The company's sales were up 16% in 2012, driven in large part by its HeartMate and CentriMag product lines. In the quarter, unit growth for the HeartMate hit 20%. For the quarter, revenue was up 17% over the same period a year ago. The company beat expectations on revenue and met them on earnings per share.

The company said it is focusing on investing in longer-term strategic initiatives, including late-stage development activities related to HeartMate III and HeartMate PHP, both of which it plans to bring into pivotal clinical trials later this year. Thoratec's plans to push to keep sales surging for its HeartMate II pump will move to Japan, now that regulators have signed off on the device. Plans call for a commercial launch to begin at the end of the 2013 first quarter.

Thoratec tried but failed to buy rival Heartware in 2009, but rumors persist it could make another run at its challenger of Framingham, Mass. In fact, Heartware may be ripe for the picking. Although analysts project the company's fourth quarter revenue will be up more than 30%, the company still isn't expected to make money. The average earnings per share estimate is -$1.64.

Heartware got some bad news last week when it reported that at least 11 of 2,900 implants involving its celebrated HVAD heart pump developed a troubling mechanical problem -- a part that could become partially separated from the main unit after extended use. No patient has had any health problems based on the malfunction, the company disclosed in a recent regulatory filing. But Heartware launched a "voluntary field correction" to make sure the breakdown isn't more widespread.

Thoratec itself has been mentioned as an acquisition target for some of the device companies seeking to gain a chunk of the ventricular pump market that could surpass $700 million in the U.S. Among the potential bidders could be Medtronic (MDT) and St. Jude Medical (STJ).

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