Thoratec (NSDQ:THOR) yesterday said its 3rd-quarter profits plunged some 85%, missing forecasts, and dimmed its outlook for the rest of the year.
The news, coupled with main LVAD rival HeartWare‘s (NSDQ:HTWR) Q3 results last week, raised fears that the market for left ventricular-assist devices is in a slump that could persist into 2015.
Thoratec reported profits of $2.9 million, or 5¢ per share, on sales of $105.8 million for the 3 months ended Sept. 27, for an 84.7% bottom-line ebb on a sales decline of 16.3% compared with the same period last year.
Investors sent share prices down for both Thoratec and HeartWare today. THOR shares were down 1.9% to $26.52 apiece as of about 10 Eastern this morning; HTWR shares have lost nearly 11% since that company’s Oct. 30 earnings release and were trading at $76.68 each this morning, down 0.9%.
CEO Keith Grossman, who returned to the corner office at Thoratec in September, sought to reassure investors during a conference call yesterday. Although the market is slowing, Grossman said, the mid- and long-term outlook is good because of the high number of eligible patients who aren’t being treated with LVAD therapy.
"We recognize and we certainly share investors’ concerns regarding the recent decelerations in worldwide market growth rate, particularly given the current under-penetration of LVAD therapy generally. While a number of factors have contributed to a market slowdown in the last couple of quarters, the addressable patient population remains significant and still very underserved," he said. "I think multiple factors have converged to suppress a recent market growth. These, of course, include an increased discussion of overall adverse events and readmissions associated with LVAD therapy, and the resulting potential limitations on both patient referrals and center-by-center treatment capacity."
Although it didn’t provide any guidance for 2015, Thoratec once again lowered its outlook for the rest of this year. Adjusted earnings per share are now expected to be $1.20 to $1.30 on sales of $450 million to $460 million, down from the prior forecast for adjusted EPS of $1.25 to $1.35 on sales of $455 million to $470 million.
LVAD slump to persist?
HeartWare’s shares plunged last week after its 3rd-quarter results revealed a 2nd consecutive quarter of slowing growth, despite narrower losses and a 39% jump in U.S. sales. President & CEO Doug Godshall remained optimistic, saying the LVAD business is historically a lumpy 1 from quarter to quarter.
"While the 3rd quarter internationally was lower-growth than prior quarters, we see that as just what seem to happen in VADs historically, and as we’ve witnessed over the past 4, 5 years, some quarters are little bit stronger than other quarters. So internationally, we actually remain quite optimistic about near and long-term growth," Godshall said. "The place we are right now in the U.S. is similar to where we have been in the past internationally, where we grow, we reach these plateaus that the system absorbs, and then we move on to growth again and find a new plateau for a quarter or 3. I am not anticipating, based on all the feedback we’ve been receiving both from the market and from Thoratec, that we’ll see a huge upside in terms of growth prospects in the U.S., but I think the medium to long term looks very rosy."
"The question on investors’ minds is now whether this 2-quarter trend represents a sustained market slowdown, or whether the market can re-accelerate from here," Leerink Partners analyst Danielle Antalffy wrote last week. Today Antalffy said the LVAD market headwinds, although likely to persist into the 4th quarter, are temporary.
"While the quarter itself presented no major surprises given the preannouncement, it’s clear that THOR expects both company-specific and broader market headwinds to persist through at least 4Q14," Antalffy wrote this morning in a note to investors. "We continue to view the majority of the headwinds as transient in nature, potentially setting the company up for outperformance relative to a now much lower bar. And as we move through 2015, easing headwinds, building clinical evidence, & ongoing pipeline progress all set the company up nicely for an improving outlook in 2016."