UPDATED July 31, 2014 with additional comment on recall.
The share-price slide came despite 2nd-quarter results that beat Wall Street’s expectations by a wide margin, as U.S. sales of HeartWare’s left ventricular heart devices surged 47% in the U.S. and 38% overall.
Framingham, Mass.-based HeartWare said it booked a $1.7 million charge "for the extension of a prior field safety corrective action to replace certain older batteries," revealing that it started the recall yesterday.
"Patients and caregivers are instructed that if a battery does not provide 2 hours of support or behaves unusually; that battery should no longer be used and should be replaced," according to the April 14 corrective action.
President & CEO Doug Godshall said the recall relates to the higher rate of battery-related complaints in Germany. After consulting German regulators, HeartWare decided to expand the field action "to include a voluntary recall of certain older batteries and replace them with new batteries which have gone through additional screening tests that were implemented last year."
"Once we came to the decision to conduct this replacement in Germany, we determined that we should adopt the same policy in all countries. Existing HVAD patients with batteries built basically a year or longer ago, will simply replace them with newer batteries when they visit their physicians during their next routine visit. We anticipate it will take a few months to complete the replacement of those older batteries," Godshall told analysts during a conference call today. "As we progress – and with thousands of implants and ever-lengthening patient support times – we will continue to learn more about how to make our system better and how to manage it better. We remain committed to making improvements to enhance product performance and communicating information that may be helpful to our customers and their patients to ensure best possible outcomes."
The recall covers serial number ranges BAT000001 to BAT039999 and BAT090000 to BAT099999, "which are more likely to exhibit premature or unrecognized deterioration of battery capacity," HeartWare said. "Implementation of this voluntary recall in other countries, including in the United States, will follow after communication with relevant regulatory authorities."
The news sent HTWR sales down 11.2% to $82.99 apiece as of about 1:30 p.m. Eastern today, despite a strong showing for the 2nd quarter ended June 30.
HeartWare reported profits of $8.4 million, or 48¢ per share, on sales of $70.1 million for the quarter, marking a dramatic swing to black ink compared with Q2 2013’s -$12.9 million in losses. Adjusted to exclude 1-time items (including a $13.7 million charge on HeartWare’s $350 million CircuLite buy) losses per share were -29¢, a whopping 45¢ ahead of expectations on The Street, where analysts were looking for sales of $67 million.
"We are pleased to announce another encouraging quarterly performance, with record sales and more than 300 units in both the U.S. as well as international markets for the 2nd consecutive quarter," president & CEO Doug Godshall said in prepared remarks. "More than 6,000 patients from 40 countries around the globe have received the HeartWare System as a treatment for their advanced heart failure, with patient support extending as long as seven years.
"In addition to our commercial efforts, we continue to make investments to advance our clinical trials, including enrolling the 2nd phase of our destination therapy study in the U.S., moving toward completion of enrollment of our Japan trial and preparing to initiate the clinical evaluation of our next-generation MVAD System," Godshall added. "As we continue to drive these programs forward, our highest internal priority remains addressing and remedying the observations raised by FDA following an inspection at our Miami Lakes, Fla., facility earlier this year."