Thoratec’s new study, $30M buyback can’t stave off Wall Street exodus after dismal Q2

August 7, 2014 By Arezu Sarvestani Leave a Comment

New study, $30M buyback can't save Thoratec from Wall Street exodus after dismal Q2

Circulatory devices maker Thoratec (NSDQ:THOR) took a major hit yesterday as a bleak 2nd-quarter reports and a lowered outlook on the year sent its stock into a nosedive.

Company leadership called the quarter "disappointing," but advised that near-term headwinds would ebb and that the long-term outlook remains strong for Thoratec. Wall Street’s response wasn’t so optimistic.

Thoratec’s stock dropped more than 26% in after-hours trading after the company reported a 25% decline in profits on a 10% decline in sales during its 2nd quarter. THOR shares were trading at $24.02 at around 8 p.m. EST, the lowest they’ve sold for in at least a year.

Even news of a $30 million share repurchase and the launch of a new clinical trial in support of European regulatory approval couldn’t stem the Wall Street exodus.

Alongside its Q2 earnings, Thoratec announced that it entered into an accelerated share repurchase program, slated to begin in the next few days, to quickly reclaim $30 million as part of a larger $200 million buyback launched in December 2013. The measure was intended to demonstrate that the company still believes in itself, president & CEO Gary Burbach said in prepared remarks.

"This commitment to capital deployment reflects our ongoing conviction in the long term opportunities in our business," Burbach said in prepared remarks. "Furthermore, our strong financial position will enable us to evaluate the potential for additional capital deployment in a consistently disciplined manner that allows for meeting our top priorities of internal growth and strategic initiatives."

In a separate notice Thoratec also announced last night that it launched a new clinical trial for its HeartMate Percutaneous Heart Pump (PHP) in hopes of winning over European regulators. The next-generation device is designed to be smaller and perform better than earlier devices, the company said.

"We are excited to begin the CE Mark Clinical Trial for HeartMate PHP and look forward to successful execution of this important clinical study," Burbach said in that announcement. "The HeartMate PHP addresses a significant clinical need for acute mechanical circulatory support and represents a new area of future growth for Thoratec," he added.

Commitment and excitement weren’t enough to keep Thoratec’s shares afloat. The stock began sinking before the end of the day, closing down by 1.5% yesterday before dropping another 26.3% by late evening.

In total the company reported profits of $17.4 million, or 30¢ per diluted share, on sales of $118.1 million during the 3 months ended June 28, 2014. That compared with profits of $23.2 million, or 40¢ per share, on sales of $130.5 million during the same period last year. Excluding special items, adjusted earnings amounted to 43¢ per share, right on target with analysts’ expectations.

Thoratec also lowered its guidance for the rest of the year, now expecting revenue in the range of $455 million to $470 million, down from previous projections of $520 million to $535 million. Adjusted earnings are now estimated at $1.25 to $1.35 per share, down from $1.72 to $1.82 per share. The figures did not take into account the company’s recent $75 million acquisition of Apica Cardiovascular and its transapical access technology.

Pleasanton, Calif.-based Thoratec faced some significant hurdles in its 2nd quarter, including the ongoing effects of a New England Journal of Medicine report published last year detailing sharp increases in the rate of blood clots associated with the company’s HeartMate II implantable heart pump.

"We believe perceptions about pump thrombosis since the late 2013 New England Journal of Medicine article along with greater scrutiny of clinical outcomes overall continues to be the largest factor impacting our business on a worldwide basis," Burbach said during yesterday’s conference call with analysts. "While we expected that this would be a headwind during the 1st half of the year, now, clearly, the impact is persisting longer than expected."

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