Seeking Alpha • Sep 28
Abiomed: Correction Offers Good Buying Opportunity
Summary
Abiomed’s Impella range of micro heart pumps enjoy rising demand in the marketplace.
The company’s OXY-1 System cardiopulmonary support device has strong growth prospect.
The company’s revenue will grow at a CAGR of high-single digits in the long term, which will drive the company’s share price significantly higher in the next five years.
Abiomed's (ABMD) micro heart pumps enjoy rising demand in the cardiovascular marketplace. I expect the company's Impella range of micro heart pumps will drive the company's long-term revenue growth significantly, and its Impella product pipeline will support long-term revenue growth as well. Long-term growth-oriented investors can buy the company's shares around the current price to maximize their profit.
Abiomed develops heart pump products and oxygenation products for patients who are suffering from severe heart disease and in need of hemodynamic support. Its products are used in cath lab by interventional cardiologists and in the heart surgery suite by cardiac surgeons. The company's heart pump products work by improving blood flow and/or performing the pumping function of the heart. Its oxygenation products work by providing sufficient oxygenation to respiratory failure patients.
Growth Drivers
Impella Heart Pumps
Abiomed's Impella micro heart pump product line is its main growth driver. Impella is a percutaneous heart pump that is used to treat CHD (coronary heart disease), and high-risk PCI (percutaneous coronary intervention). Impella has variants which are Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella 5.5 and Impella RP. These pumps beat competitive products, such as intra-aortic balloon pumps (IABPs) and the TandemHeart device, due to the following reasons:
Impella helps CHD and PCI patients maintain proper blood circulation in a better way.
Impella offers continued function irrespective of timing or trigger.
These pumps offer stability to patients despite the presence of arrhythmias.
These pumps can pump up to 2.5 to 6 liters of blood per minute, which provides better cardiac output.
According to a report:
The heart pump device market is projected to reach USD 5.5 billion by 2026 from USD 2.1 billion in 2021, at a CAGR of 21.6% from 2021 to 2026. Promising product pipeline, increasing number of product approvals and emerging markets are expected to offer growth opportunities in the market during the forecast period.
Due to the strong growth prospects of the heart pump market, Abiomed's revenue will continue to grow rapidly in the next five years.
OXY-1 System
Abiomed's OXY-1 System, which is a compact cardiopulmonary support system, is the company's another growth driver. The system offers respiratory assistance to patients suffering from cardiogenic shock combined with respiratory failure. The machine's oxygen concentrator and pump provide oxygenation to venous blood, and as a result, patients get significant respiratory support. The device performs well in the competitive environment and beat competitor products such as traditional ECMO (extracorporeal membrane oxygenation) machines due to its capability to provide uniform blood flow and superior respiratory support. I expect the device will support Abiomed's long-term revenue growth which primarily comes from Impella.
Competition
The heart pump industry is characterized by tremendous competition. Abiomed's competitors in this industry include Abbott Laboratories (ABT), Medtronic (MDT), Edwards Lifesciences (EW), Boston Scientific (BSX), LivaNova (LIVN), and Terumo Corporation (TRUMF). Abiomed competes with these companies on the basis of developing innovative heart pump devices, continuity in new product development, and advanced 24 x 7 hospital support.
Abiomed's primary competitive advantage is that its current strategy of developing devices in the area of circulatory care is supported by substantial expertise in developing heart pump devices. As a result, the company's heart pump devices enjoy significant demand in the marketplace. The company intends to continue to use its expertise in developing additional circulatory support devices and making enhancements to existing devices, which will support its future revenue growth. The company's another competitive advantage is that its Impella micro heart pump is the only FDA approved heart pump for high-risk PCI, cardiogenic shock, and right ventricular failure. As a result, Impella and its forthcoming variants will continue to drive Abiomed's revenue growth.
First Quarter 2023 Financial Results
Abiomed reported first quarter 2023 revenue of $277 million, an increase of 10% year-over-year, compared to $253 million in the prior fiscal year period. Non-GAAP net income per diluted share came in at $1.25, an increase of 13.6% year-over-year, compared to $1.10 in the prior fiscal year period.
The company delivered strong results for the first quarter of fiscal 2023. Top line grew driven by robust sales across the U.S., Europe and Japan. The company's heart pump product line is witnessing growing adoption since it addresses the challenge of treating heart disease in multiple emergency patient populations in the cath lab and surgical suite. This is driving the company's revenue growth. The company's bottom line grew driven by strong patient utilization across the three regions mentioned above. Abiomed 2.0, the new Abiomed with unparalleled focus on innovating heart and lung repairing devices amid hindrances such as hospital labor shortages, supply chain constraints and contrast media shortages, will boost the company's top and bottom line growth in the next five years. I expect the company's revenue will grow at a CAGR of high single-digits in this time frame.