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Why Did Abiomed Go Up 31.8% in April?

By Anne Burdakin - May 11, 2020 at 2:32PM

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Investors registered heartfelt support for this biotechnology company.

What happened

Abiomed (ABMD -0.21%), the first company to implant a totally artificial heart in a patient back in 2001, develops technology to help hearts recover. The company's main products are the world's smallest heart pump, the Impella, and its supporting SmartAssist technology.

Abiomed's share price vaulted up 31.8% in April, according to data provided by S&P Global Market Intelligence; most of it came at the end of the month, after the company posted heartening results for the fiscal fourth quarter of 2020. There were concerns that results would be negatively affected due to COVID-19 disruptions to non-lifesaving procedures.

For fiscal year 2020, Abiomed reported total revenue of $840.9 million, up 9% year over year compared to 2019 revenue of $769.4 million. Operating income was $249.2 million, up 10.9% year over year, compared to 2019 operating income of $224.8 million.

For fiscal year 2020, the company generated cash flow of $314.9 million. As of March 31, the company had $650.9 million of cash and marketable securities and, importantly, no debt.

Healthcare professional monitoring a patient's vitals electronically

Image source: Getty Images.

On April 29, Abiomed provided another catalyst for the stock when it announced the acquisition of Breethe, the developer of a novel extracorporeal membrane oxygenation (ECMO) system.

So what

The financial results gave investors some much needed reassurance that Abiomed is not only surviving the health crisis, but continues to thrive.

Supplementing the financial reassurance is the acquisition of Breethe, which expands Abiomed's portfolio of products for patients whose lungs can no longer provide enough oxygenation due to a variety of conditions. This acquisition is significant long-term for patients suffering with cardiac or respiratory failure, but short-term, the ECMO system is a potential player in helping COVID-19 patients overcome decreased oxygenation issues, survive, and recover.

Now what

After a difficult year filled with safety concerns from the Food and Drug Administration and revenue misses, Abiomed is finally moving in the right direction. Now that the FDA has cleared the safety issues and the company registered good sales growth, Abiomed appears to have a brighter future.

The stock is still down 25% over the past 12 months, but up 13% year to date.

I like how the company's technology has continued to improve the Impella, making versions for specific cardiac applications, and the SmartAssist technology that supports the Impella. The Breethe acquisition both supports current products and procedural use, and opens separate potential sales avenues.

The company has the ingredients for growth, but issued no forward guidance due to uncertainties caused by the coronavirus crisis.

At this point I'd suggest investors keep this stock on their watch lists. The company has a lot of potential, but given the big recent run-up and immediate market unknowns, it may be best to hold off on investing.

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