What: Following news that the Food and Drug Administration is forgoing an advisory committee meeting that could have slowed down its timeline for approving the use of Impella heart pumps in emergency patients with cardiogenic shock following heart attack or surgery, shares in Abiomed (NASDAQ:ABMD) surged 12.9% last month, according to data from S&P Global Market Intelligence.
So what: The FDA's decision may accelerate Abiomed's timeline for expanding Impella's addressable market.
As fellow Motley Fool Cory Renauer pointed out recently, 735,000 Americans suffer a heart attack each year and roughly 7.5% of heart attack victims experience cardiogenic shock. Overall, industry watchers peg Abiomed's penetration of the cardiogenic shock market at just 5%, and estimate that cardiogenic shock usage represents about 40% of Impella's sales.
Given those numbers, it's probably not a stretch to assume that an FDA approval in this indication will lead to the use of Impella in thousands of additional patients every year. That's potentially very good news for the company and its investors, many of whom are sitting on substantial gains tied to the company's existing break-neck sales pace.
In February, Abiomed's management reported that fiscal 2016 third-quarter sales reached $85.8 million, up 38% from the year prior. The increase was driven by a 45% increase in patient use of Impella products, and with one quarter left to go, Abiomed is guiding for fiscal 2016 sales of $326 million, up 41% from 2015.
Now what: Abiomed is slugging it out for market share with St. Jude Medical's (NYSE:STJ) recently acquired Thoratec division, and once the FDA broadens Impella's reach, the battle will likely intensify, especially now that Thoratec's HeartMate pumps are being pitched by St. Jude's massive sales force.
Abiomed management hasn't detailed its outlook for 2017 yet, but given operating margin is running a bit better than its 17% target, and the FDA decision clears the way to greater use of its Impella heart pumps, I think the company's momentum isn't likely to slow. If I'm right, then owning Abiomed shares might remain profit-friendly.