Abiomed Tour -- Quick thoughts

Hey Fools,

I had a chance to tour Abiomed’s HQ last week and sit down with their head of IR for an hour. My goal is to post the entire conversation on this board for all to read, but that’s going to take a day or two to complete.

In the meantime, here are a few key takeaways:

+Abiomed is pronounced Ah-be-O-med.

+Their MOAT is super wide for the following reason:
++There is no direct competition right now and getting a competing product to market would require a PMA (which is a more arduous process than a 510k approval). A potential competitor woud also have to get by the company’s 310 patents and another 300+ that are pending.
++70% of surgeries involving an Impella pump have an Abiomed employee in the room while the procedure is taking place. This is either a sales rep (70-80 in the field) or, more likely, a clinician (250 in the field). After the surgery is over the employee says “hey doc, want to reorder?” This is a big reason why their reorder rate is 100%.
++The company follows up with every single patient in the hospital in person after surgery. Patient data is collected on 95% of cases and sent back to HQ for analysis. Their database now includes data from 70,000 cases and growing.
++Patients are monitored remotely by Abiomed’s customer support staff in real time (the Impella sends data back to the company’s HQ over the web).
++The company is super, super, super serious about training (their own staff as well as Impella users). Their new training center (they showed me around) is state of the art. They regularly bring in physicians to record videos on best practices and share them on the internet so that other physicians can see.

+The TAM continues to grow as new products/procedures/geographies come online. Market share right now is 9% in the U.S., 12% in Germany, and <1% in Japan. These numbers are likely high since they are constantly getting new approvals & clinical data that expands the number of use cases that could benefit from an Impella.

+Major focus right now is U.S., Germany, and Japan. Japan’s three main heart associations (sort of like our on American Heart Association) approached Abiomed several years ago asking them to bring the device to market. Those three agencies lobbied the Japanese FDA to allow approval. Open heart surgery isn’t an option in Japan, so they are super interested in the technology since it is minimally invasive.

+Impella already has regulatory thumbs up in China, India, Israel, and Europe. New countries will be opened up after reimbursement/commercial team is in place.

+The corporate culture is very Foolish. They invite several Impella patients to the HQ every year for a summer barbeque to tell their story. They even name conference rooms after former patients. The management team has a formal book club where they get together and discuss ideas that they have read about (CEO Michael Minogue’s favorite business book is “Blueprint to a billion” by David Thomson)

Overall, I came away from the meeting very impressed.



Appreciate the commentary and insight from the inside (literally). I love owning a company that can have a significant and real impact on someone’s quality of life (or make the difference between life and the alternative) while still getting me closer to my own financial goals.

Only regret is not adding more on the way up, but I never would have predicted a 450% gain in 3 years. Given that their TAM is still open, I may have to bite the bullet and add a little more at next opportunity.

Any insight into where the name came from? I thought it was pronounced Ay-Bi-O-Med, which made a little more sense to me than your correction (Ah-Bee-Oh-Med), so now I’m curious about the origin and meaning behind the name.


Back in ancient days near the beginning of the 21st century, I bought Intuitive Surgical at an “outlandish price” and I think the forward PE was somewhere around 60-70. The investment turned out well.

Now another device maker, ABMD, sports a trailing PE (according to Yahoo) of 180 and a forward PE of around 125! Yowsa!

Given the attitudes apparently displayed in the current market, it’s quite possible that we’ll continue to see further escalation of the share price. However… even the most promising companies become too expensive at some point. Given ABMD’s solid profitability history with real earnings, that PE is not some misleading temporary artifact we often see when a company has near zero earnings. Folks are bidding it up and up to… what end? Is it reasonable to pay 180 times earnings for a company with real earnings? How so? Because it’ll just keep growing to the sky? If the answer is “Yes!”, have you been an investor long enough to experience downturns? Do you think you’re prescient enough to “know” when to sell?

Yeah, the current price troubles me.

So, I’m thinking…for me…

…there are other alternatives out there that don’t represent such risk when a correction comes. I’d like to own ABMD, but I can’t get past the price. To me, it seems as if it needs earnings from 2022 to justify even the current price.

On the other hand…

What about all these other high flyers I’m invested in that don’t even have earnings?!?!

That’s hard to justify, given my concerns expressed above, but I rationalize it based on (for the most part) rapid improvement toward profitability and presumably toward strong profitability. Not entirely rational, is it? :slight_smile:

And…I keep pondering…what is reasonable and what is not?

Rule Breaker / Market Pass Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.



That’s something that I struggle with as well. My big concern is that the company might already be near peak margin (their operating margin has expanded hugely over the last few years and is currently at 28% of so). How high can this number go? I don’t know. If 40% or 50% is possible, then investors could still win at today’s price. If 30% is the peak then future profit growth will roughly equal revenue growth. I think that 25%+ revenue growth is sustainable over the next few years. Will that lead to 45%+ profit growth (like the market is pricing in)? That I don’t know.

Another key point – ABMD is already a $19 billion company. How big can it get?

Here are a couple of numbers:

Medtronic – $118 billion
Abbott Labs – $110 billion
Stryker – $63 billion
BD - $62 billion
Intuitive Surgical – $57 billion
Illumina – $43 billion
Boston Scientific – $45 billion

ISRG & ILMN are probably the best comparisons here since they are also focused on a single product line (da Vinci and Novaseq).

I could see ABMD being a $50 billion company one day, which would be 150% upside from here. Best guess is that they’d need at least $2 billion in revenue to get there (and a 25x sales valuation, which is lower than where it stands today). For context, estimated revenue for fiscal 2019 is $766 million.

I think there’s an argument to be made that Abiomed is an awesome company but it might not be an awesome stock moving forward. However, that argument could have also been made at $100, $200, $300, and $400/share.



I think there’s an argument to be made that Abiomed is an awesome company but it might not be an awesome stock moving forward. However, that argument could have also been made at $100, $200, $300, and $400/share. – Brian

LOL. Maybe that best describes where I’m at. :slight_smile:

That’s an important concept: Great company may not be a great investment.

Rule Breaker / Market Pass Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.