I posted this at NPI board as well… but with a few edits.
I have been flirting with ABMD for well over a year but I finally pulled the trigger today after the dumb market reaction to the recent feasibility DTU trial released at AHA on Sunday.
There are several reasons why and many have commented on ABMD on many occasions here and at the NPI board. Let me discuss a few quickly and you can decide if the stock is right for you.
First, the price drop gave me a decent buying opportunity, not amazing but certainly a better buy with a 15% haircut. I’m not going to discuss valuation any more than that, I believe it to be irrelevant currently given the prospects for growth going forward in the next 2-3 years. Obviously, I will keep an eye on those metrics on a forward basis but I won’t be trimming based upon valuation metrics. FCF is + and has more than doubled over the last 12 months as have EPS. Revenue growth is quite impressive as well.
Second, the door to unload trial released at AHA on Sunday. This was a good trial for the Impella. The Jeffries analyst has no idea what he is talking about. I don’t even understand why they commented on it. It was a 100 patient 1:1 randomized trial of standard of care angioplasty for an acute myocardial infarction (heart attack for the laymen out there) with cardiogenic shock (shock due to poor cardiac pump function) vs. placing an Impella first to “unload” the heart for 30 minutes and then proceeding with angioplasty. The theory here is that reperfusion injury of the heart muscle is a major reason why hearts do poorly even after restoration of blood flow to the muscle. Theoretically, reperfusion injury can be lessened by making the heart do less work during and after the heart attack by placing the Impella initially. This effectively “offloads” the left ventricle (main cardiac pumping chamber) and allows it to, well, rest for lack of a better term. You have to understand this is completely out of the box thinking. Cardiologists have been trained our entire careers to get these patients to the Cath lab as fast as possible and restore blood flow to the infarct related artery ASAP (preferably under 90 minutes). Now we are going to wait? Crazy right?
So what, the trial didn’t show much. Wrong. The trial showed the one thing they wanted it to and that was safety. Is it safe to wait while the Impella does it’s thing? That question is now answered, absolutely. This trial showed that waiting did not worsen outcomes and actually decreased infarct size of the heart muscle compared with angioplasty/stenting alone. Understand… this is a small trial, but it is very exciting and our institution is trying to become involved with the larger follow up national study.
Third, I am putting more of these devices in every month. They save lives. I put more in last week than I did in the prior 2 months.
Fourth, new clinical data was released recently that showed patients have less renal failure after high risk angioplasty when an Impella is used vs. not using one. This is not randomized data but it showed a compelling near 60% reduction in the incidence of renal failure post procedure. For those who do not know, the contrast used during angioplasty is toxic to the kidneys in high doses, especially in diabetics and those with chronic renal failure. Also, all the data in the history of angioplasty has shown that renal failure post procedure is a huge predictor of mortality. This is an amazing data point that hasn’t been discussed much in the medical or lay press.
Fifth, they have some very cool stuff coming out in the next 1-2 years that will expand their TAM and market share. I am not at liberty to share but it has allayed a lot of my concerns about future competitors.
Finally, patents. Abiomed has all the patents for this tech and it is why there are no competitors out there currently. A startup would have to spend a ton of money to get in this space and much more than that to compete. Competition is a long way off.
Oh, one more. I don’t usually invest in things I use. Too much selection and confirmation bias and I was afraid this would burn me. I also didn’t want even a hint of putting one in for personal gain, even subconsciously. However, the totality of the evidence is now too great to ignore. The Impella is an impressive, life saving device that is here to stay. The company is very well run with sales reps that know their stuff. Abiomed is constantly evolving. Management doesn’t stay content with their current tech believing that their devices can get even better.
Hope this was useful.