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Stock Analysis of Medical Devices
Abiomed Inc. (ABMD) Thoratec Corp. (THOR)
DePaul University FIN 524Wanda Hartmann Oehrli
Impella - World’s smallest pump for left ventricle Heartmate II LVAD
Outline
1. ABMD and THOR company’s values– Abiomed Inc. (ABMD) Recovering Hearts. Saving Lives
Thoratec Corp. (THOR) Life Restored
2. Description & competitive environment3. Valuation of Medical Instruments & Supplies
Industry4. More attractively valued company
Abiomed Thoratec
http://www.marketwatch.com/video/asset/help-for-damaged-hearts/24626C3F-2C52-4AEF-809C-F922AE7A8960
•development, and sale of medical devices that provide circulatory support to acute heart failure patients across the continuum of care in heart recovery •Impella – world’s smallest heart pump •Protect, support, assist in recovery after surgery or heart attack• High risk patient • minimally invasive - angioplasty Future•More Applications, Surgical products, Expand Markets
Advanced Stage Heart Failure –ventricular assistHeartmate II Heartmate III
http://www.thoratec.com/videos/about-thoratec.aspx
Medical Devices Competitive Environment
• Estimated worldwide sales > $300 B (2011)• U.S. -largest market - estimated sales of roughly $95B (2010)• Cardiology, Oncology, Neuro, Orthopedic, Aesthetic Devices
and Healthcare IT• Aging population & lifestyle diseases (heart disease, obesity)• Healthcare reform/ FDA policy & regulationsAve Financial Info• Profit Margin 20%• EV/Sales Multiple 3.5x• EBITDA Multiple 12.8
Zacks Investment Report http://finance.yahoo.com/news/Medical-Devices-Industry-zacks-1123678571.html?x=0&.v=1 http://www.fool.com/investing/general/2011/02/25/the-magic-formula-for-these-medical-device-stocks.aspxhttp://www.nytimes.com/2009/11/05/business/05device.htmlhttp://www.horizonviewpartners.com/index.php?p=1_8_Medical-Device-Market
ComparisonABMD stock is up 68% yet EBITDA, Operating Margin and Net Income are Negative?Renewed optimism around sales of Abiomed's Impella heart pump has been a key factor behind the market run-up.
Read more: CEO of red-hot Abiomed sells $1.1M in stock | Boston Business Journal
• New generation of heart pumps• Stock up 68% since start of year
Great December Quarter 2010• More Patient increase 77%• 7th consecutive quarter of triple
digit reorder revenue• Non-GAAP profitable quarter – first
time in a long time• Generated $5 M • $60M in Cash• No debt
Abiomed
ABMD Income Statement
increasing
less negative
less negative
EBITA = Rev – COGS - SG&A + D&A= EBITDA : neg
Revenue growth 22% ave
ABMD Income Statement
ABMD Balance Sheet
Current Ratio = 4.58
No Debt
ABMD Balance Sheet
Long Term Debt to Equity = 0
Debt to Equity = 0
Total Debt = 0
License Leverage= TA =129570 = 1.2 TE 107956
Quick(Acid Test) = 3.74
= 4788 + 53477+13516 18,064
Cash = 3.23
= 4788 + 53477 18,064
ROE = NI/SE= N/A
P/E = Price /earnings = N/A
EPS = N/A
EBITDA MULT= __EV___= N/A EBITDASales Mult = 646.54M/95.60M = 6.76
ABMD Cash Flow
less negative
increasing
increasing
ABMD Cash Flow
increasing
decreasing
increasing
THOR Income Statement
increasing
increasing
increasing
EBITA = Rev – COGS - SG&A + D&A= EBITDA :126.44M
Revenue Growth 39%
THOR Balance Sheet
increasing
increasing
same
Current Ratio = 3.16
THOR Balance Sheet
Long Term Debt to Equity = 0
Debt to Equity = TD = 138,165 = 0.22 TE 621360
Total Debt =TD = 138,165 = 0.16 TA 837,743License Leverage= TA = 837,743 = 1.35 TE 621,360
Quick(Acid Test) = 2.80
= 524571 187017
Cash = 2.40
= 448,143 187017
ROE = NI/SE= 58,166M/621,360= 9% return
P/E = Price/earnings = 35.18
EBITDA MULT= __EV___= 11.79 EBITDA
Sales multiple = market cap/revenue= 1.80B/ 382.97M = 4.7
THOR Cash Flows
increasing
increasing
decreasing
Conclusion: Which is More Valuable?ABMD THOR Industry
Current Ratio 4.58 3.16
Profit Margin 76.6% 67.7% 20%EBIDTA multiple N/A 11.79 12.8Sales Multiple 6.76x 4.7x 3.5xRevenue Growth 22% 39%ROE - 9% 16.27%Summary •Zero debt
•More cash•Higher profit margin•Higher sales multiple•Good revenue growth•Sales multiple is high because stock is being purchased in anticipation of future cash flow increase
•Low debt•Some cash•High profit margin•High sales multiple•Greater revenue growth
•ROE higher for industry
http://biz.yahoo.com/p/s_ttmu.html
THOR
ABIOMED
SNP