Thoratec's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Thoratec Corporation (THOR)

Q2 2012 Earnings Call

August 1, 2012 4:30 p.m. ET

Executives

Taylor Harris - Senior Director, Investor Relations and Business Development

Gerhard Burbach - President and Chief Executive Officer

Roxanne Oulman - Vice President, Finance and Interim Chief Financial Officer

Analysts

Matt Taylor - Barclays Capital

Thomas Gunderson - Piper Jaffray

Jayson Bedford - Raymond James

Cameron Hansen - Goldman Sachs

Larry Biegelsen - Wells Fargo

Spencer Nam - ThinkEquity

Christopher Pasquale - JPMorgan

Danielle Antalffy - Leerink Swann

Jason Mills - Canaccord Genuity

Rajeev Jashnani - UBS

Bob Hopkins - Bank of America

Steven Lichtman - Oppenheimer & Company

Presentation

Operator

Good day and welcome to the Thoratec Corporation Earnings Conference Call. Today’s conference is being recorded. After the presentation we will be conducting a question-and-answer session. (Operator Instructions) At this time, I’d like to turn the conference over to Mr. Taylor Harris. You may begin, sir.

Taylor Harris

Thanks, Brian. Good afternoon and thank you for joining us today. With me today are Gary Burbach, President and Chief Executive Officer; and Roxanne Oulman, the company’s Interim Chief Financial Officer. Gary will discuss highlights from the second quarter of 2012 and then turn the call over to Roxanne, who will review the financial results for the quarter. We will then open the call to your questions.

Before turning the call over to Gary, I want to remind you that during the course of today’s conference call and the question-and-answer session that follows, we may make projections or other forward-looking statements that are subject to the Safe Harbor provisions of the securities laws regarding future events or the financial performance of the company. We caution you that these statements are only predictions and that actual results may differ materially. We also alert you to the risks contained in the documents we file with the Securities and Exchange Commission, such as our annual and quarterly reports on Forms 10-K and 10-Q. We do not undertake any obligation to update or correct any forward-looking statements. Gary?

Gerhard Burbach

Thank you, Taylor, and good afternoon. Thoratec generated solid results in the second quarter of 2012, capping off the strongest six months financial performance in the company's history. We continue to experience broad-based momentum in the global VAD market driven by strong performance from HeartMate II. On a year-over-year basis HeartMate II units grew 22% during the first six months of 2012. And in the second quarter which I would note is our most challenging quarterly comparison this year, units grew 13%.

We have realized strong performance across all key areas of our HeartMate II business, but the most significant growth drivers continue to be the ongoing development of the destination therapy indication, along with a strong contribution from emerging transplant programs and open-heart centers in the United States as well as broad-based strength internationally.

Meanwhile our acute support product line including CentriMag and PediMag, is also performing well with revenues expanding nearly 20% in the first half of 2012, excluding the impact of the Levitronix Medical acquisition. These strong results from both HeartMate II and CentriMag have more than offset a weak first half of the year for our PVAD and IVAD franchise, where revenues have declined 36% year-to-date.

During the second quarter this decline was somewhat more pronounced with revenues falling 50% or almost $4 million year-over-year. In aggregate though, we were incredibly pleased with the company's performance in the second quarter and year-to-date. During the first half of 2012, we have achieved revenue growth of 16% versus the same period last year. Increased non-GAAP earnings per share by 25% and made significant strides in both our market development and product development efforts, which should support strong performance for many years to come.

With respect to our financial results for the second quarter, Thoratec generated revenues of $118.6 million, a 7% increase over revenues of $111.2 million in the second quarter of 2011. In terms of geographic breakdown we recorded revenues of $97.1 million in the United States versus $93 million in the prior year, while international revenues were $21.5 million versus $18.2 million a year ago. Relative to the second quarter of 2011, foreign exchange fluctuation detracted $1.2 million from Q2 2012 revenues. While the acquisition of the CentriMag and PediMag product lines added $2.5 million, of which $2.2 million was recorded outside the United States.

Turning to our results for the first half of 2012, revenues were $245.4 million representing an increase of 16% versus the first half of 2011, or 15% excluding the impact of foreign exchange and acquisitions. During the first half of the year, our performance was driven by HeartMate revenue growth of 18%, which more than offset the 36% decline in our PVAD franchise, which I mentioned previously. Growth in this period was relatively balanced across geographies with domestic revenues increasing 15% and international revenues increasing 18% excluding foreign exchange and acquisitions.

Earnings on non-GAAP basis were $0.96 per share during the first six months of 2012, an increase of 25%. Unit growth of HeartMate II has been quite encouraging and has driven our overall financial performance, both in the second quarter and the first six months of 2012. For Q2, HeartMate II units grew 13% year-over-year against a very strong prior year quarter. In the U.S. where the quarterly comparison was the most difficult, HeartMate II unit growth was 8%, while internationally we achieved 32% growth for the second quarter in a row.

This performance brought first half unit growth for HeartMate II to 19% domestically and 22% on a worldwide basis. It is the destination therapy indication that has driven HeartMate II growth in recent periods, and the past two quarters have been no exception with DT implants rising to over 45% of our domestic HeartMate II sales in the first half of the year. Looking forward, we continue to expect the DT indication to account for the vast majority of growth in the VAD market.

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