NEW YORK (TheStreet) -- Shares of HeartWare International (HTWR) were falling 117.5% to $67.50 on heavy trading volume Wednesday after the medical instruments company announced its acquisition of Valtech Cardio.
Valtech is a privately-held company that specializes in the development of surgical and transcatheter valve repair and replacement devices for the treatment of prevalent heart valve diseases.
Valtech shareholders will receive an up-front consideration of HeartWare common stock as part of the agreement. HeartWare will give Valtech shareholders an additional 800,000 shares following the CE Mark approval for its annuloplasty system Cardioband, and 700,000 shares on the "the earlier of first-in-man implants for either Cardioband tricuspid or CardioValve."
"Valtech provides HeartWare with commercial-stage products for mitral repair, as well as a robust technology pipeline, an advanced R&D center and an impressive, experienced team with a proven track record," HeartWare President and CEO Doug Godshall said in a statement. "This combination represents an attractive opportunity for value creation for HeartWare shareholders, customers, employees and patients by expanding HeartWare's footprint in the high-growth structural heart market."
The acquisition is expected to close in late 2015.
About 1.5 million shares of HeartWare International were traded by 10:30 a.m. Wednesday, above the company's average trading volume of about 270,000 shares a day.
TheStreet Ratings team rates HEARTWARE INTERNATIONAL INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HEARTWARE INTERNATIONAL INC (HTWR) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 427.5% when compared to the same quarter one year ago, falling from $8.36 million to -$27.39 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, HEARTWARE INTERNATIONAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- HEARTWARE INTERNATIONAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HEARTWARE INTERNATIONAL INC continued to lose money by earning -$1.15 versus -$3.68 in the prior year. For the next year, the market is expecting a contraction of 73.0% in earnings (-$1.99 versus -$1.15).
- The gross profit margin for HEARTWARE INTERNATIONAL INC is rather high; currently it is at 68.67%. Regardless of HTWR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTWR's net profit margin of -37.23% significantly underperformed when compared to the industry average.
- Net operating cash flow has slightly increased to $5.29 million or 5.23% when compared to the same quarter last year. Despite an increase in cash flow, HEARTWARE INTERNATIONAL INC's cash flow growth rate is still lower than the industry average growth rate of 21.53%.
- You can view the full analysis from the report here: HTWR Ratings Report