ABIOMED, Inc. (NASDAQ:ABMD) is a leading provider of medical technology that offers circulatory support and oxygenation solutions. The company's products are designed to enable the heart to rest and recover by improving blood flow and/or performing the pumping function of the heart, providing sufficient oxygenation to those in respiratory failure.

ABIOMED's strategic focus and primary driver of revenue growth is the market penetration of its family of Impella® heart pumps. The Impella device portfolio, which includes the Impella 2.5®, Impella CP®, Impella 5.0®, Impella LD®, Impella 5.5®, and Impella RP® devices, has supported thousands of patients worldwide. As the company continues to innovate its product portfolio, it expects to transition its sales focus to newer generations of Impella devices over time.

Business Overview

ABIOMED's products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by cardiac surgeons for patients who are in need of hemodynamic support prophylactically or emergently before, during, or after angioplasty or heart surgery procedures. The company believes that heart recovery is the optimal clinical outcome for a patient experiencing heart failure because it enhances the potential for the patient to go home with their own heart, facilitating the restoration of quality of life. Additionally, ABIOMED believes that heart recovery is often the most cost-effective solution for the healthcare system.

The company's strategic focus is on the market penetration of its Impella product line, which includes the Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella 5.5, and Impella RP devices. These devices are designed to provide circulatory support and oxygenation for patients in need of hemodynamic support. ABIOMED expects to continue transitioning its sales focus to newer generations of Impella devices over time, with a greater concentration of product revenues coming from the Impella CP and Impella 5.5 devices in the future.

In addition to its Impella product line, ABIOMED has also acquired and is developing other technologies to expand its product portfolio. In 2020, the company acquired Breethe, Inc., a developer of a portable external respiratory assistance device called the Abiomed Breethe OXY-1 System. The Breethe OXY-1 System is designed to provide oxygenation support for patients suffering from cardiogenic shock or respiratory failure.

Financials

ABIOMED has demonstrated strong financial performance in recent years. For the fiscal year ended March 31, 2023, the company reported annual revenue of $1,031,753,000, an increase from the prior year. Net income for the same period was $136,505,000, and the company generated annual operating cash flow of $285,390,000 and annual free cash flow of $249,627,000.

In the most recent quarter, ended March 31, 2023, ABIOMED reported revenue of $265,921,000, an increase of 7% compared to the same quarter in the prior year. Product revenue, which accounts for the majority of the company's total revenue, increased by 7% to $253,246,000, while service and other revenue increased by 3% to $12,675,000. The increase in revenue was driven by higher patient utilization and sales mix in the U.S., Europe, and Japan, partially offset by the unfavorable impact of foreign exchange fluctuations and the ongoing impact of hospital staffing shortages.

Gross margin for the quarter was 81.6%, compared to 82.3% in the same quarter of the prior year. The decrease in gross margin was primarily due to the company's investment in direct labor and overhead as it continues to expand its manufacturing capacity in the U.S. and Germany.

Operating expenses for the quarter increased by 11% to $159,047,000, driven by increases in commercial hiring, marketing, travel, and clinical training and education initiatives. Research and development expenses increased by 3% to $42,089,000, as the company continues to invest in product development and clinical studies related to its existing and pipeline products, including the Impella ECP, preCARDIA, and Impella BTR devices.

The company's net income for the quarter was $106,133,000, an increase of 86% compared to the same quarter in the prior year. This increase was primarily due to a significant increase in interest and other income, net, which was $80,709,000 for the quarter, compared to $6,835,000 in the same quarter of the prior year. The increase in interest and other income, net, was primarily driven by unrealized gains on the company's investments in Shockwave Medical and other private medical technology companies, as well as a realized gain from the sale of Shockwave Medical securities.

Geographic Breakdown

ABIOMED generates a significant portion of its revenue from international markets. In the most recent quarter, 18% of the company's total revenue was derived from outside the U.S., with Europe accounting for 11% of total revenue, Japan accounting for 5%, and the rest of the world accounting for 2%.

The company's U.S. product revenue increased by 10% in the quarter, while outside the U.S., product revenue decreased by 2%. The decrease in international product revenue was primarily due to the unfavorable impact of foreign exchange fluctuations, partially offset by higher patient utilization and sales mix in Europe and Japan.

Product Pipeline and Innovation

ABIOMED is committed to continuous innovation and the development of new products to address the needs of its customers and patients. The company's product pipeline includes several promising technologies, such as the Impella ECP, Impella BTR, and preCARDIA systems.

The Impella ECP device is designed for blood flow of greater than three and a half liters per minute and is intended to be delivered on a standard-sized (9 French) catheter with an expandable inflow in the left ventricle. The company has received Breakthrough Device designation from the FDA for the Impella ECP and is currently enrolling patients in an early feasibility study, with plans to transition to a pivotal trial in fiscal year 2023.

The Impella BTR device is designed to be a percutaneous, weanable, smart heart pump with integrated motors and sensors. The Impella BTR device is expected to allow for heart recovery with adjunctive therapies for advanced heart-failure patients. In December 2021, ABIOMED received conditional approval for an IDE early feasibility study for the Impella BTR device and began enrollment in early fiscal year 2023.

The preCARDIA system, acquired through the acquisition of preCARDIA in 2021, is a minimally invasive, catheter-mounted superior vena cava therapy system designed to rapidly treat acutely decompensated heart failure related to volume overload. In January 2022, the company announced positive results from the first-in-human early feasibility study of the preCARDIA system, and the FDA has authorized the study to be expanded to up to 160 patients.

Risks and Challenges

ABIOMED faces several risks and challenges that could impact its business and financial performance. The ongoing COVID-19 pandemic has adversely affected the company's operations and markets, including its workforce and the operations of its customers, suppliers, and business partners. While the company has implemented measures to mitigate the impact of the pandemic, the depth and extent of the ongoing effects remain uncertain.

The company also faces competition from other medical device manufacturers, and its products may not be accepted by cardiac surgeons and interventional cardiologists, especially those with significant influence over medical device selection and purchasing decisions. Additionally, the lengthy clinician training process associated with the company's products could lead to reduced market acceptance and revenue.

ABIOMED's success is also dependent on its ability to develop new products, obtain regulatory approvals, and successfully commercialize its technologies. Failures or delays in clinical trials or procedures relating to products under development could negatively impact the company's business.

Liquidity

As of March 31, 2023, ABIOMED had $937,243,000 in cash, cash equivalents, and short and long-term marketable securities, an increase of $41,583,000 compared to March 31, 2022. The company generated $81,524,000 in operating cash flow and $109,681,000 in investing cash flow during the six months ended March 31, 2023, which was partially offset by $134,118,000 in financing cash outflows, primarily related to the repurchase of common stock.

ABIOMED's strong liquidity position and cash flow generation provide the company with the financial flexibility to fund its ongoing operations, including the expansion of its commercial and operational infrastructure, the procurement and production of inventory to meet customer demand, and the development of new products and technologies.

Outlook

ABIOMED has not provided specific financial guidance for the upcoming fiscal year. However, the company remains focused on increasing patient utilization of its Impella devices in the U.S. and growing its business internationally, with a continued focus on Europe and Japan. The company also expects to continue investing in research and development, clinical studies, and the commercialization of its pipeline products, such as the Impella ECP, Impella BTR, and preCARDIA systems.

Conclusion

ABIOMED is a leading provider of innovative medical technologies that offer circulatory support and oxygenation solutions. The company's strategic focus on the Impella product line, combined with its commitment to continuous innovation and product development, has positioned it as a key player in the cardiac care market. Despite the challenges posed by the COVID-19 pandemic and other industry-specific risks, ABIOMED has demonstrated strong financial performance, with robust revenue growth, profitability, and cash flow generation. The company's strong liquidity position and pipeline of promising technologies suggest that it is well-positioned to continue delivering value to its shareholders.