Abiomed - An Up-And-Coming Medical Device Maker

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Heart disease has been the number one cause of death in the United States for over 80 years, claiming 630,000 people a year, about 6% more than #2 cancer, and a whopping 3 times the mortalities of the #3 killer, respiratory disease.

It is with this background fact that we introduce our focus stock for February, Quality Growth member Abiomed (ABMD).

So how does Abiomed advance the science of treating heart disease, and what are the prospects for its business? Let's take a look.

Assisting Heart Surgery

Abiomed is more or less a one-product company. It makes the Impella line of assistive heart pumps, devices that relieve the burden on the heart's function during surgery. Impella is guided up to the heart through an artery, then - using a fascinating system of mini-motors and pumps - it unloads blood from the left ventricle into the aorta, the same motion as normal heart function. The net effect is that blood pressure and flow is more easily maintained, lowering surgical complications and helping produce better outcomes for the patient.

Currently, Impella has FDA approval for 3 procedures: high-risk percutaneous coronary intervention (PCI, or angioplasty as is more commonly known), cardiogenic shock (a condition where the heart cannot pump enough blood following heart attack), and right-side heart failure procedures. Abiomed gets over 90% of its revenue from the United States, but also markets in Germany and, recently, began selling Impella devices in Japan.

The Growth Story

The growth story is what makes Abiomed an interesting business and, ultimately, a potentially interesting investment opportunity.

The company has put up some impressive growth since winning FDA approvals and securing reimbursement in 2015 and 2016. 3-year revenue growth rate has averaged about 35%, with no sign of slowing.

This could just be the beginning. In currently approved procedures alone, the company estimates the U.S. addressable market at about $5 billion, with another $2 billion opportunity from Germany and Japan, from a total patient market of roughly 300,000. At trailing twelve-month sales of $550 million, that represents a lot of potential for Abiomed to continue to grow. Impella is still only used in about 9% of PCI procedures in the U.S., 12% in Germany, and the firm just started selling in Japan a few months ago. Also - despite EU approvals - Abiomed has not even attempted yet to break into the wider European market outside of Germany. With virtually no direct competition at this point, the growth highway looks clear.

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