Abiomed - An Up-And-Coming Medical Device Maker

Longer-term, there is even more to the story. Abiomed has started a clinical study for the use of Impella to address ST-elevation myocardial infarction or STEMI. This is a very serious form of heart attack where a major artery is blocked, affecting close to 200,000 people annually. Finally, the company has plans for new devices to enter the left ventricular assist device (LVAD) market, which is a $2 billion market worldwide.

Adding a bow to the revenue story is the fact that Impella is one-time use only. Each procedure requires a new device from Abiomed, setting up a compelling recurring revenue model. Given that these devices are used in life-and-death procedures, sales are unlikely to be economically sensitive, either. Both of these factors make the company's revenue (and, importantly, free cash flows) reliable and predictable.

All of these factors paint an attractive revenue growth picture for Abiomed, both in the short and long-term. The company should continue to grow, and rapidly, with stable and recurring revenue.

The Moat Story

Here's another interesting factor concerning the competitive picture for Abiomed... there really isn't much of one!

That's right, in assistive heart pumps, Abiomed runs a virtual monopoly. Impella is one-of-a-kind for its targeted purpose at this point in time.

That's not to say competition is of no concern at all - just that it isn't much of a concern at present. The closest to direct competition that Abiomed has faced came from Thoratec, a division of diversified healthcare giant Abbott Labs (ABT), which offered a similar catheter-based pump solution called the HeartMate. However, last February the company halted sales after numerous safety incidents. The product is currently in limbo and faces the very real possibility of discontinuation.

Abiomed will face more competition as it moves into adjacent markets. The LVAD market, in particular, has established players in Thoratec and HeartWare (part of Medtronic (MDT )). Also, I expect more device makers to take a closer look at the PCI market in the future, given Abiomed's success and estimation of market size.

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