Abiomed - An Up-And-Coming Medical Device Maker

Does The Company Have Recurring And/Or Rising Revenues?

YES. Abiomed has a 5-year revenue growth rate near 30%, a rate which has been accelerating in the past few years as Impella has garnered approvals for more indications and secured reimbursements from Medicare. The market remains substantial. The company estimates it services only about 9% of the U.S. addressable market, 12% in Germany, and it just started selling in Japan last year. This implies an addressable market of about $7 billion - and that's just in currently approved indications. Over the longer term, Abiomed is targeting devices to address ST-elevation myocardial infarction (STEMI), which could nearly double its market opportunity. Impella catheters and pumps are one-time use, necessitating ongoing repeat purchases and providing Abiomed with a true recurring revenue model.

Does The Company Have Durable Competitive Advantages?

SOMEWHAT. Abiomed owns over 300 patents, with nearly that many more pending, forming the basis of a REGULATORY BARRIERS INTANGIBLE ASSET on its devices. However, the company's real advantage at present is its virtual monopoly position in heart-assist pumps, creating trust, mind-share, and expertise with cardiologists that use them. We don't feel Abiomed's moat is impenetrable. Several large medical device companies, including Abbott Labs and Medtronic, have dabbled in the area, so far with little success. But the risk always exists of one of them entering the market to compete head-on with Abiomed (or, less adversely, buying it up instead).

Business Model Rating: yellow dot

We give Abiomed a YELLOW (somewhat attractive) business model rating. It is addressing a serious (and large market) medical need from a near-monopoly position, and has many avenues to continue rapid revenue growth for years. However, we are wary of the risk that new competition, insurance reimbursement cuts (Medicare has proposed reducing reimbursement for Impella by over 30% in some cases), and safety issues can have on the firm's business. Abiomed has an attractive profile, but one that faces numerous risks from many sides.

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