Thoratec Corporation (Thoratec) has reported revenues of $313.6 million for the full year of 2008, compared with the revenues of $234.8 million in the previous year-end. It has reported a GAAP net income of $22.5 million, or $0.39 per diluted share, for the full year of 2008, compared with the GAAP net income of $3.2 million, or $0.06 per diluted share, in the previous year-end.
“This has been a truly extraordinary year for Thoratec, highlighted by the successful U.S. commercial launch of our HeartMate II(R) LVAS (Left Ventricular Assist System) for bridge-to-transplantation (BTT) and the resultant growth in revenues and earnings,” noted Gary F. Burbach, president and chief executive officer.
“Our financial performance in 2008 was driven by an increase in Cardiovascular Division revenues of 49% year-over-year. We continue to see positive clinical results with the HeartMate II and better than expected adoption of the device by new centers. This demonstrates the effectiveness of our roll-out strategy designed to ensure that centers have the training and clinical support necessary to achieve successful patient outcomes.”
“While 2008 was a year of great accomplishment, we have ambitious goals for 2009 that will further our presence in the heart failure arena,” Burbach noted. “These include achieving growing penetration with the HeartMate II and the continued addition of VAD therapy at a number of open-heart centers. Most importantly, we will be driving toward a DT approval with the filing of our PMA and subsequently releasing data from the pivotal clinical trial at a major cardiology conference in the fall.
“In addition,” he continued, “we are looking to increase our international presence for the HeartMate II, particularly in Europe, and will lay the groundwork for a future entry into Japan. We also have important milestones in our product development programs, which strongly support the launch of the HeartMate II for DT in 2010. These include new external peripherals for the HeartMate II to enhance patient quality of life, as well as durability improvements to the percutaneous lead.
“At our International Technidyne Corporation (ITC) Division we will be working toward the introduction of a new ProTime system in the second half of the year that we believe will increase our presence in the growing market for physician office and patient home-based anticoagulation testing. In addition, we are developing a new consolidated platform to perform coagulation, blood gas, electrolytes and chemistry tests on one instrument for hospital point-of- care testing that will be introduced in late 2010. The final primary area of focus at ITC relates to a 483 Notice of Observation report issued by the FDA in January as a result of a recent inspection of our ITC facilities in New Jersey. The report detailed a significant number of observations relating to ITC’s quality system. We have commenced implementation of a comprehensive plan to address these issues, and expect to meet with the FDA in the near future to present our plan,” Burbach added.
Full year revenues in fiscal 2008 were positively impacted by $9.0 million in HeartMate II stocking orders and a favorable foreign exchange impact of $2.2 million.
Cardiovascular Division revenues were $215.0 million versus $144.2 million a year ago. Revenues at the company’s International Technidyne Corporation (ITC) division were $98.6 million versus $90.6 million a year ago.
The company provided a breakdown of sales by product for 2008 versus 2007. The HeartMate product line, which includes the HeartMate II and XVE, accounted for $160.8 million in sales, a 75% increase over sales of $91.8 million in 2007. The Thoratec product line, which includes the PVAD and IVAD, accounted for sales of $41.7 million, a 4% decline from sales of $43.3 million a year ago. CentriMag(R) sales in 2008 were $9.9 million, a 50% increase over sales of $6.6 million a year ago.
Cardiovascular Division revenues in North America were $173.1 million, a 57% increase over revenues in North America of $110.0 million a year ago. International Cardiovascular Division revenues were $41.8 million, a 22% increase over $34.2 million in 2007. Of total Cardiovascular Division revenues in 2008, $164.9 million resulted from pump sales, with $47.4 million generated by sales of equipment and accessories. This compares to pump revenues of $109.1 million and equipment and accessory revenues of $32.5 million in 2007. The balance of Cardiovascular Division revenues reflects contributions from the company’s graft business.
At ITC, revenues included $53.3 million for hospital point-of-care- including HemoChron, AVOX and IRMA-an increase of 13% over revenues of $47.2 million a year ago. Revenues for the alternate site business, which is primarily ProTime, were $30.0 million, a 16% increase over revenues of $25.8 million a year ago. Skin incision revenues were $15.3 million, a 13% decrease from revenues of $17.5 million a year ago. The geographical breakout of revenues at ITC was $64.2 million domestically, a three% increase over revenues of $62.6 million in 2007, and $34.3 million internationally, a 23% increase over revenues of $28.0 million in 2007.
GAAP gross margin in 2008 was 59.3% versus 58.0% a year ago. Non-GAAP gross margin, which excludes SFAS No. 123R expense and is described later in this press release, was 59.9% versus 58.7% a year ago. The year-over-year increase in gross margin is due primarily to the increase in average selling prices associated with US commercial launch of the HeartMate II. This was partially offset by lower margins at ITC, related primarily to geographic and product mix, and unfavorable manufacturing variances.
Operating expenses for 2008 and 2007 on a GAAP basis were $160.3 million and $138.5 million, respectively. On a non-GAAP basis, operating expenses in 2008 were $138.0 million versus $116.1 million a year ago. Operating expenses on a non-GAAP basis are described later in this press release.
The company’s GAAP effective tax rate for 2008 was 26.9% versus a tax benefit of 38.1% a year ago. The non-GAAP tax rate for the full year, which is described later in this press release, was 32.6% versus 29.0% in 2007. The principle cause of the rate increase in 2008 was higher income before taxes.
On a GAAP and non-GAAP basis, the company’s convertible debt was dilutive to the company’s diluted weighted average shares outstanding for the fourth quarter and full year 2008. The company’s convertible debt was also dilutive on a non-GAAP basis for the full year 2007. The increase in dilutive shares was approximately 7.3 million shares.
Cash and investments at the end of the quarter were $278.6 million, an increase of $60.3 million from the end of fiscal 2007. The cash and investment balance includes $30.0 million of Auction Rate Securities classified as long- term investments.
Guidance For Fiscal 2009
Revenues for 2009 are projected to be in the range of $345.0 million to $355.0 million. Growth in the Cardiovascular Division is expected to be in the low-to-mid teens. This is expected to be driven by continued HeartMate II growth as Thoratec product line sales are expected to be flat to slightly down versus 2008. Revenue growth at ITC is expected to be in the mid-single digits, with growth coming from our hospital point-of-care and alternate site offerings.
GAAP and non-GAAP gross margins are expected to be consistent with those in fiscal 2008. The continued positive impact of the HeartMate II market expansion on gross margin is expected to be offset primarily by FX rates, as well as costs associated with the introduction of new peripherals for the HeartMate product line.
GAAP income from operations is expected to increase between 40% and 60% over 2008, while non-GAAP income from operations is expected to increase 20 to 30%. The increase reflects increased revenues and improved operating leverage.
Weighted average shares outstanding are expected to be between 57 million and 58 million on a GAAP basis and 64 million and 65 million on a non-GAAP basis. We expect that our convertible debt will continue to be dilutive to non-GAAP earnings per share in 2009.