Sunday, October 26, 2008

Bookkeeping: Closing Thoratec (THOR) First Thing Tomorrow

From the category of when it rains, it tsunami's - one of only 2-3 stocks in our entire portfolio that have held up, Thoratec (THOR) put out a press release after the bell Friday that wear and fatigue on its heart pump may require surgical replacement and could be fatal.
  • Shares of Thoratec Corp (THOR) lost more than half their value after the cardiac device maker said wear and fatigue related to its implanted heart pump may require surgical replacement that could potentially be fatal.
  • The company initiated a worldwide medical-device correction of certain batches of the pump after 27 confirmed reports of damage to the percutaneous lead that required pump replacement.
  • In five of these cases, patients expired as a pump replacement was not feasible, the company said in a statement.
  • Thoratec had won U.S. regulatory approval for the device, HeartMate II Left Ventricular Assist System, in April. The device is designed for people with severe congestive heart failure and few medical options.
Heartmate II was essentially their driver and the reason the stock had a stunningly good quarter last time around, and had excellent prospects ahead. [Aug 4: One for the Radar - Thoratec] Well that is now toast - they have a conference call slated Monday but I'm having none of it - I will sell with the lemmings Monday and we're done with it. The thesis is destroyed here, and if this is a $5 stock or a $15 stock - irrelevant at this point. Management credibility broken here, and litigation process will be started imminently.

We actually had a profit on this position even in the pathetic mess of a market. That will be gone. I'm estimating our 2.4% position will be cut by 50% immediately Monday morning based on the after market quote on Thoratec (THOR), so our gain Friday will turn into an immediate $10K loss Monday. Can't do much about this one; I remember the havoc done to Medtronic (MDT) a few years ago when their much broader portfolio was hit with similar worries and the stock was hit quite hard - this is much worse from the perspective this is a very narrow portfolio of products that just was called into serious question. Even if worries prove to be overblown in the long run; a dark cloud will hang over THOR for a long time.

Just awful luck on top of everything else. Usually such bad news is precipitated by the stock selling off as "someone is tipped off" as almost always happens on Wall Street - this was one well kept secret as the stock was showing unusual strength considering the market. A conference call is slated Monday 8:30 AM - I just hope they say enough that the stock is not down 60-80% and only down 50%.

Long Thoratec in fund; no personal position (will be exiting Monday AM)

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