Monday, February 16, 2009

Thoratec (THOR) Acquires Heartware

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Thoratec (THOR) made an acquisition Friday, in which it stated would impair earnings through 2011.
  • Heart device maker Thoratec Corp. said Friday it agreed to buy HeartWare International Inc. of Australia for $282 million in cash and stock. Pleasanton, Calif.-based Thoratec said half the price will be paid in cash, and the other half in Thoratec stock.
  • Thoratec and HeartWare both make ventricular assist systems, or small implanted devices that help the lower left chamber of the heart pump blood. The devices are used to help patients with end-stage heart failure.
  • On Jan. 30, HeartWare said regulators approved its HeartWare device for sale in the European Union. The company said it was beginning preparations for the commercial rollout of the product, starting with the hospitals where HeartWare was tested and expanding to key hospitals over the coming months.
  • Thoratec said will record one-time charges totaling $15 million to $20 million in 2009 from the buyout, and that the acquisition will reduce its profits into 2011.
Interestingly the market still liked it (the stock was up) - which had me scratching my head on the surface since I'm a bottom line type of guy. However, this article by Reuters sheds some light on the subject...
  • Cardiac-device maker Thoratec (THOR) will buy Australia's HeartWare International (HIN.AX) for about $282 million in a cash and stock deal, which could give Thoratec a stronghold over the market for machines that help pump blood in patients with a weak heart.
  • "It's a brilliant move, with the number-two player Ventracor Ltd (VCR.AX) in financial distress. By acquiring HeartWare, Thoratec has essentially consolidated its market leadership position," SMH Capital analyst Suraj Kalia said. Australia-based Ventracor, which makes an implantable blood pump called the VentrAssist Left Ventricular Assist Device (LVAD), said it was seeking interest from firms wishing to take a stake or buy the company.
  • "Thoratec is the current leader in developing Left Ventricular Assist devices, and HeartWare has the most exciting next generation products currently in the development," Pacific Growth Equities analyst Duane Nash said.
  • HeartWare was significantly undervalued, and at a premium of about 112 percent, Thoratec gains a longer pipeline and HeartWare gains decades of experience in developing and commercialising these devices, said Nash.
Thoratec has been another January leader which has been hit of late, but thus far has been able to hold over the 200 day moving average. Friday's news sent the stock up to near the 50 day moving average - we'd like to see it north of $28 as a sign of strength. For now, it remains as a minor position until we see a trend develop.

[Feb 6, 2009: Thoratec Beats; Market Yawns]
[Dec 5, 2008: Thoratec with Positive Data]
[Oct 30, 2008: Thoratec Smashes Earnings; Somehow Guides Up]
[Aug 4, 2008: One for the Radar - Thoratec]

Largest mutual fund owners of Thoratec by share ownership are
  1. 9.8% - Fidelity Growth Company (FDGRX)
  2. 1.0% - Vanguard Small Cap Index (NAESX)
  3. 0.8% - Vanguard Total Stock Market Index (VTSMX)
  4. 0.8% - Lord Abbott Developing Growth (LAGWX)
  5. 0.7% - American Century Heritage (TWHIX)
Long Thoratec in fund; no personal position


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