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Abiomed Raised to Outperform

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We upgrade our recommendation on cardiac assist devices maker Abiomed (ABMD - Free Report) to Outperform following its solid second-quarter fiscal 2012 results which outstripped the Zacks Consensus Estimates.

We are upbeat about the prospect of the company’s popular Impella cardiac pumps which are used for the support of acute pre-shock patients or for prophylactic support of patients undergoing high-risk percutaneous coronary intervention.

Abiomed’s adjusted earnings per share of 3 cents a share for the quarter outperformed the Zacks Consensus Estimate of a loss of 8 cents. The company swung to a profit in the quarter on the heels of solid sales from the Impella pumps.

Revenues zoomed 26% year over year to a record $29.5 million, topping the Zacks Consensus Estimate. The company’s operational efficiency contributed to margin expansion. Abiomed once again reaffirmed its guidance which indicates strong revenue growth in the remainder of fiscal 2012.

Abiomed boasts of a broad portfolio of products that are life-sustaining in nature. The company’s strategy focuses on heart recovery as the goal for all acute cardiac attacks. Abiomed’s products are designed to enable the heart to rest, heal and recover. We believe this niche product line feeds a growing trend towards procedures that are either minimally invasive or assist the body in healing more naturally.

The company is witnessing strong demand for its Impella pumps. Utilization of Impella continues to grow at a healthy pace as borne out by the increasing number of patients being treated with the device.

Abiomed is pursuing a number of strategies (including a training program and additional clinical studies) to boost Impella utilization. Multiple clinical data updates on Impella through the remainder of fiscal 2012 are expected to boost the device’s use.

That said, we are cautious about the intensely competitive environment and reimbursement risk. Abiomed faces competition from organizations developing permanent heart assist products including Thoratec Corporation . Our recommendation is backed by a short-term Zacks #2 Rank (Buy).

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