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The 19% share price jump enjoyed by HeartWare International (NASDAQ:HTWR) yesterday on better than expected sales of its cardiac pump shows that the company can keep surprising the market. HeartWare had been expected to post third-quarter revenues of $49.4m; in fact it beat this by 11%, with sales clocking in at $54.8m.

The increase was driven by uptake of HeartWare’s ventricular assist device, called the HVAD, particularly in ex-US markets, chiming with the predictions made when the device was launched in the US a year ago that HeartWare would eventually take over from rival Thoratec (NASDAQ:THOR) as market leader.

Growing faster

HeartWare saw sales of 287 pumps in European and other non-US markets in the last quarter, giving revenues of $27m, a 38% year-in-year increase. Worldwide, 549 HVADs were sold, almost double the 256 units sold a year earlier.

And this trend is set to continue. Global sales of the HVAD are forecast to increase at a CAGR of 29%, reaching $505m in 2018, according to EvaluateMedtech’s consensus data. If the showing in non-US territories in the third quarter is anything to go by, revenues in these areas could climb even faster. By contrast, worldwide sales of Thoratec’s competing HeartMate family of pumps are set to grow at just 5% a year, hitting $423m in 2018.

This is despite Thoratec’s product gaining US approval for two indications – bridge-to-transplant and destination therapy – before the HVAD even got its first (Event – US approval for HeartWare’s heart pump could spur company to dominance, October 1, 2012). Currently, Thoratec has around half the European market and a 75% share in the US.

Even with yesterday’s climb, HeartWare's shares have still not recovered from their fall after the release of second-quarter results – despite these telling much the same story as the third quarter. US pump revenue in the first half of this year exceeded consensus estimates by 35%, with share both in and outside the US growing faster than expected.

Part of the problem was to do with a new device HeartWare is developing. The next-generation MVAD device had been expected to enter phase I trials in mid-2013; in August, the company said this would now happen in the first half of 2014.

News of a potential delay to US approval of HVAD for destination therapy – it is currently only available in the country as a stopgap to tide a patient over until they get a transplant – hit the stock. It was subsequently announced that more patients would be enrolled to assess the device’s effects on blood pressure (HeartWare’s pivotal data controversy could affect approval – and sales, September 3, 2013).

Much to do

There is still much for HeartWare to do. A survey of US doctors conducted by Canaccord Genuity last month showed that five of the eight heart pump sites that do not use the HVAD also do not plan to use it in 2014. This suggests, analyst Jason Mills said, that HeartWare must penetrate new centres in order to meet analysts’ expectations.

But the company's net loss shrank considerably to just $11.4m last quarter, from $25m a year earlier. The group is likely to remain in the red until 2015, despite accelerating uptake of the HVAD. But in 2017, according to EvaluateMedTech, it is forecast to take Thoratec’s place as the market leader.

Source: Heartware Shares Spike On Impressive Heart Pump Sales