Abiomed misses sales target following 'confusion' caused by FDA letter

Dive Brief:

Abiomed missed its fourth quarter sales target by a wide margin, prompting investors to trade its stock down by 15%.
The heart device business aimed to increase sales by 25% in the quarter but only achieved 19% growth, resulting in Abiomed's full-year figures coming in below its forecasts.
Company executives attributed the underperformance to a FDA letter about the safety of its temporary right heart pump system, Impella RP.

Dive Insight:

In February, FDA sent a letter to healthcare professionals to communicate post-approval data on Impella RP. Less than 20% of participants in the post-approval study met the primary survival endpoint, as compared to more than 70% of subjects in the pivotal trial of the device.

The FDA communication related to Impella RP, not all of Abiomed's products that treat the left side of the heart, but the company nonetheless heard from physicians who were unsure whether the concerns extended to the whole portfolio.

Abiomed took its "eye off the ball in protected [percutaneous coronary intervention]," CEO Michael Minogue said, and was too slow to realize that this set of customers had concerns about the FDA letter.

As protective PCI is an elective procedure, these customers were able to reduce use of Abiomed's device while waiting for data and feedback to alleviate their concerns. The upshot is protective PCI took the biggest hit in the wake of the FDA letter. Minogue said competitors "likely capitalized on the confusion."

Abiomed is working to ensure that the fallout from the FDA letter does not continue throughout the coming year. The company's growth rate improved in April, but is not where Abiomed wants to be, according to Minogue.

The company said it believes a final closing letter from FDA will help the situation in the coming months. Until such a resolution, Abiomed is looking to actions taken to remedy the soft demand, including sales force changes and training, to drive faster growth.

Minogue thinks these efforts will help but warned investors it will take "time and effort to get back on track." Abiomed expects the FDA letter to continue to hurt its business in the first quarter and, to a lesser extent, the second quarter.

Another challenge for Abiomed came in CMS' inpatient hospital proposed rule in April, which proposed a 27% cut to the primary Impella DRG code. Jefferies analysts wrote in a recent note to investors that "if recent history is a gauge, final rates will likely settle higher," adding that the "rates have little real impact on utilization."

"Importantly, we have seen similar proposals in the past for Impella, where initial proposed cuts give way to final adjustments that are much less severe after medical societies, KOLs, and hospital administrators weigh-in with more real-time cost data," the Jefferies note states.