Thoratec: Pumping Up

Heart failure is getting a lot of attention on the Street. And one company the pros say could become a big player in helping avoid such catastrophes is Thoratec (THOR ). "With its HeartMate ventricular-assist devices, Thoratec will be one of the most important companies in the field," says Dennison Veru of Palisades Capital Management, who is accumulating shares. The stock has swelled from 6 in March to 18 now. Veru thinks it will hit 30 in 12 months.

HeartMate devices take over some of the pumping function of a damaged heart. They are approved in the U.S. and Europe for patients awaiting heart transplants or for use after open-heart surgery. But more important, HeartMate may eventually get Food & Drug Administration approval for use as an alternative to heart transplants--if results from a National Institute of Health-sponsored trial support it.

Thoratec CEO Keith Grossman says: "We are increasingly optimistic" about the potential of HeartMate for treating new patients, who could number 100,000 a year. He explains that implanted devices might permanently assist patients with late-stage heart failure--whose hearts won't recover and who aren't eligible for transplants. This alternative-to-transplant use "is a $2.5 billion-plus market," says Michael Weinstein of J.P. Morgan Securities. He thinks approval could come in a year. He notes that an artificial heart costs some $300,000, while Thoratec's pump device costs $50,000.

Weinstein predicts 2001 earnings of 20 cents a share and 42 cents in 2002. That's in line with Thoratec's forecast: It recently reaffirmed its 2001 revenue estimates at $115 million to $120 million and cash earnings of $9 million to $11 million. In 2002, it sees revenues jumping 25% and cash earnings doubling.

By Gene G. Marcial

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