prop is now the seller....., page-16

re: the yanks were this far ahead in 2002. thats better syringe. and here's whats happenned since then:

One-Day Wonder
Cardiac Arrest

By Lawrence Carrel
June 30, 2004

Thoratec Inc. (THOR)
Share price as of Tuesday's close: $14.42
Share price now: $10.74
Change: -25.5%
Volume: 11.1 million shares, daily average 642,500 shares
Last time this low: March 18, 2003
52-week high: $19.63
52-week low: $11.66
Forward P/E before announcement: 41.2 (based on 35 cents a share)
Forward P/E after announcement: 46.7 (based on 23 cents a share)

MAYBE IT WAS a heart attack just waiting to happen.

Shares of Thoratec (THOR) tumbled 26% to $10.74 Wednesday after the maker of cardiovascular devices warned that second-quarter and full-year results would fall short of Wall Street's expectations. The Pleasanton, Calif., company blamed its lowered guidance on the slow adoption of its heart pumps as heart replacements.

"Thoratec got a little too excited about the potential market," says Jason Kroll, an analyst at Roth Capital Partners, an investment bank based in Newport Beach, Calif. "Its product could become the largest medical-device market ever, an annual multibillion dollar market. But I think when the company initiated guidance it was overly bullish, and now that's been proven." Kroll reiterated his Neutral rating on the stock in a note Wednesday.

For its second quarter ending July 3, Thoratec now expects a net loss of a penny a share on sales ranging from $40 million to $41 million. Excluding merger costs and other items, the company forecast earnings of two cents a share. Net income for 2004 should come in between 10 cents and 13 cents a share on sales of $175 million to $180 million. Previous guidance put annual sales between $190 million and $200 million. Thoratec estimates earnings, excluding items, for 2004 of 23 cents to 26 cents a share. Thomson First Call had projected earnings before items of seven cents and 31 cents, respectively, for the quarter and year.

Thoratec makes two main types of heart pumps: one for temporary use, called bridge-to-transplant, and one for permanent implantation, called destination therapy. Its Ventricular Assist Device System, or VAD, is designed to help heart-failure patients temporarily bridge the six- to 12-month wait that's often called for before a donor heart becomes available. In November 2002, the Food and Drug Administration approved Thoratec's HeartMate Left Ventrical Assist System, or LVAS, for destination therapy. The slow adoption of the HeartMate as a permanent heart replacement, the company said, was due to doctors delaying wider use until the fall, when Medicare and Medicaid are slated to boost reimbursement for the device by 30%. After Oct. 1, government reimbursement will jump to as high as $130,000 per implant.

"There does not seem to be 'a sense of urgency' among the cardiologist community to refer this high-need patient population with few available treatment options to a Heart Hope center for a VAD-DT implant," wrote Jason Mills, an analyst at First Albany Capital, who maintained a Buy rating on Thoratec in his Wednesday note. "This headwind is combined with an apparent preference by centers to hold off implanting noncritical patients to take advantage of the higher reimbursement level." (Mills doesn't own shares of Thoratec; First Albany Capital has a business relationship with the company.)

According to Roth Capital's Kroll, every year about 100,000 Americans suffering from late-stage heart failure need a transplant. Stringent criteria eliminate smokers, obese patients and cancer victims, among others, from consideration, reducing the number of possible recipients down to just 4,000. The supply of human hearts available for transplants typically meets just half of that need. (Kroll doesn't own shares of Thoratec; Roth Capital Partners doesn't have an investment-banking relationship with the company.)

Since most patients are unable to get a heart transplant, and Thoratec has the only heart pump approved for permanent use, the company expected sales and earnings to experience strong growth. The problem for Thoratec is its permanent device isn't being adopted quickly. The company now expects just 30 to 35 destination-therapy implants during the second quarter, down from 42 in the first quarter. Thoratec also makes other cardiovascular devices, but much of its growth prospects are tied to the heart pumps.

"The second quarter is clearly a disappointment and well shy of our 55-pump estimate," wrote Merrill Lynch analyst Timothy Lee in a Wednesday note, in which he downgraded the stock to Neutral from Buy. (Lee doesn't own shares of Thoratec; Merrill Lynch has an investment-banking relationship with the company.)

For the full year, Thoratec lowered its forecast for destination-therapy implants to 200, far below its previous goal of 300 to 500 permanent implants.

"With the lowered guidance, and assuming the second quarter is flat and the third quarter is weak, it'll have to do 100 implants in the fourth quarter," says Ryan Rauch, an analyst at SunTrust Robinson Humphrey, who reiterated his Reduce rating on Wednesday. "Even with the reimbursement, 100 implants in one quarter aren't easy by any stretch. The issue isn't necessarily reimbursement, but the need for a second-generation device with better durability." (Rauch doesn't own shares of Thoratec; SunTrust Robinson Humphrey doesn't have an investment-banking relationship with the company.)

Thoratec's second-generation device, the HeartMate II, has been tested on 12 patients in the U.S. and Europe without any serious complications. Six patients recovered well enough to be sent home from the hospital, two improved but remained hospitalized, one later received a donor heart and three died due to factors unrelated to the device. The company didn't return calls regarding when the new device might go on the market.

"I would say the reasons for owning Thoratec's stock have disappeared," says Alexander Arrow, an analyst at New York investment bank Lazard, who cut his rating to Sell from Hold on Wednesday. "There are no more good reasons we can think of for owning it. The growth area was the destination therapy for the pump, and it now looks like adoption will take too long to be effective for Thoratec."

Quote:
"The unfortunate thing is 2004 and 2005 were going to be Thoratec's best years because it had a functional monopoly on destination therapy," says Lazard's Arrow, "while all of its competitors are still only good for bridge-to-transplant therapy. If there were ever going to be two great years in the history of Thoratec, it would be 2004 and 2005. But now it looks like it will take two years for attitudes to change sufficiently for cardiologists to recommend patients to get destination therapy. And by 2006, all the competition will come out with new products, and they will probably be superior to Thoratec's because they will be smaller, last longer and be more mechanically reliable." (Arrow doesn't own shares of Thoratec; Lazard has an investment-banking relationship with the company.)

from
http://yahoo.smartmoney.com/onedaywonder/index.cfm?story=20040630&afl=yahoo