Thoratec Reports Second Quarter Results; Announces Filing of...

Thoratec Reports Second Quarter Results; Announces Filing of Amendment To HeartMate II(R) PMA With FDA


More Than 700 Patients Now Enrolled in HeartMate II Pivotal Trial


PLEASANTON, Calif., July 31 /PRNewswire-FirstCall/ -- Thoratec Corporation (Nasdaq: THOR), a world leader in products to treat cardiovascular disease, today reported results for the second quarter and first six months of fiscal 2007.

For the quarter ended June 30, 2007, revenues were $57.3 million compared to $54.8 million in the second quarter of 2006. Net income on a GAAP basis in the second quarter of 2007 was $1.3 million, or $0.02 per share, compared with net income of $337,000, or $0.01 per diluted share, in the second quarter of 2006. Non-GAAP net income, which is described later in this news release, was $5.3 million, or $0.10 per diluted share, versus non-GAAP net income of $5.0 million, or $0.09 per diluted share, in the same period a year ago.

For the first six months of fiscal 2007, revenues were $114.6 million versus $103.5 million in the same period a year ago. On a GAAP basis, Thoratec reported net income of $978,000, or $0.02 per share, compared with a net loss of $593,000, or $0.01 per share, in the first half of 2006. Non-GAAP net income for the first six months of fiscal 2007 was $9.6 million, or $0.18 per diluted share, versus $8.1 million, or $0.15 per diluted share, in the first six months of fiscal 2006.

"Our HeartMate II continued to demonstrate solid growth as a result of increased adoption in Europe and ongoing enrollment in our U.S. Pivotal trial. In addition, our International Technidyne Corporation (ITC) division had a very strong quarter, reflecting the impact of new products and our ability to capitalize on competitive opportunities," noted Gary F. Burbach, president and chief executive officer of Thoratec.

The company said these gains were offset by softness in sales of its Thoratec VAD (Ventricular Assist Device) (R) product line. Thoratec product line sales were impacted primarily by variability in bridge-to-transplantation (BTT) activity, as well as expanded use of the HeartMate II and increased use of short-term devices.

The company also announced that last week it had filed an amendment to its PMA (PreMarket Application) seeking approval of its HeartMate II for bridge- to-transplantation (BTT).

"We believe this updated filing with data from 279 Pivotal and Continued Access Protocol patients -- including 194 who had reached the 180-day study endpoint -- addresses all of the FDA's significant deficiencies outlined in its comment letter," Burbach said.

"It is our view that the updated data provide sound scientific evidence demonstrating reasonable assurance of safety and effectiveness of the HeartMate II for BTT, based on success across a full range of clinical measures that evaluated survival, adverse events, functional status and quality of life," he continued.

During the quarter, the company completed enrollment in the Destination Therapy (DT) arm of its HeartMate II trial by reaching the 200 randomized patients called for in the trial design. In addition, the company received Continuous Access Protocols for both the DT and BTT arm enabling the enrollment of an additional 60 patients in each arm of the trial.

Enrollment in the DT arm stood at 377 patients as of July 27, 2007, versus 320 patients three months ago. As of July 27, 2007, 231 patients had been enrolled in the randomized portion of the DT trial. Enrollment in the BTT arm of the trial was 337 patients, compared with 296 patients as of April 27, 2007.

As of July 27, 2007, the company had enrolled 714 patients in the HeartMate II trial, compared with 616 patients enrolled three months ago, and an increase of 395 patients over the 319 patients enrolled a year ago.

"There were a number of presentations of HeartMate II data at the recent American Society of Internal Organs meeting that continued to demonstrate very positive patient experiences for those supported by the device, and we are looking forward to additional data presentations at Heart Failure Society of America and American Heart Association meetings later this year," Burbach noted.

FINANCIAL HIGHLIGHTS

Thoratec reported revenues of $57.3 million in the second quarter of 2007 compared with revenues of $54.8 million in the second quarter of 2006. Cardiovascular Division revenues were $34.2 million versus $35.8 million a year ago. Revenues at ITC were $23.2 million versus $19.0 million a year ago.

GAAP gross margin in the second quarter of 2007 was 58.8 percent, while non-GAAP gross margin, which excludes SFAS No. 123R expense and is described later in this news release, was 59.4 percent. In 2006, GAAP and non-GAAP gross margin were 58.6 percent and 59.2 percent, respectively.

Operating expenses on a GAAP basis in the second quarter of 2007 were $33.0 million versus $32.3 million a year ago. On a non-GAAP basis, operating expenses were $27.6 million versus $26.2 million in the second quarter of 2006. Operating expenses on a non-GAAP basis exclude, as applicable, SFAS No. 123R expense, amortization of purchased intangibles, in-process research and development, CEO transition, make-whole provision and litigation expenses and is described later in this news release. The year-over-year increase in operating expense is due primarily to research and development activities at both of the company's divisions.

The GAAP tax rate for the second quarter of 2007 was 6.1 percent versus 44.2 percent in the second quarter of last year. The non-GAAP tax rate, which is described later in this news release, was 26.8 percent versus 29.8 percent in the prior year. The decrease in our effective tax rates reflects the benefits of increased tax-exempt interest income, along with increases in the production activities deduction and domestic tax credits.