Abbott's (ABT) FDA Nod For LVAD Boosts Medical Devices Arm

Abbott Laboratories (NYSE:ABT) has made another encouraging move with respect to its Medical Devices business. The company recently announced FDA approval for Full MagLev HeartMate 3 Left Ventricular Assist Device (LVAD).

Built on the sophisticated Full MagLev (fully magnetically-levitated) Flow technology, the HeartMate 3 system provides advanced short-term hemodynamic support to advanced heart failure patients.The Full MagLev technology enables HeartMate 3 system to lower trauma to the blood passing through the pump while optimizing blood flow. Interestingly, HeartMate 3 is an upgraded version to the existing HeartMate II system, which is used for longer duration.

The much-awaited FDA approval was awarded to Abbott post successful results from the MOMENTUM 3 clinical study. We also encouragingly note that HeartMate 3 received CE Mark in 2015.

Per management, over 5.7 million people in the United States suffer from heart failure and roughly 915,000 new patients are diagnosed with the condition every year. Supporting this data, Statista’s report on the U.S. Heart Failure market states that the market is projected to value $1,969 million by 2020, witnessing a CAGR of 16.2%. Moreover, they see an encouraging growth in the user penetration rate (as a share out of all ailing people) to 11.1% in 2020 from 8.1% in 2017. Thus, considering this data base, we believe that the latest FDA nod will accelerate the top-line growth.

Per a report by Culrav.org, the global LVAD market is projected to value $2,323.4 million witnessing a CAGR of 8.9% from 2017 to 2025. Moreover, as per Transperency Market Research, the North American market for ventricular assist devices is expected to see a CAGR of 9.2% in the 2016 to 2024 period.

Thus, considering the market potential, Abbott’s latest development will help it gain traction in the LVAD space.

Interestingly, Abbott’s Medical Devices operating segment (39.1% of total revenues) stood out as the highest revenue grossing business in the second quarter of 2017. Moreover, the company’s Cardiovascular and Neuromodulation sub-segment was the highest contributor, making up for 87.1% of the total Medical Devices revenues with 49.1% sales from the United States alone. Thus, the company’s latest development will help boost performance in this segment.

We believe an ageing population, unhealthy lifestyle and rising awareness and expenditure in healthcare will continue to drive growth in the heart failure market.

However, this market is dominated by many well-established players with Medtronic plc (NYSE:MDT) and Boston Scientiific Corporation (NYSE:BSX) being the most prominent ones.

Moreover, Abbott has been gaining investor confidence on consistently positive results. Over the past three months, the company’s share price has outperformed the industry. The stock has gained 11.7%, higher than the broader industry’s gain of 0.8%. The company has also outperformed the 1% gain of the S&P 500 market over the same time frame.

Zacks Rank & Key Pick

Abbott carries a Zacks Rank #3 (Hold). A better-ranked medical stock is Edwards Lifesciences Corporation (NYSE:EW) , with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 20.4% over the last six months.

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