AtriCure, Inc.

ATRC : NASDAQ : US$12.45
Target: US$16.00

AtriCure manufactures devices used in the surgical ablation of atrial fibrillation. Its bi-polar RF Isolator Synergy Clamp is the cornerstone of its product portfolio and is augmented by the Isolator multi-functional pen that can ablate, pace, and sense.

Life Sciences — Biomedical Devices and Services
Investment recommendation
6%, 10%, 11%, 12% and 25% Y/Y revenue growth….This is the trend in ATRC’s global A-Fib business since mid-2012, when Mike Carrel became CEO and began executing a playbook to, essentially, go on the offensive. This has been a smart move, given the A-Fib/LAA markets are under-penetrated and primed for growth, in our view. What’s more, ATRC possesses competitive advantages in product breadth, FDA labeling and strategic focus. Q3 growth of 25% – the highest level since
Q1:2008 – reflect the company’s investment in its Maze IV training program; possession of the only FDA label to treat AF surgically (where both MDT & STJ have halted their plans); the breadth of its AF product line (both open/MIS ablation and open/MIS clip); and investment in expanding the direct sales team globally.

Guidance was raised again, and we increase our forward 2013-15 sales estimates, which we still think could be too low. Reiterate BUY & raise our target to $16 from $14 (3x EV/Sales – in line with comps – applied to 2015E).
Investment highlights
 Total sales of $20.1M smoked us/consensus $18.1/$18.3ME. US sales of $15.8M (+28% Y/Y; highest since Q2/07) beat our $14ME led by upside in all areas (open, MIS and AtriClip). Strong GM (72.9% vs. 70.8%E) – partially offset by higher OpEx (adding reps & investing in clinical studies) drove better LPS of $0.13 vs. $0.14E.  2013 guidance increased again – to $80M+ (+14%) vs. 10-12% previously. We increase our 2013/14E and introduce 2015E (+12% Year over year)


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