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Examining Abiomed’s Gross Margin Trend

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Abiomed’s gross margin

In the second quarter of 2018, Abiomed’s (ABMD) cost of revenue rose YoY (year-over-year) to $29.85 million from $21.63 million due to higher production volumes and higher costs in support of higher demand for its Impella devices. Its gross margin contracted YoY to 83.58% from 83.72%.

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Expected trends

Abiomed’s gross margin is expected to be 83.54% and 83.79%, respectively, in fiscal 2019 and fiscal 2020 compared to 83.40% in fiscal 2018. Meanwhile, Abbott Laboratories’ (ABT), Boston Scientific’s (BSX), and Edwards Lifesciences’ (EW) fiscal 2018 gross margins are expected to be 59.33%, 72.08%, and 74.87%, respectively.

Valuation metrics

Abiomed’s EV (enterprise value) is $12.39 billion, and its EV-to-revenue ratio is 17.95x. Its price-to-sales ratio is 19.15x, and its price-to-book ratio is 16.46x. Abbott’s, Boston Scientific’s, and Edwards Lifesciences’ price-to-book ratios are 3.86x, 5.48x, and 8.97x, respectively.

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Operating expenses

In its most recent quarter, Abiomed’s selling, general, and administrative expenses rose YoY to $78.89 million from $60.08 million due to its higher head count and its increased spending on marketing initiatives. Its R&D (research and development) expenses also rose YoY to $22.72 million from $19.39 million due to its product development initiatives for its existing products, such as its optical sensor technology, its Impella devices, and its expanding engineering organization.

In fiscal 2019 and fiscal 2020, Abiomed is expected to incur R&D expenses of $91.74 million and $112.29 million, respectively, compared to $75.3 million in fiscal 2018. Meanwhile, peers Abbott Laboratories, Boston Scientific, and Edwards Lifesciences are expected to have R&D expenses of $2.25 billion, $1.06 billion, and $619.83 million, respectively, in fiscal 2018.

In the second quarter, Abiomed’s total operating expenses rose YoY to $131.46 million from $101.1 million. Its operating income rose YoY to $50.32 million from $31.73 million.

Next, we’ll look at analysts’ views on Abiomed stock.

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