ABIOMED Inc (ABMD) 2004 Q1 法說會逐字稿

Good morning, and welcome to the ABIOMED first-quarter 2003 fiscal financial results conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. As a reminder, this conference is being recorded. I would now like to turn the conference over to Ms. Kim Golodetz.

This is Kim Golodetz of Lippert/Heilshorn & Associates. Thank you all for participating in today's call, which covers ABIOMED's fiscal 2004 first-quarter financial results. Joining me from ABIOMED are Dr. David Lederman, President and Chief Executive Officer; Dr. Edward Berger, Vice President of Strategic Planning and External Communication; Gene Rabe, Senior Vice President for Global Sales and Services; and Dr. Robert (indiscernible), Chief Scientific Officer.

This conference call will follow the scheduled format, beginning with prepared remarks by management, and then we will open up the call to your questions. Earlier today, ABIOMED released financial results for the first quarter of fiscal year 2004. If you have not received this news release or if you would like to be added to the Company's distribution list, please call Lippert/Heilshorn in Los Angeles at 310-691-7100, and ask for my colleague, Don Garcia. This call is being broadcast over the Internet, and a recording of the call will be available for the next 14 days at www.ABIOMED.com. Also, by telephone, you can listen to a recording through midnight Eastern time, August 13, by dialing 800-642-1687, and entering reservation number 2137587.

Before we begin, I would like to state that comments made during this conference call may contain forward-looking statements that involve risks and uncertainties regarding the operations and future results for ABIOMED. I encourage you to review the Company's filings with the Securities and Exchange Commission, including without limitation the Company's form 10-K and form 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. The contents of this conference call contain time-sensitive information that is accurate only as of the date of the live broadcast -- today, August 11, 2003. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. This call is the property of ABIOMED; any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of ABIOMED is strictly prohibited.

With that said, I would like to turn the call over to David Lederman.

Welcome to all of you to this, our first investor conference call of our current fiscal year, which began April 1 and ended on June 30, 2003. Ed Berger -- I am going to ask Ed Berger to make the prepared statements that represent the management's analysis of our results, and then we will entertain questions.

Thanks to all of you for joining us this morning. We have been telling you in recent months that ABIOMED has begun a new chapter in its development, and that we view that new chapter as primarily defined by a greater responsiveness to market considerations and a sharper focus on maximizing our commercial position. In March, we laid out our plan and timetable for product introductions over the next several years. Just a few weeks ago, we presented a fairly detailed analysis of the various segments of the circulatory support market, and how our present products and products under development will serve that market. We also clearly stated our intention, ultimately, to compete in every segment of the cardiac assist and replacement market. These are the primary goals that have been driving our activities.

The first quarter of ABIOMED's fiscal year 2004, ended June 30, saw solid progress toward these goals on a number of operational and strategic fronts. In some cases, that progress is apparent from our operating results; in other areas, meaningful progress has been made but is not yet reflected in our results. But, the first quarter of fiscal 2004 saw a meaningful reduction in our net loss as compared to the prior year quarter. This is a tangible sign of the effectiveness of a number of our organizational and resource utilization initiatives taken during the past year. We will continue our efforts to assure that our personnel are effectively and efficiently deployed, and to realize new efficiencies wherever possible.

We were very gratified to receive FDA approval in May for commercial introduction of our new AB5000 Circulatory Support System console. The AB5000 provides significant enhancements for customers when used with our existing BVS disposable blood pumps, and incorporates technology to support a new generation of ventricles that will, consistent with our product development plan and subject to FDA approvals, give us access to substantially larger portions of the total heart assist market over the next several years.

Initial customer response to the AB5000 has been quite positive. We have already accumulated approximately 1500 hours of patient support in the initial centers using the new console, and we believe that it will be well-accepted in the broader market. The first of our proposed new ventricles, also named the AB5000, is under review at the FDA, and we expect a positive response within the timetable that we have already presented to you.

During our webcast in July, we told you about a scheduled AbioCor medical advisory meeting. That meeting was held last month at the Texas heart Institute in Houston. The meeting, attended by our clinical partners as well as a number of leading surgeons and cardiologists not associated with the AbioCor trial, was devoted to reviewing some of the clinical experience of the trial and to discussion of adverse events, such as stroke, experienced by some of the patients. The meeting yielded extremely valuable insights, and has pointed us towards review of patient and device management measures as the areas of action moving forward.

We are continuing the review of the clinical data from AbioCor trial patients in light of the advisory meeting feedback, and anticipate that this review will pave the way for continued enrollment of additional patients. We have learned nothing that diminishes our confidence in the AbioCor or its prospects for success, and we are very pleased by the support and encouragement given us by all of our clinical advisers and investigators.

Let me now briefly summarize the operating results of the first quarter of fiscal 2004. With regard to product revenues, product revenues were $5 million for quarter 1 of fiscal 2004, and were derived entirely from the BVS and AB5000 product lines. These revenues were $100,000, or two percent, below product revenues for the same quarter last year. 90 percent of product revenues were earned in the United States.

Revenue highlights for the recent quarter include a 26 percent increase in BVS blood pump reorder shipments and revenue over the same period last year. These reorder revenues have always been the primary measure of the growth of our BVS business. BVS revenues derived from the sale of consoles, blood pumps and training to new customers, decreased as compared to the prior year, a result of the degree to which we have already penetrated those hospitals performing more than 500 open-heart surgeries per year.

The new AB5000 console does provide an opportunity to reinvigorate the capital equipment side of our business, and that opportunity should greatly increase when we successfully introduce the AB5000 Ventricle, as we expect to be able to do, later during this fiscal year. In the meantime, we expect the current trend regarding decreased sales to new customers to continue.

Similarly, revenue recognized from BVS blood pumps shipped under extended term contracts decreased, as we continue to move away from long-term sales contracts in which revenue is diverted until the blood pumps are shipped in favor of contracts in which all of the pumps are shipped at the outset of the contract.

Cost of product revenues as a percentage of product revenues were 24 percent in Q1 fiscal 2004, compared to 33 percent for the same quarter last year. The positive variance is primarily due to an increased allocation of indirect manufacturing resources -- that's manufacturing overhead -- to new products nearing commercial introduction -- the AbioCor and the AB5000 pumps; these changes resulting in less overhead costs being allocated to the BVS. Secondly, an inventory write-down in Q1 of fiscal 2003 that did not reoccur in Q1 of fiscal 2004 contributed to the positive variance.

With regard to funded Research and Development, our efforts to obtain new contracts and grants in R&D continue to be limited, as a result of our continuing focus on developing and commercializing existing technology. Funded R&D revenues were minimal, at $100,000 and $200,000, for the three months ending June 30, 2003 and June 30, 2002, respectively. Actual revenues from contract and grants matched our plan for the first quarter of fiscal 2004. R&D expense during the quarter consisted of continued clinical and development efforts related to the AbioCor, the AbioCor II and our continued efforts to enhance and extend the existing BVS and the new AB5000 product lines. R&D and regulatory expense decreased by 1.9 million, or 31 percent, to 4.1 million in the three months ending June 30, 2003, from 6 million in the three months ending June 30, 2002. The reduction is primarily due to reductions in material and labor costs associated with development and with (indiscernible) manufacturing for the AbioCor.

In the area of sales and marketing, expenses decreased by 10 percent to 1.8 million in the three months ended June 30, 2003, from 2.1 million in the three months ending June 30, 2002. The decrease was primarily attributable to reductions in selling and clinical support expenses, as a result of steps we took early in the quarter to streamline our field operations.

Net loss for the three months ended June 30, 2003, was approximately $3.2 million, or 15 cents per share share. This compares to a net loss of approximately 5.5 million, or 26 cents per share, in the same period of the previous year. The loss for the quarter ended June 30, 2003, is primarily attributable to the substantial investment we are making towards developing and clinically testing the AbioCor and AbioCor II.

As of June 30, 2003, the Company's balance sheet included $50.5 million in cash and short-term marketable securities, compared to 54.5 million as of March 31, 2003. Cash consumed by our operations during the quarter ended June 30, 2003, totaled $4 million, compared to 3.6 million in the fourth quarter of fiscal 2003. The Company continues to have no debt on its balance sheet, with the exception of normal trade payables and expense accruals.

That concludes our formal remarks, and we would be happy to answer any questions you may have.

Randy Hogue (ph), a private investor.

Congratulations on the continued improvement that the Company is making. I have 2 questions, quickly. First, on the AB 5000 -- given that you have a new design pump before the FDA for review, you must have -- I assume -- conducted some degree of clinical trials to gain data to submit to the FDA. Could you comment on what that trial entails, David, and give us any kind of an indication of the merits or the acceptance or impression in the medical community that conducted the trial as to its benefits?

The question I understand to mean, regarding the AB5000 ventricle as opposed to the console?

Yes, the new ventricle that you are waiting to have approval on.

We do not, as a matter of practice, describe our detailed regulatory strategies, so let me just say that the FDA is currently reviewing the pump -- the ventricle, the AB5000 ventricle -- and that the ventricle is intended to be used for patients in (indiscernible) cardiac (indiscernible) failure initially, and in combination with the console that provides a lot of versatility and a lot of added advantages to our previous console combination. But it will still drive also the BVS5000. And I am afraid I can't give you much more detail, because it would be revealing a business strategy that I would prefer not to do at this time.

In terms of the use of the new AB5000 console, it is, in fact -- as Ed mentioned, we have logged almost 1500 hours already driving the existing BVS5000 blood pumps, and the feedback that they have gotten is extremely positive with regard to the clinical experience with those systems. I should also tell you that the AB5000 ventricle will initially be used in a number of select centers of some of our best users, and we have -- obviously, we are not allowed to pre-market, but when we did during its development phase some of the (indiscernible) research, those who helped us in identifying what this new ventricle needs to do -- what they saw they liked -- and we are pretty excited that we are actually listening to them. So we expect the acceptance to be quite high, and in fact, the feedback from our early market research says that we have developed something that they are eagerly waiting to get their hands on.

My second question relates to your comments on the last conference call, when you gave an update to the clinical trial, and then mentioned briefly earlier in the opening remarks -- that is, the excitement that you achieved by having your meeting back in Houston a few weeks ago, and the study that you are doing as a result of that meeting with regard to patient device management. Can you comment further on that David, as to the progress that has been made? And when do you think you might have some conclusions from that study, and what the study seems to be indicating?

As you correctly stated, we focused on issues having to do with both device and patient management. We learned an awful lot, and we learned a lot from having the participation of many of our leading advisers who are not participating in the trial -- as well as those who are. And I have to tell you without going into specific details that there are a number of conclusions that we have already made as to how to do things even better. And we expect to continue this review, which has been (indiscernible) review, during the summer months, (indiscernible) in the midst of it; and we do -- it is converging, to the point that patients are being actually reviewed, and they are -- our centers are, in fact, sending out information about new patients and we are beginning the process of selecting and reviewing other patients.

And we expect that we will be underway and start doing -- continuing this clinical trial as we have in the past. It has never been put on hold, but the screening is continuing; and again, I want to repeat -- our conclusions are converging, and they are converging, coincidentally and positively, at the time when the summer months is ending, which is normally a low level of surgical activity in the country. So that is about all I can tell you at this point.

We will -- as we move forward, we will be informing you of the strategies and what the developments are. But I want to reiterate what Ed stated before, and that is that we have not really seen anything that diminishes our confidence that we will be able to move forward and we will be able to deal with minimizing and reducing the adverse events that we have experienced in the past.

Fair enough. Bill Frane (ph) was unable to be on the call and asked me if I would ask this, and it perhaps could go to Gene Rabe, and that is -- any comments, Gene, that you might be able to make on progress with the ABS in Japan?

From the standpoint of our progress in Japan -- I interact with our distributor, Medex (ph) Japan, there virtually on a monthly basis, and receive updates regarding new centers that we have brought on board, as well as patients that have been successfully supported on the BVS. I would like to indicate to everyone that those trends continue to go up on both aspects. The technology is being placed in more and more open-heart programs in Japan, and our usage on a monthly basis continues to go up. The outcomes have also been very promising in Japan on the overall recovery rate of these particular patients. So globally, things are very positive. We are currently under complete review of the market assessment and analysis there, and pushing things to the next limit regarding market penetration here in the next year. So that is where we are at from an assessment and an update.

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

I think if there are no more questions on line, we would like to thank everybody who joined us for taking the time this morning, and wish them all a pleasant day.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your lines.