ABIOMED Inc (ABMD) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Paul and I will be your conference facilitator today. At this time I would like to welcome everyone to Abiomed first quarter fiscal 2005 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS)

I would now like to turn the conference over to Mr. Edward Berger, Vice President for Policy Reimbursement and External Relations. Please go ahead, Sir.

Thank you very much, and good morning, everyone, and thank you all for joining us today for our discussion of Abiomed's results for the first quarter of our fiscal 2005. With me today are Mike Minogue, Abiomed's CEO and President and a number of members of the Company's executive staff.

In a moment I will turn the call over to Mike who will make some introductory remarks after which I will provide a summary of our financial results for the quarter ended June 30th, 2004. We will then open the call for your questions.

First, though, it is necessary to remind you that during the course of this conference we will be making forward-looking statements. Including statements regarding future financial performance, product development efforts, strategic operational initiatives, and market response to our products. Abiomed's actual results may differ materially from those anticipated in these statements based upon a number of factors including uncertainties associated with development testing and related regulatory approvals, competition, technological change, future capital needs and other risks detailed in the County's filings with the Securities and Exchange Commission including our most recent annual report on Form 10-K. Investors are cautioned not to place undue reliance on any forward looking statements which speak only as of the date of this conference. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this conference or to reflect the occurrence of unanticipated events.

That being said let me turn the call over to Mike Minogue.

Good morning everyone and a special welcome to all of the investors and the analysts. Much has been written and discussed about Destination Therapy and heart replacement especially recently so today I'd like to focus on bridge recovery which is our core business. Bridge to recovery consists of techniques with the intent to get your heart working again while protecting the organs so you can eventually recover and go home. Recovery is the best option and one that we are committed to as we are the AbioCor mission. Bridge to recovery and Destination Therapy are two different markets that have great potential for growth but these two markets are both places that Abiomed is well positioned for success and growth, because we are the technology leaders. The bridge to recovery market could also be referred to as bridge to Abiomed now that we have two ventricles driven on one console.

In the last several months our ventricles technology has helped save many lives and sent patients home with their God-given heart untethered by any device, wires, batteries or as would be in the case the transplant without daily immune suppressant drugs or weekly biopsies for the first three months.

It is our sincere focus to give every patient who has suffered from a cardiac event the opportunity to have his or her heart rest while the ventricle pump continues to provide the support they need. This is the first step in self therapy -- total cell recovery. There are several studies that will be published that will show the importance to implant early prior to end organ failure.

Now I'd like to tell you 3 stories about these patients and their lives were saved by the recovery focus and the outstanding support by dedicated physicians and nurses. The first is a man whose father and older brother both died suddenly of heart attacks when they were in their 50s. At the age of 44, Ricky woke up with severe chest pain that resulted in six off pump coronary bypasses. The surgery went well but when he was being wheeled out of the OR he ended up going back into ventricular fibrillation. Afterward his heart wasn't able to maintain life. He was rushed back into the OR and put on two Abiomed BVS ventricles for six days to support both sides of his heart. Recovered and he went home.

Not only is he a success story he is also a good story about successful BVS patients can be when they're implanted as soon as possible.

The second patient is a 34-year-old woman who went to the hospital with flu like symptoms, ended up suffering from cardiac arrest that night from viral myocarditis. She was put on two Abiomed BVS ventricles at a spoke hospital which is an open heart hospital and then transferred to a nearby transplant hospital or what we called HUB hospital and then switched into two AB5000 ventricles without another surgery.

When a heart became available the clinician took her into the OR for the transplant. While she was in surgery they discovered that her heart had recovered. So instead of replacing her natural heart they explanted the AB5000 ventricles and now she has moved out of ICU and is at home recovering.

The third story is Mr. Passad, a 44-year-old VP at Salomon Smith Barney and he just returned from vacation with his wife and three children when he began to experience chest pain. He was taken to North Shore University hospital where was discovered that he was having a heart attack. He was put on two Abiomed BVS ventricles and later transferred to Mount Sinai and switched to the AB5000 without another surgery.

When it became clear that his heart would not recover he was kept alive for two months on the AB5000 ventricles before the heart became available for transplant. Mr. Passad has been just home following the transplant and is recovering and making plans to return to work.

Now imagine if this was your wife or if this was your brother or if it was you. Which option are you going to get at your hospital? The analogy I'd like to say is if you get a cold would you prefer to get vitamin C or have your tonsils removed? Clearly, recovery is the best option.

There are three main advantages our product offers to help make an even stronger argument while bridge to recovery should be the first line of treatment.

In the past -- this is the first reason. In the past a recovery patient required two open heart procedures in order to switch from a BBS ventricle to a longer-term external ventricle from another company. Now that we have an AB5000 Ventricle and console a patient can be switched from the BBS ventricle to the longer duration AB5000 ventricle on the same console without having to open the chest again. This is an Abiomed exclusive.

Remember these patients are trying to recover from cardiogenic shock and two operations puts major stress on the patient's ability to recover and increases the risk of infection and bleeding. Things that are deterrents to recovery. The second reason is our new console, the AB5000, makes it easier to transfer the patient from one spoke to one HUB hospital. The console also facilitates patient ambulization which is key to the recovery because it allows the patient to get up and around. In fact patients use the console as a supportive walker and this is another Abiomed exclusive. Many of the 800 open heart centers already send their bridge to recovery patients to the 100 estimate 100 transplant hospitals on the BBS Blood Pump today.

The third reason is before the introduction of AB5000, the bridge to recovery survival rates had pretty much leveled off around 30 percent. So it saved 2 in 3 which is significant. However we have begun to see some of our best centers attaining a 50 percent or greater survival rate. We are committed as part of our service contract and clinical training programs to share the best practices from the top centers with all users on an ongoing basis.

With our service clinicians, we will receive -- we will provide them coaching from our full-time nursing consultants who are experts in the use of ventricles as well as the recovery process and in an era where nursing staff levels are one of the hospital's biggest concerns we can assist to ensure the best possible outcome.

There are some additional benefits to an external ventricle vs. an implantable ventricle for bridge to recovery such as because the AB5000 ventricle is clear and external to the body we can inspect the pump routinely. An external ventricle, specifically, our device infection rate is significantly lower than the implanted ventricle. With an external device there's no impact to the patients' eating habits or drama to the abdominal area. It is also easy to switch the pump if any complications develop without surgery.

From our own clinical database we know that 70 percent of the patients need both sides of the heart supported or the right side only. And then it allows this capability to wean off one side or both sides of the heart.

And then last. External Ventricles fit all patient sizes and the procedure with the canticle (ph) insertion is much shorter than an implant. Imagine the cost savings if you can recover the heart vs. replacing it. Remember when you are sick vitamin C and chicken soup will always cost less than having your tonsils removed.

In the bridge to recovery market, we have the number one market share position and the largest installed base worldwide with over 800 consoles. But we're only penetrating less than 1,000 of the 60,000 potential cases in the U.S. Again less than 1,000 of the 60,000 potential cases in the U.S. only. That's less than 2 percent. Imagine if we got 10 percent usage penetration of the 60,000 U.S. cases. That would be more than six times the number of patients we have today.

The U.S. market today is estimated at 150 million and projected to grow 43 percent a year to 2008. And that's with the assumption of today's current penetration rates. Now imagine the potential for Latin America, China, and India, more than half the world's population. Today patients in those parts of the world have few options that are as cost-effective as the BVS ventricle.

These two big markets of bridge to recovery and Destination Therapy have distinct opportunities and challenges in the device industry and should be looked as two separate mountains to climb. We believe that for every 100 bridge to recovery patients today, only about 5 to 7 will be immediate candidates for a Destination Therapy implantable device.

There is another population of patients estimated at over 50,000 a year that have had consistent years of deterioration through congestive heart failure and will need a total artificial heart and or an implantable ventricle. The potential growth in this segment of Destination Therapy is well-known and has been discussed extensively by other companies and investors.

We are cheering for our competitors. We wish them great success in the destination therapy market. At the end of the analysis, we want to save lives, to build the best total artificial heart for liability and quality of life. We believe what our AbioCor comes to market under the HDE -- humanitarian device exemption -- it will outperform other options in terms of flow rates, infection, duration as well as being the only system to replace both the left and right pumps from the body. From our own database we know the majority of patients need support on both sides and it is very difficult to conclusively predict a left side only problem for Destination Therapy patients.

Before we get into the details of the first quarter I would like to reiterate our fiscal year '05 goals.

Number 1 is the AB5000 launch and commercial success, both in the U.S. and globally. Never 2 is the AbioCor HD approval. Number 3 is the AbioCor 2 implants in the lab and Number 4 has become profitable in the quarter this year unless we acquire products to expand our core competencies and circulatory care.

Overall we're pleased with our performance but not satisfied. We have several new processes and people ramping up in every role from sales to product development and from engineering to operations. I'm very proud of this team's ability to perform during major changes in the organization and while we conducted in-depth reviews of every program, person, and priority. This is a testament to the team that David Letterman created and the talented new leaders that have joined Abiomed.

We remain focused on creating winning culture that saves lives, leads in technology innovation, and becomes profitable. As you can see from the results quarter we have grown in the VTR market. We have also started to make inroads on distribution of the global markets. We will be announcing more details in the future on our distribution changes in Latin America, Canada, Europe and Asia.

My immediate team collectively has fluency in over five languages and has a global mindset.

We have also launched our service contracts and financing options. Some first quarter performance highlights that we're proud of. The consoles had double-digit growth in both units and also in dollars. The ventricles had double-digit growth in both units and dollars. All price increases have been implemented to reflect the value of our products and services. Overall this was a record high first quarter in the history of Abiomed. Overall this is the highest growth percentage from quarter to quarter in 26 quarters and, overall, we are on track for our product timelines and reliability targets with approximately 45 million in cash.

As I stated on our last call I would spend the next few months getting out to meet our investors and analysts. So far I've met over 50 people interested in our plan and the future and I am committed to remain visible and communicate our stories.

In summary, I would like to thank everyone at Abiomed and all of our customers for the most rewarding and exciting quarter in my career and tell you how honored I am to be part of this team. I also like to acknowledge our incredibly talented clinical consultants in the field who make every patient a priority and sacrifice so much of their time to save lives.

Bridge to recovery means everything. Bridge to recovery means everything to the patient and her family.

Thank you Mike. I'd like now to provide a summary of Abiomed's financial results for the quarter just ended. Product revenues for the quarter ended June 30th, 2004, were $7.4 million or 47 percent above the prior year comparable quarter revenue of $5 million.

A very strong 56 percent increase in domestic product revenue was partially offset by weakness in international sales. The largest portion of the increase was attributable to sales of our new AB5000 ventricles and AB5000 consoles. Although an increase in BVS Blood Pump sales is compared to the first quarter of the prior year also contributed.

Price increases across all product lines implemented during the final month of the quarter also contributed to the year-to-year revenue growth and did not seem to have a restraining influence on unit volumes. Of the $7.4 million in revenue for the quarter 78 percent came from disposable BVS blood pumps and AB5000 ventricles. That segment up 53 percent from the prior year comparable quarter and 22 percent of the revenues came from consoles and other sources such as parts and service.

Our margin on product revenues was constant in the quarter ended June 30th compared with the same quarter in the prior year. Cost of product revenues as a percentage of product reviews for the quarter was 24 percent unchanged from the prior year comparable quarter. Product mix was substantially different in the quarter ended June 30th -- than in the quarter June 30th 2004 than in the quarter ended June 30th, 2003. Total revenues were waited more heavily towards consoles reflecting sales of AB5000 consoles subsequent to the full commercial launch of the AB5000 product line.

The AB5000 ventricles had not yet been approved in the quarter ended June 30th, 2003. Our consoles typically have lower margins than our disposable blood pumps and ventricles and we have not yet achieved all of the manufacturing efficiencies we believe can be achieved for the newly introduced AB5000 ventricles and sales volumes increase going forward. These factors counterbalance an improvement in the margin on BVS Blood Pumps for the quarter ended June 30th 2004 as compared to the quarter ended June 30th, 2003.

Our evolution from technology-focused activities to commercial operations is reflected in our shifting of investment from research and development to commercial activation of the developed technology. Research and development expenses decreased by .8 million or 20 percent to 3.3 million in the three-month ended June 30th, 2004, from 4.1 million in the three months ended June 30th, 2003.

The decrease during the three months ended June 30th, 2004 is primarily related to lower AbioCor labor and material cost during the current phase of our clinical trial and to a shifting of our resources to commercial manufacturing activities.

SG&A expenses increased by $1.7 million or 54 percent to 4.9 million in the three months ended June 30th, 2004, from 3.2 million in the three months ended June 30th, 2003. The largest factor in the increase was $1 million associated with the recruiting and relocation of senior level additions to the management team.

Selling and marketing costs also increased as we continued to focused more of our efforts and resources on the commercial development of our new and existing products -- headcount, travel, and marketing materials expenses all contributed to the higher level of spending in the quarter ended June 30th, 2004.

We anticipate additional increases in sales and clinical applications personnel to provide fuller coverage of the existing and potential new customers incoming periods.

The quarter ended December 30th -- the quarter showed continued strong progress towards our goal of profitability. Net loss for the quarter was $2.4 million or 11 cents per share, 25 percent below the net loss of 3.2 million or 15 cents per share in the comparable quarter of the prior year. Excluding the charges for recruitment and relocation included SG&A would yield a pro forma lost of $1.4 million or 6 cents per share for the quarter.

As of June 30th, 2004, our cash, cash equivalent, short-term marketable securities and long-term investment totaled $45.2 million. This is a .3 million decrease from the total of 45.5 million at March 31, 2004. During the quarter ended June 30th, the Company benefited from $2.6 million in cash proceeds as a result of employee stock option exercises.

That concludes my prepared remarks. Before turning to your questions I would however like to tell you that Mike Minogue will be presenting at the Wall Street Analyst Forum Analyst Conference at the Roosevelt Hotel in New York on Tuesday, August 3rd, at 9 AM. A Web Of Mike's presentation will be available for viewing at that time on Abiomed's web site, Abiomed.com.

Thank you all, and now I would ask the operator for your questions.

(OPERATOR INSTRUCTIONS) Alex Arrow with Lazard.

Congratulations on your record quarter. Yesterday in the store call we heard the results of the survey that Thortek (ph) did about the barriers to wider adoption of Destination Therapy and with the understanding that there is a different strategy between Destination Therapy and bridge to recovery although of course you got Destination Therapy in sites eventually for the AbioCor. Wondered if you could give your view on whether they characterized the biggest barriers to market adoption to be, which were apparently in this order -- No. 1 cardiologist referrals; No. 2 product durability; No. 3 the community doctor referrals and No. 4, the level of current reimbursement. Do you see those as the same forward barriers to adoption as we look forward to forecasting whether this is really going to take off in the near future or not and would you put them in the same order or a different order? Or would you look at those any differently?

Alex, I would say that I thought Keith explained the barriers pretty clearly. I agree with them pretty much. The only thing I would say is different is a prioritization of the order. So I've worked with and have experience in cardiology as so the members of my team. Cardiologists are concerned first about the patient's well-being. So if they think that there is a solution that provides the best care for their patient they are going to find it on their own. They are going to research it and I am not sure you have to spend an extensive amount of money on marketing. Certainly you have to educate them but after that I think the adoption rate is more based on the performance of the system. Some doctors will adopt our our encounter some will not but the bottom line is we do that when the destination therapy market does develop it will develop because there's a device that does the performance that has high flows, that has low infection rate, and potentially supply support to both sides of the heart. For you to go through the capability you implant a device that only protects one side of the heart and then there does become a problem which is pretty difficult to conclusively predict that it's only going to be the left side of the heart, I think that is where some folks have some concerns.

So in the end I agree with all of Keith's points. I think they're very valid but I also think that the technology is the Number 1 factor that drives the adoption rate.

Thanks and one other question is the price increases that you've implemented have been substantial. And you've seen growth both in unit numbers and in price increases. Can you say what point during the quarter do they kick in and was it a step function all at once and what your current thinking is on your -- specific as you're willing to be on your pricing for AbioCor?

Correct. The first thing is they were stepped in and officially all the prices and increases were officially starting June 1st. Some were phased in a little sooner than that but the good thing is that there's value to our services beyond just the console and the ventricle that are the exclusives I described in addition we have an incredibly talented team of nursing consultants that are at the site helping to improve the recovery rate. And, again, if you look at the value of what we provide on pricing we are very competitively priced today. Our console provides for both ventricles there's no need to switch to different consoles if you want to have the patient get up and walk around and you can transport the patient and again if you look at the pricing increases and you look at the fact that both units are up double-digit and the disposables are up double-digit it tells you that they were accepted and the value was there for the market. As far as the question on the AbioCor pricing what you heard yesterday from Thortek was that the DRG would be anywhere from 130 for 103 in some areas of 200. What we've said along is that we're going to have controlled rollout of the AbioCor. We are going to price it somewhere between CMS and private insurance and so our ballpark range is going to be between $2 - $250,000 and again that's relative to what most people or most private insurance will reimburse for a transplant. And again the difference between the AbioCor and the other devices is you basically support both sides not one side. You don't have the wires and the duration on our target, our goal is actually higher than the current implantable one side support.

If you price the AbioCor between 200 and 250 isn't the total cost of the procedure going to be 300 or thereabouts or more? I mean Thoratek's total cost to the patient is the ballpark at least some data seems to be device costs 65,000 and the total procedure including the three-week hospital stay and a follow-up (MULTIPLE SPEAKERS)

I think, Alex, your question is has to be looked at the entire cost for the system. So it's something if the patient gets support and on the left side and then there's a problem on the right side that will require another ventricle and another procedure. If the patient gets an infection and has to come back and forth back and forth, that's also. The way we look at what we're comparing to isn't so much the Thoratek system. It's really what does a heart transplant cost? And we've done the analysis on a heart transplant and if basically heart transplant plus procedure plus the immune suppression drugs that are required are quite expensive and, again, we are going to have limited centers where we are going to be performing this. So the demand will likely exceed the supply. As we ramp up, as we do more procedures, as people get more comfortable with them, the pricing of the procedure should go down as well as we will get cost , will get economies of scale on our manufacturing and our volume we should bring the cost of our system down as well.

If I could squeeze one more in. The timing on the beginning of your AbioCor 2 trial and whether you'd be getting revenues for charging for that device and that is all my questions?

The trials for the AbioCor 2 and this is in our annual report 2004 is the AbioCor 2 preclinical. 2006 is the IDD summation. 2007 is the clinical trial and 2008 is the premarket approval. As far as the reimbursement for the trial we that is likely but at this point nothing is guaranteed that far out but currently the thinking on trials is likely that it will be somewhat reimbursed.

William Frain with UBS.

Congratulations. Looking forward to seeing you on Aug. 11th. The one question I had was there a major product in exchange between the fourth quarter of last year and the first quarter? Revenues are down, the totals are down, I'm assuming it's because there are more pumps and Ventricles sold.

There was a mix in shift in that we sold more consoles and we also sold more ventricles so there was a mix between as was stated in the readout 78 percent of the revenues came from our Blood Pump and our AB5000 ventricle. 15 percent came from our console sales and 7 percent came from our other bucket which is parts and service.

John Sherrod with Sherrod Company.

Why is it -- go back to your pricing why wouldn't strategy be better to have significantly lower pricing when you start off rather than as you say once you ramp up and get economy of scale and so on. I expect the price to come down and that I understand but I gathered and I still gather -- correct me if I'm wrong -- the margins can be very high on this anyway. And so why not start with a much lower rate and really be able to broaden the market quicker, the psychology of it, in terms of reimbursement, the whole thing I would think might benefit you and make it worthwhile to give up some of the revenue assuming that I'm right that it's going to be very profitable even at lower levels.

Good question. I think the way we look at it is we are going to have a very controlled rollout. We are not looking to put these on every shelf in every open heart center. What we're looking to do is have 20 centers of excellence that are trained that are going to get great results. The market is -- depending on which report you read -- is a $500 million to over $1 billion market.

And so what we want to make sure is that we don't have any mistakes or any places that do not get the full support of the Company to cause problems with the reputation or someone thinking that there's an issue with a product so we're going to be 100 percent focused on quality control, a few centers. And if you look at total artificial heart technology today, the two products that were out there was Abiomed and Penn State and we now have the technology for Penn State as well. The AbioCor and then the AbioCor 2 will be the best of both those technologies. We want to make sure that we grow in the right fashion, supply and demand and we want to cover our cost as we grow and reimburse and get back some of the compensation for the $80 million plus invested in the AbioCor.

(OPERATOR INSTRUCTIONS) Philip Harris, AG Edwards.

Hello, I think you partially touched on this but going back to your revenues this quarter compared to the March 31st quarter. I've got my numbers right, your revenues in March 31st quarter were 8.6 million and the quarter just ended there were 7.4 million. Is there any seasonal effect on this? Or could you comment on why they're down vs. last quarter?

There is seasonal if you look at our -- if you look at the history for the last four years, there is historically at the end of the fourth quarter of most companies' fiscal year including Abiomed, the fourth quarter of the fiscal year is usually where you see the increase in the volume of sales.

Just to touch on that as well the increase in the fourth quarter was a 19 percent increase. Increase this quarter in the U.S. was a 56 percent increase. If you also look at fourth quarter where we're in clinical trials we actually had systems out there to get the trials completed. However not all those systems were had completed their sell as well.

My follow-up question is about the AbioCor. First of all when do you anticipate that you'll get the device exemption approval? And, secondly, in regard to reimbursement, to what extent during a clinical trial which you will still be in I gather does insurance or whatever actually pay for these procedures? Who pays for them?

What was -- the first part of the question is we're on track as we've stated to have HD approval humanitarian device approval -- exemption approval by the end of our fiscal year which puts you in the January to March time frame. Nothing here can be 100 percent predicted. We are working with the FDA following their advice and policies and doing everything by the book but as we plan we will have approval here, hopefully, in the fourth quarter of our fiscal year. And then second on the pricing we expected to either be done by private insurance and/or if you look at this as an implantable device it would qualify for the changes in DRG for implantable device.

Steve Epstein of Defiance Asset Management.

Hi, Mike. Could you discuss the status of the AbioCor patient 13 and 14 and any plans for future implants and then also how their health impacts your thoughts on timing of discussions in the FDA?

Thank you, Mike. This is Bob Kung. The patient 13 and 14 at this point they are recovering steadily. And so we haven't encountered any problems with stroke or anything with these patients right now. So things are moving along. The trial actually is coming to a conclusion. We are looking for the 15th patient for the enrollment however the HED process is not paced by having the 15th patient. So that is running on its own schedule.

And at this point in time since we are at the close to the conclusion of the study I'd like to just perhaps give you a little bit of a sense of what we think our accomplishment has been to date. To give you a sort of an aviation analogy I think what we have done with the AbioCor in a short trial right now is very similar to what 80 years ago you know, Charles Lindbergh flying across the Atlantic. That's what I think we have accomplished. However we are definitely not a Boeing 777. There are some ways there's still a lot of work to be done to get to that point. But that is going to be our ultimate goal to get to the point where a patient not a patient but when a passenger gets on a plane, they don't worry about safety anymore and we'd like to get to the point where the future generations of AbioCor will be at a point where once they are implanted, patients will not have to think about it on a daily basis and that what they will be concerned about is their daily lives, conducting their daily lives and that's our ultimate goal. So I feel we're on track towards that and thank you.

If I can ask another question on the 85,000? How many facilities have purchased the 5000 to date and if you can discuss the (indiscernible) plans to penetrate hospitals that haven't purchased the yet?

As far as the numbers there's over 50 units that are out right now the 85,000 consoles and stuff. And I'm sorry I didn't get the second part of your question?

Any plans or what your marketing approach is to penetrate the hospitals that you would consider a target market? How many of those are and what your plans are to actually grow sales?

There are about 800 open heart centers and the majority of the 800 open heart centers are about half, currently half or BVS console. And they're currently using our Blood Pump. So what we're trying to do is talk about the benefits of now having the console that you can move the patient around and then you can transport the patient to a transplant center. At the transplant centers if you saw that our press release and then U.S. World News Report, top cardiac centers of the top 50 centers 47 out of the 50 are our customers. So they as well have our BVS consoles and so when a patient shows up with a Blood Pump they can run that patient on the Blood Pump with that console or they can run them on the new Ventricle that 85,000 ventricle as well. So we are going to be targeting for upgrades. We're going to be targeting for education and we're going to be targeting to go back into all our centers and try to drive everyone's survival rate up 15 to 25 percent. There's no reason if our best sites out there have a 50 percent protocol, this is something that we need to get in every other hospital. In addition to that, one of the things we've wanted in the trial is if you can reduce bleeding you can increase your survival rates from 15 to 20 percentage points. So if you look at the capability now to be able to go, to take a Blood Pump patient and change them to the AB5000 without opening the chest again, you have less risk of bleeding, less risk for infection and, again, we're going to be out there teaching and hoping to improved the survival rates for everyone.

Is it safe to assume that the majority of your penetration is in your best center so far and that this is just a gradual education process in the others?

I would say that's a safe assumption. There's a lot of other sites we have to penetrate. We have besides the fact that we're only getting approximately 1000 out of 60,000 patients we really have a long way to go getting our own people to increase the utilization on bridge to recovery.

(indiscernible) with ATIS.

I have two questions. One is about the 15th patient. Can you explain kind of the recruitment process and why it takes so long to find a person to get on the trial? What's the hindrance?

Well first of all let's talk about the trial and the patients. In order for us to have a patient that qualifies they pretty much have a life expectancy right now of less than two weeks. Two weeks or less. And in addition to that they have to have some specific guidelines that we measure that have to do with their injection fraction, failure to both sides of their hearts, their weight, their size, their health and then patient consent. And family consent. So we are very specific about that. And what we also try to do is we try not to do anything with any patient that has a chance of recovery or has a chance of getting a heart transplant. So based on those standards we have such a short period of time, because we have patients that are senior, elderly patients over 70. We have patients that have had years and years of long-time congestive heart failure and organ damage. And we are trying to wait to the right minute so we know there's no other alternative.

In fact, on one of our patients based on measurements we thought we still wanted to wait and see and it was essentially two days later. We didn't think the person would make it through the weekend in order to get the procedure done. So we have a very short period of time where we're within the window that we can go and we want to make sure that we have the right patients. And again patient consent has got to have the family's consent, we want to make sure that everyone is aware of what we're doing. And so we're very selective and, again, I just want to reiterate what Bob said. Patient 15, the path or submission for H15 is not determined one over the other. We're doing both in unison.

As far as the HDE, I am sure you've worked it out with the FDA and they're helping you with this process but can you explain for example if you follow Novacor and World Heart when they're trying to get destinations they are already on the market for bridge. Why is it that they were required to do a head-to-head vs. Thoratek so they're doing an equivalence trial. They've got over a few hundred patients on Novacor's (technical difficulty) what is it about your product that lets you go on the market after just 15 patients?

Actually a very good question. Let me just address what you want to know regarding why they have to do a comparative trial. The HDE is an FDA application process that is valid only when there is no other device that can address that patient population. So in the case of the worst heart device since the thoracic device is on the market once you have a device on the market you cannot go the hasty e-route. That's one reason.

That's actually the primary reason that they cannot go the HD route. Now since the AbioCor there's really no device, currently, that can address that very severely sick patient population that actually Mike early on described to you. That by itself is one of the reasons that qualify us for the HDE. There's another criteria which is back at the present that the patient population just for now that we have defined. Again, very limited population less than 4,000 in the United States.

So again that's only because we're right now addressing the very very sick patient. It does not mean that in the future that device like the AbioCor once we get the experience that we can get beyond the 4000 limit. Now 4000, it's plenty of patients to help. But certainly in the initials stages in introductions so we feel that really actually is not a limit to the initial clinical introduction or use of the AbioCor. Those are the reasons for that we can do the HD some of the other devices could not.

So it is really the dual ventricular? (technical difficulty) both ventricles for sale?

We are addressing a very specific patient population that currently is not addressed by anybody. In case that improved on the market.

And your profitability forecast? Does not require (technical difficulty). I don't know what the squeaking sound is. Sorry. As far as breakeven, do you need device approval to breakeven? And what is the number of devices you'd need to sell before it's profitable as --?

Our goal for profitabilities in the quarter is not impacted by the HD. For the Abiomed market.

Last question. Number of sites during the trial -- I missed that, if you said it. As far as the 15th patient how many locations are actually enrolling patients or searching for that?

Well we have six sites but they are really three sites that are really two sites obviously the active ones and we have another site in Boston that's also that's ready to go actually whenever there's a patient that can be presented within those criteria that Mike described

There are no further questions at this time.

There being no further questions we will conclude the call. Thank you all very much for joining us. And we look forward to speaking with you at the end of our next quarter.

Ladies and gentlemen, thank you for participating again. At this time you may now disconnect.