ABIOMED Inc (ABMD) 2005 Q3 法說會逐字稿

Good morning. At this time, I would like to welcome everyone to the Q3 Investor Conference Call. (Caller Instructions)

I will now turn the call over to Mr. Javier Jimenez, VP of Operations. Thank you. Mr. Jimenez, you may begin your conference.

Thank you. Good morning and welcome to ABIOMED’s third quarter investor’s call. This is Javier Jimenez, VP of Operations. I’m here this morning with Michael Minogue, ABIOMED’s CEO and President. Also with us today are CSO Dr. Robert Kung and SVP of Global Sales Christopher Macdonald.

The format for today’s call will be as follows. Mike will provide you with an overview of significant current developments and future plans. I’ll provide a summary of the financial results for our fiscal third quarter of 2005 ended December 31st and then we will open the call for 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, ABIOMED’s strategic operations and initiatives and market response to our new products. ABIOMED’s actual results may differ materially from those anticipated in these forward-looking statements, based upon a number of factors, including uncertainties associated with development, testing, and related regulatory approval, competition, technological change, future capital needs and other risk detailed in the Company’s filing with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this release. 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 an anticipated event.

Now I am pleased to introduce Michael Minogue.

Thank you, Javier and good morning, everyone. Before we give you the detailed financial breakdown, I wanted to give you my assessment of where the Company stands, where we have made significant achievements and where we are still improving.

ABIOMED has a results-oriented philosophy and we believe strongly in execution. We have a leadership team that has had significant impact on ABIOMED’s performance, including achieving important milestones this quarter. However, we did fall short of our goal to be profitable for Q3. I want to take some time to tell you why we believe this occurred and how we are addressing it moving forward.

Our miss this quarter was primarily related to US sales execution, particularly in the face of newly ramped up competitive pressure following our success in Q2. We’ve made considerable changes to improve the US sales team, some of which were underway before Q3. These changes were made to better enable us to capitalize on the bridge to recovery or BTR market.

Just to remind everyone, we see the US hospital market as a hub and spoke model. Last quarter, on the webcast, we used the example of Cleveland Clinic, which serves as the hub or heart transplant center. Around the hub are several spoke hospitals or non-transplant centers that perform open heart surgeries and it’s an 8:1 ratio -- 8 open heart hospitals versus every 1 transplant center.

The spokes represent the largest opportunity for our products and serve as a feeder program to the hub hospitals when patients are transferred. The optimization of the hub and spoke model statistically shows improved outcomes for patients in regard to recovery and survival. Prior studies by the Cleveland Clinic and Columbia Presbyterian in New York show that early utilization of the VADs improves outcomes and we also know this from our 10-year database.

In line with this goal, we’ve made changes in US sales management that we believe will help us more rapidly execute our hub and spoke sales strategy based on the FDA approved products, which we have today in both BVS and AB5000, and CMS reimbursement, specifically the DRG 525.

In the last two quarters, we have transitioned in 7 new sales representatives to capitalize on our momentum. We still have 4 open territories in the US and given the breadth of this change, we did not have coverage in a couple of our key transplant center accounts. As a result, AB5000 ventricle unit sales were down 17% from the prior quarter.

We’re not going to be giving too many specific details on accounts, because we do not want to give away any unnecessary information to our competitors. However, in the meantime, we’re making progress in shifting the mindset of our customers, investors, and the public at large to view ABIOMED as a Company focused on receiving the heart as well as replacing it.

This quarter we expanded our installed base for BTR with 53% unit growth for AB5000 consoles versus the prior quarter. More than half of the consoles were sold into targeted-spoke open heart centers. This is our core customer. Compared to last year, we also experienced a 28% increase in BVS revenues and record sales in Europe.

Operationally, we continue to make progress in the internal controls, including capital expenditures, making the Company cash positive from operations for the first time in 8 years. We generated total cash, including proceeds from stock option exercises, of $1.2 million as compared to a burn rate of $1.3 million for the same quarter last year.

We accomplished this while continuing our strong commitment to R&D. Currently, approximately 75% of our R&D expenses are allocated to the AbioCor I, the AbioCor II, and enhancements of our existing commercial products, AB5000 and BVS. The other 25% are invested in new technologies and products to be introduced in the next 1 to 2 years.

On the clinical side, we are seeing an increasing number of days of support for patients on the AB5000, with some patients on bivad (BVS) support beyond 90 days. As of our latest update, 66% of AB5000 survivors have gone home with their own heart. The overall survival and recovery rate has improved and the hub and spoke model shows higher results.

Approximately 30% of our survivors have also avoided additional organ transplants after the AB5000 improved overall circulation, an added benefit of early intervention. We have observed that the recovery rate for AMI, or heart attack patients, on the AB5000 support has significantly improved and that patients generally need 25 days on support to provide the best chance of recovery, compared to the BVS results on 5 days.

One misperception that had been out there was that if your heart was going to recover you would know within 5 days and we now know that that’s not the case. Additionally, the definition of “survival” means that your heart has recovered and you’ve gone home or you’ve had a successful heart transplant. The definition of “recovery” is you go home with your own heart or sometimes referred to as “weaned”.

We are focusing our efforts on reducing the variation of results within our installed base - 62% of our hospitals have a survival rate of greater than 30%, while 38% of our hospitals have a survival rate of less than 30%. Again, 62% of our survival rate greater than 30%, 38% of our hospitals have a survival rate of less than 30%.

We have created a new team that focuses on sharing best practices and showing statistical analysis of protocols for hospitals. This has never been done in the past. The protocol for the AB5000 and BVS cannula insertion is identical. So the timing of early implantation remains a critical element for recovery.

The SHOCK trial published in 2000 on patients with cardiogenic shock following and AMI event demonstrated a mortality rate of 50%. ABIOMED’s goal is not only to keep patients alive, but to send them home with their own hearts. Remember that a heart transplant provides a 50-50 CHC of living beyond 10 years and requires daily medication of immunosuppressant drugs.

We will be working closely with our customers to publish multiple studies on acute events for the AB5000 in the future.

We are also working to support our customers in terms of clinical education. We have ramped up the clinical team, going from 5 nurses on staff to 11 currently, with the goal of 14 overall in the US. We recently completed a media and marketing kit for our support program that will provide hospitals with tools that they need to educate their audiences on our products.

We launched our online clinical education program and further modules are underway. In addition, last week we sponsored a satellite symposium at the Society for Thoracic Surgeons annual meeting, called STS, and STS members attended a session on hard recovery with presentations by 4 cardiothoracic surgeons. Nicholas Madera from Cleveland Clinic, Layman Gray from Jewish Hospital, Ralph de la Torre from Beth Israel and Mark Anderson from Robert Wood Johnson, New Jersey.

Dr. Mark Anderson specifically shared his insight on how he has achieved a 76% survival rate for 115 patients over the last several years. Again, a 76 survival rate for 115 patients over the last several years. In the next few weeks, we’ll be posting the presentations on our website as well as distributing copies on CD’s to both our clinical and investor audiences.

In regard to the AbioCor, I would like to also provide a brief update.

The process of seeking approval under the Humanitarian Device Exemption is continuing. We recently responded to a series of questions from the FDA, an anticipated step in this review process.

We believe we are on track and in line with our original estimate of receiving approval by the close of our fiscal year, which ends in March. But due to the interactive nature of the approval process, cannot pinpoint the absolute timing.

In addition, the Medical Device Modernization Act of 2002 places the FDA’s review emphasis on IDE and PMA applications. In the meantime, we have also been continuing work on the AbioCor II with additional implants in animals taking place this quarter.

As a preview of what is to come for ABIOMED in the near-term, I want to tell you about a new initiative that we have launched this quarter. Patients who suffer from AMI cardiogenic shock represent the most under-treated portion of BTR patients. We are launching a program in a partnership with several of our key customers to conduct a study on AMI patients, using a protocol to determine which patients would benefit from VAD support.

Again, we would like reiterate that we are the only company with ventricle support products indicated for recovery following AMI cardiogenic shock. We will provide additional updates on our progress as this program gets underway.

In conclusion, I would like to give everyone a sense of where we stand for the fourth quarter.

We expect sequential revenue growth this quarter. Again, we expect sequential revenue growth this quarter, but also expect additional spending for the expansion of S&M activities, R&D, and the Sarbanes-Oxley compliance. As a result, we expect to achieve break even for the quarter and plan to provide guidance for the FY06 on our next quarterly conference call.

Now I’d like to turn the call back to Javier, who will provide a summary of the quarter’s financial results.

Thank you, Mike.

Financial highlights of the third quarter of FY05 as detailed in our press release this morning including the following --

* Product revenues for the quarter ended December 31, 2004 were $9.6 million, or 46% above the $6.5 million reported for the quarter ended December 31, 2003. This revenue growth for the quarter just ended was driven by increased sales of both our AB5000 and BVS products.

The largest portion of the increase was derived from delivering a record number of AB5000 systems during the quarter as the product continued to gain market acceptance and patient outcomes improved with its wider use. Of the $9.6 million product revenue for the quarter, approximately 78% was derived from sales of BVS disposable blood pumps and AB5000 ventricles.

Our European subsidiary, ABIOMED B.V., set a Company record for revenues, increasing its sales by 69% over the quarter ended December 31, 2003. International sales accounted for 9.0% of total product revenue during the three months ended December 31, 2004 and December 31, 2004.

* During the quarter ended December 31, 2004 we showed a net loss of $200,000 or a $0.01 loss per share. This compares to a net loss of $2.0 million or $0.09 per share for the three months ended December 31, 2003. We primarily attribute this loss to a slower than expected sales force expansion in the United States while we continued our commitment to the development of new products.

* Our gross profit margin on product revenues improved during the quarter ended December 31, 2004 compared with the same quarter of the prior year. Cost of product revenues as a percentage of product revenues was 26% during the three months ended December 31, 2004 compared to 33% in the three months ended December 31, 2003.

* Research and development expenses increased by $300,000, or 8%, to $3.4 million in the three months ended December 31, 2004, from $3.1 million in the three months ended December 31, 2003. Approximately 75% of expenses incurred for R&D during the quarter were related to our ongoing development of the AbioCor I and II and improvement of our existing commercial products, with the remain percentage invested in the development of new technologies and products.

* Selling, general and administrative expenses (SG&A) increased by $600,000, or 16%, to $4.3 million in the three months ended December 31, 2004, from $3.7 million in the three months ended December 31, 2003. The increase is the result of higher marketing expenses, including marketing materials and tradeshow costs, as we expand our sales and marketing operations for our existing commercial products. In addition, we have also incurred substantial increases in professional service fees during the current quarter as a result of the Sarbanes-Oxley 404 Project related to establishing, documenting and testing our internal control processes.

We have supported our operations primarily with net revenues from sales of our BVS and AB5000 circulatory assist product line, government contracts and proceeds from our equity financing. As of December 31, 2004, our cash, cash equivalents, short-term marketable securities and long-term investments totaled $44.7 million.

During the nine months ended December 31, 2004, cash used by operating activities was $4.0 million, 45% less than the $ 7.4 million used by operations in the nine months ending December 31, 2003. The reduction in cash used by operating activities is primarily the result of our lower net loss of $2.1 million during the nine months ended December 31, 2004 as compared to our net loss of $7.9 million for the nine months ended December 31, 2003.

We increased inventory by $1.7 million as of December 31, 2004 in anticipation of new AB5000 sales and our receivables increased by $1.2 million as a result of our higher revenues. Both of these items offset a portion of the improvement in operating cash flow resulting from the lower net loss.

Net cash consumption from all activities, as determined by the net change in cash, short-term marketable securities and long-term investments, was $800,000 for the nine months ended December 31, 2004, compared to $ 7.0 million consumed for the nine months ended December 31, 2003.

During the nine months ended December 31, 2004, the Company benefited from $ 3.9 million in cash proceeds as a result of employee stock option exercises and employee participation in the Company’s stock purchase plan.

Thank you, Javier. This concludes our prepared comments for this morning and we will now open the call to questions.

(Caller Instructions) Jolene Furdek, Southwest Securities.

Hi. I was wondering, did you sell any BVS consoles this summer - or this past quarter rather - or was all of the nondisposable revenues solely AB5000 consoles?

That’s correct. All --

So there were no BVS consoles sold in the quarter?

That is correct.

Okay and then can you give a little bit more detail on the breakdown between the AB5000 ventricles versus the BVS pumps?

We’re not planning to break down that information at this point on the disposables, which one is AB5000 and what’s BVS. 78% of the total revenues were disposable versus 81% last quarter. But we’re not breaking it down in between AB5000 and BVS.

Okay. I have a couple other questions, but if there’s somebody else I can just come back in the queue and do a follow-up.

All right. Thank you.

David Zimbalist, Natexis Bleichroeder.

Hi, a couple questions. First, can you talk a little bit about -- sequentially your gross margin, obviously, was down, some of which, I’m sure, is due to the sales. Can you give us a little sense as to how much of that was due to the fact that you had a higher mix in Europe versus the fact that you had a lower mix, sequentially, of sales of the disposables?

It’s fairly comparable. I guess the two main drivers for the sequential was the mix of domestic versus international sales and the fact that our console content was higher in this quarter. As well as the fact that out of the three components - BVS, [indiscernible] ventricles, AB5000 ventricles and consoles - the one that was the most down was the AB5000 ventricle, which carries the highest margins.

Okay and also can you comment talk a little bit -- you’ve talked about a number of new initiatives and you’ve thrown in Sarbanes-Oxley in terms of fourth quarter operating expenditures. Can you give us as range as to what you expect expenses to be up sequentially, operating expenditures for the quarter?

I’m not prepared to give an estimate of what it would be. The Sarbanes-Oxley for everyone in the industry has been a taxing event for everyone and it’s more than we anticipated beginning a year ago at this time. But we’re still within the industry average that we’re seeing in all publications.

In regard to your question, David, on the R&D spend and what we are -- we are spending to the budget that we had prepared, so this is not additional spending that we will be surprised. However, we’re not going to -- we did not cut in Q3 and we’re not going to cut in Q4 the R&D dollars to bring new products to market as well as enhancements for existing products.

Okay and then lastly, can you talk a little bit about some of the areas in which you’re -- you had talked about 25% of R&D being spent on non-BVS, non-AbioCor, AB5000 products. Could you talk a little bit about what areas that might be in? Is it largely focused on congestive heart failure (CHF) or on shock or is it other types of products outside of cardiovascular or outside of CHF and talk a little bit about what areas those might be?

Yes, I’m not going to specifically cover that market until the time comes to launch and we don’t want to give any advance to any of our competitors. I will tell you, though, it will be within our core competency as we move forward.

Okay, thanks.

Greg Simpson, Stifel Nicolaus & Co.

Hey, good morning, guys. I’ve got about three of them for you. Mike, first of all - and I don’t know if you want to bring Chris in on this discussion - but on the sales force coverage issue you mentioned that you’ve got 4 openings. Of the accounts that largely were the problem in the third quarter, are those accounts now covered and what’s the timing to bring on the additional 4 people?

Yes, the timing for the additional 4 people is as soon as we can find. But we’re looking for a platform and somebody who understands the growth potential and understands that they have two different customers - some are transplant centers, some are open heart centers.

In regard to where the big centers were, that is the case where we didn’t have coverage. One of those areas has been recently -- we did have a person join in that area and the other areas I’m not going to comment where they were. We’re not talking about a large percentage. Again, the low hanging fruit for the AB5000 has been at some of these transplant centers, but that our real focus is also the spoke accounts as well.

Okay and now to try to get at the -- I’m going to take a different tack to try get at the question about AB5000 usage and not the breakdown in the quarter. But can you give us some sense - and I’ll leave this to you - the average usage per account in some sense? I don’t expect a direct answer to that, but maybe what’s the average usage of AB5000 ventricles per console, for example, in your best account? Or can you give us some variation between hub and spoke accounts?

Sure. I mean, let’s start off with the hub and spoke. We have -- it’s about an 8:1 ratio of open hearts to transplant centers. Those accounts themselves utilize different types. So, if somebody at a spoke buys the new console, they’re primarily still going to be using the BVS and that’s primarily where the majority of our usage is occurring.

Where you start to look at things like AMI patients that in order for them to recover its likely going to take 25 days on bivad support and for those types of incidents we would recommend using an AB5000. However, the model is so new and we’re developing the new market, that kind of what we said at the last earnings call, is we can’t give you a predication yet on utilization, because there’re different centers and different adoption rates.

But I will tell you, though, that all the centers that had been using the BVS, putting in the cannula, are basically doing the exact same procedure as they would with the AB5000. So there’s going to be those that adopt and move over quicker and there’s going to be those that still want to use the BVS, because that kind of the Gold Standard for post-cardiotomy cardiogenic shock.

Okay. Is there an account, though, that’s been using the AB5000 for a length of time to where you could throw out a rough number?

I can’t throw out a rough number, because again it’s a huge variation between the different centers. You would assume that transplant centers would have a higher utilization, but in some cases we see that’s not the case. We have some very active open heart centers as well that are more proactive in using the ventricles and have higher success rates as a result.

Okay, good enough, and then on the new product area. First of all, you mentioned you did more animal implants of the AbioCor II. Can you give us a sense of how many have been done now and then kind of moving on beyond that, without identifying what new products you’re coming with next, can you maybe narrow down the timeframe a little bit? I mean, can we expect the first of these new products, and we’ll use our imagination, but do we expect one in 6 months, 9 months, or will we see anything in the next 12 months?

Well, first on the AbioCor II, we have done animals in the past. We are doing our second this quarter. However, we also have 3 to 4 AbioCor II that have been running in the engineering labs nonstop for over a year. So we do have some of that clinical data.

In regard to our core markets and some of the things we’re developing, I cannot comment at this time. What I will tell you is, per in the call where we said these products will be introduced in the next 1 to 2 years, which means that you will know about them within a year period, as we start to go out into more trials.

Okay. All right. Thanks.

Michael Meek (ph), Private Investor.

Good morning, gentlemen. I could hardly have asked for a better report, so I’m very pleased. I do have just two questions. One is about the new product area, just one quick follow-up. Do you expect the new products that you’re working on now to be equal to or greater than the potential of the products you currently have on the market?

Michael, that’s an excellent question. We expect them to have upside as far as their market. We also expect it to help us round our core competencies of circulatory care and unfortunately that’s all I can tell you at this time.

Okay, that’s good. My other question goes to the AbioCor, if we could switch gears for a second. You mentioned that you had hoped to hear something by the end of March. When the FDA does come back to you, what exactly is it they’re going to be telling you and what does it mean for let’s say the next year of AbioCor installations?

Well, what we have said we hoped to get and anticipate by the end of our fiscal year, which is March, is approval for the Humanitarian Device Exemption, (HDE), which would enable us to sell up to 4,000 of these per year in the US.

Now that is a number that is much larger than we would be capable of manufacturing. And what we’re going to have, because we again have the only total artificial heart that’s enclosed in the patient, is we’re going to have a very controlled rollout following our approval, if and when, from the FDA.

And what that would mean is 10 to 15 centers of excellence that would be certified and trained that would go through process at some of our other centers that have been involved in the clinical trials. And those same centers would then be the same sites that we start our trials for the AbioCor II in that timeframe as well. So the market is very large. It’s going to be very specific and we’re going to make sure the most important thing is the success of the centers and the success of the patients who undergo HDE.

From a perspective of what does that mean from the patient criteria, that essentially means that these patients do not have any other alternative and again, there’s many folks today that they don’t have any alternatives because they require total support. They cannot go on a transplant list and for other reasons they have no other alternatives and that’s the type of patient the AbioCor will play to.

Okay. Now the original file was for 15 patients, I believe. Am I to infer from what you’re saying now, that if you got approval from the FDA, that we will see an accelerated level of installations?

It’s not a matter of installations. The original trial was up to 15 patients, so we do not need the 15 patients for that approval. We’ve submitted without it. You have to look at this from the long-term, because the AbioCor I will have limitations on size and the AbioCor II, while we believe will be smaller, will also have a longer reliability timeframe.

So the goal here is to continue to make progress on both the AbioCor I and the AbioCor II and that’s why our intent is not to roll these things out quickly, not to put them at a lot of centers. Each center will be certified and that’s the most important thing, is that we have success for all our patients that undergo the AbioCor I.

Okay, so my last question, to sum this up, would be that over the next year, if you do get approval by the end of March, we shouldn’t be looking for a greater number of patients to be receiving the AbioCor than we did during the trial?

Well, if you think about the trial, the trial started in 2001 and that was 14 patients, up until now. So, I don’t want to differentiate. I wouldn’t call that an accelerated growth. I’d say that certainly we would expect to do more than 14 in three to four years. But it’s not to try and mass produce these things and do hundreds of them out at several centers.

Okay. Thank you very much.

Randy Ho (ph), Lion’s Share Financial.

Good morning, fellows, and congratulations on the continued progress. Mike, would you flush a little bit this study that you talked about, briefly, in your opening remarks, the one that’s going to track results with AMI shock?

And specifically, what sort of endpoints would you like to see that in your minute, should they be achieved, you would view it as so compelling that your growth in pump usage and what have you might be accelerated beyond what you otherwise would have anticipated? In other words, if you could give us some sort of quantification of what the results hypothetically could be and which ones would be outstanding and which ones would be sub par?

Sure. I mean, if you look at what has been a continued problem for the industry, it has been patients suffering from cardiogenic shock. If you go back to 2000, there was a study done that is well-known comparing medical management versus revascularization for cardiogenic shock. So patients suffering from AMI, from heart attack, about 10% of those in the US, 7 to 10% go into cardiogenic shock.

And what cardiogenic shock does is it causes problems for the ventricle, but also it causes problems that the organs fail and as the organs fail your mortality increases. And the best that the trial showed was, on average, about 50% mortality in 30 days to 1 year. So there’s a lot of room for improvement and if you look at that initial trial that was done, only 3.0% of all the patients that underwent revascularization actually had access to a ventricle assist device, only 3.0%.

So we’ve already seen studies from our own database and probably the biggest challenge we have is just the huge variation, so I’m going to give you two things from our database. In our old database and in the old mindset, everyone assumed that if someone’s heart was going to recover on it’s on you’d know within 5 days. What we talked about last time, in the earnings call, was that we know now that that’s not statistically true, even on the BVS. 51% of our BVS survivors for the last 10 years have required more than 5 days.

Now if you look at what’s happening for the AB5000, one of the biggest problems that you have for recovery is bleeding. Well, these patients used to go on to a BVS and then after 5 to 10 days they made a decision that they would put them on longer-term device and they would go to a competitive unit. Which would core the ventricle, because the size of the cannula was so large. That it would basically be removing a chunk of the heart itself, the size of quarter, which is called “coring the ventricle”.

And what we’ve seen from our own results is, once the patients can go to the 25-day period without another surgery, without having their chest reopened, having the capability to get up and walk around, we’re seeing the recovery rate on the AMI more than double what it was for the BVS. And the reason that is, is it takes a longer time and usually biventricle support for people that have undergone cardiogenic shock to recover their own heart.

So we are optimistic. Anything, when you see things that are statistically double, it is statistical, and we do have more studies that we’re going to be going at different centers. The net effect is that you have to have early implantation, you need to get access to the ventricle assist and the other thing is you have to avoid bleeding. So those are the two main things.

There was a prior study done by a Dr. Lou Samuels where he showed a success rate on patients if implanted with a ventricle assist device that had already been on 2 to 3 inotropes with intraaortic balloon pumps, if you got to those patients in less than 24 hours. His success rate was 80% were weaned, so 80% recovered. However, only 40% of them would be discharged.

So great results to get 80% but then he would end up explanting the patients earlier - the 5 to 10 days - so that they would not have to go on to another surgery for another device and cause more bleeding. Now you have the capability with the AB5000, is you don’t have to make that decision at 5 to 10 days. You can leave them on as long as it takes and again, what we’ve statistically seen is for those that have recovered, they need 25 days on the AB5000.

But that’s a pretty amazing study, because again, these people have high mortality rates and now what we’re going to do is try and do a protocol, which might be even a little more aggressive than less than 24 hours. It could be less than 12 hours or at 12 hours.

So we’re pretty optimistic and again, where’s the biggest growth? AMI patients and we are the only company that has approval for that type of label.

Okay. All right. Thank you and second question. Now that you’ve had the AB5000 out in the clinic for 9 months or so, are you seeing other uses of the device other than AMI shock? Or I assume you might be using it for post cardiac and shock, I don’t know? But I’m hearing -- I heard one story that was on the [technical difficulty] where I heard it, where they anticipated the need to put somebody eventually on the AB5000 following open heart surgery. They went ahead and put him on the device prior to the surgery instead of the blood pump and circulated the system during the surgical procedure by virtue of the AB5000 pumps. Is there anything going on as a trend there or any other uses?

You know, I think there was something done, which I’m not going to comment on, but there was something done where a patient was on the ventricle assist device and actually they took the patient back into a cath lab for a procedure. But we haven’t done anything or really analyzed that situation, nor do I think that’s a long-term trend.

The one thing I would say that we missed was let’s say the patient’s heart doesn’t recover and we’ve had patients that have had that happen, but about 30% of our survivors have actually had other organs come back and recover. So they were able not to have to go on for a kidney transplant per se.

Okay and then my last question is on the AbioCor II and might be directed to Bob Kung so that he doesn’t escape some questioning during this call. But how are things -- I know you spoke to this a moment ago. But would you refresh us on what the timeline is for the introduction into the clinic of the AbioCor II and specifically the target date for the IDE, the length of the PMA trial, and when you might submit the PMA?

Randy, thank you for specifically calling me out. I was enjoying this.

Sorry.

That’s okay. No, no, this is fine. No, that’s fine. No, I said I was enjoying what Mike was talking and so forth, so I was having fun with that. But anyway, as far as the AbioCor II is concerned, the ultimate target time is still 2008 and that I think we’ve stated before pretty clearly and that part of it still remains our target.

Now, in terms of the intermediary stages and so forth, which are details, I think at this point it’s probably a little bit premature to go into any of the details. We are going to go through the animal studies. We have a reliability study, testing, that needs to be completed.

As Mike said earlier, there are some devices that are already running but we do need to do formal reliability testing and some form of animal testing and that’s going to happen over the next year and a half or so. And then we will be ready to start at least the clinical evaluation part of it, so 2008 is still the target.

Bob, having been involved so intimately as you were in the AbioCor I and then, following that, had a chance to observe the working on the bench of the AbioCor II, can you comment at all, Bob, about advantages of the II over the I and any excitement that you might have seen by developing this technology vis-à-vis AbioCor I?

Yes. I think the biggest advantage is the fact that it is has a drive system that allows us to reduce the size of the AbioCor by about 30%. I think that’s really sort of the real prime advantage and in addition to that, the drive unit itself has a long history. In fact, it’s been about 20 years of development. So it does have some simplicity, which translates into higher reliability. So we feel that, in the long run, it’s going to buy us a lot more patient advantage. There will other patients that the AbioCor I cannot address that the AbioCor II will be able to address.

Okay. Well, thank you very much.

William Frain, UBS Warburg.

Good morning, everybody, just two quick questions. Originally, going back about 15-16 year, the original market for the BVS was expected to be total around $150 million. Now, with the AB5000 and with the BVS and the new uses of it, do you have a new number? And number two, how are we doing in Asia and Latin America? Thank you.

I think the first question on the dollar amount, we have not given out dollars and we have not projected a forecast to the market. What we’ve consistently quoted is a third party report that was actually published in March, so before I started, and was not published or requested in any way by ABIOMED.

And what it really shows is that there’s a very low penetration rate in the market for BTR and in that report, it’s suggests that there’s 60,000 potential patients with 51,000 of them being the cardiogenic shock AMI patients and it shows an extremely small percentage penetration.

Even on post cardiotomy cardiogenic shock, which the report says is approximately a little less than 1,000 patients a year. Which, if you just do the post cardiogenic shock, that’s about 11% penetration and if you do the overall penetration of it, it’s less than 2.0%.

So, it’s clearly a market. If you’ve read some of the reports by JP Morgan that were on Thoratec back in 2001, they had a BTR market, again, at a high number. We’re focused looking at more as the patients and the penetration rate and haven’t given you a defined dollar amount for it.

The second question on Asia and Latin America, I think we’re seeing progress in both areas. We have patients now being done in China with the BVS. In fact, I believe the very first patient there was a save. And in Latin America, we are starting to see the education and the awareness of the doctors who are sponsoring us, from the US, that are down there teaching them the protocols, is utilization is also starting.

And for those that were at STS, we did have a pretty large contingency at the show, at our satellite symposium, both people from Latin America as well as doctors from Asia.

Thank you very much.

Jolene Furdek, Southwest Securities.

Hi. I was wondering if you could just talk a little bit more about the competitive environment, because I know you made allusions to the fact that your AB5000 ventricle business was a little soft because one of your competitors was being sort of aggressive? And I was wondering if you could give us any color on that?

Sure. I mean, we have a very good competitor. They’re much bigger than we are. Their focus has been in transplant centers and if you remember their earnings, they had projected to hit a certain number and then they had done an early press release saying that they would miss on the destination therapy market but that the BTT market was up.

The BTT market has historically been pretty stable, especially a month and a half into the quarter. So it was the end of their year and they have good salespeople and they did what they needed to do and without having a tenured sales force or even having a salesperson in some of these accounts, they impacted probably some of our business.

However, our real market and where the growth is, is out in the spokes and when we’re out in the spokes that’s where the opposite occurs. That’s where they’re really not covering, nor do they have the label approval for many of the recovery type indications that would be necessary to be out there.

So it’s a good competitor and again, I think the idea is to grow the pie and make it bigger and compete on making great technology.

Okay and the 53% increase in the AB5000 consoles you posted, you said that a significant amount of that was in the spokes now. So are you finally starting to make some penetration into the spoke hospitals or a lot of the previous sales into the transplant centers and as far as the spoke hospitals go, are they new spoke hospitals or are the upgrades?

Sure. That’s a great question. Now, our business has historically been a spoke hospital, if you really look at the numbers and again, these spoke hospitals do have our BVS. So we have a huge installed base out there.

Of the 100 transplant centers, 90-plus have our BVS console or have upgraded. But there’s over 800 BVS’ out there, so if you just do the math we have a lot more spoke accounts that are using the BVS and the BVS is kind of the backbone of the Company.

That being the case, more than half of the boxes we’ve sold went out to the spokes and then the spokes, what they will use, is they’ll still use the BVS ventricle but as well as the AB5000 ventricle. But the box itself is much better, easier to use, and that’s why they’re upgrading.

So we are seeing progress and the majority of those accounts were upgrades, but that’s also a good thing when you consider how large our installed base out there is.

Right. So I also said -- I know I asked before about the BVS pumps and the AB5000 and versus the BVS pump disposable ratios and I know you didn’t comment on that. But I’m curious. It did say that you had a significant improvement in the BVS pump sales and I’m wondering if you could just give us a little bit of color on why that happened, what you attribute that to.

On the BVS year-over-year, when we look at that comparison, the biggest driver was the price increase that we introduced at the beginning of the fiscal year that we set in place last year.

Okay. So, sequentially, can you comment on how it was versus last quarter?

It was comparable to last quarter.

Okay, great. Thank you so much.

You’re welcome.

Steve Emerson, Emerson Investment Group.

Go ahead, Steve.

There is no response from Mr. Emerson’s line. I’ll go on to the next question. Your next question is a follow-up question from David Zimbalist with Natexis.

Hi, thanks. I’m wondering if you can comment a little bit about what you’re seeing in utilization in the AB5000 ventricle, what kind of mix you’re seeing between convergence from BVS to the AB5000 versus primary use of the AB5000 on patients?

David, it’s a good question and one that we’re not trying to frustrate you but one that, until we have a credible model that we can build between what’s a spoke utilization and what’s a transplant utilization, it’s not going to be a number that you can build a pattern on.

So what I will tell you, from an indication perspective, we recommend and we’re seeing that for those people that are undergoing kind of the open heart surgery that can’t come off the heart-lung machine, those are where we’d recommend that the places also generate and use the BVS, because those are the ones where recovery is usually a shorter period of time.

In indications such as AMI or viral myocarditis, those are the patients that statistically are going to require anywhere from 20 to 30 days to recover their heart. And for those places we also see a bivad trend is much more successful, whereas you don’t have any surprises on the right side. So that kind of gives you kind of the estimate of what’s that population out there and based on the indication, depending on whether someone would use the BVS or if they would use the AB5000 and whether they’d do a univad or they’d do bivad support.

Okay. Thank you.

Jeff Neal, Bear Stearns.

Good morning. I just had one question, focusing on the sales rep situation. You noted that you still have 4 open territories. How many people are you looking to place in those territories and what’s your timeline for completion of that circumstance?

Yes, it’s a question, Jeff, on the -- its 1 per, so 4 open territories is 4 salespeople and the timing is as soon as we get the right salesperson with the right core competency to represent the Company.

Okay. Thanks.

There are no further questions at this time.

Great. Well, in conclusion, I’d just like to close this.

ABIOMED is capitalizing on the potential of the BTR market in the coming months. We’ve already seen success, both operationally as a Company and clinically for the patients our products are designed to help. Going forward, we are continuing to work aggressively to expand our leadership position in the BTR market.

I want to thank everyone for their support. Thank you for participating in the call and we look forward to our next conference call following the fourth quarter.

This concludes today’s conference call. You may now disconnect.

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