ABIOMED Inc (ABMD) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Abiomed Incorporated earnings conference call. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) I would now like to turn the presentation over to your host for today's call, Mr. Dan Sutherby, Chief Financial Officer. Please proceed, sir.

Good morning and welcome to Abiomed's fiscal fourth quarter of 2008 earnings conference call. This is Dan Sutherby, Abiomed's Chief Financial Officer. I'm here with Mike Minogue, Abiomed's Chairman, President, and Chief Executive Officer. The format for the call will be as follows, first, Mike will provide you with strategic highlights for the quarter and then I'll provide a summary of the financial results and then we'll open the call for your questions. Before we begin, it is necessary to remind you that during the course of this call, we will be making forward-looking statements, including statements regarding future financial performance, product development efforts, Abiomed's strategic operational initiatives, market response to our new products, our progress towards commercial growth and future opportunities.

And 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 approvals, competition, technological change, anticipated future losses, complex manufacturing, high quality requirements, dependence on limited sources of supply, government regulation, future capital needs, and other risks detailed in our SEC filings. Investors are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of today's conference call. 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 call or to reflect the occurrence of unanticipated events.

Comparative references made today financially in this call to revenue, gross margin or other increases or decreases refer to fourth quarter of fiscal 2008 as compared to the fourth quarter of fiscal 2007 unless otherwise stated. I am now pleased to introduce Mike Minogue.

Good morning, everyone, and thank you for taking the time to join us today. It has been an exciting quarter and productive year, as you have seen from our press release. Today I would like to cover three main topics. They are Q4 results, the regulatory status, and fiscal year '09 goals. So first let's discuss the recent operating highlights and product achievements. We reported record revenue in Q4 that was up 26% to $17.5 million. Impella disposable revenue was up 308%. We are seeing great demand for this product. During the quarter a record number of patients were supported by the AB5000 circulatory support system worldwide, including AB5000 patients in Germany, France, Italy, Spain, Canada, Brazil, and the United States. The AB5000 console is now installed at approximately 62% or 74 of the U.S. transplant centers and at approximately 25% or 225 of the open heart hospitals.

We believe the new iPulse combination console, that will formally launch in the U.S. this quarter, will primarily increase our U.S. console penetration rate with the remaining 75% or 675 of the open heart hospitals. We do anticipate multiple consoles at each hospital, similar to the intra-aortic balloon pump model. Based on healthcare statistics, one of the leading causes of in-hospital mortality is heart attack or AMI cardiogenic shock. To look at the potential AB5000 disposable revenue opportunity, if every transplant and open heart hospital were to support only two AMI cardiogenic shock patients per year with the AB5000 Bi-VAD configuration, this would generate $163 million in disposable revenue. Healthgrades.com is a public website reporting heart attack death rates for only Medicare patients.

Here are some specific examples of what's in the report of in-hospital Medicare death rates for the last three years. One New York transplant hospital reported 2,096 cases with 11% mortality or 237 deaths. Another open heart hospital in Michigan reported 1,768 cases with 11% mortality or 201 deaths. And one open-heart hospital in Ohio reported 2,129 cases with 13% mortality or 277 deaths. I encourage all of you to review your local heart hospital performance. This website supports our belief that there is clearly a need for more than two AB5000 patients a year at every open heart hospital. Our AB5000 AMI abstract presented at TCT showed that of the 100 patients more than 50% were in cardiogenic shock for more than 24 hours. Even with this near-death population, 40% survived and two-thirds recovered their hearts.

So based on the above three examples, just those three hospitals, that could mean 286 patients get to live and 188 of them will recover their heart. Now, the iPulse combination console gives every heart hospital a cost-effective solution to treat these patients and reduce their in-hospital mortality rates. In addition, we think Impella will create more awareness in the cath lab for these shock patients suffering failure on both sides of their heart. From a regulatory perspective, the AB5000 and BVS are the only products approved by the FDA for all heart recovery acute events. CMS also assigns DRG 1 for heart recovery with BVS or AB5000 VADs. This is the highest paying DRG in the country, with an average payment of $171,000. Also, for the first time in Company history, Abiomed recognized revenue on its AbioCor Total Replacement Heart. In addition, Abiomed recently received a National Coverage Determination from the Centers for Medicare and Medicaid Services, CMS, approving coverage of the AbioCor.

This represents two major achievements and the product is now offered at three hospitals worldwide and sells for $250,000 apiece. These hospitals have started screening patients under the HDE guidelines. They are the Johns Hopkins Hospital in Baltimore, Maryland, Robert Wood Johnson University Hospital in New Jersey, and St. Vincent's Hospital in Indiana. The AbioCor will offer hope to heart failure patients without any alternatives. To remind everyone of the duration of this journey, in 1964 the NIH launched this national program by offering funding with the challenge to companies to build a totally implantable artificial heart. After 44 years, we're the only Company to achieve this goal. Special recognition goes to Dr. Bob Kung, our Chief Scientist and inventor of the totally implantable artificial heart, and Dr. David Letterman, the other inventor and retired founder of Abiomed.

Abiomed's commitment and persistence over the last 27 years with the technology, biology, physics and regulatory agencies have allowed us to move to the next chapter of this vision. Science fiction has now become science fact. Overall, revenue for fiscal year 2008 was $58.9 million, up 16% compared to revenue of $50.6 million for the full fiscal 2007. In this past year we significantly expanded our product portfolio, received numerous regulatory approvals, while investing in our clinical expertise and distribution in the cath lab. We have executed on our plan, which has positioned Abiomed for success. I'm extremely proud of everyone in the Company for all their achievements and efforts this past quarter and year. Moving to our second topic, I would like to discuss our regulatory status. So let's start with the Impella 2.5 510(k).

The Company has been engaged with the FDA staff in an interactive review of the Abiomed 510(k) submission for the Impella 2.5 device. The FDA recently communicated that the Company had adequately addressed their remaining concerns and that Abiomed had cleared all remaining deficiencies. While there can be no guarantees as to whether 510(k) clearance will be provided by the FDA or as to when any formal clearance will be finally granted, Abiomed has delivered to the FDA what the Company believes to be the final submission and anticipates formal 510(k) clearance before the end of the current quarter ending June 30, 2008. We are continuing to give visibility on our progress with the FDA in light of the unexpected duration of the process. In parallel with our 510(k) process we have been conducting a U.S. clinical study on the Impella 2.5 for high-risk percutaneous coronary intervention, or PCI, called Protect 2. So the PCI trial is called Protect 2 and it's at up to 150 U.S. hospitals.

On the status of our Impella 2.5 clinical studies, we remain pleased with the demand of the product and high interest level of interventional cardiologists. We received approval on the Protect 2 study at the end of August, and as we stated in the last earnings call, the average cycle time is 120 days to complete the institutional review board, or IRB, the purchasing requirements, and on-site training. We announced on our last call that nine centers had the ability to enroll. Today we wanted to share more insight into the process. To date on Protect 2, 149 hospitals have signed a nondisclosure agreement and have started the IRB approval process. Through today, of the 149 hospitals 93 sites have submitted for IRB approval and of those approximately 70 sites have received IRB approval. Currently, 31 of the 70 sites are open for enrollment and, as of today, 19 of the 31 centers have enrolled approximately 70 patients for Protect 2.

I have received questions on Protect 2 on the composite end points and I want to explain the rationale and assumptions on the major adverse events. To refresh everyone's memory, the Protect 2 is a randomized study between Impella and the intra-aortic balloon pump, or IABP, with prophylactic support for 654 high risk PCI patients. The Impella system is an active unloading catheter that can provide up to 2.5 liters a minute of flow to the peripheral circulation. The device does not require a stable heart rhythm and its function is independent from the heart cycle, unlike an intra-aortic balloon pump. It also provides higher hemodynamic support than an IABP, which does not unload the left ventricle. From the perspective of a specific pumping measurement, the Impella 2.5 pumps approximately 2.5 liters per minute, while an intra-aortic balloon enhances flow from 0.2 to 0.5 liters per minute if the left ventricle is pumping and the aortic valve is opening.

We know how an intra-aortic balloon pump works also, obviously, because we make and sell one. Therefore, the patient may better tolerate the procedure on Impella as compared to the intra-aortic balloon pump. Additionally, in order to show the treatment effect and the benefit, we will ask the interventional cardiologists to define the revascularization plan prior to randomization. For example, how many vessels will be treated should the patient remain stable during the entire procedure. The treatment plan will then be compared to the actual treatment in both groups. Abiomed believes, based on our clinical experience and customer feedback, that with sustained hemodynamic support from Impella the cardiologists will be able to more often achieve their therapeutic plan.

The trial is designed to show superiority of the Impella over the intra-aortic balloon pump after 30 days post PCI. We expect to see a lower rate of periprocedural adverse events in the Impella group as compared to the intra-aortic balloon pump group. The assumptions for our specific hypothesis are -- the proportion of major adverse events in the IABP group will be 30% and the proportion of major adverse events in the Impella group will be 20%, resulting in a treatment effect of 33% or net reduction -- or net reduction of 10 percentage points. This hypothesis is based on our research that several observational studies have reported a rate of up to 24% of periprocedural death, myocardial infarction, stroke and revascularization in patients with high-risk PCI and prophylactic use of the IABP.

Since our study endpoint includes additional intra-procedural adverse events, such as but not limited to severe hypotension or renal failure and will include a more complete follow-up and monitoring for periprocedural myocardial infarction, we estimate the rate of major adverse events in our study at 30% for the IABP group. Furthermore, the hypothesis of 20% major adverse events for the Impella group is based on our European experience and our U.S. pilot safety study. These ten components or measurements were selected as the primary composite endpoint. The major adverse events are death, myocardial infarction or heart attack, stroke, repeat intervention on the same vessel, need for cardiac or vascular surgical operation, acute renal dysfunction, increase in aortic insufficiency, severe hypotension requiring immediate treatment, CPR or severe arrhythmia requiring emergence, and last, failure to eliminate or reduce significantly the blockage in the targeted vessel.

To complete today's review of our clinical trials with respect to the Impella 2.5 AMI protocol called Recover 2, 33 hospitals have started their submission process for the IRB pivotal study. We do expect some overlap of hospitals conducting both trials. The study was conditionally approved in March, 2008 by the FDA and our goal is to demonstrate once again superiority of Impella as compared to the intra-aortic balloon pump for 384 AMI patients with hemodynamic instability undergoing PCI. Pertaining to the rationale of completing a PMA path with the Impella 2.5 510(k) clearance, we believe a PMA approval would lay the immediate foundation for Impella to become the global standard of care in the cath lab for all high-risk PCI and AMI procedures as compared to the intra-aortic balloon pump, which only has a 510(k) and limiting supporting publications for effectiveness.

We do think balloons will continue in usage pre and post heart surgery and also outside the United States, which is why we put that technology on the console that drives the BVS and the AB5000. We believe we will offer the surgeons balloon. On another regulatory topic, we are very excited about our new AB5000 portable driver that will allow for more patient mobility and potential discharge. It is the lightest most powerful VAD driver with the lowest noise level and operation. Today, Abiomed announced that it received FDA conditional approval for an investigational device exemption for its AB5000 portable driver to conduct a U.S. patient discharge study at 20 hospitals for 30 patients. The Company's AB5000 portable driver is already approved under CE Mark in Europe, where the first two patients have already been successfully supported. In the future, we plan to continue to update our shareholders and our analysts on our clinical progress and we appreciate your comments and questions.

The final subject I would like to cover is fiscal year '09 and our goals for the year are, number one, launching Impella 2.5. This includes U.S. clinical trial execution on Protect 2 and Recover 2 and providing Impella support to patients at over 100 U.S. hospitals. Number two, increasing Impella manufacturing capacity through operational excellence with quality and forecasting accuracy. Number three, driving to profitability by budget and expense discipline. The path and mindset must start now in every department in order to achieve this goal in the future fiscal years. And last, number four, increasing revenues greater than 25%. This is attainable by supporting patients in the cath lab, ICU, and surgery suite with our entire portfolio of products. For the year, Abiomed forecasts its fiscal year 2009 revenue to be in the range of $75 million to $80 million representing growth of approximately 27% to 36% over fiscal year 2008.

This revenue estimate is subject to the receipt and timing of certain regulatory approvals, including but not limited to our anticipated timing of the 510(k) clearance of the Impella 2.5 device. In conclusion, this past year marks my fourth year at Abiomed. We are gaining great momentum with our customers both in Europe and the U.S. Our vision is clear. Heart recovery is the best option for patients and most cost effective for the payer. Our strategy is clear, have a strong presence in the cath lab and leverage our existing relationships in the surgery suite with our new products and regulatory approvals. Our execution is clear. We need to continue to expand our footprint into every cath lab and enhance our relationships with cardiologists as well as heart surgeons at every heart hospital. Our results are driven by improving patient outcomes for heart recovery.

For this reason, we offer clinical flexibility of products with the Impella in the cath lab and the iPulse in the surgery suite, as well as the AB5000 portable for the transplant hospital. Our partnership approach with our customers is developed with evidence-based medicine and real outcomes. This is what drives their reimbursement and quality metrics. CMS recognizes the need to pay for performance for heart recovery with the goal to improve the patient's quality of life while reducing the overall health care costs. Based on the global trends and clinical needs, Abiomed is well positioned for the future of heart care and will play a role in improving today's global standard of care. Today, we have the distribution, clinical expertise, products, reimbursement, patents, scientific publications, and most important, we are executing on our plan. In the end, it is time for the standard of care to treat more than just the plumbing and the electricity. It is time to treat the heart as a pump to protect or recover heart muscle. I will now turn the call over to Dan Sutherby.

Thanks, Mike. If you would please turn to the P&L attached to our press release I will provide some details on our financial results for the quarter. First to revenues. On our product mix for the quarter, total disposables, service and other revenue, meaning the non console revenue, and also excluding AbioCor, comprised approximately 85% of revenue for the fourth quarter. Total disposable revenue was up 27% and total console revenue was down 28%. The console revenue during the quarter was mainly related to our AB5000 consoles and we expect demand to now shift to our new iPulse combination console. As a general comment relative to AB5000 consoles, we have been utilizing a console deployment or placement strategy to generate disposable revenue with strong gross margins. Turning to gross margins for the quarter, gross margins were 72% for the quarter and 74% for the full fiscal year 2008.

Included in cost of goods sold during the fourth fiscal quarter of 2008 were approximately $500,000 of expenses related to our strategic capacity ramp-up for Impella and these costs negatively impacted our reported gross margin in the fourth fiscal quarter by approximately 300 basis points. We also recognized AbioCor revenue during the quarter that, from a mix perspective, lowered our overall gross margins and saw some effect on gross margin during the quarter from our AB5000 console deployment programs. Continuing down the income statement, research and development, or R&D expenses for the quarter were $6.7 million, up approximately $700,000 and included Impella trial costs of approximately $1 million. R&D expense for the quarter also included stock option expense of approximately $300,000. Now to discuss SG&A expenses. SG&A expenses for the quarter were $14.4 million compared to $11.1 million for fiscal Q4 of '07, reflecting our strategic investments in our distribution.

Also included in SG&A for the quarter was a charge for an inventory write-down of approximately $700,000 and stock option expense of approximately $700,000. Total sales and clinical headcount globally was 75 at the end of our fourth fiscal quarter, up just under 20% from the levels of a year ago. Continuing down the income statement, included in other income and other expense, you will notice we have reported a separate line item for the change in fair value of the World Heart note receivable and warrant. As a result of World Heart's financial situation, disclosed in today's press release, we have deemed the note to be impaired from an accounting perspective and recorded a charge of approximately $5.6 million during the fourth fiscal quarter of 2008. The net loss for Q4 of fiscal '08 was $15 million, or $0.46 per share, but included certain charges that I will now discuss in detail. The net loss for the quarter included a $5.6 million charge for the impairment of the World Heart note receivable.

During the quarter we recorded stock option expense of $1.1 million, an inventory write-down of $700,000, and intangibles amortization of $400,000. Excluding these charges, the non-GAAP or adjusted net loss for the fourth quarter of fiscal '08 was approximately $7.2 million or $0.22 per share. Our GAAP net loss for the fourth quarter of fiscal '07 was $6.3 million, or $0.22 per share, and included stock option expense of $1.2 million and $400,000 of intangibles amortization. For the full fiscal year 2008, our GAAP net loss was $40.9 million, or $1.26 per share, and included certain charges as follows. The net loss for the full fiscal year 2008 included a $5 million charge for the change in fair value of the World Heart note, stock option expense for the full year of $5.4 million, an inventory write-down of $1.2 million, and a litigation settlement charge of $1.2 million recorded in our fiscal Q1 related to the Nazarian matter, and full-year intangibles amortization of $1.6 million.

Excluding these charges, the non-GAAP or adjusted net loss for our full fiscal year 2008 was approximately $26.5 million or $0.82 per share. If you would now turn to the balance sheet attached to our press release, as of March 31, 2008, our cash, cash equivalents, and investments totaled approximately $39 million compared to approximately $50 million at the end of our fiscal Q3. During our fiscal Q4, and included in the cash burn for the quarter, we disbursed $4 million for the World Heart investment and we invested approximately $3 million for the capacity ramp-up and inventory build for Impella. Based on our revenue guidance for fiscal year 2009 of approximately $75 million to $80 million of revenue and subject to the receipt and timing of certain regulatory approvals, we believe that we have sufficient cash and investments to fund our operations for our fiscal year 2009. I would now open the call to your questions.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of David Lewis with Morgan Stanley. Please proceed.

Good morning, guys.

Good morning, David.

First of all, Mike, can you just remind me when the first patient was enrolled in the study this year? Approximately.

For the protect 2, it was last quarter. We announced last quarter that we had nine centers enrolling.

So that's sometime around January?

No, the prior quarter. The November time frame.

Okay. So I'm just trying to get a sense of kind of the ramp-up period. Enrollment was a little stronger than I guess we had anticipated. It is about 12% of total enrollment.

I'll walk you through it. Last quarter we got the approval end of, two quartering ago technically. Two quarters ago we got the approval end of August. The average for these centers to get them up is around 120 to 140 days. However, we did get nine centers that were ready to go, potentially could enroll by the end of December. So we did. The first patients were done in November from a handful of centers that had already got through the IRB and started screening.

Okay. So if you look at this number -- so that's great, that's very helpful. If you think of your highest enrollment site, what is the number of patients your best enrollment site has enrolled to date?

We haven't given the specifics, but it's double digits. The reason we're breaking this out, because the speed of this trial, as you can see, is the more centers that we have enrolling, the faster it's going to be. We've done 70 patients. There's now 31 centers that can enroll, but the 70 patients was on the first 19 that have got up and running and we've had over 10 in the last week. So it's ramping up quickly and, as you can see, there's 70 folks that have IRB approval and we only have 31 of them now enrolling. So for those folks it's either getting the purchase order or getting them trained or both. Then on the AMI side, we do expect some benefit of the speed. There's 33 IRBs that are in place because certain centers are already trained, they have already gone through the first IRB and we do expect that to ramp up quickly as well.

Okay. So, given the slow pace we saw with the IDEs this is sort of a dramatic reversal. If you look at the speed of enrollment here and the number of centers that are coming on line, are you willing to sort of provide a possibility enrollment date for Protect 2? It could be as fast as another six months?

The reason we're not providing that is because really it's dependent on this ramp-up. That's why we're providing you exact clarity into these numbers and as we are bringing centers on. At a certain point here we will give you that specific prediction, David.

Okay, I'll stop pushing on that one. Just on the 510(k) process, Mike, it wasn't clear, was there additional information intraquarter that you submitted to the FDA in addition to bench top data, meaning once you submitted information on bench top data, was there additional questions from the FDA and then you submitted more information and that's what you're trying to say in this release, or is that not accurate?

It was always deficiency number four, which was bench testing. And then on bench testing there's several parameters from platelet count to hemolysis and really it was just reviewing the data and getting them comfortable with the results as well as understanding the parameters that we ran the testing under.

So really more verbal discussions as opposed to formal submitting more data post the bench top.

Correct. It has been an interactive review, so this has not been so much submissions. It's been back and forth going through that data in detail. What we have now concluded is that amount of detail has resolved all of their deficiencies and we now have formally submitted the information that we have interactively reviewed.

And given, and I'm sorry for all these questions. Given you've enrolled 70 patients has there been any discussion with the FDA on wanting to see because you have 70 patients actively enrolled and you only submitted 35 or 36 before? Has there been any discussion on wanting to see information from those patients or no?

The clinical side was deficiency three, which had been resolved, and bench testing is specifically looking to compare one predicate device to the Impella 2.5. We announced that the one predicate device did not have any clinical data in their submission, therefore we needed to do a side by side test to do the comparison. Bench testing is utilized to predict clinical performance. In our case we have already submitted to the FDA the patients that you referenced as well as several peer review publications adding up to 180 patients that showed very positive results. I think that the investors and shareholders should feel confident that this has been a very thorough process and we have resolved these issues and feel confident in the device itself.

Okay, last question, I apologize. There's a lot of legalese around your guidance, the $75 million to $80 million, as relates to approvals, most notably Impella. Would you characterize the 75 to 80 million as would you not have approval for Impella and we're taking a conservative view on guidance, or we think we're going to get approval on Impella in the nest two months and we're putting our best guess out there on the Impella ramp?

Well, the forecast is what we put it out there as. We believe we are going to get the 510(k) this quarter and we basically gave you the submission of $75 million to $80 million in that forecast.

Okay, thank you very much.

And congratulations, David, on your recognition this week with The Wall Street Journal.

Thanks, Mike.

Your next question comes from the line of Bob Hopkins with Lehman Brothers, please proceed.

Thanks and good morning.

Hi, Bob.

Just a couple things. First of all, in the press release you say you've delivered that final submission. When did that happen specifically?

Bob, the submission that is formally sent in is details that have been informally reviewed.

Right, I understand. I'm just curious about when that's final.

So the Table of Contents, which was the summation of everything we had done an interactive review of, was submitted last week and then a minor element went in Monday.

Okay. So if -- I understand that things that have been discussed informally, but if you've just sent it in last week and something additionally on Monday, but then you go on in the press release to say that all issues have basically been resolved, those two statements seem a little bit at odds don't they?

What we've submitted is what we have discussed for the last two months. So we essentially have submitted components along the way and we've resolved each of those components over the last six weeks. This was the interactive process. Now that those issues have been resolved, we're putting together a Table of Contents that puts informally the information that we've reviewed to allow them to have that formal final submission.

Okay. So the confidence comes from the, basically the verbal conversations as you went through the detailed process. You have got 19 centers that have delivered 70 patients and you've got 31 approved and going to 70. Should we expect that the pace will uptick significantly? In other words, is there anything that gives you pause about all of those 70 centers that you mentioned in the release really coming on-line in a meaningful way?

So far the centers have been coming on quickly and it's a matter of getting them trained and starting to screen for high-risk population. So they have to meet the criteria, which is EF of 35% or below for unprotected left main, less [patin] vessel or triple vessel disease with an EF of 30% or less. So provided that they are screening for those patients we do expect the centers to continue to enroll, get up and running, and treat patients.

Okay. I was just thinking about the first group that's currently enrolling versus the next group that being currently enrolling. There's nothing that would lead to you believe that the pace of enrollment of that next group that is coming on line will be any less than the current group that's enrolling today?

I do not have any reason to believe that.

Okay. And then finally, just one quick question on the base business, is it just a timing thing? We thought that AB5000 revenues would be slightly higher given the approval of the console. Is that just a timing thing where you expect a little bit better ramp as we go forward over the next quarter or two?

It is partly timing and then part of it is that we essentially did not prelaunch it in the U.S. We had it out there, we were doing specific deals, and so really the training and the launch is happening this quarter. In addition, as Dan suggested, we're changing the strategy on the sales of the console over the prior three years. What we're offering to centers that will generate the higher volume and utilization and put in place a program for recovery specifically to AMI patients is the ability to have us place a box, if they buy and utilize a certain amount of ventricles. So that's our model for the future on the iPulse. Some will still buy them, some will look at this deployment strategy. That's similar to what we're now doing with Impella, where we're able to put in the box and then transfer the box upon a certain utilization number.

Great. Thanks very much. Appreciate it.

Thanks, Bob.

Your next question comes from the line of Bruce Nudell with UBS, please proceed.

Good morning, hi, Mike. Just a kind of parsing of the language. When you noted that all deficiencies have been met, does that mean that the questions have been answered successfully or all the data that's required to answer the questions without a commitment that they've been answered successfully, have been submitted?

The questions have been answered and, however, I put the, have to put the legal clarification on there, there's absolutely no guarantees, but specifically to your question, we have resolved and answered all questions adequately and that is the informal feedback from the FDA.

Okay, great. And with regards to the composition of this trial, any sense of how many are the triple vessel and how many are the left main or last unprotected vessel?

As we announced in the last earnings call, the triple vessel disease, and there's lots of justification for it and we gave some statistics from the NIH database. Last quarter we had said that 70% of the patients so far had triple vessel disease. The update number on the 70 now is around 80%. This is significant because we did not have triple vessel disease in the pilot study.

Great and just my final question is with regards to your endpoint, how important do you feel the completeness of revascularization will feed directly into the outcome study and to what extent will it kind of indirectly influence longer term over this 30-day period outcomes?

That's a good question. I think it's a combination of the 10 endpoints. So anything from death to inability to do the therapeutic plan. And I think both of them have a compelling argument for the use of the Impella. As we move forward we will be able to look at all the parameters, besides the individual ones, to determine the severity and the improvement for the patient.

But I guess with IABP, for instance, as the sole support, what's the extent of successful complete revascularization with triple vessel disease?

There's not a publication measuring how many they didn't do with it. That's the critical question, Bruce, and that's what we're trying to define. What we have heard from centers is they've gotten used to and especially in Europe is once they start to see a patient that's flat line, talking to them under support of Impella, is they get nervous about doing patients in the future with just the balloon pump. Remember, the balloon pump is actually not pumping any blood, it's augmenting blood flow back to the heart. The balloon pump is in the path of the PCI procedure. So it's opening and closing. If there is an arrhythmia or any change in the heart beat, the balloon pump has to reset itself. And so there's lots of arguments there of why in some cases people didn't use balloon pumps at all for high risk because they were just hoping to do it as fast as they can. And in today's world with placement of stents and the importance of clots and drug-eluting or bare-metal, you really need to take you time to do the procedure correctly.

I guess my final question, I apologize, is how many lesions do you anticipate the average patient will have treated in Protect 2?

Well, based on the protocol, it's -- one component is the unprotected left main, which a lot of the folks in the rural cardiology world want to do, but if you look at the math on today's 70 patients, 80% are triple vessel.

So it's at least two stents per case, would you guess?

Yes. Or more.

Thank you so much.

Your next question comes from the line of Assaf Guterman with Lazard Capital Markets, please proceed.

Hi, good morning. Out of the 33 hospitals that signed the NDA for the AMI trial, how many already participate or already signed for the high-risk angioplasty one? Just trying to get a feel as to the overlap.

It's a little over 80%. I could get you that number but it's the majority of them right now.

And you expect this ratio to pretty much stay the same?

I think that we will have a high amount of centers that are doing both the Protect and Recover 2. There are several centers that are focused really on these high-risk patients. And then there are other centers that are really primarily driven on the AMI protocol. So we are going to try and customize the study for both. In general we want to see the success at the centers. What we have learned from Europe is that the centers that are doing high-risk PCI procedures with Impella have the ability to get trained on a scheduled basis. So, for example, Monday is high-risk day, and then that allows them to get comfortable with the technology, so at a midnight AMI patient it's not the very first time they've done the patient. So we think the two go well together and, remember, they're the same process but one patient is having an emergency and one patient is scheduled, but you're still putting Impella in and then doing the PCI procedure.

So between the two trials, the total number of centers that we should look at is closer to 150 than 300.

It will be greater than 150 and less than 300 and it will probably be 80% centers doing both. 70% to 80% is my best guess.

Okay. Quick one on the Impella consoles. Are you currently placing them for free in the U.S. for the angioplasty trial, if the high-risk angioplasty trial? Have you made a decision on what you're going to do once you are going to have the Impella commercialized? Are you going to sell it out, are your going to continue placing them for free?

So the question is that on the pivotal centers, on the centers that are doing the trial, we wanted to provide them some incentive, as far as helping them to get into the trial to start enrolling patients. And so what we're doing is, when they buy a certain amount of disposables, we transfer title on the boxes. Under the 510(k) scenario, we will be charging for the box and we will be charging for the disposable.

And last question on the guidance. You're talking about $75 million to $80 million in revenue. I think in the past you mentioned that between the two pivotal trials you can get revenue of as much as $20 million, I assume. Even if we take $10 million, which would be related to those two trials, and you take it out of the guidance, we look at growth rate which is pretty much comparable with previous years. And my question is, does it -- did it give any credit for possible or likely 510(k) clearance? Because I don't see the impact of the 510(k) clearance on your guidance given that about $10 million or so of revenue could come from the trials themselves.

This year we ended at $58.9 million. If you add $10 million to that for the trials, that's basically $68.9 million or $70 million, and we're saying there's another $10 million with the 510(k). So that's our guidance based on the 510(k) timing.

Right. But the $10 million is not purely 510(k). It's growth of all of your other product lines as well.

Right.

Okay.

But it's still a 26% to 36% growth rate.

That's clear but when you initialize the pivotal trial revenues and you look at the actual growth rate that we're talking about, talking about something like 15% to 19% growth, which is pretty much comparable with what you did in the past. And in the past you did not have the benefit of launching the Impella as you would hopefully have this year. So my question is is it just being conservative on your part or am I missing something there?

Well, I think we spent a lot of time going through the numbers and so our forecast is $75 million to $80 million, which is a 26% to 36% growth rate. I think that is aggressive in today's standards with -- and so you have a Company that's growing at 26% to 36% with very strong gross margins with a very high growth potential. So that's the way we look at our forecast. Obviously it's just that, it's a forecast.

Got it. Thank you.

(OPERATOR INSTRUCTION NS) Your next question comes from the line of Greg Simpson with Stifel Nicolaus, please proceed.

Okay, thanks. I get beating the dead horse honors today. Mike, on the Impella process, I guess the question that everyone is going to want to ask is what can go wrong at this point? And before I let you answer that, if you even want to, to follow up on the previous questions then. So the FDA has obviously gotten comfortable with all the bench testing data and all the back and forth and the issues are resolved, so my question is, do you -- to get them to issue the approval, or sign off on the approval, is it a requirement then to formally submit this information?

To answer your question, Greg, in order to have something formally approved, you have to have a formal submission. Up until last Friday, all the interaction, all the reviews were informal, but they did have the packet of information. And upon resolution we submitted a Table of Contents and the formal submission of the information that we had reviewed. And that is a requirement in order for them to process the 510(k) clearance.

So you knocked down the issues with them informally and then to get the formal approval you had to formally submit the information.

Correct.

Okay. I won't ask any questions on enrollment rate. Let me ask on iPulse then. Dan, can you quantify, with the change in the sales model, can you quantify what revenue directly related to iPulse may have been recognized in the quarter? And then maybe as a follow-up to that let me ask that now, given the change in the sales model, how much near-term revenue do you maybe forgo by putting the boxes out there in return for those usage commitments? How much does that maybe impact the near-term?

Greg, this is Mike. I'll start off with, we had orders last quarter, but they did not convert to sales. We did have one out there that we had had a sale on in the prior quarter. However, we do have about double-digit units of orders and or shipped to the field. It happened at the end of the quarter or the beginning of this quarter. And it's to make sure that we are getting centers to collect data and then using them as reference and training centers for the balloon pump. We have had it out in Europe. We have been doing that process as well. And we have had patients in Europe on iPulse also using the AB5000 ventricle. So that's also part of the rollout of the device. As far as the model, the model to our accounts is really customized to whether it's a transplant center or if it's an open heart hospital.

If it's a transplant center, a lot of them already have at least two AB5000 consoles and they have balloons, so they may not necessarily want that many more iPulses, but they may want the portable. If you're at an open heart facility and they have an old BVS or they don't have anything at all and they're interested in starting a heart attack recovery program, if they didn't put in their budget the prior year for this amount of -- for money and they want the ability to start the program and treat patients now, we give them the flexibility to buy the disposables at our price of $45,000, and then at a certain point of utilization, we can transfer title or they can rent it or we can take it back.

So there's a multiple -- there's multiple steps here to provide the flexibility to either every open heart hospital, to allow them to treat these patients. We also are utilizing our relationships and what we're doing in the cath lab to assume that there might be some centers and some patients, that whether they're high-risk PCI or AMI patients, that if they are in profound shock and they do suffer right side failure, they are going to need more support, so we will give them the ability to then take the patient over to the surgery suite and have the AB5000 technology there. And at open-heart hospitals, all of these facilities have intra-aortic balloon pump consoles. The new model with the iPulse is we expect all open heart hospitals to have one or two, and that gives us the ability to treat all the patients at all the open-heart hospitals with the AB5000 ventricle.

Okay. Great. Thank you, guys.

Your next question comes from the line of Amy Stevens with SIG, please proceed.

Thank you. Good morning. Just wanted to follow up on a couple of things. First, in terms of your gross margin, have you witnessed or any increase in any of your costs associated with manufacturing there, or component parts that you might be buying from outside, are any of them passing along cost increases to you or anticipate doing that?

No.

Okay. Thank you. And then in terms of selling -- you talked about the strategy with regard to the flexible arrangements in terms of getting the boxes on the Impella. Is part of that or is any of that, have you witnessed any push-back in terms of willingness to make sort of large capital expenditures on the part of the centers, presumably as a consequence, any kind of economic impact from the current environment?

I don't think it has anything to do, Amy, with the current economic environment. Specifically, hospitals have two processes for purchasing equipment. On the capital end, the process requires a champion, an analysis and usually a review board. On the operating side, it's a lot more fluid and that process is what we found doesn't require to have had a budget put in the prior year. And so we're utilizing both processes and allowing the hospitals the flexibility to purchase the equipment in whatever method they prefer.

In terms of the budgets that they have established, you haven't noticed any changes, obviously.

If I could comment on that, from a program of today's future for these hospitals, they need to reduce their mortality metrics.

Right.

There's more and more of these websites, so I think from that end the Impella and the AB5000 help them. They're also looking to increase their own revenue and for the last three years CMS has increased the DRG codes that relate to our products, including this past year. So if you're in the cath lab, you have an opportunity to treat more patients that are high-risk without the risk of mortality and CMS does reimburse at a higher rate for supported Impella PCI procedures. And as I stated in my transcript, that if hospitals can implant, explant, or recover a patient with BVS or AB5000, they move into the highest paying DRG in the country, which also allows them to reduce their mortality to help patients to lower costs and to also generate a high DRG.

And there's no effect in terms of their mortality rates that they have to report? Is there any concern about getting into a sort of new methodology that maybe they don't have as much experience with or -- I know the data is good, so they should presume that it will help their mortality rates, but do you see any question marks about that coming from centers?

I think if you read, and you are a physician, if you read the last 15 years of all the publications on intra-aortic balloon pumps, it's very clear that an intra-aortic balloon pump does not reduce death in cardiogenic shock. That is pretty much accepted. It does enhance blood flow. So all the mortality rates that are out there today are based on the standard of the shock trial from 2000, which has to do with revascularization followed by some support with an assist device being the intra-aortic balloon pump. In the shock trial patients I believe 89% got intra-aortic balloon pumps as well as revascularization as well as [xynutrobes] and you still saw that about 50% of them were essentially -- they died within six months and there really was not a statistical difference in death at 30 days between optical medical management of drugs and revascularization.

On the balloon side we would contend that the intra-aortic balloon pump really is the standard of care. When you move over into the surgery world, now you are talking about what's been kind of a niche technology for AB and BVS at primarily the transplant centers that have published papers and have had great recovery or had recovery rates over the last few years. I give you one example since you are in God's country in New Jersey where I grew up. My local hospital is Valley Hospital In Ridgewood. It's an open heart hospital. And they just sent out their information to the local community, they have in the last year and a half, I believe, done nine AB5000 patients and they have greater than a 50% recovery rate, not survival, recovery rate, and survival is higher than that.

This is a center that put together a program, they're treating the community, and they really have optimized the way they treat their patients. They're not a transplant center so they don't offer that service, but what they do offer is to patients having heart attacks or viruses they can actually hopefully get them home with their own heart. In addition that cath lab will also be part of our trial process on the Impella and now we're going to have a whole program that will allow these hospitals to treat an AMI protocol which doesn't exist today. So back to your original question about the mortality rates, we do significantly think that we can help these patients and remember when they die, they don't die of stent failure or pacemaker failure, they die of organ failure which means they need a pump.

Okay. Thank you for that. That's very helpful. And I guess the last question, to take away the beating the dead horse rights from Greg, I wanted to just ask, in terms of your discussions with FDA and when you were sort of at the beginning point of understanding that you were going to need to do this final bench testing, I guess I had a sense of what I -- from conversation to do what I thought the timing was, obviously you did as well. Did that change at all in terms of how long you thought the process of just the actual execution of the bench testing would take or did it bear out exactly as you had thought?

Well, in November, 2006, we gave our initial guidance which said between September and this past March 31st. So that was our best guess back then. We did anticipate several rounds. In the end of March, we had completed our bench testing, but we were still in the review process. And when we got to the point where we realized that all the issues we were still reviewing would not be complete by March 31st, we basically issued our 8-K. As far as the bench testing, it was not the duration of the time it took to do the bench testing. That was reasonably short. It was just the review of all the components and bench testing can require several parameters that have to be agreed on. Everything from the way measurements are taken or the temperature and these things are outlined in the FDA guidelines and if you're -- if you would like to review all those details, it's in a document, an ISO document, 10-993, and it will give you all the details on in vitro and in vivo testing.

So basically you are saying -- the process itself, it did not exceed, during those last six weeks that you referred to, that wasn't exceeding the time at the beginning of that six-week period that you expected it to take? That was in keeping with it?

Well, in -- to answer your question directly, it did exceed the time because that's why we had predicted the end of March.

Okay. All right. Well, thanks a lot. I appreciate it.

Thanks, Amy.

You have a follow-up question from the line of Bob Hopkins. Please proceed.

Sure, just very quickly on the guidance provided for 2009 to be clear, you said about $10 million in revenue from the trials, about $10 million from Impella launch, and $59 million of base business. So essential in your guidance you're assuming no growth in the base business? Am I getting that right?

Let me go back. So the comment that I made was based on his assumption of $20 million, if it was $10 million, we haven't broken out the trial revenue being at $10 million. In forecasts, it may be less or it may be higher. Bob, as you can tell here from this enrollment as these centers roll up it's a lot different if we're at 70 centers versus 150 centers and then if we have one trial or two trials ramped up. So I would look at it in its entirety as far as the revenue. We do expect growth from the base business. We do expect a higher percentage of growth from the Impella side of the business and this is our forecast we're at today. As we proceed we'll continue to up our guidance if we feel the need.

Okay, thanks. Just wanted to clarify. Appreciate it.

You have a follow-up question from the line of Bruce Nudell with UBS. Please proceed.

Mike, thank you. With regard to the IP associated World Heart, it's sounding like it may very well fall into your lap. Do you fellows have a firm strategy for how to extract value from this IP yet? Is it something that you will potentially JV with somebody on or is something that you will put on the shelf for awhile and develop later? Thank you.

Bruce, thanks for asking the question on World Heart. What our plan is is to not utilize our existing cash for World Heart in the event that it goes bankrupt. It is a secured interest, so the IP would come to us, unless, of course, someone paid for a fee that was beyond our loan of $5 million and interest. If we do end up with the IP we'll make an assessment of whether we put the technology into a small delay or if we go out, as you suggest, and create another entity that's separate from Abiomed to drive the execution of that technology.

Thanks so much. In the trial setting, have you folks disclosed the ASP that you're hoping to extract from Impella at the clinical sites?

We charge today $20,000 for the disposable for the Impella 2.5.

Thanks so much.

At this time, there are no further questions. I would now like to turn the call back over to Mr. Michael Minogue for closing remarks. Please proceed.

Great. Thank you. Well, in closing, our opportunity for success has never been greater and we will continue to adapt and execute on our mission, which is to save lives, to lead in technology and innovation, to grow the shareholder value for you, and to create a winning culture for our Company. Thank you again for all your support for the last four years and thanks to the Company for all its efforts. Have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.