ABIOMED Inc (ABMD) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2009 Abiomed Inc. earnings conference call. My name is Ann, and I will be your coordinator for today's call.

(OPERATOR INSTRUCTIONS)

As a reminder, this conference is being recorded for replay purposes. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of the presentation.

I would now like to turn the presentation over to Aimee Maillett of the Corporate Communications Department. Please proceed.

Thank you. Good morning, and welcome to Abiomed's second quarter 2009 earnings conference call.

This is Aimee Maillett of Abiomed's corporate communications department. I'm here with Mike Minogue, Abiomed Chairman, President, and Chief Executive Officer, and Ian McLeod, our Principal Financial Officer. The format for today's call will be as follows. First, Mike will provide you with strategic highlights for the second quarter. Next, Ian will provide details of the financial results outlined in today's press release, and we will then open up the call for questions.

Before we begin discussing Q2, it is necessary to remind you 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. 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 changes, 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 call, or to reflect the occurrence of unanticipated events.

Lastly, comparative references made financially in this call to revenue, expenses, or gross margin or other increases or decreases will be made by references to second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008, or second quarter of fiscal 2009 as compared to the prior first quarter of 2009.

I am now pleased to introduce Mike Minogue, Abiomed Chairman, President, and Chief Executive Officer.

Thanks, Aimee. Good morning, everyone. Thank you for joining our call.

Today I am proud to report the best quarter in company history, with revenues of $20 million during our summer quarter. Impella sales are taking off. After one full quarter of 510(k) clearance we have achieved our fiscal year objective ahead of schedule, with over 100 US Impella cardiac hospitals with general use catheters and over 100 patients supported in the US outside of the trial. This signifies that the intra-aortic balloon pump, or IABP, conversion to Impella is happening under the 510(k) clearance. Those who attended the TCT Conference in mid-October witnessed this growing momentum. As of the end of Q2 we have 6% commercial penetration of a potential 1,700 US hospitals, and we continue to prioritize the next top 200 heart hospitals based on volume. As a company we are driving results and executing on our four corporate goals of launching Impella 2.5, increasing Impella manufacturing capacity, driving to profitability, and increasing revenues greater than 25%. Today I will review the first goal in more detail, and provide updates on the last two corporate goals.

So first on our number one goal of launching Impella 2.5 and the clinical studies, total Impella revenue was $10.5 million, up 650% for the second fiscal quarter of 2009, compared to the same period of fiscal 2008. Impella revenue recorded during the second fiscal quarter of 2009 included $8.8 million in the US, sales of which $6.2 million was for sales of the Impella 2.5 device sold under 510(k) clearance, and $2.6 million sold under the Protect II and Recover II trials. the end of the quarter, a total of 108 sites had acquired commercial 510(k) catheters, and 40% of them had already supported one or multiple patients with Impella; again, that was at the end of the quarter. 20 sites had already supported two or more patients, and eight sites had used it in five or more patients outside of the trial by the end of the quarter. The average order for Impella catheters sold during the quarter was approximately four pumps per order.

As of September 30th, 2008, Impella 2.5 commercial 510(k) usage was at 97% in the cath lab, and 3% usage in the surgery. Of the Impella procedures in the cath lab, 76% were for high-risk PCI, 15% were for AMI shock, and 9% were for other forms of shock or cardiac decompensation. This is following the trend from Europe, as customers gain experience from high-risk PCI and expand to other applications. Impella continues to grow in Europe, particularly in Germany and the Netherlands, our only countries in Europe with a direct sales approach. This was our best quarter in Europe, with revenue growth at 87% from Impella, and strong growth on the legacy business of 60% from our AB5000 VADs, driven primarily with our new portable driver.

We are breaking out the Impella US revenue from commercial and trial products this quarter. As a result, we will be matching the quarterly revenue to the clinical patient report for the defined quarter. So as of September 30th, 187 US hospitals were pursuing the Impella 2.5 Protect II trial for high-risk percutaneous coronary intervention, or PCI. 67 hospitals were enrolling patients; 35 hospitals had Investigational Review Board, or IRB, approval, but not yet enrolling; and 85 hospitals submitted to the IRB, where submission was pending. Overall at the end of Q2, 141 patients from 35 hospitals have been enrolled, or 22% of the 654 patients required. From our Q1 earnings call on August 7th, 55 centers were enrolling with 107 patients completed from 31 hospitals. These end of September results represent 34 additional patients and 12 new enrolling hospitals, with the majority of both coming in September. It is worth noting that most cath labs slow down significantly in August for scheduled PCI procedures.

To give some history, on May 21st we announced 31 sites that were ready to enroll, and at the end of September we had more than doubled the number enrolling in four months to 67 sites. The number of sites ready to enroll is critical to our progress and completion of the study. Another critical factor is to ensure we are getting true high-risk patients per the profile of the design study. As you recall, the assumptions of our Major Adverse Event rate, or MAE, was 20% and 30% for Impella and IABP respectively. In aggregate, this represents a 25% expected adverse event rate for the trial. Our primary investigator, Dr. Bill O'Neill, stated at our TCT symposium that our initial aggregate major adverse event rates are tracking inline with this expectation. So out of the combined number, we are enrolling the patient profile desired and seeing the expected adverse events to date.

Because these trial patients are very sick, we have had a few centers that have dropped out of Protect II, or will be dropping out because they feel uncomfortable randomizing to an intra-aortic balloon pump now that Impella is commercially available, and they feel that Impella is more effective for their patients. All of these centers have experience with Impella and continue to use the device in their daily practice. The vast majority of hospitals remain committed to the completion of the Protect II trial. We are not trying to influence any decision by any customer either way, and are leaving this communication to trial Steering Committee. However, Abiomed's goal is to identify any concerns at the hospital and to ensure physicians can treat their patients inside or outside of the trial, in light of a very personal decision.

There's been some speculation on the potential for Abiomed to achieve the primary composite end point of Protect II perceived similarly to a drug study. We feel this binary perception is somewhat misleading, based on the design of the Protect II trial and our existing 510(k) clearance. The Impella pump does what it is mechanically designed to do, pump 2.5 liters a minute, as compared to a drug, which by design is measured by a clinical outcome with side effects. We do believe we will show superiority for the primary endpoint, but it is important to understand that this is a combination of ten end points selected by the Company and individually recorded. Each individual endpoint provides some validation of a superior clinical benefit, from reduction of death to improved renal perfusion, and each has an individual value to the physician and patient.

These individual end points are why we believe there is a need for Impella with high-risk PCI. Our reasoning is based on our insight into the field of circulatory support, and the knowledge of our physician team of investigators around high-risk PCI. As a team, we have done a comprehensive review of all high-risk PCI procedures with and without intra-aortic balloon pump support, as well as other technologies. Based on our research to define high-risk PCI for the Protect I pilot study, we reviewed internal hospital data with the FDA. This analysis conducted at high-volume experienced centers revealed in-hospital mortality rates of 9% to 20% for true high-risk PCI patients, over half of which were supported with an IABP. Clearly, this mortality rate is higher than desired and can improve. These rates conclusively demonstrated the need for support with high-risk PCI. This mortality rate is also likely a limitation for current high-risk PCI patient treatment.

We know that Protect II is a definitive step function to drive global adoption of Impella 2.5 for high-risk PCI. The success of this study is not based on speed to completion, but enrolling high-risk PCI patients. There are more gold standard studies already in progress, like Recover II and Impress for AMI patients. We are confident that Protect II, Recover II, and Impress will demonstrate the superiority of Impella over the IABP for defined end points. This confidence is why we are pursuing these PMA studies, even though we are not required to take this next step for commercial sales because of our existing 510(k) clearance.

If these studies statistically validate Impella's superiority, we will have a very strong argument to obsolete IABPs and immediately convert the remaining use of 58,000 IABP procedures to Impella for these indications. Today the guidelines in both Europe and the US recommend intra-aortic balloon pumps for high-risk PCI and AMI PCI. In general, our Company philosophy is publish or perish. We believe this is the best way for Abiomed to change the standard of care in the cath lab.

Over the past few months, three new studies have been published on Impella 2.5. All three document the safety and effectiveness of the device in different patient populations and indications such as high-risk PCI, which is [Brazada] in October 2008 from Italy. AMI profound cardiogenic shock [CFER] in JACC, October from Germany, or reduction of infarct size and improved cardiac function in large interior MI by Dr. Henriques in JACC March 2008. Also Dr. Henriques, from the Amsterdam Medical Center in the Netherlands, presented the results of the Europella Registry Study at TCT. The study included 144 high-risk PCI patients treated at 10 high-volume tertiary angioplasty centers in Europe. The results of the study showed excellent safety profile for Impella, with an in-hospital and 30-day mortality of 4.7% and 5.5% respectively. The abstract of the study was published in the October issue of the American Journal of Cardiology. We expect the publication of new multicenter study manuscripts from Europe and the US in upcoming months will further reinforce the clinical added value of Impella 2.5 in the cath lab.

The science of unloading the heart is new to the cath lab. The ventral assist field has been around for over 20 years, but confined to a small number of scientists and heart surgeons at transplant centers. From that experience, the following points have been scientifically proven and are generally accepted by the FDA and experienced physicians. Point number one, reducing work on the heart muscle reduces the muscle oxygen demand. This is achieved by VADs, including Impella. Point number two, increasing coronary blood flow increases oxygen supply to the heart muscle. This is achieved by intra-aortic balloon pumps and Impella. Point number three, increasing cardiac power increases perfusion to the key organs and decreases patient mortality. This is achieved by inotropic drugs, conventional VADs, and Impella.

Drugs do this temporarily by making the heart work harder, but this increases mortality as dosages go up, with studies suggesting 80% mortality with three or more inotropes. Conventional VADs do this but create major adverse events, including [estronomy], bypass run, potentially coring of the heart muscle, and critical time is lost in mobilizing the surgery suite. Impella is the first product that meets all of the above demands, and can be inserted in the cath lab with a prophylactic safety profile. We have already heard from many US customers that their patients would not have survived without Impella maintaining the diastolic pressure for high-risk PCI, or increasing cardiac power for AMI.

The science is proven, but the Impella statistical perspective randomized clinical benefit to the patient needs to be demonstrated for a superiority label from the FDA. Abiomed's BVS and AB5000 VADs have shown a clinical benefit because of point number one with oxygen demand, and point number three with cardiac power. The FDA has approved these products for heart recovery, the BVS in 1992 and AB5000 in 2004. The IABP has had 510(k) clearance since 1976, and has been used based on point number two with oxygen supply, but it has not shown a statistical clinical benefit with reducing mortality for AMI patients. One such study that documents this is a primary angioplasty and AMI, referred to as PAMI 2.

Now I would like to discuss our 510(k) launch in the US, and how we are moving forward commercially with parallel commercial studies underway. Our commercial Impella launch started in the US on June 2nd, with the 510(k) clearance. Our 510(k) success will ultimately be determined by the acceptance from our physicians that understand the fundamentals of hemodynamic support as already described. From a practical perspective, they already know after one usage that Impella actively pumps approximately five times more blood than an intra-aortic balloon pump. As expected, the majority of our revenue this quarter was generated from the US 510(k) commercial sales.

Approximately 28,000 IABPs will be used to support high-risk patients and 30,000 IABPs will be used to support AMI patients this year, with the majority of utilization coming at the high-volume centers. In total, it is estimated that 130,000 IABPs will be used this year in the US alone, all under the 510(k) commercial clearance. Approximately 1,000 to 1,500 hospitals have IABP technology today, and the Impella is now at 100-plus of the top cardiac hospitals.

In any FDA trial, patients are enrolled based on a strict inclusion and exclusion criteria. In the real world, many patients would be high-risk and would require support but can fail to comply with inclusion and exclusion criteria. For example, in our Protect II study we exclude many patients with kidney dysfunction, since it would complicate the analysis of renal perfusion end points that we think favors the continuous flow of Impella. We would also exclude a high-risk patient with an ejection fraction of 33%, and triple vessel disease. Patients with administered and inotropic support have injection fractions that are temporarily enhanced, and may go outside the trial criteria of 30% for triple vessel and 35% for unprotected left main. However, these are exactly the types of patients that may need support, and are now being done under the 510(k) clearance.

We also plan to expand the range of global clinical studies. The following actual intra-aortic balloon pump procedures are also of interest - 33,000 high-risk CABG surgery or weaned from CABG procedures; 16,000 unstable angina patients; and another 20,000 procedures for general support. We are currently reviewing hospital study protocols and abstracts for off-pump CABG, and supporting acutely decompensating congestive heart failure patients. We also believe more patients will benefit from Impella as compared to an intra-aortic balloon pump, due to the science of how Impella works.

One recent study, the SYNTAX, which stands for the SYNergy between Percutaneous Coronary Intervention with TAXus and Cardiac Surgery, compared angioplasty to CABG for unprotected left main or triple vessel disease. This study showed a similar safety profile of PCI or CABG with respect to mortality and new heart attack risks. The study also showed a higher risk of stroke for patients that were randomized to CABG, and a higher rate of revascularization for patients that were randomized to PCI. This suggests there is room for improvement in the PCI procedure. With the SYNTAX study, there is more evidence to support the use of PCI treatment in unprotected left main and triple vessel disease patients, so we expect to see more patients with unprotected left main and triple vessel disease to be referred for PCI instead of CABG. Those with poor cardiac function will be at the highest [para] procedure mortality and morbidity risk, and would potentially benefit from circulatory support with Impella.

Cardiology practice in the cath lab has evolved rapidly over the last decade. Advanced technology and greater operator expertise have resulted in dramatic increases in the volume and complexity of procedures. As device technology and pharmacotherapy improve, interventional cardiologists are tackling more complex and higher-risk cases during PCI. With the aging of the population, patients are becoming sicker and Impella is critical to this development. No physician can predict in advance which high-risk patient will collapse during the procedure, if the vessel will dissect, or the irreversible damage that could be done to the heart muscle as a result of the procedure-induced ischemia.

Impella can become an enabler in the cath lab to potentially improve safety and outcomes for high-risk patients. All things being equal, the same physician may achieve a better angiographic success with Impella if he needs to use adjunctive therapy, such as rotoblation for severe calcified lesions, longer balloon inflation time, or use multiple stents in long, complex lesions. Patients with low ejection fraction and poor cardiac reserve have a lower ischemic threshold, and do not tolerate such maneuvers without effective hemodynamic support. The diastolic pressure could collapse as a result of the ischemia induced by the procedure, which can extend the damage to the heart muscle.

The new question is, what patients have the cardiologists not treated that have gone on to surgery, or what patients were turned down by the surgeons that can now be treated with support from Impella? Today, we are seeing patients that fail the trial inclusion and exclusion criteria that are being supported with commercial Impella catheters during their PCI. We are also seeing AMI patients receiving Impella at hospitals not involved or pursuing the Recover II trial. Protect II only relates to high-risk PCI patients and does not include cardiac indication, which is the largest use today of intra-aortic balloon pumps, at about 30,000 a year. Based on the feedback from cardiologists, we believe there's an eminent need for Impella with heart attack patients suffering from large interior infarcts. The AHA reports that even when a patient survives a heart attack, they estimate a loss of 15 years of their remaining life. In addition, heart attacks kill six times as many women a year as breast cancer.

One last item to note is on reimbursement. Impella can save real costs, because it provides new therapy that treats an old problem. Impella is the lowest reimbursed circulatory in the CMS DRG system, from half to a third less expensive, with the lowest insertion expense in both cost and time required. For high-risk PCI patients, avoiding surgery or avoiding an MI or kidney failure, or an emergency surgery, can significantly save money for the system. In the case of AMI patients, avoiding is organ failure, dead heart muscle, cardiogenic shock or a heart transplant, can easily save over $1 million in costs for the life of the patient, with potentially better quality of life for the patient.

In our opinion, the future of healthcare reimbursement will be based on comparative effectiveness to avoid costs, not just delay them. This is the essence of Impella and of heart recovery. Today AMI still is one of the leading causes of in-hospital mortality which includes significant costs. IABPs are reimbursed under multiple DRGs 237 and 238, reimbursing between $16,000 and $27,000 per usage. The total charges just for the IABP DRGs of 237 and 238 are $1 billion. Some of the 130,000 cases are included in other DRGs or are reimbursed under private pay. Based on last year's summary, IABPs were included under 24 DRGs with their ICD code of 37.61, with total charges of $4.1 billion. So if an intra-aortic balloon pump is utilized, the hospital charges the highest DRG attainable.

In the case of Impella, the new DRGs are 216, 217, and 218, and these buckets include 15 other ICD-9 codes from other technology. Impella lists under ICD-9 code 37.68. We are tracking the cost of both arms in Protect II and Recover II. Unlike other add-on technologies that incur an additional expense to CMS, Impella looks to obsolete old technology like the balloon, or avoid open heart surgery, which includes longer-term expense of other higher-cost treatments, potentially involving the surgery itself, longer length of stays in the ICU, drug therapy, ICDs, VADs, and heart transplants. Overall, our products are designed and exclusively reimbursed for heart recovery, which will reduce patient costs while improving the quality of life for the patient.

The next goal I would like to discuss is our driving to profitability. All senior leaders in the Company are focused on budget and expense discipline. We have been conducting daily updates on all elements of our cash allocation, forecasting accuracy and bill plan. While we have not forecasted profitability of this fiscal year, we are putting processes in place to reduce our cash burn.

Our gross margin for second quarter fiscal 2009 was 76%, compared to 75% last year and 66% last quarter. The non-GAAP net loss for the second quarter of fiscal 2009 was approximately $2.5 million or $0.08 per share, a significant decrease compared to the non-GAAP net loss for the second quarter of 2008 of $7.7 million or $0.24 per share. Cash burn for second quarter of fiscal 2009 was $4.1 million. In addition, Abiomed raised $42 million in net proceeds from a block trade of 2.4 million shares in late August 2008, and invested in five secure Treasury funds yielding 1.5%. We did this immediately in August, with the investment objective to preserve principal. We had also invested some cash from the Columbia Fund periodic redemptions in these Treasury funds. As a result, we had $48 million in these secure treasury funds as of September 30th, 2008, with an additional $16 million remaining at Columbia and $3 million in cash and other, totaling $67 million in cash. Our results show the progress on several fronts. We are financially secure, with no debt, and approximately $90 million US NOL as we move closer to our goal of achieving profitability.

Finally, we are on track for our last goal of increasing revenues greater than 25%, with record revenue this quarter. As we state in the press release, we grew 75% to $20 million, and revenue for the six months ended September 30th was $36.4 million, up 43% compared to revenues of $25.4 million in the first six months of fiscal 2008. A total of 915 disposable pumps were shipped during the quarter, excluding intra-aortic balloon pump disposables, as compared to 468 in the second quarter of fiscal 2008; representing a 95% increase in the number of units shipped. Total disposable service and other revenue, non-console revenue, comprise approximately 90% of total revenue. On the US distribution, this fiscal year-to-date we have made 18 hires in the field sales and clinical organizations, eight in sales and 10 in clinical support, bringing the total to 26 sales, 21 Impella specialists, and 17 cross-trained clinical consultants.

Impella 2.5 is our key product and number one goal, but we have a complete spectrum of products to help the patient survive and the heart recover. There will be more to come in the future on updates with the Impella 5.0, the Impella right side percutaneous, the Impella pediatric, the AB portable, and other upgrades.

In conclusion, we are adapting to the market and executing on our goals, and the results are evident. We are moving swiftly like a small company, and planning the processes to become a big company, from manufacturing to global distribution. We are grateful to our investors, and understand in today's market our responsibility to make good decisions and execute on our priorities in order to grow your shareholder value.

I will now turn the call over to Ian, our Principal Financial Officer.

Thanks, Mike.

If you would please turn to the financial statements attached to our press release, I will provide some details on our financial results for the quarter. First, the revenues. Total disposable revenue was up 91%, and total console revenue was up 31% for the second quarter fiscal 2009. The console revenue during the quarter was mainly related to Impella console sales, and we also started to see a shift in the quarter in console sales from the AB5000 console to our new iPulse combination console. Our launch strategy of Impella 2.5 has been focused on increasing demand for disposable products by providing consoles to initial sites at little or no cost for a minimum order, or in the future monthly rental fees. We expect these console promotions to decrease as the number of hospitals using our Impella 2.5 products increase.

Continuing down the income statement, research and development, or R&D, expenses for the quarter, were $6.8 million, up approximately $1 million compared to the second quarter of fiscal 2008. R&D expense included Impella trial costs of approximately $2.3 million for the quarter.

Now I will discuss selling, general, and administrative expenses, or SG&A. SG&A expenses for the quarter were $13.9 million compared to $12.3 million for fiscal Q2 of 2008. The increase was due to $1.1 million in stock-based compensation associated with restricted stock grants vesting, based upon the achievement of a performance milestone during the quarter. The net loss for Q2 of fiscal 2009 was $6.3 million, or $0.18 per share, which included stock-based compensation expense of $3.4 million and intangible amortization of $0.4 million.

Excluding these charges, the non-GAAP or adjusted net loss for the second quarter fiscal 2009 was approximately $2.5 million, or $0.08 per share. Our GAAP net loss for the second quarter of fiscal 2008 was $9.4 million, or $0.29 per share, and included stock option expense of $1.3 million and $400,000 of intangibles amortization. For fiscal 2009 year to date, our GAAP net loss was $15.4 million, or $0.46 per share, as compared to a $17.7 million net loss, or $0.55 per share, for the same period of the prior year of fiscal 2008.

If you would now turn to the balance sheet. As of September 30th, 2008, our cash, cash equivalents, restricted securities, and short-term marketable securities totaled approximately $67 million, as compared to approximately $28 million at the end of fiscal Q1. We have decreased our inventory by $700,000 for the quarter, and have had strong cash collection, as evidenced by our accounts receivable increasing only 5% this quarter, as compared to revenue growth of 22% for the quarter over fiscal Q1 2009.

We will now open the call to your questions.

(OPERATOR INSTRUCTIONS)

And the first question comes from the line of Greg Simpson with Stifel Nicolaus. Please proceed.

Thanks, good morning, guys. Mike, great quarter for Impella, obviously. Can you give us maybe some commentary around what you are seeing at centers that have had the longest experience with Impella terms of utilization rates? I'm not expecting you to quantify that, obviously, but anything anecdotal that maybe you can pass along to us?

Yeah, Greg, and I gave you -- I can actually repeat some of what I put in the script here, which is - it's a long script but I wanted to give as much details as I could. We had 108 centers at the end of the quarter, so obviously some of those came in the September month. Of that, 40% of them had already done one or more patients, 20 sites had already supported two or more, and there were eight sites that had used it in five or more patients outside the trial. And what we see is initially they get comfortable by doing these high-risk patients, and then as they get comfortable with that they start to expand it to these other utilization indications, the main one being AMI or heart attack.

Is there any way maybe to discuss as they do get comfortable, where kind of these high-volume centers kind of gravitate towards? Are you seeing anything that looks similar among the top centers in terms of usage? I realize it's very open-ended. I'm just trying to get a feel for how much they're adopting Impella versus balloon pump as they, obviously, get more experience with it?

Well, I mean, all we can tell you is that with one quarter of experience that, you know, essential half of them used it one or more times, and some of those got it in the second half of the quarter. In the summer quarter, that's - usually August is the slowest period. So I basically -- the numbers I'm giving you is what we're seeing as far as utilization within the first quarter.

Okay. Fair enough. On gross margin, a very strong quarter, especially in light of the changes in the model for consoles that were discussed last quarter and you touched on here. Is that solely the impact of Impella, or is there anything else at work here? And also, how does this change your guidance going forward, for gross margin specifically?

It doesn't change our guidance for gross margins. We had guided to 70% to 75% for the fiscal year, and it is essentially all in the Impella side, as we've disclosed.

Okay. And then also, same kind of question on SG&A. Very well controlled in absolute dollar terms, despite the strong top-line performance. Is this specifically a sign of the seriousness about driving the profitability?

It is a sign of the seriousness of getting to profitability. However, as you have seen, we are still increasing our distribution, but we're choosing to decrease expenses in other areas that have -- do not have as much of a priority as our number one goal, which is the Impella launch.

Okay, thanks. I've got several others but I'll get back in line.

The next question comes from the line of Bob Hopkins with Banc of America. Please proceed.

Hi, thank you and good morning. Just a couple quick ones here. How many centers specifically dropped out of the trial, and how many can you expect going forward? I totally understand why it's happening because of the issue that the -- that Impella is approved right now, but do you have specific numbers?

As we said, it's just a few.

Okay. Do you expect more of this going forward, at a small pace like you are seeing right now?

We do expect to see a few for both studies, but as I stated the vast majority, they want to complete the trial.

Right. Now, just understanding just commercial approval we now have, and you had summer, and I'm just trying to understand sort of the pace of enrollment that we're at right now in terms of looking at average enrollment per center, per month, or whatever metric you want to use. I'm just curious if you think the rate that you are at currently is a rate that will be sustained? It's been moving around since you first got -- since you first started enrolling in the trial. Just curious as to your thoughts as to whether or not the rate that you are seeing this quarter is a sustainable rate going forward?

There's a couple things to that. So the 510(k), as you can see, it gives them the opportunity to use it commercially, but we also find that the more they use it, the more available it becomes for them to use it in the trial for the recruitment of the patients. In regard to this past quarter, it really was our first quarter with 510(k) and it's also the summer months, so it's hard to make too many assumptions based on a very slow August, and what we'll do next quarter is update you again on the trends more in the -- during the busy time of the year. What we did see is on the trial itself was the trial trending a little slow during the TCT weeks, and the utilization under 510(k) picking up, and we'll see how that continues with November and December.

Okay. And then I wonder at this point, roughly speaking do you think this is a trial that will be completed by midyear next year, or are you not willing to speculate at this point?

Bob, what we've said is as we get further down the path and a little bit more confidence in the trends, we will give a prediction for the completion of the trial, both trials. So what I would expect is on next call or the following call, we will give our projection of when we think we'll complete the trial.

Okay. Last question for me is, could you give us an average selling price for the device in the quarter?

We're charging between $20,000 and $25,000, so the average price is probably around $22,000.

Is that different for in the trial versus commercial use?

It is, and it's also based on whether they're renting consoles or a minimum purchase.

Got it. Thanks very much.

Thanks, Bob.

The next question comes from the line of Eric Schneider with UBS. Please proceed.

Good morning, Mike.

Good morning, Eric.

I know you don't want to speculate yet on when the trial going to complete, but unfortunately we have to, so are you going to provide the numbers from the ends of the previous quarters so we can get a sense of what enrollment was over each of those three-month periods?

The ends of the previous quarters. Are you talking about --

The Protect II enrollment, both patient and center numbers were previously from the day before the calls essentially. So we've got sort of -- several three-month periods, then a two-month [stub] period.

Okay. So what we gave you was actual numbers, May 21st, August 7th, and now the end of the quarter. So we are giving you the specific touch points at those moving targets. So what you are asking for is to get at the end of the prior quarter what the numbers were?

Yes, that would be helpful.

Yes. I'd have to look and break that out, but I think what we gave sue actually giving you more visibility to the trends than if I were to just break them out flat to the quarters, but I'll look at that.

Thank you. Then you noted the majority of the enrollment happened in the month of September, and you have narrowed the majority down. Is it two-thirds? Three-quarters?

Majority usually means greater than 50%, and that's what we mean, greater than 50%. We didn't break it out specifically.

Okay. And then just this question. With some of the centers dropping, will you be able to get to 150 actively enrolling, or will it be 150 who have ever enrolled? So as centers drop, will essentially the number of potential centers enrolling get lower?

So Eric, as we keep giving you each quarter we give you the number who are pursuing. So as of the end of the quarter there was actually 187 sites that we're pursuing or in the study and we can only do 150, so we had a bit of a buffer already for centers that were trying to get into the study that we weren't going to be able to satisfy.

Okay, thanks.

Hey, Mike this is Bruce. I had a question, and it was just one of tone. You had kind of intimated that, you know, even if -- that this is not an all-or-none trial, saying that some end points may be highly significant and impactful, even if the overall endpoint is not met. Was there any signal in there regarding any change any in your view of the likelihood of success?

No change in the fact that we believe we will hit it, and we also believe that individually obviously death, MI, stroke, renal perfusion, those are critical end points to show a benefit. What we did add to this call was reiterate that our assumptions of 20% and 30% are in line, and that at TCT during our symposium, Dr. Bill O'Neill, who is the PI, stated that we are seeing that aggregate rate and that we are enrolling the sick patients that we were targeting.

Right.

So that's very positive for us, and it builds our confidence in the entire design of the study.

Perfect. And my final question is, could you just help scale - you know, Protect II seems to be on --

Bruce? Did we lose you?

Mike? Hi.

Yes.

Sorry. On the scale of clinical impact, could you contrast the likely impact of Impella in Protect II versus Recover II?

Could you repeat the question, Bruce?

Sure. In other words, do you feel that Impella could be even more impactful in the setting of AMI in Recover II than it is even in Protect II?

I think it can be more impactful from the perspective of treating a larger patient population. If you think about what's happening to a heart attack patient with a large anterior infarct, if that muscle dies, that patient's quality of life has changed. If that muscle dies, that patient is going to require long-term support in order to maintain their current lifestyle. And as we start looking at mortality rates around the country, around the world, with all the advances in drugs and angioplasty and stents, you are still seeing this infarct problem occur, as well as you are seeing patients die, and the results are evident. You just look at the number of patients that lose ejection fraction after an interior infarct, or you just look it at one of the leading causes of death in hospital mortality is heart attacks. So I think that that becomes really a key indication and a new therapy for treating patients. Instead of just thinking about door-to-balloon time, which is the angioplasty, we believe it is going to go to door-to-Impella time, where you will be using revascularization hand-in-hand with Impella for large anterior infarcts.

Thanks so much.

(OPERATOR INSTRUCTIONS)

And next question comes from the line of David Lewis with Morgan Stanley. Please proceed.

Good morning.

Good morning, David.

A couple of quick questions here, Mike. I know this question was already asked to a certain extent, but last quarter you gave us the sort of as-of-report date enrollment number. Now you are saying 141 at the end of September. Do you have sort of an as-of-Friday enrollment number?

David, we do. The challenge is, as we break out the revenue for this past quarter, trial to commercial, we need to match - in order to break that out, we need to start matching the revenue per the clinical trial numbers. So we're one month in, and as I said, the utilization under commercial 510(k) is up significantly on a trend, and the utilization for the trial during TCT was slower based on the fact that most of our -- many of our PIs were not at their hospital itself. But that's the reason we're differentiating now.

Understood. So the number has danced around a little bit here but generally speaking it's been between 15 to 20 patients per month. On a go-forward basis do you think that number goes up, down, or stays about flat?

Statistically, you would assume it is going to go up because there's now twice as many enrolling centers. Even at the 141 centers, that's been enrolled just from 35 hospitals. And right now we've got 67 with another 20-plus with IRBs that are pending to get started. So we are going to be close here to having 100 centers enrolling pretty soon, and what we expect at that point is to continue to see a ramp-up in enrollment. But we'll give that update at the end of the following quarter, and then we will start giving more guidance, specifically on Protect II, of where we think we are going to end up.

Okay. That's helpful directionally. Mike, of the 108 total centers what percent are solely commercial?

75% of the centers in the trial have already purchased general use or are in the process of, but the biggest growing number was the centers that are just doing the commercial use only. That's the second biggest amount of centers, and we expect that to continue to grow as we go to the next 200 centers that are not interested in the trial.

but it's not a simple --

By definition, the top 100 to 200 hospitals are your top volume, but also your sites that are most interested in trials. As you get outside of that, you start to see high-volume centers that are interested in just treating the patients and not joining the clinical trials.

Okay. But it's not as simple as taking the 108 and subtracting the 67, because that's only the 67 enrolled in Protect II?

Right. You can say that of that, 75% are buying are using general usage catheters.

Okay. And then thinking about inventory, Mike, just given the way -- there's obviously a lot of demand and people are buying at least four catheters to your point average, but there are other customers who are buying - we've heard as high as eight to ten catheters up front, or pumps up front. Any concerns you have from a small quarterly effect next quarter, or the quarter thereafter, of building a little too much inventory in the channel, and that kind of having a leveling effect on top-line results?

David, let me give you a bit of the kind of the progression of how we have been selling the different catheters per the box. When we first got started, all of our sales were under trial sales, and would we were looking to do is get the first adopters who wanted to get up and running as a sign of commitment that they would order ten, and then they would receive the two consoles at no cost or on consignment. We then transitioned to five and five where centers could buy five, then after they bought an additional five, these were the trial centers, then we would transfer the consigned box.

As of the commercial introduction, we no longer are doing that or are requiring that. What we're really down to now is centers that buy up to five, if they are a commercial center they can buy two. So we're really not seeing orders now above five in general. And the reason we're doing that now is because we are looking to expand to that next level of just a general user, and for those folks they are more comfortable buying two to five catheters, and we'll continue to offer flexibility in today's financial times that if they want to buy just two and rent two boxes, we'll do that as well. So we're going to adapt to what the needs are of the hospital, but there is a definite desire for them to get up and running, and so that's why we've structured our offering this way.

Okay. So given the growth in Impella, and the reduced quantity on orders, you wouldn't expect to see a significant inventory effect going forward?

We're not really - we don't - the question you had was about eight places that were buying eight to ten. My answer is really, that was about a year ago. That is really not occuring today. Today it is more along the lines of anywhere from two to five.

Okay. And just coming off of TCT, and this question was asked before, but if you think about relative importance, and this may be difficult to answer, but in terms of the importance of hitting the composite endpoint versus the importance of specifically hitting stroke or death, do you view it as sort of equivalent in importance, or [preliminary] feedback from TCT suggests that perhaps stroke and death are more important than the composite?

Well, obviously the composite is our goal, and what we're shooting for. However, if the composite is close but maybe not 33%, then clearly people are going to look at death, they are going to look at MIs, they are going to look at renal perfusion. They're also going to look to see if they can or can't do the procedure with or without a balloon. The good news on today's call is we're validating that as of today, we are in line with our assumptions of 20% and 30%, and as we also stated from the Europella, which is multicenter PCI of over 100 - I think it's about 140 patients, you are seeing very low in-hospital mortality, as well as 30-day mortality. So all of the stats, the statistics and things we've reviewed in the past are continuing to be pretty consistent.

Okay. Thank you very much.

And the final question will come from the line of Assaf Guterman of Lazard Capital Markets. Please proceed.

Hey, Mike. Good morning. Just a quick question. In August, there were 55 centers that opened for enrollment. As of the end of September, I think 141 patients came from 35 centers. So about 20 centers were open for at least two months, and still being enrolled any patients, and the question I had is do you have the ability to replace centers which do not enroll at a satisfactory pace, or are those centers there to stay, and therefore going to keep the spot of other centers who could actually enroll more rapidly? Do you have any control over that?

Well, Assaf, you always have control on whether or not a center is going to maintain status or not in a trial. We have a very good Steering Committee, with some of the most senior people in the field, and we're going to allow them to be actively engaged, and kind of police the procedures, making sure we're getting sick enough patients, as well as making sure they are committed to the trial. The one thing that's a leading indicator is even if a center hasn't enrolled, is really what they're screening. And so we also track and we can see even if a center hasn't done their patient yet - their first patient yet, the fact that they've maybe screened multiple patients shows us that they're committed and driving to enroll.

Okay, thank you.

Thanks.

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

Thanks everyone for your time today, and if you have any follow-up questions feel free to call us. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.