ABIOMED Inc (ABMD) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2009 Abiomed Inc. earnings conference call. My name is Kristin, and I will be your operator for today. (Operator Instructions.) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Ms. Aimee Maillett with Corporate Communications Department. Please proceed, ma'am.

Thank you. Good morning and welcome to Abiomed's third-quarter 2009 earnings conference call. This is Aimee Maillett of Abiomed's Corporate Communications Department. I'm here with Michael Minogue, the Abiomed Chairman, President and Chief Executive Officer, as well as Bob Bowen, our Chief Financial Officer. The format for today's call will be as follows.

First, Mike will provide you with strategic highlights for the third quarter. Next, Bob will provide details on the financial results outlined in today's press release, and we will then open up the call for your questions.

Before we begin discussing the third quarter, 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. Abiomed's actual results may differ materially from those anticipated in these forward-looking statements based upon a number of factors, including uncertainties associated with development, testing and related regulatory approval; competition; technological 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 conference call or to reflect the occurrence of unanticipated events.

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

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

Thank, Aimee. Good morning, everyone, and thank you for joining our call today. In Q3 we continued to prioritize and execute on our four corporate goals of launching Impella 2.5, increasing Impella manufacturing capacity, driving to profitability and growing revenues greater than 25%.

Today I will review the status of Impella relative to our first corporate goal, as well as provide an update on our steps to drive to profitability and grow revenues greater than 25%.

In regard to our Impella launch, there are four main points I will discuss in detail. Number one, the Impella launch is underway with the 510(k) clearance, and we're focused on maximizing revenue, increasing our cash burn and driving to profitability as we continue to grow the US field distribution.

Number two, scientific evidence from publications has already validated that Impella is superior to an intra-aortic balloon pump or IABP with regard to increasing cardiac output and cardiac power. With 163 of the top heart hospitals having purchased Impella 2.5 in the last six months, the customer demand indicates market acceptance and clinical validation.

Number three, the goal of Protect II clinical trial is to demonstrate clinical superiority over the IABP for high-risk PCI population. This can be done by hitting the composite endpoint and/or by showing individual benefits on most critical endpoints like mortality, MI, stroke or renal dysfunction. Our goal for this study on our commercially cleared Impella 2.5 product is success on the endpoints, not speed of completion.

We are also very confident in our assumptions for major adverse event rates for high-risk PCI and Protect II for the intra-aortic balloon pump.

Number four, the goal of Recover II and Impress is to demonstrate clinical superiority over an IABP for PCI post-AMI. However, we believe that the Impella provides a new treatment paradigm to help recover heart muscle for heart attack patients.

So now more detail. Number one, the Impella launch is underway, and we're focused on maximizing the revenue. The majority of our revenue since 510(k) clearance has been and will be under general use for Impella. Our quarter of $17.3 million in revenue was based on strong Impella sales of 112% growth at $8.9 million, and legacy sales dropping 29% to $8.4 million, down $3.4 million compared to the third fiscal quarter 2008.

We normally see a ramp in our end of quarter console legacy sales, especially for the December quarter, which did not happen this quarter. Based on today's financial environment, we did see more scrutiny across the board as hospitals look to conserve cash versus using end of year funds for non-budgeted items. All hospitals are being more conservative with their cash, but Impella sales were less impacted based on our ability to place consoles with an incremental disposable order. Our average new order for a new account continued this quarter at four Impella 2.5 units.

The Impella commercial revenue recorded during the third fiscal quarter of 2009 was $7.3 million in sales. Again, that is the US commercial revenue. Of which $6.7 million was for sales of the Impella 2.5 device sold under 510(k) clearance and $0.6 million sold under the Protect II and Recover II. The Impella revenues for general use for the US sequentially increased over Q2, which is our first full quarter with 510(k). In Q2 we sold $6.2 million with 108 hospitals, and in Q3 we sold $6.7 million and opened 55 hospitals for general use of Impella 2.5. We believe this is significant because Q2 had pent-up demand after the June 510(k), and we opened fewer hospitals in Q3. Our trial revenue is now a small part of our topline revenue, transitioning from $2.6 million in Q2 to $0.6 million in Q3. We additionally re-labeled trial units to general use over both Q2 and Q3. We believe that our growth will continue in both utilization and new accounts and look to optimize the mix.

As of the end of the quarter, 163 US hospitals have purchased Impella for general use, and over 260 patients have been supported in the US alone. We likely cannot account for every single patient within a small period of time, but we are confident that it is over 260 patients.

We have substantially exceeded our fiscal year corporate goal to penetrate 100 hospitals supporting 100 patients with Impella. This ramp has stressed our capacity as we have trained new hospitals at nearly two times the expected rate for the last two quarters. Impella 2.5 is a new technology, new to an Abiomed customer in interventional cardiology and requires training of the support staff. We have achieved this milestone with the newly expanded sales and clinical team while managing our four clinical trials and supporting our legacy business in the heart surgery. By any measure we believe that having 163 Impella accounts at the end of Q3 is a solid indicator of the customer interest and a sign of the clinical conversion underway with the 510(k).

This successful penetration into the top leading US hospitals has happened in spite of today's economic climate.

We have also learned some lessons over the last two quarters on utilization. Utilization is a function of several factors such as the amount of time the Impella specialist can dedicate to this site after completion of the training, the hospital's ability to identify different types of eligible patients from prophylactic use to emergency support, and the physician and staff's comfort level in trying new technology in general.

As reported, hospital experience for the last two quarters with Impella ranges from one day to six months of technology on-site. Today 60% of our accounts have done one or more patients as compared to 40% last quarter. Last quarter reported that 21 out of the 108 accounts, or 20% of our hospitals, have supported two or more patients, and as of the end of Q3, 62 out of the 163 or 38% have supported two or more patients. We have tripled the number of users that have supported two or more Impella patients.

We have also moved from 8 to 16 or 10% of our hospitals that have supported five or more patients with Impella. The number of patients supported by any one of our users is from 0 to 17 patients for general use.

Typically Impella 2.5 is used in the cath lab with 91% taking place in the cath lab and 9% of Impella usage in the surgery suite this quarter. 71% of Impella 2.5 cases have been used to support high-risk PCI, and 15% of the cases have been used for AMI or heart attack or cardiogenic shock post-AMI. The remaining 14% of the Impella 2.5 cases have been used for other indications involving hemodynamic support.

In regard to hospital inventory, we recommend that each side has a minimum of two Impella 2.5s on the shelf for emergency use or backup, and this seems to be acceptable with the accounts based on the reorder patterns.

Our success at capturing 163 accounts over the last two quarters meant we were not able to be present in the cath labs after initial training. We are adapting and adding more Impella specialists in the US and expanding the clinical support team with per diem ads from advanced customers with experience.

We have also enhanced the sales representative role to include hands-on training with the Impella specialist and certifying them to provide patient support in the cath lab. Many have a background that enables this capability, and this effectively adds to our focus to drive utilization at the sites that have purchased.

In regard to the economic environment, we are working with each hospitals to meet their needs if they are committed to starting a program with Impella. The high-risk PCI population is ideal to manage the patient, certify the customer and create the environment for positive outcome. Overall our utilization continues to grow and expand as centers gain more experienced and incorporate Impella into treating unscheduled heart attack patients or chronic patients admitting to the ER.

Remember that in each of these hospitals, there might be one cardiologist who is now trained on Impella, but there is a potential to train another 20 to 30 interventional cardiologists at the same site.

We now have over 70 US field or clinical specialists in the US and have added over 10 people alone in January. We know that we need the presence of an Impella specialist in the lab to drive that first patient usage. There is a positive trend for those that have used Impella to expand additional applications beyond just high-risk PCI.

Based on the additional Impella specialists added in the field, the positive utilization trend has continued in January, and we have continued to reduce the amount of hospitals without experience weekly.

Number two, scientific evidence from publications have already validated that Impella is superior to an IABP with regard to increasing cardiac output and cardiac power. We are continuing to pursue more studies to establish an undisputable clinical argument beyond what currently exists in the literature for multiple applications. This will be helpful to convince late adopters, as well as to support expanded applications. We see Impella applications beyond just reducing mortality. We see it as a new therapy for recovering and/or protecting heart muscle. We also see it beyond the applications for just an intra-aortic balloon pump.

The Protect II study represents one of the four main interests for the Impella 2.5. These four main interests and their associated clinical studies initiatives are prophylactic use for high-risk PCI. The corresponding studies are the [URAPELA] and the Protect I, which are both published, and the Protect II in process. We believe this total population represents 30,000 to 60,000 patients per year in the US alone.

Number two is emergency usage for AMI post-PCI. The corresponding studies are MACH II, which is published, as well as Recover II and Impress in Europe, as well as our internal database. We believe this total population represents 50,000 to 100,000 patients per year in the US based on approximately 865,000 hospital emissions for AMI for heart attack. We have already collected survival data on over 50 US AMI cardiogenic shock patients under Impella general use.

Therapeutic support for acutely decompensating patient that has chronic heart failure is our third main interest, and these patients are admitting to the hospital where they are acutely decompensating. The corresponding studies will be based on a protocol called recompensate, and we will also be incorporating case studies with imaging technologies from spec to PET to MRI to visualize the impact of Impella 2.5 on the heart muscle. These studies will not be conducted through the FDA and will be conducted with academic hospitals with independent IRB approvals.

The fourth main interest is surgery support with Impella for either off-pump or minimally invasive heart surgery or support before or after open heart surgery. We're currently submitting abstracts and case studies from individual centers. This becomes a platform for new techniques where the surgeons wish to avoid a sternotomy or the heart/lung machine for a risky preparation such as an off-pump CABG of an elderly patient.

Moving on to our third point, the goal of Protect II is to demonstrate superiority over an intra-aortic balloon pump for high-risk PCI, and this can be done in multiple ways from hitting the endpoints to showing benefits on the most critical endpoints like mortality, AMI, stroke or renal dysfunction.

As of the end of Q3, 85 hospitals are ready to enroll patients in Protect II with 28% or 180 patients completed from 49 hospitals. An additional 18 hospitals have received IRB approval but are not yet ready to enroll. These are the net numbers after some hospitals have decided to depart from the study and move strictly to general use. We will likely not pursue any new hospitals for Protect II and maintain a focus on what we have today with the approximately 100 centers.

The goal of Protect II is to hit our endpoint. To this measure we have implemented additional steps for Protect II that may further improve our outcomes while potentially reducing the speed of completion such as allowing hospitals to drop out of this study for general use, relabeling Impella at trial catheters to general use, and requiring a two patient minimum general use experience for high-risk PCI before enrolling patients in the study.

As noted on our last call, we have 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 Impella is more effective for their patients. Abiomed's goal is to identify any concerns at any hospital and to ensure physicians can treat their patients inside or outside of the trial.

Today we allow for any account that has ethical concerns or just a desire to treat patients with Impella to drop out of the study. As of December 11 or as of the end of December, 11 hospitals have dropped out of this study that had IRB approval or were ready to enroll, and 70 hospitals have dropped out of the study that initially signed up and had not yet completed the IRB process.

Another control measure we implemented was to ensure that physicians at enrolling centers had completed two general use procedures with Impella before doing the first trial patient.

As a result of both of these changes, over the last two quarters, we have converted and relabeled 94 trial catheters at 36 hospitals to general use under 510(k). These hospitals have purchased trial catheters over the past year for the trial and are using the product commercially at a faster pace than the inclusion criteria allows for Protect II. 70% of this relabeling occurred in our second quarter.

As part of our trial process, we apply a strict interpretation of the inclusion criteria based on ejection fraction or EF. For example, as disclosed in past calls, the majority of our patients to date have had triple vessel disease, which translates to a majority of our patients in Protect II having an EF of 30% or less. Additionally each enrolling PI has the ability to not enroll a patient that meets the criteria if they feel based on their experience that the patient does not need any support.

For example, a younger healthy patient with an unprotective left main and EF of 35% could be excluded if the physician felt that an intra-aortic balloon pump alone was not needed.

Overall we are very confident in the assumptions for the major adverse event rates for Protect II and specifically for the intra-aortic balloon pump. At the TCT in October, our primary investigator, Dr. Bill O'Neill, stated at the TCT Symposium that our initial aggregate major adverse event rates after 20% of the trial completion are tracking in line with this expectation. So, as a combined number, we are enrolling the patient profile desired and seeing expected adverse event rates to date. We're confident based on our prior IABP publications that these rates or higher will continue in the trial.

Based on the review of the literature for high-risk PCI, you will find that more than 50% of the patients reported have an EF of greater than 35%. Our trial success depends on site experience and treating patients that meet our defined inclusion criteria based on an EF of 35% or less for unprotective left main or an EF of 30% or less for triple vessel disease. This EF criteria is something we have controlled in the screening and enrollment of the trial.

Protect I was the first high-risk PCI study on patients that all had a reported EF of 35% or less and included a 30-day major adverse event report with non-Q wave MI and renal dysfunction.

Based on our Protect II major adverse event protocol, Protect I ranged between 10% and 20% major adverse events rate. We are adding new patients to the cath lab that in the past were deemed too risky with most being turned down by both cardiologists and/or heart surgeons. As our general population ages with comorbidities, Impella provides a new cost-effective option for PCI.

One important conclusion in the publication from Protect I was that these patients have higher sustained EF or ejection fraction after the PCI procedure by several points. In the past to our knowledge, this has never been demonstrated.

Our Protect II study will be the first multicenter randomized prospective study of intra-aortic balloon pumps and Impella on a defined high-risk PCI population validated by the FDA at 30 days post-PCI measuring 10 selected adverse events. We believe that this high-risk PCI IABP population will reveal a mortality rate alone that exceeds any other in the cath lab for a defined high-risk population of patients and, as already stated, believe it will be in the range from 8% to 20% per site depending on the severity of their patient mix and experience. By any measure an 8% mortality rate alone demonstrates room for improvement before you even measure MI, stroke, hypotension or renal dysfunction, all of which increases length of stay at the hospital, costs and affects patient outcomes. The URAPELA registry study included 144 high-risk Impella PCI patients treated at 10 high-volume tertiary angioplasty centers in Europe. The results of this 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.

Overall our reasoning for Protect II 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 IABP support, as well as other technologies. We are studying true high-risk patients per the profile of the design study.

Point number four, the goal of Recover II and Impress is to demonstrate clinical superiority over an IABP for PCI post-AMI. However, we believe that Impella 2.5 provides a new treatment paradigm to help recover heart muscle for heart attack patients with insertion of Impella before or after revascularization.

Today this treatment is commonly referred to as door to balloon time, and they are referring to the angioplasty balloon. This represents the revolutionary application because it can potentially help patients who survive the heart attack but develop congestive heart failure as a result of the damage to their heart muscle. We believe Impella can be used to enhance this treatment paradigm.

The American Heart Association reports they even if you survive a heart attack, on average the patient loses 15 years of remaining life. We are now just getting started with one patient in Recover and four patients in Impress. These studies require Impella experience and will include unscheduled emergency patients. For this reason hospitals in both studies are required to have performed a minimum level of cases with Impella supporting high-risk PCI. We're confident that Impella will provide clinical benefit because it increases cardiac output and cardiac power, which has been statistically proven to be the number one correlate to in-hospital mortality for these patients.

Additionally prior publications such as the MACH II and ISAR both showed Impella benefits over an intra-aortic balloon pump on ejection fraction and cardiac output respectively.

In the European Heart Journal in January 2009, there is an important new publication called a systematic review and meta-analysis of intra-aortic balloon pump therapy in ST elevation myocardial infarction, should we change the guidelines, by [Dr. Henriquez] on all relevant past papers with intra-aortic balloon pumps for PCI post-AMI. This paper identified 804 related articles on AMI and intra-aortic balloon pump usage and narrowed the final meta-analysis to 16 papers with 1410 patients chosen for AMI treatment with and without intra-aortic balloon pumps, the most relevant heart attack population. The analysis revealed that the intra-aortic balloon pump showed no statistical benefit in mortality or left ventricle function. However, the intra-aortic balloon pump arm did show a statistical increase in the risk of stroke -- again in the risk of stroke and bleeding over the arm with no intra-aortic balloon pump support. This IABP AMI PCI application is recommended by the European Society of Cardiology, as well as ACC and AHA. This is the number one use of balloons, intra-aortic balloon pumps, in the US with approximately 28,000 procedures per year. Again, this meta-analysis showed the balloon had no statistical benefit in mortality or left ventricle function, but it increased the risk of stroke and bleeding, and this application is recommended by the societies and is the number one use for intra-aortic balloon pumps.

The Physician Editorial Review commented the following and I quote, "Despite the high-class recommendation, the rate of IABP used in cardiogenic shock patients is only 20% to 30% as an international average. Assuming a 5% to 8% incident of cardiogenic shock of all hospitalized acute myocardial infarction, this translates to 40,000 to 50,000 cases per year in the US and 60,000 to 70,000 cases in Europe. Thus altogether 70,000 to 96,000 cardiogenic shock patients per year do not receive the IABP although it is recommended by guidelines. This is mainly influenced by reimbursement policies and by the fact that many cardiologists believe there is little evidence for randomized controlled clinical trials for the clinical benefit of an IABP in cardiogenic shock. The principal reason for the lack of evidence is that the IABP was introduced prior to the strong regulations by the regulating authorities, namely the FDA, which happened in 1976. In the absence of such requirements studies to demonstrate the safety and clinical utility of an assist device are typically not performed because they are very costly, and after introduction such as a study, it is difficult to perform because any negative result might be thought to jeopardize the current profit arising from this product despite the overwhelming potential."

So, as a summary, the intra-aortic balloon pump has been out for over 30 years, primarily driven by one company, which failed to do a very elaborate study as we're doing now with Impella.

As a company, Abiomed understands the IABP technology in depth as proven by the fact that we make one and hold patents in this space. This is why we are confident that our Impella technology combines the proven science of a ventricle assist device deployed with the ease and safety of a catheter. For Abiomed measuring mortality is just the first step. Saving heart muscle is the key to improving treatment and making Impella the standard of care.

Finally, I would like to discuss our corporate goals to drive to profitability and growing revenue greater than 25%.

Year-to-date Abiomed has grown 29% in revenue. The Impella 2.5 has already become the growth driver for our business. However, we have a legacy business with strong clinical results, reimbursement, gross margins and exclusive regulatory approvals. In the long run, we believe the Impella 2.5, as well as the 5.0 Impella right-side percutaneous catheter and the Impella pediatric catheter will likely be available at all advanced cardiology hospitals.

In comparison, we will focus the legacy products on selected advanced heart surgery suites that desire a heart recovery strategy for profound shock patients and in some cases after Impella support. Impella continues to grow at a pace that requires dedication of our resources for both new accounts and existing utilization. Over time we will strengthen our legacy focus and feel that the new products in the US such as the Impella 5.0 and AB5000 portable driver will fuel this success. Until these new surgery products are FDA approved, we will prioritize the Impella 2.5 launch. The FDA regulatory milestones will guide the timing of our surgery redeployment.

We continue to maintain solid gross margins of 74% across the entire Company on all of the products in the portfolio. We reduced our effective cash burn rate to approximately $2.5 million for this quarter, and at this burn rate, we would have over six years of cash available.

Abiomed ended the quarter with $63.0 million in cash and no debt, as well as the $90 million NOL or net operating loss credit to potentially apply to future profits.

Our strategy has been to grow our field distribution along with our revenue and focus on the cath labs. The majority of our new hires have cath lab experience and established relationships with interventional cardiologists. Our specific goal has been to optimize our revenue, cash burn, trial support and patient outcomes. We believe this strategy to be prudent and a key reason we have significantly reduced our cash burn rate, as well as move closer to our goal of profitability. Abiomed has a strong pipeline of known new products that are platform driven with the majority of the R&D dollars behind them. This story is about execution to penetrate every cath lab with the Impella platformed and selected high-volume surgery suites with AB5000. This recovery technology is exciting for multiple reasons already stated and because it represents one of the best opportunities to reduce health care costs to one of the most expensive patients in the system while improving the quality of life for the patient.

In our opinion the future of health care reimbursement will be based on comparative effectiveness to improve quality of life and avoid costs not just delay them. This is the essence of Impella and heart recovery.

As a patient, what technology would you want for a high-risk PCI or a PCI after a serious heart attack? One of the leaders of a top ranked national heart program recently flew a family member into his hospital for a high-risk PCI supported with Impella.

In closing, today the Company is financially stronger than any other time in our 27-year history as we enter the worst economic crisis since the great depression. Our management team understands our obligation to our patients, customers, shareholders and employees. We are focused on the execution of over short-term goals and motivated by our mission to promote heart recovery and eliminate in-hospital debt from heart attacks and high-risk PCI.

I will now turn the call over to our CFO, Bob.

Thanks, Mike, and good morning, everyone. If you will please turn to the financial statements attached to our press release, I will provide some details on our financial results for the quarter.

Overall revenues of $17.3 million were up 8% from the prior year. Revenues of Impella disposables and consoles totaled $8.9 million and were up $4.7 million or 112%. Impella disposable revenues represented approximately 98% of total Impella revenues, which reflects our commercial focus on increasing utilization and demand for disposable products by providing consoles to new sites at little or no cost. We expect these console placements to decrease as the number of hospitals utilizing the Impella products increases.

Impella revenues represented 51% of total revenues in Q3 versus 53% in Q2 and 26% in Q3 fiscal 2008. Non-Impella revenues totaled $8.2 million and were $3.4 million or 29% lower than the prior year. Gross profit percent for the fiscal third quarter was 74%, near the upper end of our expected range of 70% to 75%, but slightly lower than the prior quarter and prior year. The gross margin rate will vary due to product mix, production volume and the console placement programs.

In addition, we recorded an inventory reserve of approximately $250,000 in Q3 related to the AbioCor productline to bring AbioCor inventory levels to what we believe was the core operating level. That charge resulted in about one point of reduced margin rate.

R&D expenses totaled $5.2 million versus $6.9 million in fiscal Q3 2008. The decrease was due to higher material spend levels in the prior year for AbioCor and the portable driver. Clinical trial costs in Q3 '09 totaled $1.3 million compared to $1.1 million in the prior year. On a sequential basis, R&D spend was $1.7 million lower, largely due to clinical trial spend in fiscal Q3 '09 of $1.3 million compared to the $2.3 million spend in fiscal Q2 2009. SG&A expenses totaled $13.2 million in fiscal Q3, down from $13.5 million in the prior year and $13.9 million in the prior sequential quarter, reflecting our global focus to control spend levels and move toward profitability while we continue to build and enhance our commercial and distribution capability.

I would like to emphasize that we're not reducing our field sales and distribution resources. Quite the contrary, we have added resources and have continued to add clinical resources during the fourth quarter and during the fourth quarter of this year.

The net loss for fiscal Q3 on a GAAP basis was $7.7 million or $0.21 per share compared to a net loss of $8.3 million or 26% per share in the prior year. Stock compensation expense in Q3 totaled $1.9 million compared to $1.4 million in Q3 '08. Both periods included $0.4 million of intangibles amortization. Excluding these charges the non-GAAP or adjusted net loss for the third quarter of fiscal '09 was approximately $5.4 million or $0.15 per share compared to $6.5 million or $0.20 per share in Q3 '08.

Please note that these non-GAAP net loss or per share amounts for Q3 '09 include a loss on the Columbia Fund investment portfolio of $1.9 million, partially offset by a gain on the sale of WorldHeart stock of $0.3 million for a net of $1.6 million.

For fiscal 2009 year-to-date, the GAAP net loss was $23.1 million, or $0.67 per share, compared to $26 million or $0.80 per share for the same period in the prior year of fiscal 2008.

Turning to the balance sheet, we ended the quarter with $63.8 million of cash and short-term marketable securities. For the quarter net cash used for operating activities was $2.5 million, which included a $1.9 million write-down of the Columbia Fund investments. The accounts receivable balance of $14.2 million was only slightly higher than the $14.1 million at the start of the fiscal year. The A/R as a percent of quarterly revenues was 82%, up slightly from the previous sequential quarter but lower than Q1 '09.

The fluctuation is largely due to the timing of shipments, and we see no material change in the A/R aging over the past four quarters. Inventories of $17.8 million were up slightly from the start of the fiscal year, but are lower than each of the past two quarters, including a decrease of $1 million from September 30, 2008.

We will now open the call to questions.

(Operator Instructions). Greg Simpson, Stifel Nicolaus.

If I could start with the commercial side of the Impella ramp, am I understanding what you're saying correctly is that I understand the need to have support people in the centers, especially in the early going. Are you guys basically saying you guys are stretched thin? Is it a result of the number of centers that are interested here? How does that dynamic play out here over the next few quarters? I mean we are all going to be trying to gauge and reset our Impella ramp. I'm trying to figure out how this all plays in as you expand the number of people.

So, as I explained, sequentially the general revenue in the US for Impella went up 8% in spite of the fact that we opened half of the number of accounts we opened in Q2. The difference is that the trial revenue is declining. We did relabel some trial catheters also into -- for commercial use. And what we found is that our centers want the Impella person there as they do their first essentially five patients beyond just the training.

When they get to that comfort level, that is the one physician in the support staff. We also have the ability then to get other interventional cardiologists trained at the same center, and there are positive trends as once we get them using, they use it more, and they expand to other applications.

Okay. And on the relabeling, Bob, can you may be -- can you maybe quantify that a little bit and maybe give us a little better feel for how that affects -- again, we're just looking very short-term here on the revenue ramps to try to get our hands around this. Maybe you can just explain that in terms of the number of units or something along those lines.

Well, over the last two quarters, it was 94 units, and the unit's average ASP is $20,000 to $25,000. So you can think of that as a movement from trial catheters into general use. That gave the hospitals incremental inventory levels and general use for utilization needs that otherwise might have been satisfied with new orders.

We also disclosed that 70% of those relabels happen in Q2.

Got you. Okay. And then on the topic of cutting back on the number of centers in Protect II, will that -- if I understand correctly, will that help you enroll faster because you're going to be able to focus on a smaller number of centers? Is that the goal behind it or just the centers that were kind of at the back of the line were just figured they would move onto commercial utilization and pass on the trial? Can you give us a little better feel? Did you guys have discussions with the centers and just mutually agree that they would step out of the trial? Can you just go into that a little bit? And again, whether that would -- given the ability to focus your attention a little bit more, will that maybe have an accelerating effect on the trial itself?

We're not saying it is going to have an accelerating effect. It could have the opposite of that, but what we have talked about was that we have had centers that for ethical reasons no longer want to randomize now that 510(k) is commercially approved. We also have centers that just want to use the Impella. They don't want to be in the study anymore. They want to transition to general usage. And since the goal of the study is to help drive conversion to late adopters, if centers are ready to convert now and start using Impella, then we allow them to do that, and frankly, we can encourage it, provided they are going to use the Impella for these high-risk patients or AMI patients.

We also believe that with the number we have, we have a good set of very experienced users who are committed to this study, and we're going to be able to continue to move forward with them at a pace that we can then focus those resources rather than trying to focus resources for all of our general use accounts, as well as 150 clinical trial centers, and we're going to bring a little bit more focus to it as well.

Got you. Last question and I will get back in line. On the centers that dropped out in general, have they been trained, and do they have access commercially, or does them dropping out of the clinical trial have any impact on them getting trained? If they are just going to be commercial centers, does that enhance their ability to get trained quicker?

Either they have been trained already in the study and they have dropped out, which means they would have likely already had commercial product and been using, or they were going through the IRB process and that was just part of what they were going to go through the purchase. And now that they are going to drop out of the IRB, their purchase order is not as complicated, and essentially now we're going to go in and train them.

Bob Hopkins, Bank of America.

You guys talked about a whole bunch of things on the call. I was wondering if you could just kind of give us your best opinion at this point as to when you think trial enrollment will be complete? You said last quarter that you might be willing to do that on this call.

In the last quarter, we did say we might be able to do it this call or the next quarter. At this point, based on what we're doing and the fact that we're narrowing the number, we are not prepared today to give an estimate, and that has been consistent since the beginning of the trial.

Is it pretty fair to say, though, that it's highly unlikely to be a 2009 event that you complete enrollment? I mean I guess that is sort of obvious with the numbers.

We have not given any forecast, but that would be unlikely based on the numbers.

And then I'm curious about the folks that have dropped out, the 11 that you mentioned and then the 70 in two separate categories. Are those all dropping out for ethical reasons or reasons that they want to use Impella, or are some of those just for whatever reason not happy with the device or dropping out for other reasons?

To my knowledge it is either ethical reasons or they just essentially want to use Impella and not be in the study. We have not had people that have said we don't believe in the technology at all, and we want to drop out of the study, and we do not want to use it commercially.

Okay. And then you mentioned again as you did last quarter that you're comfortable that the trial will be positive or that it will trend in the right direction, and either could be a positive for the Company, and you're making some slight changes to protocol. I just want to be sure that those comments, what you meant by those comments.

You still -- what do you think is the highest probability outcome, a positive trial or are a trial that trends in the right direction and is still considered a success?

I have not changed our position at all, so I will clarify that point is we do believe we're going to hit the end point. We also know that based on the end point, we have chosen the feedback we have gotten from physicians is if we show a difference in death or MI or kidney dysfunction or stroke, those are pretty strong indicators that will drive acceptance from their peers. But we're trying to do both, and that is why we have a composite endpoint.

And then one other thing I just wanted to get your thoughts on it. You have enrolled 180 patients. It is one-to-one randomization. So I guess around 90 pumps have actually been implanted, and yet the Impella revenue that you have recorded would imply that you have sold 250 to 260 of those devices. So it says that of well over half of the devices that you have sold are still on shelves. Could you just talk through that dynamic, and is my analysis correct? Will that work its way through as we go forward?

Well, I think that the relabeling of 94 catheters has already been done in Q2 and has passed Q3. And for the other centers, if they are continuing in their plant to be in the enrollment, then I do not see that as an issue of working through the numbers.

Okay. And then just lastly --

If a center, though, drops out, we can quickly and easily now that the product is approved, they have the option as well to use it for a 510(k).

Okay. And one last question just on cash. You mentioned you could at this rate go another 60 years without raising cash. I am just curious as to what your projections are for how much cash you will have on the balance sheet when the trial is complete?

As you know, we only give one year out guidance, which ends in March, but we're very confident where we are at right now in our cash position, as well as our revenue ramp, and we will be giving the forecast for next year on the following quarter call.

Erik Schneider, UBS.

The first question is related to the additional central rollout criteria for Protect II that you described around the investigator belief that the patient needs ventricular support. First has that always been in place? And if it has not, when was it instituted? And if it has, what proportion of patients otherwise screened were determined by the investigators not to need ventricular support?

I want to make sure I understand your question. Can you -- (multiple speakers)

Sure. The first part is, has the criteria where the investigator determines that a patient that otherwise meets all of the rule in and out criteria for Protect II, they choose not to include them because they don't believe they need ventricular support, has that always been in place or is that new?

That has always been in place, and that has been reinforced in general. That also was looked at and evaluated in the Protect I is those patients were also deemed to be either supported with a balloon or with tandem heart for the majority of those patients. So yes, that has always been in place.

And do you know what proportion of patients who meet the inclusion and exclusion criteria and otherwise would have been included have been deemed not in need of ventricular support by the investigators? (multiple speakers) Was it half of the people?

No, it is not a large number, but it is that -- it is really that young, healthy patient that has unprotected left main without prior history and EF of 35%. And there's a couple of them out there.

Some of them may end up going into the study for if they are going to do a complicated therapy like rotor blade or something with it. However, the rest of them, as we have said, the majority of the patients in Protect II have triple vessel disease.

And I think you were previously describing, if we go back to the commercial launch of Impella, that the trial sales and training was really sort of a thin wedge to introduce people to ensure that you got trial enrollment. And not it sounds like you're flipping that around so that they should do the first couple of units commercially before doing trial. Does this suggest that there was a training issue, that either people did not want to wait to get trained or could not be trained in time, or that there was some difficulty with their initial placements in the trial?

I think it is just a general best practice we learn from Europe. So on the feasibility studies that have been done, that is one of the experienced centers did not have essentially user mistakes. And when we have started going to Impress, which is the European AMI study, the PI thought it would be important that the centers had experience when they were doing their AMI patients, which tend to be at later hours rather than doing their first patient under an emergency situation.

Now that we have the 510(k), we thought it was also a nice prudent add to have centers get some general experience before they enroll their first patient in Protect II. (multiple speakers)

To point out what the point is, we think Impella is very easy to use. And if you look at Protect I, those patients for the most part with only 20 patients were the first time used for most of those centers, and we still had the positive results. We just think that this is, now that we have a 510(k), it is a nice benefit for them to have that capability.

And then did you mention the number of the 163 centers that had done a commercial patient so far?

60% have done one or more, and we have done over 260 patients since the 510(k).

And then just one last one. On the relabeling that went on, does the sale revenue that was reported, is that adjusted for those relabelings, or do we need to reduce the reported in trial sales revenue to account for the fact that those units were subsequently relabeled to commercial use?

I don't think there's any requirement to change the revenue in which the period in which it was recorded.

I'm not asking about a GAAP requirement. I mean from our perspective to figure out how many units are used/stocked under either trial or commercial?

So they are relabeled now, so they will be used for general use.

David Lewis, Morgan Stanley.

Just a question coming back to this issue of utilization, last quarter we talked and (inaudible) asked about utilization on the call. So now that we have had this reclassification, it seems like last quarter when you talked about trial or 510(k) commercialization, you had about $8.8 million of US revenue. This quarter it is about $7.3 million of US revenue. So are you saying definitively that next quarter US Impella revenue is going to be up?

David, can you repeat that? Your question is, are we saying Impella revenue in the US for general use will be up or total revenue?

Total revenue. Because obviously the reclassification, what people really want to know here, is now that the trial has reached steady-state (multiple speakers) how is the commercial (multiple speakers) 7.3?

Yes. Okay. So I understand the question. So obviously we don't give guidance within the quarter for the specific, and we certainly don't guarantee the revenue. But, as a general rule, we believe that we had sequential growth from Q2 to Q3 for Impella commercial use, and we believe that the trend will continue, and we will have sequential growth of Impella commercial revenue for the next quarter. But that is not a forecast.

Okay. And just not to push you here, but what you are implicitly saying is you have reached a steady-state with your clinical trial business in the US? So regardless of these various reclassifications, you had a bolus of demand selling out of inventory, and given the underlying trend in the utilization, you do expect that business to be up sequentially?

That is our belief, and just again to summarize, we did see it sequentially go up again this quarter, even in light of the fact with the economy, with the relabeling and with the opening of 55 centers, which is half of the prior quarter, we did see a sequential growth, which we think is a very positive trend.

Okay. So just sticking to that idea, if you basically believe you're going to be running sort of a $32 million US business for Impella in the first two quarters of commercialization and you have six years of cash, doesn't some of the things we're hearing on this call suggesting that you're not, frankly, spending enough on sales and marketing and you don't have enough people in the cath lab to train?

It is a good question, and what was reiterated by Bob and myself is that the spending you're seeing being reduced is on R&D products that have already been -- the bulk of the spend on them is done. So manufacturing expenses, some marketing expenses that are not related to the Impella US launch, operational expenses, general overhead expenses, and with the exception of that, we are increasing all the spend levels for anything that has to do with the Impella US launch, whether that is the commercialization of it or the trial.

As I stated on the last quarter, we had added a significant amount of people into the field. We now have over 70 people in the US. We have added more than 10 people in January, and on a comparative basis compared to a balloon pump, we're much larger now than the distribution by the companies that sell intra-aortic balloon pumps.

So I think we have a very large salesforce. We bet awhile ago that would be more important to have clinical Impella specialists before sales. So that is -- that tended to be a true assumption. The fact that we have overshot the centers that we have ramped up is a proof to that, and really it is about getting these Impella specialists that come into Abiomed with relationships and they understand the cath lab, getting them trained. They are also bringing in and using per diem folks. And we also are using the salesforce now that as we transition more of a focus to them on Impella for utilization, they get signed off, and we will be doing patient support as well in the cath lab.

So I think we have a very big distribution. I think it is going to continue to grow with revenues, and I think that is the right way to do it in today's economic environment. But I do not feel that we are understaffing the US field in any way, and in fact, I think we have continued to accelerate over the last six months specifically.

Okay. Just on trial tightening, we had a lot of people who are sort of pending IRB approval, but dropped out, so they really were not in the trial.

Just maybe walk me through again the dynamics around that? Was this the provision that you are going to require them to do two devices? Was this simply given the economic environment they could not afford to sort of participate in this trial? Or was it just simply pent-up demand, a lot of people they showed interest and then realized that if they really want to be in this trial, they could access to Impella 2.5 510(k). But it is a significant number of people who really were not in the trial who just sort of feigned interest? I think it is important to really flush out who these individuals are and what happened.

Sure. So there's two components of that. The first group is the ones that were already in or already had IRB. That dropped because they are now ready to treat patients with Impella. They have experience, and they don't think it is -- a balloon can provide the support they need for their high-risk patients. So that is one class. The second class of these 70 are kind of that second-tier group that does do studies, but they are not pure academic centers.

The interest level at these centers was based on their desire to bring Impella into their institution and to have the ability to at least offer it on a randomized basis to their patients.

Now that the product has commercial approval, their main interest is to treat their patients with Impella and to move forward in today's economy or just in general on the way their hospital operates to move into the commercialization.

Sean Lavin, Lazard.

You answered most of my questions, but I have one. I wanted to talk about the trial revenue in the quarter. When we look at it with 18 additional centers, we would have thought the revenue may have been a little higher than it was. Am I correct that new sites still order five devices, or could you talk a little bit about where that revenue came from or that number?

Let me go through the numbers with you again to make sure we are clear. So there are 85 hospitals that are enrolling, and so they are using -- they have purchased -- there's 18 that have submitted, but they don't have approval yet for the study. So there's no purchases of those 18 into that .6 million.

Okay. So in September, there were how many centers enrolling?

Yes, so there are centers that can enroll, and there are centers that have done a patient. So there's 85 centers at the end of December that are now able to enroll patients. And they are trained and they are up and running, and they are screening.

Of those 85, 49 hospitals have completed patients one or more to a total of 180 patients. (multiple speakers) There is another 18 hospitals that have submitted to the IRB that do not yet have approval, so they have not purchased any trial catheters.

But I guess on September 30, there were 67 centers that were open to enroll. Now there are 18 more. We do not know that those 18 have bought any devices.

Right. (multiple speakers) But that difference, some of those may have bought one, and they may have general use, and that might be essentially that is what they are using now.

That makes sense. Thank you.

Duane Nash, Pacific Growth Equities.

Two quick questions. The first one was early in the call, you mentioned a number of 260 patients supported. And I was wondering what that referred to? I missed that unfortunately.

Sure. So we have done over 260 patients in the US under general use for the last six months. We are not likely counting every single patient that has been done, but we know we have done over 260. There are certain centers now that are operating on their own that we go back to when we are trying to make sure that we capture every single patient for our internal database.

Understood. And second question, which might be a little harder, is the issue of hospitals dropping out. I am just wondering exactly how that works with a hospital. One concern that someone might have is that as these hospitals tend to get more experience with the Impella and see that it actually works versus the balloon pump, that a large portion of them might want to drop out. Is there a way to gauge how committed a hospital will be to completing the study?

That is a good question, and there is a way to do it. And one of the reasons that we are now staying to our current levels is because the bulk of the folks that have been in this study now have used it commercially, and those that had an ethical question because they have used Impella and had success, they are transitioning out, and they are just going to be using it commercially.

Others believe in the technology but are committed to continuing with the enrollment of their patients. And that is based on the fact that they -- they made a very personal decision. So that is up to them, and the steering committee has discussions with them, and we feel confident that that bulk of the group that is left is committed to completing this study. And then those folks that were not yet completed with their IRB that dropped out, they potentially are dropping out because they are not really interested in the academic side of it. They want the Impella technology at their center. They are comfortable with the way it works, and they want to move forward and use it commercially on all their patients.

Brian Kennedy, Jefferies & Co.

Can I go back to the difference in the Protect II center base between last quarter and this quarter?

Last quarter we had 187 sites in total expressing interest either enrolling with IRB approval or awaiting IRB approval, and this quarter, as I calculated, we have about 103. So can you just walk through where that delta went? Obviously I see the 63 difference in centers who have purchased. Do we assume that the delta between the 83 or the 84 and the 63 are awaiting to purchase -- are about to purchase? Is that the proper way to look at it?

Close. So, Brian, it is 85 are enrolling. So we break it into those that are enrolling. So 85 are enrolling, and 18 hospitals are pending the IRB approval, and they are still moving forward. All the rest essentially have -- are now no longer in the study are dropping out of the study.

Right. Okay. And if I look at the 187 from last quarter and the new 85 plus 18, I get 103, so it is a delta of 84. Do I assume that the 84 has migrated to the 510(k) channel, and if so -- (multiple speakers) delta there -- (multiple speakers)

So 11 plus the 70 is 81, and there is an incremental three that were between the different quarters by the time we reported to the dropout.

Okay. And just in terms of the difference on the 510(k) progress front, you reported 163 have purchased this quarter and 100 last quarter, so a delta of 63. So the difference between the 84 and the 63 is centers that are interested in purchasing in the 510(k) channel but just have not purchased? Is that the right way to look at it?

Well, Brian, it is not a one-to-one. But just a comment on what you said. It is 108 purchased in Q2. 55 more purchased in Q3, bringing the total to 163. So it is not one-to-one of the 11 and the 70. In fact, some of the 11 already have the product, and some of the 70 also already have the product. They purchased it initially under general use as well, and now they are dropping out of the study. So that is why it is not a one-to-one. (multiple speakers)

Then just again on the 510(k) side, with the reclassification should we look at last quarter's 6.2 as the appropriate base, or is that -- should that number be higher if reclassified?

Say that again, Brian, please.

With the $6.2 million last quarter and the reclassification, is that the appropriate base to start from for 510(k) sales, or would the reclassification drive that number higher?

Well, the way we look at it is we relabeled so they can use it for a 510(k), so that is on top of it. But so this Q3 you would say the base was 6.7.

Right, okay. And then just lastly, is there anything you can tell us about 510(k) usage by indication, and has there been any change there that you have noticed? I mean you cited the device's efficacy in AMI shock. Are you seeing that trend up in 510(k)?

Yes, Brian, that is a good question, and part of the trend we like to see is that we started with the 76%, 77% higher, high-risk PCI. It is coming down, and we are seeing it expand now into AMI patients.

As I mentioned, we have done over 50 AMI patients that we have tracked and looked at survival data, as well as we're seeing acutely compensated patients, we're seeing some off-pump cases in surgery, and lots of other creative ways. So that is part of why we believe the application will continue to grow. But, as I mentioned, the high-risk PCI is really the right environment to get good patient outcomes, be scheduled to be there, get the physician and the staff comfortable with the technology, and that also mirrors what we saw in Europe.

Okay. So projecting forward you think it is going to remain close to that 75% high-risk PCI, 25% other ratio?

Well, I think it also depends on how fast everything grows, but I think that the trend should be high-risk PCI as we roll the technology out and people get trained. There is a very large number of high-risk PCI patients that we believe can benefit from Impella. We also know there's a very large number, potentially even a greater number for AMI patients, and we also know there are these acutely decompensated chronic patients that are also a relatively large number.

Again, if you just take balloon pump usage for AMI and high-risk PCI, that is about 60,000 a year in the US.

Due to the time, we can take no more questions. I would like to turn the call back over to Mr. Mike Minogue. Please proceed.

Thank you, everyone, for your time, and if you have follow-up questions, please feel free to give us a call. Have a great day.

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