ABIOMED Inc (ABMD) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Abiomed, Inc., Third Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time.

(Operator instructions)

I will now turn the call over to your host, Susie Lisa, Senior Director, Investor Relations and Corporate Development. Please go ahead.

Thanks Stephanie, and thanks everyone for joining us for the Abiomed Third Quarter Fiscal 2013 Conference Call.

As she said, I'm Susie Lisa, Senior Director, Investor Relations and Corporate Development. I'm joined today by Mike Minogue, Chairman, President and CEO; and Bob Bowen, Chief Financial Officer of Abiomed. 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; then we will open up the call for your questions.

Before we begin discussing the third quarter fiscal 2013 results, it's necessary to remind you that during the course of this call we will be making forward-looking statements, including statements regarding development of Abiomed's existing and new products, the Company's progress toward commercial growth, and future opportunities and expected regulatory approvals.

The Company'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, including the potential for future losses, complex manufacturing, high-quality requirements, dependence on limited sources of supply, competition, technological change, government regulation, litigation matters, future capital needs, and uncertainty of additional financing, and other risks and challenges detailed in the Company's filings with the Securities and Exchange commission, including the most recently filed annual report on Form 10-K, and quarterly report on Form 10-Q.

Listeners are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this 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 release, 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 fiscal 2013, as compared to the third quarter fiscal 2012; or third quarter fiscal 2013 as compared to the prior second quarter of fiscal 2013.

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

Thank you, Susie. Good morning, everyone.

We are proud to report another strong quarter in which we supported a record number of Impella patients. Abiomed grew 19% year over year in total revenue to $38.3 million, and set Impella usage records within the quarter for the highest month, highest week, and highest day. Our momentum continued to grow in spite of some recent challenges. This quarter we maintained our adapt and execute mindset, and I appreciate the resiliency demonstrated by the team and the loyalty of our customers.

Today I will focus on our first three corporate goals, and Bob will cover the fourth goal. Goal number one is revenue growth. This quarter, Abiomed achieved sequential revenue growth and year-over-year double-digit growth, driven by strong Impella usage. We have now grown sequentially in five of the last six quarters, and achieved year-over-year double-digit growth for 13 straight quarters. With record patient utilization, both prophylactic and emergency port increased, and represented 47% and 40%, respectively, of total usage. Abiomed now has a US field team of over 100 employees, and approximately one out of every three Impellas is implanted independently. Our dedicated on-site field team and expanded 24-by-7 call center support have become a key selling point and core competency for our Company. We consistently score high marks in independent surveys for customer service.

The number two goal is focused on our publications. There were 14 publications regarding Impella within the quarter, such as an EP study called Permit I in Circulation, Arrhythmia, and Electrophysiology; the US Impella registry in CTI; the European Impella Cost Effectiveness Study in the Journal of Medical Economics; and of course, PROTECT II in Circulation. We believe that many of these new publications will strengthen the literature around medical society guidelines, and Impella is now incorporated into three different guidelines. Specifically, Impella is now listed in the 2011 ACC/AHA/SCAI guidelines for PCI, the 2012 AHA guidelines for the use of mechanical circulatory support, and the 2013 ACC/AHA guidelines for the management of STEMIs.

The number three goal is around executing on our clinical and regulatory processes. This has been a busy quarter relative to our US Impella CP limited product release. We have supported over 200 Impella CP patients, and our customers are excited to have the additional hemodynamic support delivered on a 9 French catheter with the same speed of insertion and ease of use as the Impella 2.5.

On the topic of the 515 FDA panel meeting held in December, it was recommended that Impella remain as a Class III device, and that all existing and future temporary concircular assist devices will require a PMA. The overall process will take time before the issuance of the final rule that determines the device's classification. In the meantime, all the products in the categories remain on the market under their current 510(k) indications.

Since the December panel meeting, we have had multiple conversations with the FDA, and have recently submitted an extensive briefing document outlining the totality of the Impella data to demonstrate safety and effectiveness. This document is based on the outline presented in the Abiomed slides at the 515 panel meeting which is available as an exhibit to the 8-K we filed with the SEC on December 7, 2012. The summary includes 262 patients under FDA/IDE-approved protocols; 685 patients that meet the FDA clinical evidence requirements, including the Impella registry; and also references 201 publications covering 1,877 patients. It is important to note this library of clinical evidence required seven years of studies and a $30--million investment by Abiomed. Additionally, with over 12,000 US patients supported to date, Impella maintains a low adverse event rate relative to the MDR rates listed by the FDA.

From a hemodynamic perspective, there is extensive clinical literature demonstrating that Impella provides significantly more hemodynamic support than an intra-aortic balloon pump. Since the 510(k) clearance in 2008, Impella has become the most widely used heart pump in the United States. We have been encouraged by the FDA to submit a formal PMA, and we hope to gain additional clarity as to the agency's expectations for the submission after our meeting with them later this quarter.

Abiomed is also taking action to gain additional HDE regulatory approvals for our devices. Recall that the FDA humanitarian device exemption approval is for specific patient populations of up to 4,000 patients per year. These submissions will include prior FDA Impella studies, and may require small future studies or registry clinical data analysis. Our product portfolio continues to expand as well. For our new Impella RP US study, we are ahead of our original guidance thanks to a rapid FDA review and approval of the IDE protocol. We have already conducted our kickoff meeting with the clinical sites, and two RP-approved hospitals are actively screening for patients.

To remind everyone, this will be a 30-patient study across ten sites for an HDE submission in patients suffering from right heart failure with multiple applications. There is a critical clinical need for right heart support. Outside the US, our physicians have told us that this product has already saved lives. The Impella CP product and the Impella RP, when approved, will provide a new level of biventricular support that can be administered percutaneously, a first in the history of heart pumps.

In summary, our Company culture is motivated by our ability to impact the lives of our patients and support our customers. Abiomed has become stronger after every quarter and every challenge, and we are executing our tactical plans. Our Company has evolved into a resilient commercial organization that is profitable, debt free, and expanding the number of exclusive regulatory approvals, breakthrough innovative products, and geographical reach.

We believe the demand for our Impella platform has never been greater because there is a new level of awareness among interventional cardiologists for hemodynamic supportive procedures. This is due to many factors, including number one, recent cardiology trends around appropriate use criteria for patient selection; number two, scrutiny around length of stay and hospital readmissions; number three, new updated guidelines; and number four, a dedicated E-Impella CPT code.

Our clinical and economic evidence continues to build, along with our financial strength, as we again approach $90 million in cash after completing our $15-million share re-purchase plan, ultimately the most important factor to our customers is improving patient outcomes, and that is what we believe has been the key to our sustained growth for the last three years. This fourth quarter, we remain on track to close out another record year and record quarter on almost every major metric. We are very confident in our future, and believe these are the days and the ways to become the new standard of care for percutaneous hemodynamic support.

Thank you to all our stakeholders for your investment in our Company. I will now turn the call over to Bob Bowen, our CFO.

Thank you Mike, and good morning everyone.

Before I get started, I would like to refer you to the Safe Harbor language noted at the outset of the call, as well as the risks and uncertainties noted in our SEC filings, particularly our most recently filed 10-K and 10-Q. As noted by Mike, I will focus on our fourth corporate goal, which is operational excellence.

Fiscal third-quarter revenue of $38.3 million was up $6.1 million, or 19% from last year, driven by $6.7 million, or 30%, increase in Impella re-order revenue, including the Impella CP. The re-order revenue was largely driven by a 26% increase in reported patient utilization. As previously stated, we likely do not have this ability to all patient use given our customers' increased comfort with independent use. Revenues from initial site purchases of Impella 2.5 were $1.1 million lower than the prior year, as 23 new sites purchased the Impella 2.5 in fiscal Q3, versus 37 new sites in the prior year, due in part to our focus on the Impella CP limited launch. All other revenue from US legacy products, Europe, rest of world, service and funded R&D was up $0.5 million.

During the quarter we added Impella CP to 34 existing Impella 2.5 sites, bringing the total Impella CP site count to 46 as of the close of the quarter. Impella CP represented approximately 10% of overall reported US patient usage during the quarter. We are also watching these sites closely for usage and inventory patterns to help us understand how sites might adjust or re-mix inventory levels with the addition of the Impella CP. As of December 31, the addition of the Impella CP at these 46 sites resulted in a 33-unit increase in total Impella site inventory, or slightly less than one per site.

Thus, it seems at this early stage, the addition of Impella CT to the site mix results in an inventory carrying level of one additional Impella unit. The overall average hospital-owned Impella 2.5 and CP unit inventory level was consistent with prior quarters, at approximately 2.2 catheters per site. We may see this inch up over time as more sites add Impella CP, and as overall Impella usage increases; but for several quarters, average site inventory levels have not changed much.

In summary, our momentum continued and our commercial organization remained focused, in spite of some head winds during the quarter, including the disruption in the northeast from Hurricane Sandy. Despite these head winds, patient usage grew sequentially and year over year in all four of our US regions. The gross margin rate for the quarter was 78.7%, compared to 80.5% in the year-ago period. Gross margin rates were slightly lower than in past quarters due to placement of AIC upgrades, as well as costs related to capacity expansion to support future demand for Impella products, and initial start-up costs related to the addition of the Impella CP. An additional 149 AIC consoles were placed world-wide, and as of the end of the quarter approximately 50% of the US Impella 2.5 sites have received a new AIC console, which is required to operate the Impella CP.

Total operating expense in the fiscal third quarter was $27.2 million, compared to $23.7 million in the prior year, or up 15%, due mostly to increased personnel and related costs, largely related to the continued build-out of the commercial organization, and $1 million of outside legal costs related to the DOJ investigation. In the third fiscal quarter, income from operations totaled $2.9 million, or 7.6% of revenue, including $1 million of outside legal costs related to the DOJ investigation, compared to $2.2 million, or 6.8% of revenue in the prior year.

On a year-to-date basis, income from operations was $12.4 million, or 10.8% of revenue, compared to an operating loss of $1.4 million in the prior year. As noted on the last earnings call, we expect second-half operating expense levels to be higher than the first half of fiscal 2013, and at this stage of our development our plans are to continue to invest to support top-line growth, given the opportunities we see. We are very much on track to achieve our targeted operating margin rate for the year of 8% to 10%, and as noted on prior calls, we may fall outside that range in any given quarter.

GAAP net income for the fiscal third quarter was $2.7 million, or $0.07 per diluted share, compared to GAAP net income of $2.9 million, or $0.07 per diluted share in the prior year. This is our sixth straight quarter of GAAP profitability. Unusual items affecting GAAP net income in the quarter were outside legal costs related to the DOJ investigation of approximately $1 million, which reduced diluted EPS by approximately $0.02 in the quarter. Conversely, last year we received a $1-million settlement in the third fiscal quarter, which increased diluted EPS by approximately $0.02 per share.

Year-to-date GAAP net income of $11.3 million, or $0. 27 per share, compared to a loss in the prior year of $1.1 million. As a reminder, at the start of the year we had US federal net operating loss carry forwards of approximately $190 million, which are fully reserved for accounting purposes. These federal NOLs begin to expire in 2018, and stand to 2031.

The balance sheet remains in excellent shape. Accounts receivable of $1.9 million equated to 52% of quarterly revenue, or 48 day sales outstanding, compared to DSO of 49 days in the prior year. Inventory of $15 million equated to 39% of quarterly revenue, and turned at 2.4 turns, compared to 2.6 turns in the prior year. We have explicitly increased Impella disposable and console inventory levels during the year, with the addition of Impella CT, as well as a planned effort to increase CT stock levels and maintain CT stocks at our Aachen, Germany, and Danvers, Massachusetts, facilities for risk mitigation purposes. We are fortunate to have the financial flexibility to take these precautionary actions.

We ended the quarter with cash and short-term marketable securities of $85.7 million. During the quarter, we generated cash of $7.7 million from operating activities, used a $0.5 million for capital expenditures, and used $10.7 million to re-purchase 800,000 shares of stock. On a fiscal year-to-date basis, we have generated cash of $18.8 million from operating activities, used $2.1 million for CapEx, and used $10.7 million to re-purchase 800,000 shares of stock. As a reminder, we have no debt. Please note that we completed our $15 million stock re-purchase program in January, with the purchase of an additional 323,000 shares of stock for a total cost of $4.4 million.

Turning to guidance, we are pleased with our performance through the first nine months of the fiscal year, and the team really delivered throughout the third quarter. We are maintaining our full-year revenue guidance for fiscal 2013 in the range of $155 million to $157 million, representing an expected annual growth rate of 23% to 24%, with Impella growth greater than 30%.

Operator, we will now turn the call open to questions.

Thank you.

(Operator Instructions)

Our first question comes from Brooks West from Piper Jaffrey. Your line is open.

Good morning, I have got a handful of questions. Let me start -- Mike, did you provide an update on the DOJ investigation and expected timeline there?

We did not provide an update. Essentially nothing has changed, and we are cooperating and have been providing information to them.

Okay. Any -- can you narrow their -- what they are interested in at all for us, or still kind of ambiguous there?

Still ambiguous. Again, after the last earnings call, we also maintain that we are in compliance with the FDA.

Okay. Let me switch to Impella. 21% global growth in the quarter, you're guiding to 30% growth for the year, more than 30% growth. By my math that implies about $38 million or more in Impella revenue in fiscal Q4, but more importantly about an 18% growth rate, given the strong start you had to the year. I'm wondering is that growth rate kind of a high teens growth rate? Is that a level we should think about as we view Impella growth going forward? Is that a place to set expectations?

Brooks, we grew -- we think we are going to grow more than 30% this year. The back end of the year comps are more challenging than from the front end of the year comps. We'll give guidance for next year on our next call, but I think it's not unreasonable to expect that we are going to see sort of a potentially a similar pattern, with -- because the growth that we secure here in the back half of this year is going to flow into the front half of next year, and so the growth rates are going to naturally increase.

Okay, two more. Mike, we all know PCI volumes have been coming down. I wonder if you could comment on where you feel you are in terms of penetrating your potential Impella market, and how do you feel procedure volumes have impact that? Then I have one last one on gross margins.

Sure, so Brooks the overall PCI volumes are coming down, and that's based on this scrutiny of the appropriate-use criteria. When you look at that criteria, there is significantly the highest form of appropriateness comes to the patients that require the most -- the most complex, the most severe -- and it's also the way the CPT codes have been aligned. The sicker the patient, the more appropriate; and the physicians are being reimbursed for that. What it also means is there are several physicians that are now growing a practice around the complexity of PCI, and they are looking to incorporate a hemodynamic strategy into that platform.

You still feel like your penetration is going up?

We feel like our penetration is going up. We also believe there are more patients coming to the cath lab in general today that are a lot sicker than in the past; and many of these patients are being turned down by the surgeons, because they are not looking to do all comers any more. There is a heart team approach, and their adverse event rates, again for the surgeons, are listed on line. There is a lot of collaboration, and what you're starting to see is that you can have a benefit of PCI for patients that in the past might have been turned down by the heart surgeon.

Last one, Bob, on gross margins. I understand there is some start-up costs this quarter. Should we look for that to pop back up to more traditional -- greater than 80%? How should we think about gross margins?

I'm not sure I would suggest that it's going to pop back up. I think it will return to prior levels, with really the wild card being I think how quickly we choose to place AICs at the remaining existing sites. From an operating standpoint in the manufacturing area, I think we'll return to normal levels.

Great, thanks guys.

Our next question comes from Greg Simpson from Wunderlich Securities.

Good morning, everyone. Mike, let me focus first on CP. My talks with doctors indicate a very high level of interest, and it seems that is starting to show up in your numbers. Maybe give us a little more indication from you what you are seeing in the field, and then kind of the plans for the broader roll-out as we move into 2013?

Sure, Greg, as you said in your question, there is strong demand. They do like the fact they can get more flow and essentially have nearly the same insertion time, in some cases the same introducer. We just have been getting very positive feedback overall on the technology. What we are going to do this quarter is now go to a broader base of folks that have the AIC, that have more extensive experience, and continue to get them comfortable with the technology, and get them to independent use.

Can you maybe give us a sense -- I know there is a little bit of training involved -- how much of a time sink is that for the sales guys in the very early going?

I think it is a little bit of a time synch, but it's also well-invested time. Part of what we've done is we've continued to expand our clinical team, our training organization in the field, and we've essentially tripled the size of our call center so that we're able to respond quickly and help with more support.

Okay, and the feedback I get on the product is great. I'm curious if -- I know it's early, but can you give us a read on maybe how the usage specific to the CP kind of breaks down. Is it in fact -- and again, I realize very limited usage -- is it in fact being focused more on the emergent use, as opposed to prophylactic, or is it a mix?

I think the way we are approaching the market is we are giving them an Impella pump, and then they can choose the flow rates that they'd like. That can be based on the size of the patient, the complexity of the case, and the flow rates that they want. There is a slight price difference, and what you are seeing in our breakdown is there certainly was a little bit of a bump up in our emergency use this past quarter. But I think again as our strategy is not necessarily to have just one product fit all, it's to give the full flexibility to the physician to choose the flow and to choose the price point. I also think some of the benefit on the emergency side has to do with some of the recent publications around the intra-aortic balloon pump, and I think people are more open to hemodynamic support, and deciding when they need to get more than 2.5 liters per minute, and when 2.5 liters is appropriate.

Okay, thanks. To have that lead in to a follow-up on gross margin, Bob, you mentioned obviously the recovery in gross margin -- or the pop-back, whatever we want to call it in gross margin -- depends in part on the pace of placing the AICs. Is there any additional pressure on you guys, since you have to have the AIC for the CP? Are you getting more demand for the AIC, or are people pushing you a little harder to get it?

I think the AIC is just a great console, and it automates a lot of the steps, and it fundamentally changes the way people think about the procedure. Ultimately all sites are going to want it, and we just are feathering out the upgrade process over time. Yes, there is a lot of demand for it, and we would expect over time that all sites will get it.

Okay, and then one final question if I could, Mike, on Japan. It's kind of got lost in the shuffle here lately. Can you give us an update there? I'm curious about the visibility you have on the process, and maybe just kind of refresh us. I know you've suggested before year-end calendar '13. How much visibility do you have on that? Obviously, it's a significant market opportunity for you guys?

Sure, Greg. We do have visibility to it. We maintain our guidance to the end of the calendar year 2013 for the approval with the reimbursement potentially to be approved within six to 12 months of that date.

Okay, thanks very much.

Our next question comes from Jayson Bedford from Raymond James.

Thanks and good morning. Just a couple of quickies. There was certainly a lot of noise in the third quarter, whether it be the 515, the DOJ. Do you think that impacted usage in the field? Meaning, are customers for some reason more hesitant to use the technology in any way?

I think there definitely was noise. For the most part, our average user and physician is not tied into that noise. Certainly some folks may hear about it that track more of that information. We said we had our best month in history, and that actually was in October. We said we had our best week ever, and that was actually in December; and we had tied for our best day ever, and that also was within the quarter as well. I think that a lot of this has to do with the distraction of Management and our focus. I'm very proud of the field team for the way they executed. The most important factor to customers, again, is improving patient outcomes, so I think in their grand scheme, they are focused on using the technology because they believe it is the right thing for their patient. From a Management perspective, we are back on track, we're excited for the fourth quarter, and we're moving forward.

It was touched on earlier, but on the CP launch, from what you have seen so far, do you think it is expanding the market? Meaning, those centers who are using CP right now, are they using it more than they did with the 2.5?

What I think it is, there is just an acknowledgment, for those of you that have done the surveys for a while, where you've heard the comment that they wanted more than 2.5. There is an acknowledgment with some of the users that they had asked for higher flow, and they believe that they needed it for certain patients, and now they have it. Ultimately, that likely helps the penetration rate in getting people to think about hemodynamic support for a broad range of patients.

Last one for me, and then I'll get back in queue. You mentioned that you'll meet with the FDA, I think, later this quarter. When do you think you'll know which path you are going down? Meaning, whether or not the FDA will allow you to use existing data for the PMA?

I think the 515 to the PMA process is really looking at the totality of the data. As I outlined, we have a tremendous amount of patients under FDA protocol, and we have an ongoing registry, and we feel confident that the FDA is going to look at the totality of the data, and there also were comments at the panel meeting itself that some companies may not have to do another study, or may have the ability to use what they have. We feel good about where we are. We obviously -- we have a good relationship with the FDA, and their interest is again to keep the best technology out there to help patients, and we feel good about the process moving forward.

Thanks.

Our next question comes from Raj Denhoy from Jefferies, your line is open.

Hi, good morning. I wonder if I could ask a bit about that submission you did to the FDA of the totality of the data you have to date. I'm curious what's in that that might be new or that the FDA has not yet considered through the review of the product thus far?

Sure. The outline of it, if you go look at the slides that we presented at the panel meeting that we posted in our 8-K -- that was December 7 -- you'll see the outline of it; but it is -- there's 262 patients that were included in FDA studies. That also includes patients that had failure -- trouble coming off the heart-lung machine, that's the RECOVER I. It also includes the publications of both registries, the European registry and the US registry, which they've never reviewed, and they didn't review in the panel meeting; it was omitted.

Also, it's just there is so many publications each quarter. We're averaging about 15 publications per quarter that were also not included, and we have four pending publications, both upcoming on the US registry, as well as more on the PROTECT II, so we're able to share a little bit more insight on those things. That was mentioned briefly at the panel meeting by Dr. Popma. Last is the guidelines continue to be updated, and many of those guidelines that incorporate Impella don't include the latest and our most comprehensive publications.

Right. Just so I'm clear, though. My understanding is sort of the backbone of it is the PROTECT II, and I guess there's a couple other FDA-approved studies, as well. There has been some publications on the registry data to date. I guess your sort of take on it, though, is the FDA has not fully considered all of this? I imagine a lot of the follow-on studies and the smaller studies really aren't Class I data. You are suggesting there is a lot of data yet the FDA needs to consider, or perhaps consider differently before they make their final decision?

Well Raj, I mean they have never done a review for the PROTECT II or all these other publications under a PMA-type approach, because we have a 510(k) clearance. Now, they have done reviews from the data back from when we did the 510(k), and they incorporated in the PROTECT I and some of the registry data, or some of the publications from Europe, but we have never actually gone in and submitted a packet for the totality of the data. This will be an entirely new submission, and the 515 panel wasn't specific to Impella, again was a category. Even though they did spend a lot of time talking about PROTECT II, the panel was really recommending for both all existing and all future technologies.

Okay, that's fair. You mentioned, obviously, the CPT code came in place this year. Have you seen any change in terms of clinicianalization or anything, once that code was put in place on January 1?

Well, can't comment about the quarter, within the quarter, but what we maintain is that having a dedicated CPT code standardizes the process. It's a lot easier for folks to do that versus our unlisted code, which they may get paid or they may be denied. If they are denied, they may resubmit. They have to fill out a lot of paperwork per patient. Again, just from an audit perspective, is having a dedicated, or having dedicated CPT codes simplifies the process. Raj, I go back to the other comment about what interventional cardiologists are looking for is really standardization. They want to practice medicine on appropriate patients, and they want to have a standardized approach on the technology they use. Overall, I think that is very positive.

Okay. Also on reimbursement, now that we're in this 515 -- sort of the post-515 process and we're waiting to hear what the FDA is going to do here -- what are your thoughts on how reimbursement might play out going forward? If the FDA asks you to do an additional trial even if this period lingers on, and there remains questions about the FDA stance on approval for high-risk PCI, what are your thoughts on what the carriers may do, particularly the regional carriers in terms of continuing to reimburse for that indication?

Yes, so the 515 panel basically said this category should be a PMA. They didn't vote, or even comment anyway, on the technology of Impella itself. I would encourage all the folks to go back and read the conclusion statements of the publication of the European registry or the US Impella registry, or even the PROTECT I and PROTECT II conclusion statements, which talk about safety, feasibility, hemodynamic support. I think that is the important thing to consider.

We have recently met with the CMS as we do our yearly updates what we're doing. We maintain, as we released in our 8-K, that we do not believe there will be a national coverage decision this year on Impella. However if we did have one, we'd be confident in the outcome based on our current clinical data, and also the history with the NHIC, and the fact that all the regional carriers are covering it today, as well as the fact we recently got approval of a dedicated CPT code, which is again a two-year process that the Society submits to AMA, and AMA gets approval from CMS.

In our opinion, being put on the list with the balloon pump for a potential may be more caused by the recent information and publications around the intra-aortic balloon pump rather than Impella. Again, we are just going to continue to update them about all our publications, letting them now we are now in three guidelines, and also showing them all the new publications so that as we move forward, our physicians have the ability to utilize our technology.

Okay, then just housekeeping. Did you say the split was 47% high-risk PCI and 44% MI in the quarter, in terms of Impella utilization?

It was 47% for prophylactic and 40% for emergency.

40%. Okay, thank you.

Our next question comes from David Lewis from Morgan Stanley. Your line is open.

Hi, it's Steve Beuchaw from Morgan Stanley here for David Lewis. I apologize if there is any feedback on the line. I don't know if you're getting that. Bob, I wanted to follow up first on a comment you made earlier in the Q&A. It sounds like you feel comfortable with a case for top-line re-acceleration beyond an implied -- let's call it 10% or 12% revenue growth in the fourth quarter. It seems like it is easy enough to get there, if we say utilization trends back up toward 1.9, 2.0, we keep adding 20 centers per quarter. Is that the right way to think about this going forward, and are there any other levers we should be thinking about that give you that confidence in the re-acceleration of revenue growth?

I think that's the right way to think about it. We'll add probably at least 20 centers, Impella 2.5 centers, per quarter. We expect utilization to continue to grow. As we move into the first half -- I look at the growth rate on an annual basis, and I find that to be more meaningful, myself, than the quarterly growth rates, because there is some seasonality in the business, there has been historically. We will see -- I fully expect a re-acceleration of the growth rate in the first half of next year. To the extent the comps are more difficult in the second half, it could abate somewhat again in the second half of next year. We'll have to see what our planning shows as we work through that the next couple of months. But I think that seems to be the nature of the business. The overall growth rate, I think, is -- but the annual growth rate is what's most important to me.

Thanks, Bob. One on the DOJ process, just a clarification. Is it correct to have the view that any sort of changes to marketing or any re-training, these are all completed at this point so that to the extent there might have been any disruption in the field sales force, that's all behind us?

Steve, this is Mike. As we said at the last call, we believe our processes have been compliant for some time, and we'll continue to focus on maintaining that rigor around what we do, including using the FDA as an extension of our marketing team. As we do new materials in the projects, we'll incorporate them in that approval process from the start.

Got it, thanks. One last one on the 515 process, just a clarification. In the comments you have made here on the call, are we really focusing on -- I should say, have you been really focusing on the shock indication, or is this inclusive of high-risk PCI, and are these processes running in parallel? Thanks so much, everyone.

I think what our strategy is, is to incorporate the totality of the data. We have extensive amount of information on PROTECT II and PROTECT I, which is more on the prophylactic use, but we are certainly working with the FDA on other ways to explore indications, and that can be through the HDE, a national registry, or another study that they would like us to conduct on top of what we are already submitting for. We'll continue to update you all as that process unfolds.

All right. Thanks everyone.

(Operator Instructions)

Our next question comes from Charles Croson with Sidoti and Company. Your line is open.

Hi guys, thanks for taking the questions. Just a couple quick ones as most of mine have been answered. Mike, you talked about the confidence with the LCD. I know it might be tough to comment on that. Do you think that with the data you have, that you would at least -- let's say we're in the early stages of that process each being a possibility. But do you think it would look something somewhat similar to what the LCDs look like right now? Would that be what that outcome -- given the data you guys have, do you think that would be the outcome you would probably get?

That's what we believe. If you remember, the NHIC decision was made before the 2011 guidelines, and additionally these last two that I mentioned on the call. It was before the publication of the US Impella and the publication of PROTECT II. We have more publications now coming that are going deeper into whether it's the subset -- of the pre-defined subsets that were in pro PROTECT II, or just more analysis of the US Impella registry.

Whether or not we go through it, they'll determine. I don't think we meet the criteria because our numbers are small. Being now in three guidelines and having the amount of data we have, it puts us in a tier of our own as a 510(k), and actually puts us in many cases just having more data than many PMAs that are out there on the market today. We're focused on moving the technology forward, and we will work with CMS on whether or not then to do it on a local basis or national basis, but it doesn't change our strategy to publish both the clinical data, as well as the cost-effectiveness data moving forward.

Okay, that's helpful. Bob, a question for you. I think you quoted the sales reps are now just above 100. What's the plans in adding more reps as we go through '14?

For the foreseeable future, we will continue to add four to six heads in the field per quarter.

Okay. All right, and then one last question. I think you touched up on it, Mike, just briefly. The warning letters that are still outstanding with the FDA, I know you said you were in compliance and you gave good details last time we had met. Anything further to add to that?

No, these letters stay open for a period of time, and we just have to continue to establish the credibility and work with the FDA. Over time, we will look forward to have that letter closed down.

Okay. All right thanks, that is all I had.

Thanks Charles.

Our next question comes from Bob Hopkins from Bank of America.

Good morning. Just a couple of quick ones. First, can you talk about Impella pricing this quarter? Are there any changes that are worth pointing out; and going forward, as you look to next year, what your expectations are for price? Is it a reasonable way to model maybe low-single-digit price declines, or do you think you can maintain price?

Bob, our strategy would be introduction of the Impella CP, which we've introduced at an ASP of $25,000, is to have some slight -- a gap between the CP and the 2.5 for those sites that get the CP, with the overall objective of maintaining the ASP that we've had previously. This quarter versus last year, the domestic catheter ASPs were within $0.04 of each other. So we didn't see any change in ASP this year versus last, and on a year-to-date basis they were also very close. That's what we're intending to execute going forward.

Great. One other in terms of the Impella revenue number in the quarter. I was wondering, can you guesstimate as to how much Sandy might have hit you? Was there anything else in the quarter, either positive or negative, that impacted that number, in your view?

Well, we did see -- without getting into the specific numbers -- in the Newark, New Jersey, area we did see a noticeable reduction in patient use during the quarter, which has now started to ameliorate. There was certainly disruption in the Northeast, both from a site standpoint. Some hospitals were closed, as you may well know; and our people, some of them, their homes were -- had some significant damage. They couldn't get gasoline for their cars, there was clearly Northeast disruption. We are particularly pleased to see that despite that, they still managed to grow sequentially.

Was it more than a couple million dollars or was it less than that?

It was less than a couple million dollars.

All right, thank you very much.

I'm showing no further questions at this time. I will now turn the call back over to Mike Minogue for closing remarks.

Thank you everyone for your time today, and thank you for your support. If you have any follow-on questions, feel free to reach out to us, and have a great day.

Thank you ladies and gentlemen, that does conclude today's conference. You may all disconnect, and have a wonderful day.