ABIOMED Inc (ABMD) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ABIOMED third quarter 2014 ABIOMED earnings conference call. All participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. (Operator Instructions). I will now introduce your host for today's conference. Aimee Genzler, you may begin.

Thanks, Ashley. Good morning and thank you everyone for joining us for ABIOMED third quarter fiscal 2014 conference call. I'm Aimee Genzler, Manager of Corporate Communications, and 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 third quarter. Next, Bob will provide detailed financial results outlined in today's press release and we will then open up the call for your questions.

Before we begin discussing third quarter fiscal 2014 results, it is 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 expanded 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 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 are valid 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.

Also, we remind our participants that the products discussed on this call, including the Impella 25 and Impella 50 and Impella CP are 510(k) cleared for partial to full circulatory support for periods less than six hours and during critical procedures that do not require cardiopulmonary bypass. Other products discussed including Impella RP, Symphony, and Impella Pediatric are currently investigational devices and are limited to investigational use.

Lastly comparative references made financially on this call to revenue, expenses, gross margin, or other increases or decreases will be indicated by references to third quarter of fiscal 2014 as compared to the third quarter of fiscal 2013, or third quarter of fiscal 2014 as compared to the second quarter of fiscal 2014. I am now pleased to introduce Mike Minogue, ABIOMED's Chairman, President, and Chief Executive Officer.

Thanks, Aimee. Good morning, everyone.

ABIOMED delivered another solid quarter, with a 21% increase in total revenue to a new all-time high of $46.2 million, and a 25% increase in Impella revenue to $42 million. This quarter, ABIOMED received additional approvals on commercial insurance coverage and achieved new all-time quarterly records on Impella utilization for the highest reported patients treated in a month, week, and day. We have grown top line revenue double-digits for 17 straight quarters year-over-year, achieved profitability, and accumulated $107 million in cash without incurring debt. Impella is now in over 800 US hospitals, with over 2,000 physicians trained and the demand for Impella CP is evident in the results.

We believe our continued growth is driven by a combination of factors. First, Impella is a break-through patented product platform with existing reimbursement for hospitals and physicians. Second, Impella serves an unmet clinical need for percutaneous circulatory support for minimally invasive procedures to treat a growing population of high-risk patients. These trends will likely only grow greater over time. And finally, ABIOMED is capitalizing on the opportunity to increase revenue, complete the regulatory requirements, and become the new standard of care.

On today's call, we will cover three of our four fiscal year goals and provide specific updates relative to our progress, starting with our second goal, achieving significant patient and revenue growth. This quarter, overall company and Impella rest of new growth exceeded 20%. As a percentage of total case mix, prophylactic and emergency circulatory support represented 48% and 42%, respectively, with 10% in all other categories of total usage. We are pleased that all three patient categories grew double-digits year-over-year.

We also continue to preserve our discipline in the US to limit quarterly new site openings and maintain low customer inventory levels. One interesting European trend is that since the publication of the intra-aortic balloon shock II study in Germany, Impella sales in Germany have ramped on average 200% year-over-year for the last three quarters.

Our third goal is supporting the medical community to publish manuscripts on hemodynamic support, patient outcomes, and cost effectiveness. This quarter the study called "The Current Use of Impella 2.5 in Acute Myocardial Infarction Complicated by Cardiogenic Shock -- Results from the USpella Registry" was published in the Journal of Interventional Cardiology based on the analysis of 154 consecutive patients from our US registry. Although subject to certain limitations inherent in a retrospective registry study, the abstract conclusion stated, "the results of our study suggest that early initiation of hemodynamic support prior to PCI with Impella 2.5 is associated with more complete revascularization and improved survival in a setting of refractory cardiogenic shock complicating in AMI." Additionally, the published multi-variant analysis reports that initiation of Impella 2.5 support prior to PCI was an independent predictor of in-hospital survival, especially for women.

We encourage all of our investors to read this important publication in its entirety, and note that in ACC, AHA, SCAI, PCI guideline already exists with a class one recommendation for PCI and hemodynamic support for patients with cardiogenic shock requiring stabilization. Overall in Q3, there were over ten public new articles published referencing Impella. We believe our focus on clinical publications, along with cost effectiveness data differentiates the Impella platform. We believe it is unique for a product to altogether have the potential to enable minimally invasive treatment options, improve outcomes, and reduce costs. This is likely a contributor to positive reimbursement coverage from many major private insurance carriers, as well as CMS.

Our fourth and final goal is executing on our clinical and regulatory processes in order to achieve approvals in Japan and the United States. To remind everyone, the FDA modular submission is summarized by a PMA shell which outlines the modules, provides a table of contents, and identifies information necessary to support the filing and approval of a specific class III product. The FDA has approved our PMA shell, which outline the components of preclinical and testing, manufacturing and quality, and clinical data. We are on schedule for our clinical summary, and plan to submit our fifth and final module for the PMA in February as planned. The other four modules have already been submitted in prior quarters, which utilize information from our prior FDA 510(k) clearances.

The Impella 2.5 PMA being filed as part of the 515 process provides the FDA access to data on multiple FDA studies, registry publications, over 18,000 patients and five years of real world US clinical experience, and medical device reporting, or MDR, safety records. Until the 515 process is completed, ABIOMED will operate under its existing five 510(k) clearance from 2008 to 2012.

With respect to our Impella RP study to support a humanitarian device exemption, or an HDE submission, we have enrolled 24 of the 30 patients and are 80 percent completed. We are currently preparing to submit for a CAP approval, or continuous access protocol, for the approved 15 RP sites in order to continue enrolling patients after the thirtieth patient. We anticipate an Impella RP CE mark later this year, and FDA approval by February 2015. The Impella RP operates on the same AIC console and will be introduced into our established hospital installed base.

As a reminder, there is no other product like the Impella RP. And for the first time, it enables percutaneous biventricular support for heart failure patients.

Now I would like to provide an update on Japan. We are anticipating the PMDA approval of Impella in Japan by the summer. This slight delay from previous communication is due to our internal prioritization and allocation of resources in order to complete the FDA PMA submission. However, reimbursement is anticipated to be completed earlier than communicated and follow within six to nine months from approval. Our Japan hybrid distribution strategy is progressing as we complete the regulatory approvals independently, and make plans to manage and support the top 20 heart hospitals and key opinion leaders. The responses from the potential partners on our Japan RFP are being evaluated by our team.

Today ABIOMED is announcing that we recently received CFDA approval in China for Impella 25, Impella 50, and the original MPC console. We will submit a new application in the future for the AIC console and Impella CP. As a result, we will conduct a limited launch at five to ten key hospitals next year, in 2015. Once we select our strategic partner to cover the rest of Japan, we plan to expand to China and India under a similar model. After we establish our footprint in Asia with the Impella platform, we intend to commercialize and launch Symphony there first because of the enormous demand for a low-cost, minimally invasive, implantable heart pump with the unique potential to remodel or recover the left ventricle in chronic hearts.

In summary, ABIOMED is growing consistently by double digits, is profitable, is innovating new products. We are on track to transform into a PMA and PMDA company and offer biventricular percutaneous heart support to our expanding global install base. From a strategic perspective, as we complete Q4, poised for another record year in patients and revenue, we are even more excited to enter the next phase of growth with two pending regulatory approvals and a new product introduction on the way.

As always, we want to thank all our stake holders for their support and all our employees for their hard work and dedication to our mission. I will now turn the call over to Bob Bowen, our CFO.

Thank you, Mike, and good morning, everyone. As noted in this morning's full earnings release, fiscal third quarter revenue was a record $46.2 million, an increase by $7.9 million or 21% from the prior year. Worldwide, Impella product revenue grew 25%, which was the highest worldwide Impella growth rate since the second quarter of fiscal 2013.

In the US, Impella revenue grew 21% to $37.7 million. The primary components of US Impella revenue include -- US Impella reorder revenue in Q3 totaled $31.4 million, an increase of 16% from the prior year, reorder revenue growth from the quarter was slightly higher than reported patient use growth in the quarter of 14%, due mostly to the increasing mix of the higher priced Impella CP, revenue of $3.8 million from the initial purchase of Impella CP by 75 hospitals compared to revenue of $2 million from the initial purchase of Impella CP by 34 hospitals in the prior year, and revenue of $2.5 million from 31 new Impella 2.5 site openings compared to revenue of $1.9 million from 23 new Impella 2.5 site openings in the prior year.

Reported patient use again exceeded unit reorders. Total US Impella 2.5 and Impella CP unit reorders were approximately 92% of reported patient use, essentially what we have experienced in each of the past three quarters and in line with our current expectations during the rollout of the Impella CP. Hospital unit inventory levels of Impella 25 and Impella CP remain lean and combined total 2.5 units per hospital, compared to 2.4 units per hospital in the prior sequential quarter. We will not be surprised to see the average climb toward three units per site as we expect many sites to settle on an inventory level of at least two Impella CP units and one Impella 2.5 unit.

Thirty-seven percent of US customers now have the Impella CP. Forty-one percent of reported patient use was with the Impella CP. And 47% of US Impella revenue was from the Impella CP. This reflects the continued strong demand for this higher-flow device, along with growing emergent patient use.

Outside the US, we had another strong quarter of Impella growth. OUS Impella revenue totaled $4.3 million, an increase of 76%, again as a result of growing Impella revenue in Europe, particularly in Germany. Worldwide service revenue grew 15% to $2.7 million, as a result of the increased installed base of Impella AIC consoles and related service contracts. Legacy product revenue, which is largely the AB5000 product totaled $1.4 million in the most recent quarter. We expect to experience continued declines in legacy product revenue due in part to caninbalization from the Impella CP and 50.

Gross margin for the quarter was 79.5%, compared to 78.7% in the year ago period. The gross margin improvement of 80 basis points was largely due to higher production volumes and improved yields, offsetting the margin impact of placing 178 Impella consoles in Q3, compared to 149 in the prior year.

Approximately 80% of Impella sites in the US now have the AIC console. For the foreseeable future, I think it is reasonable to assume that console placements per quarter will continue at approximately this level to complete the conversion from MPC units to AIC units. To support increased site needs and to support growth outside the US.

R&D expense of $7.8 million is up $1.5 million compared to the prior year, largely due to expenditures to support ongoing product development and clinical initiatives, including the Impella RP trial, as well as to support regulatory filings in the US and Japan.

SG&A expense of $24.4 million grew $3.5 million compared to the prior year. Of the $3.5 million increase, $3.2 million was related to our continued investment, sales, marketing and our 24/7 customer support center, most of which is headcount-related investment, and all of which is focused on maximizing customer satisfaction and the patient management experience. We also incurred 0.7 million of medical device tax for which there was no counter part in the prior year.

GAAP net income for the fiscal third quarter was $4.4 million, or $0.11 per diluted share, compared to GAAP net income in the prior year of $2.7 million, or $0.7 per diluted share. At this stage of our growth curve, our primary focus is on activities that optimize patient outcomes and the pathway to establishing improved standard of care. But we also take great pride in our earnings and cash generation performance, particularly for a medical device company of our size.

The balance sheet remains in excellent shape, and we continue to prudently manage working capital, which is reflected in our growing cash position. Both accounts receivable and inventory levels are little changed from the start of the year on a growing revenue base. We ended the quarter with cash, short and long term marketable securities of nearly $107.4 million, up $19.2 million from the start of the fiscal year, and we have no debt.

Turning to guidance. As noted in our press release, we are reiterating our full year revenue guidance in the range of $180 million to $185 million with Impella growth expected to be approximately 20% for the year. Although we do not provide quarterly guidance, we recognize that this quarter's guidance essentially provides fourth quarter, as well as total year guidance.

I would remind investors that last year's fiscal fourth quarter was very strong, which makes this coming quarter a tougher year-over-year comparable. The fourth quarter year-over-year quarterly growth rate will likely be lower than the third quarter growth, while still achieving our annual guidance.

Through nine months, income from operations was 3.5% of revenue. As indicated in our last call, we believe income from operations for the year, excluding any one-time charges, will be in the range of break even to 5%. We do expect to incur higher operating expenses in fiscal Q4 due to the timing of product development expenditures, higher SG&A expenses, including higher stock compensation expense, and costs to complete the documentation, document submission phase of the DOJ subpoena. Through nine months, we have incurred $4.9 million of outside legal costs related to the DOJ subpoena and shareholder litigation, and we expect the total will be approximately $6.2 million for the fiscal year.

In summary, the team delivered another great quarter of execution, and we look forward to another record year of Impella performance. We will now open the call to questions. Operator, would you please open the line?

(Operator Instructions). Our first question comes from Matthew O'Brien of William Blair. Your line is open.

Good morning. Thanks for taking the question. I was hoping we could start with Japan first and the commentary about timing there. It looks like net-net given what you're saying about reimbursement timing that we're still probably looking at something around March 2015 to be selling that product. So it really even though you're getting delayed a bit in terms of the approval, the actual timing of commercialization is about the same.

And then if you could help us understand the decision to reallocate some expenses over towards the FDA submission here in the US versus Japan, because it looks like the SG&A number in the quarter went down pretty meaningfully.

So, Matt, just real quick on the Japan question. Yes that's correct it's probably net-net around a three month slip provided everything else goes as planned. And then on the moving to resources, part of that just had to do with we are finishing up filing and responding to questions in Japan. Some of that time and those resources were moved so we could complete the FDA. And as far as the cost side -- Bob?

Yes. Matt, we did allocate resources to the US FDA regulatory process. But the real reason for the downtick in the SG&A expense sequentially was the result of a lower spend on the legal fees related to the DOJ submission process, and that is just timing of their submitting products to complete the process. And so a little bit of that money is shifted into fiscal Q4. So the DOJ actually in Q3 was $700,000 and in the prior quarter, it was $1.7 million. So it was down $1 million on those legal fees.

And then the other piece was stock comp was lower in Q3 than it was in Q2. It was about $1.1 million lower, and that's basically just a function of how our grants work and when performance milestones get met. And this tends to be a little bit lumpy and that's going to probably tick back up in Q4 which is one of the reasons our expenses will go back up in Q4. And the DOJ will tick back up in Q4 also.

Okay. That's all very helpful.

Secondly, on the international side of things, you know, growth there, obviously, very strong again. Is that all driven by Germany and then you're going to be coming up against a difficult comparison here in a couple quarters. How should we think about the international business going forward?

So I think, Matt, the question on international is we look at it as Europe, and Europe is primary driven by Germany, where we have invested some additional heads in leadership and they've been executing and doing a great job. And so we continue to see that and have views that that will continue to grow. As well as the rest of Europe is also expanding. It's been positive across the board.

As far as outside of that, it's really been preparing for the Japanese market, and we -- as you know, we don't expect to have any revenue from that this fiscal year.

Okay. One last one for me if I may. On the RP CAP, can you talk a little bit more about some of the timing there and I'm assuming you're going to be getting paid for those products. Is it reasonable to think that could be over the course of a year a several-million-dollar opportunity?

No. The way the CAP works, a percentage, you continue to submit for chunks of basically 20 to 30 patients at a time. It's more about us collecting more data than driving revenue. And we do expect to have -- we're at 80% now complete. We expect to hopefully wrap this up over the next two months, the final patients.

Great. Thank you.

Thanks, Matt.

Thank you. Our next question comes from Chris Cooley of Stephens. Your line is open.

Thank you. Good morning. I appreciate you taking the questions.

Hi, Chris.

Could you maybe just elaborate a little bit, Mike, on the Symphony plans? I was a little surprised to hear you talk about Asia first. I understand strong demand but I'm curious if you can utilize that data in the US. I haven't seen much out of Asia accepted here in the US I've seen European data accepted in the past. I'm kind of curious about the thought process there and then I have one quick follow-up. Thanks much.

Sure, so the thought process on the Symphony is it's a completely unique idea. It's patented as well. And it's the only device in development that can be put in in less than an hour, does not require a sternotomy or any physical touching of the heart itself. It's put in somewhat of a pacemaker pocket where you sew the 30 CC pump into the subclavian -- it's timed with the heart -- and these are for patients that they are frequent fliers. And many of the countries outside the US, they really don't afford devices or destination therapy. There is no destination therapy and in some cases not really as big a transplant culture as well.

So starting with the more developed one, Japan has expressed interest in this device specifically, because they do have an incredibly large heart failure market. Physically, they're small m size. And the intent of the Symphony is that when you put it in, you're eventually going it take out. If you go to places like China and also India, again, there's a large heart failure population but there's really not a lot when you try to go from the drugs to the next -- the next step. It's really you kind of have to completely jump in and you're going for a transplant -- and over there, there's lots of limitations on transplant.

So it doesn't mean we won't pursue the US and won't come into the US either, but what it also means is we, as you say, Chris, we will collect lots of data, clinical data, and when we come to the US, we'll be coming armed with lots of publications and lots of clinical results. But we definitely see the Symphony as kind of a universal product because it's so easy to put in, minimally invasive and we plan to price it as a very low price point and lease the drivers of the consoles, so you really just have the disposable item.

Super. And then one maybe just for Bob and yourself here on the guidance.

Clearly, business looks like it's doing well here through the first nine months of the fiscal year. You're ramping up utilization as well on those install base sites. Maintaining guidance for the full year and in particular Impella growth guidance of approximately 20 percent. Consensus, I think, implies a little bit above that. I realize that's been your guidance throughout year, 20%. But I want it press is it an approximation of 20% and you're trying to be a little bit more conservative here with just a few months left in the fiscal year, or are you trying to signal maybe a little bit choppier utilization or some uncertainty there? I just want to be clear about that. Thanks.

I think, Chris, for the year, we are going to be pretty close to 20% on Impella growth. That's -- we've been pretty consistent on that, and I think the numbers we look at suggest that's exactly where we're headed. I think we will see a downtick, as we have seen continued downticks on the legacy side of business.

Understood. Thanks much.

Just one other point to that, Chris, is we also maintain the process to try to keep the set number of new sites. And so we don't look at this as a quarterly projection. We don't give quarterly guidance. We give yearly guidance. But we want to make sure that we're opening up a reasonable number of sites per quarter so that we can have the training and ensure patient quality and a good positive experience for the customers.

Thank you.

Thank you. Our next question comes from Anthony Petrone from Jefferies group. Your line is open.

Thanks. Good morning. Maybe Bob just to, maybe, maybe take the guidance question in a different direction and then a couple for Mike. You mentioned that catheter inventories can go to three per site. I am wondering is that more of a fiscal 2015 target or as you look into the next quarter, could you actually be at three catheters per site because that in and of itself would suggest a certain amount of growth based on the increase in the number of hospitals that you've had from last year? And it seems like that number is going up well too. So just a question on do you get the three per site next quarter or is that more of a fiscal 2015 sort of target?

Yes. No, Anthony, this is something that's going to happen over a series of quarters. I think that -- I do think that many hospitals are going to end up there. But, you know, it's been nudging up about a tenth of a point per quarter at most over the last several quarters. So this is a journey. This is not something that's going to happen in one quarter's time.

Anthony, to put that into context, if you have one patient on Impella support, usually they want to have another one as backup, which means that if any other patient comes in, they'll want to have another one. We're also flexible. There will be sites that take inventory and leave it down at two and we'll continue to be flexible and bring pumps in on an emergency basis because it's something that they expect from us. We're a full-service company, so we're going to work with them. And again, I think some might go that way. Some might even go higher that have a busy practice, but then others that will continue to stay at two.

And then just the new sites, are they still taking on three catheters up front once they're a new site that's opened?

They are.

Okay. And then a couple for you, Mike, on Germany. Obviously, that is trending well with Shock II seems to be driving Impella away from balloons. Can you saw German opportunities how many balloons are being used today and maybe in terms of volume and have you sized that market in terms of dollars?

We haven't sized Germany specifically in dollars. It is the third largest med tech market. But there's certainly, if you look at all of Europe, the projections depending on which reports you read range from 50,000 to 80,000 in balloon pumps for Europe. So that's the scale of Europe.

Great. One last one on the FDA and the PMA modular submission. I'm just wondering at this point how much USpella registry data has been submitted to the FDA and would you care to give maybe a look as to what that data looks like in terms of reducing major adverse events costs et cetera? That would helpful. Thanks a lot.

So we, obviously, can't get into the details of the submission. But what we've said is that this is really the totality of the data. And we've had three FDA studies that have been already published. That was 262 patients in the IDE. We've now had the registry publications from Europe, the US, and then recently on the emergency patients from the US. There are over 200 publications already in print, which is almost 2,000 patients collected in that. And we certainly have an active USpella registry that's growing. And so we will be continuing to take out a certain amount of data that we can scrub and can be adjudicated through the CEC and through the process with the hospitals.

But we'll continue to publish. You'll see these -- also most recently what just came online was two more publications off of the Protect II. One is the atherectomy subset, the other is the learning curve. And again, we'll continue to publish off of Protect II, the database, as well.

All right. Thanks.

Thanks, Anthony.

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

Thanks for taking my questions and good morning. It's Steve here for David.

I wonder, Mike if you could take a step back to the 10,000-foot view of the base business with Impella. We're focused on a lot of moving parts here with the guidance for the fourth quarter and the inventory. Given everything going on in the pipeline you probably spent a little less time than normal. You're talking about what you see in the base business. I think it's a good question. You really stabilized here. You're telling us you can grow something like 20% in the fourth quarter even against a pretty healthy comp.

As you take a step back at a very high level, what do you think the sustainable growth rate of that business is? Are we at a stable level, as you look at the funnel in terms of new centers that can come on line and what you see in terms of sequential utilization trend?

Steve, that's a good question and we don't give guidance for the next fiscal year. But I'll give color on that in being that this is our coming Q4 and then the following earnings call we'll give that guidance for the year.

But just as a high level view, we look at it as we are in the existing sites that we're at we're a little less than 10% penetrated with Impella. So just at the sites that we're at, we're continuing to grow with training more doctors, usually getting more applications. And the ease of use is a big piece of that because what drives growth is training and data. So training is the things that we look at the hospitals on, make sure they have good experience and data it's really all these publications.

But the last component of that is just time. It takes us time, and we are building our infrastructure, our distribution, so there's tenure that counts in the field. But we feel very good about just continuing to go deeper at the existing sites we have.

And what you're seeing is that there is really great demand for the Impella CP and it really appears that it hits the sweet spot of what folks want, which is a percutaneous insertion, as well as higher flow for their patients, whether they're larger or they need emergency support. So we feel very confident in the positioning of that product.

We also continue to see utilization of the Impella 2.5 for some of those elective cases where they're not necessarily at hemodynamically challenged and we think that gives us the ability to have two price points, and we also know and encourage all of you to do the surveys on the Impella RP, that this right-side device is of huge demand and is really going to impact the clinical treatment of these patients.

and, Steve, I just want to add because I'm -- if I misspoke, I just wanted to clarify that I didn't mean to suggest that Impella would grow 20% year-over-year in the quarter. Our guidance has been consistently that we would grow 20% Impella for the year. I think that if you work through the numbers, you'll see that for the quarter that's more like a mid to high teens growth rate for Impella on the quarter, and 20% still for the year.

Got it. I'm sorry if I missed that up.

And then one more question. I was wondering if you could take the discussion around the FDA and the 515 process to the next step? You've been really helpful giving us a series of signposts for the first 12 to 18 months in that process. Could you give us a sense for what the milestones would be for the next 12 months? Any update on whether you might have a panel and what should we be on the lookout for? Thanks so much.

Sure, Steve. Our expectation today is we're going to panel. And we remain on track, as I stated, for filing the clinical submission in February. After we submit, the agency has 180 days to review the filing. If there's no advisory panel, that's it. There's no advisory panel. But again, we expect to have one, which means there's 320 days in that process.

As far as kind of the next steps for us is that our main goal here is to get the PMA, but then phase two of this is we'd like to expand the labels, and look at things like biventricular support or bridge to recovery, which we have on our surgical devices. And for that, we're talking to the agency about either a bridge to recovery study, which is a single arm, you're comparing two performance criteria, or potentially an audited independent registry, which, you know, will leave the decision and the choice up to the FDA and we'll work with them on whatever their preference is.

But I do want to remind all our investors that we're currently in five guidelines. And if you look back, there was one in 2011. There was another one in 2012, and there have been three in 2013. And I would argue this our strongest publications have come out in the last six months and will be coming out against in the next six months. And on top of all of those clinical publications, you're seeing cost effectiveness data that comes out that really puts us in kind of a top tier in terms of being cost effective relative to incremental cost affecting the scores or even being dominant in some of the publications where we have the ability to improve outcomes and lower overall costs.

Great. Thank you so much, everyone.

Thank you. Our next question comes from Jayson Bedford of Raymond James. Your line is open.

Good morning and thanks for taking the question. Just I guess to follow up on that last question, how long will it take, after you get approval for the 2.5 to get approval for CP, and what do you think will be required to get CP approved?

So, Jayson, the CP is a supplement to the 2.5. So once we get the PMA on the 2.5, we'll be doing the supplement. And what it likely -- first of all, so everything remains under the 510(k) clearances until it's formally transitioned and then likely we'll be, we're in the discussion now on the PMA for the 2.5, and that's the priority. But it will likely be just collection of data or some other agreement with the FDA on making sure that the supplement, meaning the Impella CP, has an enough data to show reasonable assurances of safety and effectiveness. But again, we've done well over 1000 patients, might even be over 2000 patients now in the US on the Impella CP, and you again will see some publications coming out from the USpella on that, as well.

In terms of driving growth, you mentioned training. Can you just maybe update us on the size of the sales team and maybe how that splits between represents and any clinical specialists you have?

Sure. So at the end of the quarter, we had about 143 people in the field, and that includes management. We're going to continue to add four to six people in the distribution per quarter for the foreseeable future. Two-thirds of those are really clinical folks that have that depth and experience. But everyone is expected to -- and is trained to provide support in the cath lab, routinely they're in scrubs, and we really have to come kind of a full service organization.

So when you buy Impella, you get a heart pump made under a microscope, and what you get on site is some people who are trained and are experts in helping to support these types of patients, as well as we've invested in our call center, which is 24 by 7, which has seven dedicated people who have on-hand experience and been with the company, some of our tenured folks, and that way we can provide some real support in the intensive care unit to help the new nurses or new users get the best outcomes they can get.

In terms of CP startups came in a little higher than we expected. It is kind of the new level to anticipate going forward?

It's not necessarily a new level. There is significant demand. We still are requesting that all the new centers start with 2.5. We may make some exceptions going forward on that, because some of these sites really want to start or have that device as they get started. So I think you'll see a little bit of what you've seen in the past, some quarters up a little more, some quarters down a little more.

and then last one for me, you've kind of given us some good detail on the international growth. But what's the true source of the strength? Is it new geographies? Is it new centers? Kind of look at where the growth is coming from. How would you separate it between either, again, new countries, new centers, or just kind of existing centers ramping in their utilization?

Jason, it's primarily the centers in Germany doing more patients. It's pure patient growth in Germany, and the team's done a great job there. And again, the tenure there has increased as we've added more heads. But it's really been a very successful execution on their part with the new console, the AIC console, and the Impella CP.

Thank you.

Thank you. Our next question comes from Brooks West of Piper Jaffray. Your line is open.

Hi. Thanks for taking the question. Mike, do you have a sense for the therapeutic mix with CP? I mean you kind of got to that in an earlier question. But are you seeing CP used primarily for emergent patients and then 2.5 is going to prophylactic?

That's usually the trend, Brooks, although some people will use it for maybe larger patients if it's more of an elective. But that tends to be the trend.

Can you give us the recent ASP trends for those two devices where you're seeing 2.5, CP come out for the quarter?

Sure.

Yes. So on a -- I mean the actual pricing for the 2.5 and the CP individually are relatively stable. We've said the 2.5 on average is about $22,500, and the CP is $25,000. And those numbers have been very stable over time. The mix is shifting to the CP so that on a total average catheter basis, Brooks, worldwide, on a quarterly basis, the average prices were up 1.9% and on a year-to-date basis they were up 0.8%.

Okay. Thanks, Bob. And then, just one -- I've gotten a couple of questions from people during the call, Mike. On the FDA, you're shifting some resources to that process, you're still guiding for the February submission. Is there anything to kind of read into that shift of resources or just you're coming down to the end here and you feel like you needed a little bit of extra push?

Nothing to read into.

Okay. Thanks, guys.

Thank you. Our next question comes from Jan Wald of Benchmark. Your line is open.

Thanks for taking the question. This is actually Erica Layon, in for Jan. There have been a lot of great questions already on the call, so hopefully you don't mind if I dig a little deeper in some areas. Have you found that new sites are waiting for the PMA before starting up, or is this more of a regulatory versus a first milestone?

Yes, Erica, that's a good question. Most of our sites don't actually understand or are even aware of whether we have a 510(k) or PMA and they usually have never heard of the 515 process. So for them they're focused on when the guidelines state for treating patients.

That is really helpful. So that's probably something the Street's a lot more focused on than any of your potential clients

Right.

It sounds like there's also a strong amount of clinical data coming out. Is this just a continuing of the tide of data, or are there any particular studies or publications thought are going to be a lot more notable than the rest that we should be looking for?

So we highlight -- we have over ten per quarter on average but I try to highlight one. So the recent one on the emergency patients, I'd encourage every investor to read that because it really shows something that the guidelines have stated for a long time as a class I recommendation that for emergency patients, there's that benefit of PCI in that you should use hemodynamic support for patients that get worse.

I think it's a very insightful paper. It also talks about the impact of initiation of support, how it impacts survival as well as what's the impact to women. So I think that's a very interesting paper.

Also if you look at the cost effectiveness data on the emergent settings, you'll see that we have what's called a dominant profile, which means that you actually get better outcomes at lower costs. And I think that's a unique feature in the space for medical devices.

And then last is this learning curve paper and the atherectomy paper have been put now online and accepted. And it really allows you to go deep in the Protect II and look at all the data and look at all the subsets and understand where additional hemodynamic support benefits the most.

That's very helpful. So we should just keep looking for a continued groundswell of strong evidence as opposed to trying to keep an eye out for one particular publication, right?

Correct. Obviously, the Protect II data site is a FDA IRB -- has an IRB process so I think we're going to continue to publish many papers over the next several years on that data set.

That is what should be definitely a great plan. Thank you very much on a definitely a strong quarter. Thank you.

Thank you, Erica.

Thank you. Our next question comes from James Terwilliger of Wunderlich Securities. Your line is open.

James.

Thanks, guys for taking my question. Congratulations declarations on the quarter. I've been jumping between calls so I think I missed I missed something you said earlier. I apologize for this. Could you update me on the Impella RP and HDE process?

Sure. So the Impella RP, we're at 24 of the 30 patients in, so 80%. We hope to have the enrollment complete over the next two months. And the HD process humanitarian device exemption, we'll be submitting for that approval. The criteria for that is a safety and probable benefit. And then while we're submitting and waiting, we have anticipated approval in February of 2015, we'll also want to get approval from the FDA to allow the existing 15 sites that have been in the study to continue to treat patients. We routinely get requests for emergency support or compassionate use which at this time we're not able to do that because we are in this study. But the FDA support on this study's been outstanding. They have given us fast turn around and it has probably been one of the most productive and supportive studies we've done.

And just -- thank you. In lastly in terms of sales and distribution, this would just be with your current sales force. Correct?

Correct. I mean the nice thing about the Impella RP is it's the same customers, it's going to run on the same AIC consoles that they have. It's really a -- in many cases it's going to augment what we're already doing or also treat some new patients.

There's great demand for it for multiple types of patients. It's not a -- it's not a market that is a million patients. It's a smaller patient population. But for many of these patients, if you don't provide some support on the right side, and they're too sick to go through some of the surgical procedures, many of these patients will terminate.

And then lastly, have you thought of any type of pricing strategies associated with this device?

We have. And we'll get further into the details. But you can -- you can anticipate we're going to price it around the lines of the Impella 2.5, the reimbursement will probably be similar to the Impella 2.5. And then as always, we work with people to be flexible based on their volume of use, their independent level, and those that are promoting and trying to get great outcomes and put the time and energy into training.

Thanks for taking my question, guys, and congratulations on an amazing quarter. Thank you.

Thanks, James.

Thank you. Our next question is from Anthony Petrone from Jefferies Group. Your line is open.

Mike, thanks. Just a follow-up on China. I'm just wondering if you could give a little bit of detail there, why the decision to maybe go at it with just a handful of sites and then planning on that for 2015, is that just a matter of resources? And then on that as well, can you sort of size the opportunity there? Thanks.

Anthony, the Japanese market is really our next big market that we're building out the resources and making investment now. We have the ability to get the direct approval in our names in Japan and that's what we're doing. We will want to have that intimacy with customers, and we already have a Japanese advisory board. The top 10 to 15 or 20 centers will be kind of our training centers.

And then an interesting fact in Japan is there's more cath labs in Japan than in the United States. And what we want to ensure is that the quality and the control is there. So we'll focus on the top centers, but we'll want to partner with resources to ensure that we really expand and get the good outcomes at the outlying centers.

Because of the size of the market, we'll make the investment and then from there, the secondary markets and timing will be China and India. And the reason that we're going to go at it this way is again, we want to control the quality of the training and basically maximize the management experience of the patients so that we can get those great outcomes and then our model is also to collect data and then publish as we enter each of the countries just like we did in Europe and the US, kind of like a Japanese registry, a Chinese registry, and eventually an Indian registry, so that we can really show the outcomes and gets better and have an evidence-based metric for each of the countries.

Thank you.

Thank you. I'm not showing any further questions in the queue. I'd like it turn the call back over to management for any further remarks.

Great. We appreciate your time today. If there are any follow-up questions, please feel free to follow up with us directly. Have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may now disconnect. Everyone have a great day.