ABIOMED Inc (ABMD) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Abiomed, Inc. fourth-quarter 2016 earnings call.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Ingrid Goldberg. Ma'am, you may begin.

Thank you. Good morning and welcome to Abiomed's fourth-quarter of FY16 earnings conference call. This is Ingrid Goldberg, Director of Investor Relations for Abiomed, and I'm here with Mike Minogue, Abiomed's Chairman, President and Chief Executive Officer, and Mike Tomsicek, Vice President and Chief Financial Officer.

The format for today's call will be as follows: First, Mike Minogue will discuss strategic highlights from the fourth fiscal quarter and then turn to our key operational and strategic objectives. Next, Mike Tomsicek will provide details from the financial results outlined in today's press release. We'll then open the call for your questions.

Before we begin, I would like to remind everyone that this presentation includes forward-looking statements about the Company's progress relating to clinical, regulatory and commercial matters, as well as government regulations, litigation matters, capital and other expenditures and financial performance. Each forward-looking statement contained in this presentation is subject to the risks and uncertainties that could cause actual results to differ materially from those projected in such statements.

Additional information regarding these risks and uncertainties appears in the heading Forward-Looking Statements in the press release we issued this morning, our Annual Report on Form 10-K for the year ended March 31, 2015 and in subsequent Form 10-Qs. The forward-looking statements in this presentation speak only to the date of this presentation and we undertake no obligation to update or revise any of these statements.

Thank you for joining us. I'm now pleased to introduce Abiomed's Chairman, President and Chief Executive Officer, Mike Minogue.

Thank you, Ingrid. Good morning, everyone. In Q4 Abiomed had another strong quarter, signifying the continued adoption of the Impella family of devices with $94 million in revenue and 39% in revenue growth. US patient utilization increased by 45% and was driven by robust growth in both Protected PCI and emergent patients.

For the full FY16, Abiomed generated $330 million in revenue with growth of 43% and overall US patient growth of 49%. This exceptional growth highlights the creation of new treatment paradigms for high-risk heart failure patients around protecting and recovering heart muscle. Our impressive performance validates Impella as the new standard of care and Abiomed as one of the fastest growing GAAP profitable medical technology companies.

Abiomed continues to have no debt, increased our cash position by $80 million to $213 million this year and has grown top-line revenue double digits year over year for 26 straight quarters. Our Company has amassed three FDA approvals, 346 clinical publications and 225 patents with an additional 212 pending. FY17 is positioned to be an outstanding year as we continue to execute our plan. I am proud of our dedicated employees and grateful to our customers that have enabled our Company to create a new era of medicine focused on the field of heart recovery.

For today's call, we will highlight three topics: our recent FDA approval for AMI cardiogenic shock, our significant progress in Protected PCI and our continued execution of our strategic plan. First, Abiomed recently announced that the FDA has granted PMA approval for the Impella 2.5 CP, 5.0 and LD devices for the indication of AMI cardiogenic shock and post-surgery shock.

An FDA PMA approval for safety and effectiveness is the highest level of approval available and marks another significant milestone for Impella as hemodynamic therapy. In Abiomed's case, this is our third FDA approval in 15 months. It is important to fully comprehend the magnitude of this recent approval.

AMI cardiogenic shock is a growing indication that affects multiple age groups and represents one of the highest mortality risks for patients in the hospital. These patients die of organ failure when their heart is unable to pump enough blood to the body to sustain life. Clinicians are actively seeking new approaches to effectively treat this severely ill group.

Impella is now the only percutaneous hemodynamic support device that is FDA approved safe and effective for this population. In the setting of cardiogenic shock, Impella therapy stabilizes a patient's hemodynamics, unloads the left ventricle, perfuses the end organs and allows for recovery of the native heart.

For the first time, Abiomed can now share specific cardiogenic shock clinical data in educational slides, cath lab and ICU protocols, patient identification tools, physician case studies and patient stories. Additionally, the inclusion of heart recovery in our FDA label enables our field team to train and educate physicians, including additional specialities such as ER physicians, intensivists and heart-failure cardiologists on the new hemodynamic science of heart recovery and unloading the left ventricle. The action of mechanically unloading the heart with Impella has the potential to prevent and/or limit the progression of heart failure.

In the future, Abiomed will work with the hospitals and physicians on protocols to rapidly identify these emergency patients and share best practices, such as stabilizing a patient early and evaluating for myocardial recovery in an effort to prevent the downward spiral of cardiogenic shock and potentially improve patient outcomes. In today's cost-conscious healthcare environment, percutaneous recovery of the native heart is one of the most cost-effective solutions in heart failure and in medical devices. It is also the preferred outcome for patients of all ages.

In specific cost-effectiveness terms, per the 2013 CCI publications by Dr. Brij Maini, heart muscle recovery with Impella in emergency patients is categorized as dominant because it reduces absolute costs and significantly improves patient quality of life overall. We have thousands of patients that have benefited from Impella's support and avoided the cascade of invasive surgery and having to be listed for heart transplant. These stories are truly inspiring, and will be available on websites, in the media and posted on YouTube.

As a reminder, many cardiogenic shock patients are already in the hospital and today we estimate that we treat only 5% of this 100,000 patient population. Even prior to this the FDA approval, the emergency patient support has been recognized by physicians as a role for Impella and it has been growing over 40% year over year.

Next, I would like to emphasize our continued execution in Protected PCI. This quarter closes the first full fiscal year with the Protected PCI PMA approval and we are pleased with the growth of 66%. We are excited by our impact to improve the lives of the heart-failure patients with coronary artery disease and limited surgical treatment options.

Unlike those patients in cardiogenic shock, many from the Protected PCI patient population are being medically managed at home or in hospice care, and must be referred to the interventional cardiologist for complete revascularization in the cath lab with PCI treatments. The multitude of educational tools, outreach programs and training initiatives demonstrating the clinical patient benefits and cost effectiveness has had a direct effect on our growth.

This is an entirely new, minimally invasive treatment paradigm for the heart-failure population. We believe we are only treating approximately 5% of this 121,000 patient population in the United States. It is important to note that for both the Protected PCI and cardiogenic shock indications, we are in the early innings of growth. We are approaching this transformation with great care to ensure we have appropriate use and optimized patient outcomes.

Moving on to our last topic of continued execution, I will quickly highlight our Impella RP controlled roll-out and our Japanese regulatory progress. This coming fiscal year, we plan to complete the Impella RP post-market study and submit for a PMA approval next fiscal year to convert our humanitarian device exemption, or HDE, approval. Until that time, we will maintain our controlled Impella RP launch and we currently have 80 heart teams trained at selected hospitals.

For Japan, we continue to build our local team, establish training capabilities, and have selected the first 10 hospital sites. To date, 20 Japanese physicians have attended training at US hospitals and observed cases. As mentioned on prior calls, this launch requires PMDA approval, expected in the summer, and MHLW approval for reimbursement expected in the October quarter.

We do not expect any material impact to revenue this fiscal year with our controlled roll-out, but we will incur marketing and distribution expenses to position for future success into the second-largest medical device market in the world. I recently returned from an 11-day trip to Japan, which reinforced my strong belief that this medical community will embrace the Impella platform, and already acknowledges the significant clinical need for heart recovery with percutaneous hemodynamic support.

In conclusion, the Impella platform has a long runway for growth. We are financially secure and operationally prepared to continue to recover hearts, lead in innovation and grow shareholder value. Abiomed is revolutionizing the treatment for heart failure by focusing on the heart muscle with our exclusive regulatory approvals.

We have been successful in starting the new field of heart recovery because of our technology and our onsite clinical expertise. As a result, Abiomed has achieved sector-leading levels of growth, additional regulatory approvals and sustainable profitability. Our Company is unique because we have several recent growth catalysts for our existing Impella family of products, as well as future levers with new geographies like Japan, new indications like STEMI, and new products pending like Impella ECP, Impella 5.5 and Impella BTR.

I am proud of our patients-first culture and our ability to adapt and execute all these years. After 12 years as the Abiomed Chairman and CEO, I have never been more excited or confident in our future. We know our success comes from our commitment to meaningfully impacting the lives of our patients and helping our customers improve patient outcomes. I specifically want to thank all of our employees for their hard work and dedication this fiscal year and our investors for their support.

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

Thanks, Mike, and good morning, everyone. Today I'd like to share details on the impressive results we posted in the final quarter of our FY16 and then turn attention to guidance for FY17. Abiomed's growth is encouraging and we are well-positioned to continue building our technological and commercial capabilities. Our investments during FY16 have led to our success and we will further expand the reach and application of the Impella technology to the benefit of patients and caregivers around the world.

Fiscal fourth-quarter revenue increased 39% to a record $94 million. US Impella revenue rose 42% to a record $81.8 million, driven by a 45% increase in patient utilization. Protected PCI and emergent patients were the foundation of our growth in the quarter, representing year-over-year growth of 58% and 48%, respectively.

Outside the United States Impella revenue totalled $6.9 million and was up 21% on a constant-currency basis. Worldwide-service revenue of $4.4 million was up 19%.

As of the end of the fourth fiscal quarter, the Impella 2.5 had been placed at 1,039 of approximately 1,400 targeted hospital sites for a penetration of 74%. Impella CP has been placed at 826 hospital sites for a penetration rate of 59% of total hospitals. Impella 5.0 has been placed at 408 sites for a penetration of 29%. Impella RP was added to nine hospitals, bringing the total number to 80 sites, for a penetration rate of 6%. Our approach of gating the roll-out of RP continues, with focus on rigorous training, publication and sharing of best practices to create training centers that support the eventual full launch of this critical technology.

Reorder performance was very strong for Q4 with US reorders at $76.9 million and growing 49% versus prior year and our reorder rate was again 100%. Average combined Impella 2.5 and Impella CP inventory at hospital sites was 2.88 units per site, unchanged versus prior quarter and up slightly versus 2.71 units in the prior year. Abiomed is maintaining its system where customers stock pumps for immediate use and rely on rapid replenishment direct from Abiomed.

Gross margin for the quarter increased to 84.4%, compared to 84% in the same period of the prior year. As in recent quarters, margins were helped by favorable euro exchange rates and strong product volume and yields during Q4.

R&D expense for the fourth fiscal quarter totaled $14.2 million and was approximately 15% of revenue. The bulk of the increase comes from program investments in technological product enhancements, the global cVAD registry, manufacturing processes that will further capacity and efficiency and new product development. Recent investments in manufacturing infrastructure allow us to produce pumps at nearly double our current sales pace and we can achieve this output quickly as needed.

SG&A expense for the fourth fiscal quarter totaled $45.3 million, up 31% from the prior year. Most notable here is the expansion of our US commercial team, where 11 employees were added this quarter for a total of 214 professionals. Our plans for FY17 include substantial investment in this industry-leading commercial team, with an increase of 10 employees per quarter expected. The addition of more clinical and commercially focused staff allows us to go deeper in existing accounts and support the use of Impella for all appropriate PCI and AMI shock patients.

Operating profit for the fourth fiscal quarter was $19.8 million, or 21% operating margin, compared to $12.4 million or 18% operating margin in the prior year. GAAP net income for the quarter was $11 million or $0.24 per diluted share. This result is difficult to compare to the same quarter last year as those results were impacted by a one-time $86.5 million adjustment related to the release of the valuation allowance on most of our deferred tax assets. For a better comparison basis, GAAP income before taxes for the fourth quarter of FY16 was $20.2 million, a 63% increase versus $12.4 million prior year.

The balance sheet remains in excellent shape and we ended the quarter with cash and marketable securities growing $16.9 million to a balance of $213 million. Our top priority for use of cash is to support our organic growth. The Company has approximately $57 million in deferred tax assets, primarily due to NOL.

I'll close my review of results with a few observations on a record-setting FY16. Total-year sales were nearly $330 million, an increase of $100 million to the top line and growth of 43% from prior year. Gross margins improved by 2 points versus the prior year, ending at approximately 85%.

Operating expenses increased as we invested for growth. However, we still increased operating margins by 6.6 points to 19%, compared to 12.4% in 2015. Finally, we remain debt-free and grew cash by nearly $80 million to $213 million during the year. All impressive results.

Turning to guidance, as noted in our earnings release, we expect our FY17 revenue to be the in range of $430 million to $445 million, delivering 30% to 35% growth on the year. This guidance is based on the following conservative assumptions: a continued gated launch of the RP program, opening about 10 new sites per quarter; no material revenue from Japan in FY17 with incurred expenses; and the expected impact from shock FDA approval to occur in the second half of the fiscal year, as we will spend substantial time in the first half training our US field team on the AMI shock indication. This guidance is in line with our five-year vision and we will plan to refine guidance as we move forward, especially around quarterly performance, the Japan process and regulatory updates.

Turning now to operating margins, with the investments in place, we expect our FY17 GAAP operating margin to be in the range of 18% to 20%. Given our investment plans, we expect lower margins in the first half of the year and improved margins in the second half as our revenues grow. We have challenged our operating teams to meaningfully expand Abiomed's commercial, technological and clinical capabilities in a disciplined way within the bounds of delivering modest improvements in operating leverage during 2017.

Our investments during FY17 in product enhancements, new markets, new indications and new products, are very important and will lay the ground work for long-term growth.

I would also like to remind investors of the seasonality of our fiscal-year revenues. In Q1, our field team is brought to headquarters for extensive training and also tends to take their annual vacations after a busy Q4. Q2 is seasonally slow for all cardiovascular devices due to summertime slowdowns in the cath lab and physician vacations. In Q3, we typically see a significant sequential lift based on increased hospital activity and physician engagement. In Q4, our March quarter, we have our best results as we end our fiscal year. Therefore, our second-half revenues usually represent approximately 54% of our total year.

In summary, as we close out a very successful FY16, and begin a promising new chapter in our mission, we couldn't be more excited to be investing in and leading the field of heart recovery.

Operator, would you please now open the line for questions?

(Operator Instructions)

Raj Denhoy, Jefferies.

Good morning.

Morning, Raj.

I wonder if I could start with the shock approval recently. I'm curious if there's anything in the label we haven't seen yet that references intra-aortic balloon pumps and any of the data around shock -- or the shock studies, excuse me -- and how balloon pumps might even be contraindicated for that population.

Raj, thanks for the question. There's nothing in there that specifically talks about the data around intra-aortic balloon pump. Our submission has to do with all of our information also going back to the original bridged recovery approvals in 1992 by the surgical device BVS, as well as the AB 5000 device in 2004.

However, in our label it talks about being able to utilize the Impella support whether an intra-aortic balloon pump is being utilized or not being utilized. Essentially the site can either replace the balloon or skip the balloon as a step. But of course, they're expected to follow the normal progression, which has to do with inotropic use and proper judgment.

Okay. You also made the comment that shock has been growing quite well, you've already seen very strong adoption in that category. With the approval in hand now, is it reasonable to expect that you can see better than the 40%-plus growth you've been seeing in that indication to date?

Raj, two things on that question. First, the market results are showing that the rate of cardiogenic shock has been increasing. It's actually doubled per the reporting metrics over the last ten years in the United States, as well as if you look at just the CMS population, that's increased 50% over the last four years. And remember that many of these shock patients are much younger and less than 65.

Relative to your question about our growth, we do expect a bump in growth, primarily in the second half of this fiscal year, and certainly over the next five years since we're only in 5% of this population. However, this may not be as dramatic in the short term because we're already experiencing such strong growth of, as you see, greater than 40% year over year.

With the addition of the approval, the big issue is we will be able to market and educate directly for it. Again, a lot of these patients are already in the hospital and already being treated for hemodynamic instability.

Just one last one on shock and I'll drop. You give these metrics around hospital adoption of the Impella, 1,039 hospitals in the quarter. Is it fair to assume that if a hospital has adopted the Impella that they are using it both for high-risk PCI and shock? Or is there some segment that have yet to adopt it for shock in that number?

Raj, that's a very good question and one of the things that we track as far as the type of patients that the hospitals are supporting. As a general training phenomena, we usually start with the Protected PCI patients in the elective or urgent setting that allows us to be there to proctor and to train the technologists and to be there with the physicians. However, once we start providing that support for Protected PCI, usually all of them immediately will transition over to more the emergency patients on an as-needed basis.

Great, thank you. Nice quarter.

Thanks, Raj.

Danielle Antalffy with Leerink Partners.

Thanks, good morning, guys, and congratulations on a great quarter. Mike, I was wondering if you could comment on the language from FDA around Impella's ability in shock? And you touched on this for sure in your prepared remarks but around recovery, and how that resonates with physicians, first of all. How recovery is fitting into the paradigm of care which is what you touched on, but what that means for the long-term market trajectory and the shift to Impella to standard of care over time?

Danielle, thanks for the question. First of all, on the label, and the PMA approval, this now makes Impella the only percutaneous hemodynamic support device that is FDA-cleared for safe and effective for treating cardiogenic shock. Prior to this label, the Abiomed products, the BVS and the AB 5000, were the only two surgical products that were approved for bridge to recovery.

The mission and the foundation of our technology has been always focused on heart recovery, and it's really around protecting the heart muscle or recovering the heart muscle. And that's what makes our solution unique compared to other innovative technology, such as stents, which is really the plumbing or the coronaries of the heart; the pacemakers, which is the electricity of the heart; the valves, which are the door the to ventricles. But we're really the only Company that is focused on helping the heart muscle.

And even the innovative technology around the bridge to transplant devices, or LVADs, they do a very good job of sustaining a person to enable them to get to a transplant. However, by coring out a hole in the left ventricle, by bypassing the coronary flow, what you're really doing is preparing the body for a new pump or a new transplanted heart.

What we do is already very unique. And as you mentioned, this is significant because now we'll be able to go educate the broader community about what's the science around unloading the left ventricle, what happens with the pressure volume loops, what happens to the wall tension and what happens to the coronary flow when you can put an actively unloading heart pump like Impella into the left ventricle, which allows the heart to work less, it allows the coronary flow to increase and it allows the muscle itself to not require the same level of blood or oxygen to sustain life.

This is an exciting new field. If I can end it, your question, with one real world case of an Impella patient, it's a story of a gentleman named Mike Glennie. He's one that we haven't really been able to speak about before this approval, to our physician community. In 2010, Mike, he was a full time firefighter in Arizona. He had a massive heart attack and collapsed in the street and a passer-by gave him CPR. He ended up at the hospital and he received Impella support prior to his revascularization. They supported him through the procedure and for multiple days.

Four months after his event his heart was functioning at near full capacity and that gave him the ability to not only be discharged but go back to work. So six years later, Mike is retiring this year after 42 years as a firefighter in the Phoenix department. So he did not go on to more surgeries followed by a potentially transplant device followed by a heart transplant if he's eligible, which then requires immuno-suppressant drugs and several other things to recover from.

That's one of the points on heart recoveries, not only is it best for the patient but it absolutely reduces costs. So it's probably the most cost-effective application, or at least one of the most cost-effective applications in med tech and in all of heart failure.

That's great. That's a great story, Mike, thanks for that.

A follow-up question, as you mentioned sales force training and a specific focus on that in the first half of the year, how do you avoid any disruption on the existing PCI indication while you're training the sales force? If you could give some color on how you're going to manage all that. Thanks so much.

Danielle, we will manage it by focusing on both the Protected PCI population and the education as well as driving protocols and working and partnering with hospitals to find ways to identify cardiogenic shock. We really do believe that by partnering with the hospitals, Abiomed and our very talented team in the field will be able to improve patient outcomes.

I think that's a big mission and a great goal for any company, and as we improve outcomes, we tend to reduce the length of stay at the hospital. We tend to reduce the re-admissions, which is very important to hospitals, and we get a better outcome for the patients.

So really it's an execution story, as you heard from Mike. We are continuing to invest in our personnel and our infrastructure, and we will plan to slightly accelerate our hiring to approximately 10 people per quarter, if they're the right people. But we're really in a good position to execute on both Protected PCI and AMI shock.

Perfect, thank you.

Thanks.

Chris Cooley, Stephens.

Good morning.

Good morning, Chris.

Let me just add my congratulations for the record quarter. My first question, you had a phenomenal quarter there in terms of growth but I think equally impressive is the leverage you're starting to realize down through the P&L. When we look at the cash balances, I realize you said you're going to expand a little bit here in terms of sales and marketing and the like, but how should we think about the level of cash that you actually need at this point in time to support organic growth, the number one use of cash?

Because it really looks like, by my math here, cash flow is about 21% of revenue now in the most recent quarter. How much cash do you need to support organic growth? And then how do you think about the rest of those cash balances? And I'm got a quick follow-up. Thanks.

Yes. Thanks, Chris, and this is Mike Tomsicek. We still consider the cash position we have as small as a percentage of our market cap, and I think before reconsidering, we would get closer to 10% of our market cap held in cash.

As you mentioned, we are very focused on the organic growth opportunity and we're investing in it. And we do have sufficient funds to do that. We also have sufficient funds to defend ourselves from a patent position and to focus on small, early-stage technological advancements that will make the product that we are selling today easier to use and more broadly adopted in the marketplace.

We'll make smart choices with our cash. But we still consider the cash position we have right now to be relatively small compared to the strategic size of the business.

Understood and appreciate those comments. Then if I may, Mike you mentioned in your prepared remarks a little bit on STEMI. We really didn't get into that as, obviously you have a phenomenal opportunity with shock. Could you update us on your thoughts regarding the timing in moving forward on that patent population as well? Thank you.

Chris, as we've mentioned at a couple of our other presentations, we believe that the STEMI population, so different than today's AMI cardiogenic shock or post-surgery cardiogenic shock approval population, we believe that the use of Impella for STEMI patients will have the ability to improve their recovery and we are planning to start a pilot study this coming year. And we'll be giving more details around the timing and what are the specifications of the study.

But to give a high-level review of this population is to think about what happens to the survivors. And even for cardiogenic shock survivors, the acute incident, subsequently it causes an area of dead heart muscle, which is called an infarct, and that results in the majority of these patients becoming part of the growing epidemic of heart failure.

So as a person has a heart attack and the hospitals treat them appropriately with door-to-balloon time and potentially revascularization through stenting, what happens is they live through the process. But per multiple publications, around 75% become heart failure patients within five years. And within five years, 45% of the women and 35% of the men will die. So this is another population that's 200,000-plus patients in the US, where we believe that the unloading with the Impella pump will have a clinical benefit in helping to prevent these patients, these survivors, from becoming future heart failure patients.

Thank you.

Jayson Bedford, Raymond James.

Good morning. Can you hear me okay?

We can, Jayson, good morning.

Just a couple quickies. The 38 new CP hospitals was a bit lower than we were looking for and I understand this is not linear. But I'm wondering, does the AMI shock indication accelerate demand for CP? And what should we look for in terms of new adds in 2017?

The way we look at the roll-out each quarter, Jayson, is managing the growth and the training resources. We do not allow new sites to start with the CP because we like to have the rigor and the control and manage the training of their first several patients. And many of those patients are Protected PCI.

Over time, we will have the ability, if we'd like to increase the number of new CP sites, we can choose to do that. I certainly think now that we have the AMI cardiogenic shock indication, that the Impella CP may have the ability to accelerate as we decide to open up more sites and focus on that patient population directly.

Okay. Looking at the operating margin guidance for 2017, I'm assuming that gross margin is flattish, which then implies a sizeable increase in spend which I fully understand given the opportunity out there. Outside of the new reps, can you give us some metrics or some detail on where the incremental spend is directed?

Then as a follow-on, I think there was a very clean package message with Protected PCI, which I think had a big impact. Are we going to see a similar strategy with the new indication?

I'll handle the question on the investments and then I'll leave the strategy and the indication at the end. As far as investments are concerned, we listed a number of them. We'll continue to invest in the cVAD registry. We'll make substantial investments there to collect information about the use of our products in a way that will be supportive of indications that we could gain going forward, a number of which we've mentioned on this call. Again, those investments can be meaningful.

We've talked a lot about growing Japan. The expense associated with Japan, could approach $10 million this year, given the way we're intending to build the team there and the investments we'll need to make in the regulatory process. Those are two examples.

We will make investments in marketing outreach. We talked a little bit about referrals, getting Protected PCI patients off the sidelines and continuing to fuel that growth will be worthy of some investments.

And we've talked about a number of new products during the course of the call today, 5.5, bridge to recovery, the ECP product, that will really lay the ground work for growth in future years and need investments now. Those investments will expand the over 200 patents and over 200 patents pending that we have. As you mentioned, I think now is the time to keep our foot on the gas on these important things that open new markets, new indications, and introduce new products to the marketplace.

There was a second question there, Mike, about how we would approach shock as opposed to Protected PCI from a launch standpoint.

I think the answer is on the shock, the key thing to remember is many of these patients are already in the hospital. Really what it comes down to is a lot of education, partnering with the heart failure community to develop protocols to identify shock, to try to stop the cardiogenic shock spiral early and to try to look for and promote myocardial recovery. At a high level, as a Company, we're always focused on appropriate use with experienced high-risk operators to get the optimal or best patient outcomes.

All right. Thanks, I'll get back in the queue.

David Lewis, Morgan Stanley.

Good morning, guys, this is actual actually Scott Wang in for David. Two quick ones for me. First, can you discuss your expectations for Japan? I know you're not expecting any revenues in FY17, or any material revenues, I should say. But any sense of how the adoption curve in Japan will compare relative to how it looked in the US?

Scott, thanks for the question. We believe that there's a tremendous demand and comprehension of the ability of the Impella to provide a solution of heart recovery. To remind our investors in Japan, they do not necessarily do heart transplants. The patient population is relatively small, so they don't do well with most of the implantable technologies. And culturally, they're opposed to transplants and sternotomies, so you're looking at a minimally invasive type of environment.

The interventional cardiology community in Japan does some of the highest-risk patients. They do longer procedures and having hemodynamic support definitely is something that they have a clinical need for today. It was acknowledged years ago that the clinical societies reached out to Abiomed directly and then wrote into MHLW to request that Impella be brought to Japan because their belief that it would save many lives.

Japan is the second-largest medical device market. And we think that the growth rate will really be a combination of education around training, data and time, as well as our focus on how fast we want to grow it to ensure that we continue to get the optimal outcomes that's required with the technology.

So it sounds like you're saying, Mike, that the adoption curve will be probably better than the US for Impella?

What I'm saying, Scott, is the adoption curve will really be paced on how much and how fast we want to go. But again, we believe that the best way to roll out a transformational technology is to go at a controlled pace to get great outcomes, to share best practices and to publish the results.

Many companies sometimes can get ahead of themselves and that can tarnish their reputation. And what we want to do in Japan is really ensure that we're just maximizing the patient outcomes.

Fair enough, Mike. I guess one more for me. Does Abbott's pending acquisition of St. Jude change your long-term strategic thinking as it relates to competition or in terms of anything related to market development? Thank you.

The short answer is no, there's no change. The longer answer is, any company that is interested in this space validates the size. Given that our number one priority is education, we feel that any effort by either St. Jude or Abbott putting towards educating the community on the benefits of hemodynamic support is advantageous.

We don't think that there's really any change, whether it's St. Jude or Abbott, as it pertains to Abiomed and it will not meaningfully change our business strategy in any way. Based on the initial PHP clinical results, we feel very confident in our technology and our clinical advantages.

Got it. Thanks again. Congrats on a great quarter.

Brooks West, Piper Jaffray.

Hi, thanks for taking the questions. Mike, I wonder if I could try to tie together some of the questions around the shock launch. I'm wondering if you could give us a little bit more mechanics in terms of -- is it safe to assume that you're doing shock cases in every hospital?

And I'm wondering, to the extent you see penetration into the ER, again, from a percentage opportunity standpoint, how much opportunity is there to get into the ER? You clicked off intensivists and cardiologists. Can you give us a little bit more mechanics around the scale of the penetration opportunity?

And then secondly, I know you lead with complex PCI for new accounts, but are there accounts to push you into new US accounts that you're not currently doing business maybe leading shock? Thanks.

Thanks for the question, Brooks. The interventional cardiologists will remain our primary call point. But with this FDA approval, we'll be expanding our education to reach the other specialties, as you mentioned, for example, ER physicians, the intensivists and also heart failure cardiologists. And emergency patients that present to the cath lab are from different areas of the hospital so that's why it's important to touch the various clinicians, and this is not something we've been able to do prior to the approval.

But again, to reiterate with the approval, this is the first time we're able to work with all the physicians. One of the key tools is to identify cardiogenic shock. By doing that, we'll be able to be in the -- in helping them develop protocols and tools. So there is a plan, if I were to go through the laundry list of the tools, there is direct education now for that broader population in plan, as you mentioned, the ER physicians are one of them. We also will be educating the broader community on the science of unloading the left ventricle, something that's been published and documented for over 15 years.

Number two is the protocol development. We can now partner with hospitals on looking at these protocols for early recognition of shock and how do you track and find myocardial recovery. That's something we've not been able to do and I think you'll see several publications from leading centers.

On an education perspective, we can now work with the physicians to create educational slide decks, which are under way. In the future, we'll have websites that talk about shock, cardiogenic shock. One will be cardiogenicshock.com and that will be primarily for clinicians. Another one will be heartrecovery.com and that will be for patients. Then we'll be continuing to have clinical dossiers on the summary of all the clinical data going back since 1992 on all of the science and the engineering around unloading the left ventricle to optimally get heart recovery. So long answer but a very good question.

Okay, thanks, Mike. And then if I could follow up, I'd like you to speculate a little bit on the RP launch which sounds like it could come -- or the extended launch, it sounds like it could come in about 12 to 18 months. Shouldn't that be actually a bigger opportunity than what you're talking about here with shock? And I'm wondering, as you transition from an HDE to a PMA, how you might approach that market opportunity. Thanks.

From a patient population perspective, the AMI cardiogenic shock population is the largest and our biggest opportunity in general. However, many of the profound shock patients end up suffering from left- and right-side failures.

As the field progresses and we start treating more shock patients and improving outcomes, one of the important components of survival has to do with if a patient has right-side failure. There's some recent publications out of Europe demonstrating that many of these patients that are in profound shock ultimately need right-side support to recover and we're going to be working with that protocol as well.

On the specific and individual right-side failure, that has multiple types of patients from failed transplant to biventricular failure to post LVAD implantation. So it has a selection of several types of patients, and that's why the training and the protocol development is so important. We will be having a more of a broad launch in that time frame you mentioned, in the future years, so that we can really start to develop and build out the individual protocols for those more of the, what you would call the orphan indications that are not as prevalent as overall cardiogenic shock.

Ben Andrew, William Blair.

Good morning. Thanks for taking the questions. The line I guess I was going to take is a little different from where we've been talking about protocols and the ramp. Mike, talk about your efforts to build the economic case to protect that flank, if you will, over time as the volumes grow and as the impact on the system grows.

Does cVAD have an economic component? Are you guys looking to any additional post-market data collection? I know there's been a fair bit historically published. Talk about how you think about that effort going forward.

Thanks for the question, Ben. There's two very important elements of our approval for heart recovery. The first is this patient population, as I mentioned, has one of the highest mortality risks in the hospital. So when you think about treating and solving clinical problems today, being able to improve survival is something that not many companies or products have the ability to do.

First and foremost, that's our number one priority. Not only to use our current technology to attain the results but really work with the hospitals to improve outcomes. And we'll be publishing, documenting and tracking those outcomes with two methods.

Number one is we use salesforce.com to track all the patients. That information is at a high level but we'll be able to turn back a report to our hospitals to tell them, based on the data we've collected, how they're doing against their peers and be able to compare and contrast their technique, their protocols to other sites, whether the other sites have better or worse outcomes.

The second element is to go even deeper with our cVAD registry, which is a global registry now for Impella use. And we'll be able to look at a lot of details that we collect using definitions that we've had in our FDA studies with an independent data collection and independent echo analysis and CEC. And for that we'll be able to really go deep and have the accuracy not only to publish the data and use the data for regulatory reasons, but we'll also be able to publish specific protocols to achieve the best outcomes and collect some of the cost-effectiveness data associated with those patients.

We can show that we have protocols to improve heart recovery and get those outcomes. But then again, as I continue to really try to educate not just the physician community but the investor world, being able to recover a patient's heart is the most cost-effective application. It's called [dominate] because it reduces absolute costs and improves outcomes.

If I take the example I mentioned before on Mike Glennie, he is now living with his own heart. He did not have to have a transplant. He did not have to go on to all the other therapies that are associated with getting a transplant and post transplant. And the dollars that we're talking about here on a short term of 6 to 12 months is in the range of millions of dollars in hospital charges.

So we are not we have not stopped collecting data. Our protocol now between either our FDA studies, our single centers, the sales force and especially the Impella cVAD registry, allows us to have a continuous collection of data that we will continue to publish, both the clinical benefits and the cost effectiveness. As you mentioned, we will continue to promote this so that people understand just how cost effective and how much better heart recovery is for patients.

Okay. And then as a follow-up, as you do start detailing the broader groups within the hospital, what sort of feedback do you get? Do you get any push-back? Where are the points of focus? And obviously it's an evolving situation, but the early experience, both with shock and then as you're ramping up now with Protected PCI for the last four or five quarters.

Ben, I think the answer to our focus really revolves around this mantra that we've used, which is training, data and time. And when it comes to push-back, it's usually based on the training or the data. To go through that a point at a time, on the training it has to do with ease of use, making sure that the nurses, the ICU, the folks that are treating the patients feel comfortable and are trained. And for that, we have our on-site support as well as our 24 by 7 call center, so that we're able to talk to them and help them as they're treating patients.

On the data, we're certainly going to continue to publish clinical benefits as well as cost-effectiveness benefits. But obviously having an FDA approval is probably the gold standard relative to talking to customers about the validation of your data.

Great, thank you.

Thank you. I would now like to turn the call back to Mr. Minogue for closing remarks.

Thank you, everyone, for your time today. Again, I'd like to thank our investors for their support. We will be available if anyone has any additional questions. Thanks again for your time today.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.