ABIOMED Inc (ABMD) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2018 Abiomed Inc. Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Ingrid Goldberg, Director of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to Abiomed's Third Quarter of Fiscal 2018 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 Bob Bowen, former Chief Financial Officer and Consultant to Abiomed. The format for today's call will be as follows: first, Mike Minogue will discuss strategic highlights from the third fiscal quarter and then turn our call -- and then turn to key operational and strategic objectives. Next, Bob Bowen will provide details on the financial results outlined in today's press release. We will then open the call for your questions.

Before we begin, I would like to remind you that comments made on today's call may contain forward-looking statements about the company's progress relating to financial performance, clinical, regulatory, commercial, litigation and other matters. These forward-looking statements are subject to certainties -- to certain risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additional information regarding these risks and uncertainties are described in the earnings release we issued this morning, our Annual Report on Form 10-K for the year ended March 31, 2017, and our most recently filed quarterly report on Form 10-Q. We undertake no obligation to update or revise any of these forward-looking statements as a result of subsequent events or developments, except as required by law.

During today's call, adjusted net income and adjusted net income per diluted share non-GAAP measures will be used to help investors understand the company's financial performance. These financial measures are reconciled with the comparable GAAP financial measures in the earnings release and regulatory filing from today, which are available in the Investor section of our website at www.abiomed.com.

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

Thanks, Ingrid. Good morning, everyone.

In Q3, Abiomed delivered best ever quarterly results on nearly every metric starting with $154 million in revenue, up 34%. Our robust growth set new records and was driven by U.S. patient utilization for both Protected PCI and emergent support, which increased 24% and 43%, respectively. In company history, our top 3 U.S. Impella utilization months were all in Q3. We also achieved records in Europe aided by strength in the German -- in Germany, which grew 71% year-over-year. Our operational discipline and execution allowed us to achieve best-in-class gross margin of 84% and our best ever operating margin of 29%.

We generated an additional $57 million in cash from operations, which brings our cash position to $351 million. We now own both manufacturing and training facilities in Massachusetts and Aachen, Germany and maintain no debt as a company. With our solid balance sheet, we are investing in innovation, education and our patent portfolio. This quarter, we marked a new milestone of 300 patents awarded and an additional 272 patents pending. It is an exciting time as we collaborate with our customers to improve patient outcomes and the standard of care for circulatory support. As a result, the field of heart recovery is growing, and Abiomed is well positioned to capture the $5 billion U.S. market opportunity while planting the seeds for future growth in global markets.

For today's call, I will highlight the clinical need and growing awareness of heart recovery with Impella support in the U.S., Germany and Japan. Starting with the U.S., both the Protected PCI and cardiogenic shock indications established new quarterly records. Our Impella adoption increased to a total of 9% of the 121,000 high-risk PCI and 100,000 emergency patients. We continue to have a long runway for growth because of our clinical benefits and FDA approvals. Our focus on training, data and time, combined with independent physician-led initiatives like CHIP and the National CSI, continues to improve awareness and is having an impact on adoption.

Last quarter, I spoke about a publication from The Advisory Board, an independent expert health care consulting company acquired by UnitedHealthcare. This quarter, The Advisory Board circulated 2 additional publications referencing Impella. The first publications comes from the Cardiovascular Roundtable Annual Meeting, Protected PCI, complex coronary artery disease and cardiogenic shock were highlighted as advanced programs that enable innovative hospitals to differentiate themselves and capture new market opportunities. As a reference, TAVR and mitral valve are also on this list. The second publication stressed the significant clinical need for the growing cardiogenic shock population. The report outlined the necessity for aligned patient care, recommended tactics for building a cardiogenic shock network and addressed the benefits, ranging from improved quality of care to alleviated cost burden. This timely publication piggybacks on success of this year's TCT physician call to arms around improving outcomes in cardiogenic shock, and this initiative is under way across United States. To be absolutely clear, cardiogenic shock is a major clinical problem with 50% mortality rates, and it has a growing moderately aged population. We support 10% of this population today. What is critical to comprehend is that this is not only about survival. Native heart recovery is the goal. It is superior to just survival to the next therapy, such as heart transplant, and recovery improves patient quality of life and significantly lowers costs. The Advisory Board's recommendations aligned with our Abiomed mission to support hospitals in establishing Impella programs and protocols to improve patient outcomes. As a company, we are encouraged by the mounting attention and awareness from major influencers on the shock crisis.

Moving to our Impella RP commercial launch. We opened 36 new RP sites for a total of 222 hospitals and also set a record for patients supported. For our STEMI DTU FDA feasibility study, we now have 15 hospital sites IRB approved that have randomized 26 patients to date, surpassing the halfway point of 50 patients. We are on track to complete the enrollment within our 18-month projection ending in October.

Outside the U.S., we also made significant progress. In Germany, we set new patient records and have penetrated 12% of the annual 25,000 potential patients. In Japan, we have opened 9 of our projected 10 sites for the fiscal year ending in March and generated $1.1 million in revenue in Q3. We are prudently pacing our Japanese launch to ensure quality and optimal outcomes around heart recovery.

I would like to share a story of one of the first patients treated in Tokyo at Mitsui Memorial Hospital, one of the leading cardiovascular centers in Japan. This 68-year-old patient had a history of coronary artery disease and called an ambulance after experiencing severe chest pain. Upon arrival to the hospital, he arrested and required CPR. One of his coronary arteries was 99% blocked, and he was in profound cardiogenic shock with a lactate of 12, signifying severe lack of oxygen in the body. As a reference, one of the characteristics of cardiogenic shock is a lactate of greater than 2 and most people die when it is above 6. The physician inserted Impella 2.5 prior to the PCI in accordance with the clinical best practice of the National Cardiogenic Shock initiative protocol, and the patient remained stable throughout the stenting procedure. After 3 days of Impella support, the patient's lactate normalized and he was successfully weaned off Impella. This patient returned home to his family with his native heart. This story elucidates the strong clinical demand for Impella in a country like Japan with cultural views that limit heart transplants and open-heart surgeries. To date, 123 hospitals have initiated the Impella application process. 66 hospitals have submitted the application, and 31 hospitals are currently approved.

Before concluding, I would like to provide a brief update on the Impella 5.5 and the Impella ECP heart pumps. We remain on track for our first-in-man studies outside the U.S. in the first half of this calendar year and believe both products will further address the clinical needs of interventional cardiologists and heart surgeons. For those that missed our recent Investor Presentation at J.P. Morgan in January, we have posted our presentation on our website, including animations and new product introductions under the Investors section at abiomed.com.

Turning to guidance, we are increasing our fiscal year 2018 revenue guidance again to approximately $583 million, an increase of approximately 31% from the prior year. This compares to our prior fiscal 2018 guidance of $565 million to $575 million, an increase of 27% to 29%. This projects Q4 revenue to be approximately $164 million, up 31%. We are also again increasing our fiscal year 2018 guidance for operating margin to approximately 26% compared to the prior 23% to 25%.

In summary, this quarter's execution enabled the best results in revenue, operating margin, cash generation, patents and patient utilization in the U.S., Germany and Japan. As a company, we are especially proud of our ability to work together with our hospitals to help improve patient outcomes. Abiomed continues to be one of the fastest-growing MedTech companies with increasing GAAP profitability. I want to recognize and thank the team for their dedication to our patients and customers. I also want to express our confidence in the future as we continue to build the field of heart recovery.

I will now turn the call over to our former CFO and current Consultant, Bob Bowen.

Thank you, Mike. Good morning, everyone.

Today, I would like to share details on the continued strong growth Abiomed achieved during the third quarter of fiscal 2018. As mentioned, fiscal third quarter revenue increased $39.3 million or 34% to $154 million. U.S. Impella revenue rose 30% to $130.7 million, driven by a 33% increase in patient utilization. Outside the U.S., Impella revenue totaled $17.3 million and was up 94%. Additionally, worldwide service revenue of $6 million was up 25%. In the U.S., at the end of the fiscal third quarter, the Impella 2.5 has been placed at 1,181 of approximately 1,400 targeted hospital sites for a penetration rate of 84%. Impella CP has been placed at 1,134 hospital sites for a penetration rate of 81%. Impella 5.0 has been placed at 498 sites for a penetration rate of 36% and Impella RP has been placed at 222 sites for a penetration rate of 16%.

Reorder performance was strong for Q3 with U.S. reorders at $125 million and growing 31% versus the prior year and the reorder rate was approximately 100%. Average combined Impella 2.5 and Impella CP inventory at hospital sites rose slightly to 3.75 units per site versus 3.7 in the prior quarter and versus 3.3 units per site in the prior year. Our busier sites carry more inventory as each pump must have a backup pump. In this way, higher patient volume at a given site requires higher levels of safety stock.

Gross margin for the quarter was 83.8% compared to 83.4% in the same period of the prior year. Gross margin was favorably impacted by higher production levels as the company manufactured the most pumps in its history. The favorable effects of higher production volume were partially offset by more console placements, the introduction of new manufacturing lines and the hiring of training of new operators to support growing demand. Because of investments in recent years, we have full manufacturing capability in both Massachusetts and Aachen, Germany. We plan to continue to invest in the manufacturing area, particularly the adding of additional operators with related training initiatives and introduce new products and/or product features.

R&D expense for the third fiscal quarter totaled $17.7 million and increased 8% from the prior year. The bulk of R&D spending is related to investments in product enhancements and new products as well as research costs from our STEMI DTU FDA feasibility study and ongoing cVAD Registry study. We expect to continue investing in product and clinical initiatives in the future.

SG&A expense for the third fiscal quarter totaled $66.6 million, an increase of $12.6 million or 23% from the prior year. We expect to continue expanding our industry-leading commercial team, and we expect to maintain a hiring pace of up to 10 additional U.S. field employees per quarter. We also expect to increase spending in Japan as we support the commercial launch in that country.

Operating income for the third fiscal quarter grew 76% to $44.8 million or 29.1% of revenue compared to $25.4 million or 22.2% of revenue in the prior year. The increase in operating margin was due to strong revenue growth and operational discipline, which confirms the leverage in our business model. We will continue to invest in new products, product enhancements, new markets while prioritizing revenue growth and maintaining our operating discipline. We expect Q4 operating margin to be approximately 26%.

GAAP net income for the quarter was $13.4 million or $0.29 per diluted share. Third quarter fiscal 2018 adjusted net income before the recently enacted Tax Reform Act was $32.2 million or $0.70 per diluted share compared to $15.4 million or $0.34 per diluted share for the prior year period. Third quarter fiscal 2018 adjusted net income included income tax expense adjustments of approximately $18.8 million or $0.41 per diluted share due primarily to the recently enacted Tax Reform Act and excess tax benefits on employee share-based compensation awards, which were not applicable in the prior year period. We believe the effects of the Tax Reform Act will reduce our effective tax rate by 8 to 10 points beginning in fiscal 2019. This excludes the impact of excess tax benefits, which we believe will have a lesser effect in fiscal '19 than in fiscal '18.

Also, keep in mind that we are not currently a cash income taxpayer due to our deferred tax assets totaling $75 million. The balance sheet remains debt-free, and we generated $57 million in cash from operating activities to end the quarter with $351 million in cash.

During the quarter, we also closed on the purchase of our Danvers, Massachusetts global headquarters for $16.5 million. Our top priority for use of cash is to support our organic growth with product innovation, distribution, manufacturing and to continue to build our substantial advantage in intellectual property. Abiomed looks forward to continued execution during the fourth quarter. We have important tasks in front of us as we further penetrate Protected PCI and cardiogenic shock markets, roll out Impella in the Japanese market, launch Impella RP with the recent PMA approval and invest in product development and clinical studies. Abiomed will continue its pursuit of industry-leading innovation, growth and execution.

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

(Operator Instructions) Our first question comes from Chris Pasquale from Guggenheim.

Mike, the progress in Japan is very encouraging here this early out of the gate. Could you just remind us how big you think that market is in terms of the number of hospitals that would be good candidates to be performing these procedures? And given the start you're off to, any thoughts to sort of raising the number of hospitals that you guys would like to get started here before the end of your fiscal year?

Sure. Thanks, Chris for the call. We think the market is 50,000 patients in Japan and likely up to 350 heart hospitals. Our goal for the year was that we would open 10 centers by the end of March. So we're ahead of schedule right now with 9 of the 10 opened. Of the $1.1 million in revenue, much of this is initial placement revenue, but we do anticipate some more incremental revenue in Q4. We will, over time, continue to go at a pace faster as we ramp. But we want to make sure that for the first 18 months of our launch, we get great outcomes, we've got rigorous training and compliance because we're also excited to bring the Impella CP and RP and other new products into Japan as soon as possible. And just to remind everyone, Japan is the second-largest medical device market. For cultural reasons, they're not a sternotomy or transplant environment and they also -- unfortunately, for them, they have a smoking population. So we think we can have a major impact in bringing heart recovery to the country. And we currently have 31 employees in Japan, and we're continuing to ramp with the patients.

That's very helpful. And then just to clarify on the impact of tax reform. Your underlying rate, if I go back to last year, was probably close to 40%. The last couple of quarters, excluding that benefit from the excess tax benefit from stock-based compensation, has been running closer to 30%. So what do you think the underlying rate looks like now post reform?

Well, excluding the tax -- beginning in fiscal 2019 because for the fourth quarter, we're on a blended rate for the year. But as I mentioned, we think we'll be 10 to 12 points lower excluding the effect of the excess tax benefits from the employee stock compensation.

So just to clarify, does that imply a number closer to 30% or closer to 20%? I'm just trying to get a sense of what your true...

Closer to 30%. Closer to 30%.

Closer to 30%. Okay. Perfect.

It could also be 8, it could be 12. So it'll range and then you have your additional expensing of shares independent of that.

Our next question comes from Chris Cooley from Stephens.

Quick question from me. When we just think about the top line, Mike, you're now, I think the only company of scale with 31% organic top line guidance for the full fiscal year. Just talk to us a little bit about how you see the international markets, which I'm assuming are going to be your primary drivers, evolving in the coming fiscal year and how sustainable. When we think about Germany, that was a -- been 2 very sizable step-ups there in a row. Then just a follow-up on the margin. Can you talk to us a little bit about what you saw that enabled you to get to 29%? I realize 26% is the guidance for the full fiscal year, but obviously trying to look a little bit ahead as well there for fiscal '19 when we think about what type of margin contribution we can receive.

Well, Chris, we had a strong quarter relative to our operating margin, it was our best ever. We are continuing to invest in Q4 in innovation in some of our clinical studies and product enhancements, so we've guided to a 26% for the Q4. But as we've discussed with our 5-year vision, we are pursuing a $1 billion business with a 30%-plus operating margin. And we are probably a little ahead of that 30% rate at this time, which we like, but we continue each year to incrementally move it up. But because of our razor, razorblade model, we believe that we can be best-in-class operating margin, the way we are best-in-class gross margin and growth rates. And that's one of the goals for the company. Relative to your question on outside markets, we are only 12% penetrated in Germany of the 25,000 patients, and we're very confident in that growth going into next year. And as we've mentioned, we will likely frustrate some investors in that our pace in Japan will be methodical, will be slow, but you really are entering a market that not only is it the second-largest market, it has the ability to be a heart-recovery-only clinical environment for us. So as we bring these new products into the country and then some new products around heart failure, we think we have 10-plus years of sustainable growth in Japan. So we really want to get it right with the government. MHLW and PMDA are in charge of all the indications, all the patients and all reimbursement. There's no such thing as an insurance company there, and that's why we want to establish our credibility with them up front and, again, continue to have patient stories like I mentioned where these patients in the past would usually have died or spent an amazing amount of time in the hospital before they died organ at a time, and to be able to send these patients home with their own heart in a shorter period of time is just a tremendous new clinical option that they haven't had in Japan. So we'll continue to execute and we'll continue to deliver best-in-class metrics.

Our next question comes from Raj Denhoy from Jefferies.

Wonder if I could maybe start on the shock result in the quarter, the 43% growth. Given some of the commentary you made around the absolute necessity of Impella for these patients, is that a rate of growth that you see as sustainable now in a sense that maybe we're hitting a bit of an inflection in the shock market that the use of it sort of becomes -- or the lack of use of it sort of becomes unsupportable at this point?

Raj, on our growth rates, in general, what we really always focused on is overall patients and patient growth. And we said this in the past that we believe that the shock approval would take time to accelerate and would continue for the next 5-plus years, but there is a bit of a seesaw effect that happens between Protected PCI and shock and even our other buckets. So what we're focused on is sustainable growth so that we continue to have the right pace but get the best outcomes, collect data and look for best practices. So I do think that the bigger question is the penetration rate. We are only at 9% blended, so we have a long way to go, but we believe that the best way to continue to accelerate adoption is actually to have great outcomes and improve outcomes each year, which we've done. We will be giving more guidance on the next call for next year, but we certainly feel -- we're very pleased and we're very happy to see the effect of the physician call to arms on shock at TCT. And if you think about how poor outcomes are when you -- only 50% of the patients that go into shock at a hospital live, it's essentially a coin toss. So we think we're going to have a major impact on improving outcomes. And again, these are relatively young patients, anywhere from 60 to 70 years old, and they have a lot of life left to live with their own heart.

That's helpful. And since you brought it up, the question of guidance for fiscal '19, so you're doing 30 -- 30-plus percent, 31% in '18. I mean, is something in that 30-ish percent range sustainable in your mind as you look into '19?

If you're getting into specifically a subset of our overall growth, we'll give more details on that, but we really -- but we think that -- again, that's why the benefit of having protocols, it's really about getting the hospital system ready to go. 100,000 patients are the ones we're focused on. Over a couple of hundred thousand patients here die in hospitals of shock or overall heart failure. So our targeted population of 100,000 means that of the 1,000 heart hospitals, they each have to do 100, which means that they do 8.3 a month, which means they do 2 a week. So 2 a week penetration of the 100,000 patients we're talking about is a $2.3 billion market. So we really have to get these great outcomes and it definitely has that potential to continue to ramp, and that's why we're so focused on collecting the data and sharing best practices.

No, that's fair. I was kind of getting at overall account of the company guidance for '19. But I'm guessing you're probably not in a place where you want to address that yet.

Correct. Thank you, though, for the question.

Maybe just one last one just on -- given the pace in Germany, Japan is ramping. When do you start thinking about other international markets, start putting the effort into opening up other geographies?

We understand the importance of the top 3 countries for MedTech: U.S., Germany and Japan. And we want to make sure that we really establish Impella as the true standard of care and bring our new products in there. We also understand that Germany has great influence in Europe, Japan has great influence in Asia and the U.S. has great influence on the rest of the world. So we've started to look at seeding what are those next countries. We've mentioned at our last investor conference that we have approval in some new countries like India and we're working through China, and there are some -- many other countries where people are doing first-in-man experiences to get used to it. But we'll give more of those forecasts on the next earnings call, and we'll outline to everyone what are those seeds that we're planting now but just to bring you back to our intense focus, fanatical focus around adoption in the U.S., Germany and Japan.

Our next question comes from Matthew O'Brien from Piper Jaffray.

Mike, is there a way to parse out the growth that you've seen so far from the National CSI group? Obviously, the acceleration in emergent is quite notable here. Are you seeing the group that's within the National CSI protocol is growing 50%, 60%, 70%? Any way to kind of figure out what that's doing?

Matt, that's a great question relative to the initiative going around the country. The physician community, in some cases, their focus is just locally. They want to have better protocols at their own hospital, that's one of the reasons that you see a demand for the Impella RP. If you are going to treat profound shock patients, you likely need a right side device and again, that's at 222 sites. You have other hospitals that are working directly with the National CSI group, that's the Detroit initiative and they're submitting their data to that organization and that physician group. And then we have our own sites that are in our cVAD Registry, which is an FDA-audited ongoing study, and we're asking those sites also to switch to the NCSI protocol as well. We do think -- this, in general, is a 43% growth, so that's very strong. And we think it's being spread across the board and it's going to continue to drive adoption as more and more physicians get trained and feel comfortable putting the Impella in. And it's worth noting, this is the second quarter in a row and where the shock or the emergency patients exceeded the Protected PCI coordinator or the Protected PCI patients, but we're also working with coordinators to drive that volume as well. So it really comes back to just getting great outcomes, understanding these are different types of patients. Our Protected PCI patients are like the TAVR market and our emergency patients are out there in all these different hospitals, and we want to be able to capture them as soon as we can.

That's fair enough. The other question I had was on the RP side. You kind of sort of mentioned it. So you've got a bunch of hospitals that you had been using as part of the HDE, then you've got the approval and we saw a pretty nice ramp last quarter and this quarter in terms of the number of centers now that have RP. Can you just talk a little bit about the older centers that you have been using under the HDE now that you have full FDA clearance, how they're trending? And then the newer ones, how they're starting to utilize the product as well. Like what kind of contribution did you get from RP in fiscal Q3 and kind of where that ramp is going.

The RP was 5% of our revenue mix as a product. And I expect it will exceed the 5.0. RP is up 85% in revenue year-to-date, and there's tremendous demand for it. On your question of who's making the biggest contribution, the formula of training, data and time applies to the RP as well. So the sites that have had it the longest are the ones that are most active. They tend to be the place where sometimes patients are transferred to. They're publishing papers and they're really out there now establishing their protocols around using that technology. We also trained 28 physicians this quarter at our Heart Recovery Institute, and we continue to have courses around the country and in headquarters each quarter.

Our next question comes from Bruce Nudell from SunTrust.

Mike, in 2014, we counted actually 120,000 cardiogenic shock admissions. And my guess, and it may be a little lower than yours, that only about 35,000 get treated today with any form of mechanical support. Of that group of patients, what percent do you think are ultimately addressable with the kind of rule-outs of just geographic -- being able to get to them geographically because of the hospitals they go to and/or because some are just so end-stage, it's hopeless?

So Bruce, your question on the number of how many we believe are addressable, we believe 100,000 patients are in the hospital today of a relatively moderate age that should receive Impella support. On the reports that you can look at that are sampled or that are pulled from CMS, they don't always report all the deaths relatives -- or accurately or even when someone has had support. But you're 100% correct, about 1/3 of these sites or 1/3 of these patients are getting any support with the intra-aortic balloon pump, so there's tremendous upside there. The number that is probably the more adequate one to utilize is looking at how many inotropic drugs are used a year. And there's well over 100,000 patients that receive multiple inotropes in order to improve their hemodynamics. And inotropes have been shown to be a predictor of death as you escalate from 2 to 3 and 3 to 4. And if you look at just the net effects or the net numbers on deaths in hospitals, well over 300,000 patients die of organ failure or heart failure in the hospital that, again, are relatively young that could benefit from being stabilized with Impella, both on the right and left. So we do believe that 100,000 is the appropriate proper number from a bigger funnel just like we believe the 121 is a conservative and proper number to be treated today for high-risk PCI.

Perfect. And I had another question. We counted, once again in 2014, around 200,000 STEMIs and certainly, being able to get Impella as kind of standard of care will be a huge boost to market growth. My question is, in the pilot study, what degree of ventricular sparing, either measured by injection fraction or perfusion or whatever method you're using or viable tissue, what kind of change are we looking at to be deemed clinically significant in your pilot study?

For the Impella DTU, which stands for door to unloading, study, it is a feasibility study to show that Impella could be used in this patient population safely because remember, they are not in cardiogenic shock. They're not at that level yet. And we're really also testing the concept that you can delay opening up the coronary blockage by unloading the Impella -- with 30 minutes of Impella unloading. And the thesis is by doing that, you'll precondition the myocardium and you'll reduce the size of the infarct caused by reperfusion injury or the apoptosis process. And if we can show that this is safe and the delay doesn't cause an issue for these patients, we can then move into the pivotal study where we'll be looking at showing what you're mentioning is reduction of infarct where you'll look at not only troponin and CKMB, we'll also have MRI follow-up images as well. But just so for all the people on the call, in today's growing epidemic of heart failure, we have amazing technology and innovation, and from the plumbing side of stenting or pacemakers on the electricity, they've hit a limit of how they can improve survival. They've also had a result that the stats show that 70% of the people that have heart attacks will suffer from heart failure within 5 years. So clearly, we can do better with this population. And as you mentioned, if we can show this here in this population, there'll be new patients, but I think it also adds more credibility and benefit for all our other applications.

Our next question comes from Danielle Antalffy from Leerink Partners.

Just wanted to follow up, Mike, if I could, on the cardiogenic shock acceleration that we saw in the quarter. Is there any way to quantify? I mean, it did accelerate meaningfully at least based on our numbers. How much momentum -- I know this is -- I'm asking you to put numbers around what is more qualitative, maybe even to talk about it qualitatively, momentum post-TCT. I felt like I came away from TCT hearing similar anticipation around cardiogenic shock and the different initiative that we saw back when CHIP was first implemented, whenever that was at TCT a few years back, right? There was a notable pickup amongst physicians and KOLs on cardiogenic shock. Can you talk about that a little bit? And then following up on that, how we should think about the growth in cardiogenic shock versus high-risk PCI. And how you balance that between -- amongst the sales force and sort of drive a balanced growth outlook between both. Sorry, that was a long question.

So Danielle, we are -- there was great momentum coming out of TCT, as you mentioned. The call to arms by the physician community was very rewarding to -- for the company after the work we've done with education and training. And the community, the physician community has acknowledged that it's -- the outcomes for the mortality rate for the last 20 years in cardiogenic shock has been 50%. And the call to arms is that this population, we can do better than 50%. There is a lot of attention to the opioid crisis, and there should be. And there's a lot more we can do. Cardiogenic shock is also a crisis that is responsible for more deaths in the U.S. than the opioid crisis. And again, these are 60 to 70 years old that have more life to live. So we are incredibly focused not just on survival, and I think this is where the momentum is starting to transition, but in native heart recovery because it's one thing to survive and it's another thing to survive and go home with your own heart and go home within a shorter period of time. So that's the ultimate goal and that's where the momentum is starting to occur, the science and the understanding around what is native heart recovery. History also shows that in FDA approval, it's usually the strongest catalyst for market adoption. And this is the first fiscal year we've had full FDA exclusive approvals for high-risk PCI and shock as well as a dedicated DRG. So while we're one of the fastest-growing MedTech companies, changing the practice of medicine can be challenging, and that's why we always go back to our function of training, data and time. And the last point of your question was around how do we balance high-risk PCI. Again, our overall focus is on both high-risk PCI is a population that is out there, that we have to find them and get them referred into our best centers that's why we're doing things like patient awareness campaigns, education, the referring physicians. But in the end, we want to get great outcomes and we want to continue to grow at the right pace that is sustainable and collect our data and publish and share best practices.

Okay. And then just a follow-up. On rep productivity, as we think about -- I know you guys continue to add to the sales force, but how -- where are you on the sort of rep productivity curve? And how do you get more out of your existing reps? And maybe you can talk about some of the innovations that you guys have put in place that should help rep productivity like the remote -- I won't say remote monitoring, but remote communication device or whatever it is for docs at the hospital?

Sure. So as you mentioned, we are investing heavily in our field team. We've added 100 field members in the last 24 months, and that's a combination of sales and clinical people. Going forward, we're going to continue to add up to 10 per quarter of the right people and we're -- we've now exceeded 300 people in the U.S. and we've been adding more in Germany as well. I think from a productivity perspective, the more protocols, the more experience hospitals have, the more independent use we anticipate from them in the future. We likely do not need to be at most hospitals for Protected PCI. And in many cases, we will swing into the hospital into the ICU because we think we can help standardize protocols, but we also have a 24/7 call center with nurse experts. And as you mentioned, we are moving to a model where we'll be able to see the console, interact with the hospital, the physician, our own person on our phones. And those are some of the algorithms we're working on to help identify when the patient is weaning or when the patient needs more interaction with the ICU or the physicians.

Our next question comes from Margaret Kaczor from William Blair.

First one from me is just a follow-up from the comments you guys made this morning on The Advisory Board publication. Have you guys seen any kind of an impact from that, whether it's new interest from centers that aren't trained yet? For example, for shock or existing centers that maybe are doubling down on the existing program? And is this something new for you guys from The Advisory Board or just kind of continued push towards Impella program?

Margaret, I think it's continued push. It adds credibility to hospitals that are looking to establish Protected PCI coordinators or shock programs. The Advisory Board is a well-respected organization, and most all the CEOs and COOs and CFOs of hospitals are familiar with it and many of them subscribe to it. So it's a further validation point and we think it adds to the current momentum.

Okay. And then if we look at the utilization rate of Impella 2.5 and CP, you guys have seen a pretty nice increase really over the last 12, 18 months. Can you guys give us any other clarity regarding that? Is it the -- is it pretty broad across the installed base? Or driven by a larger -- maybe some of the larger sites?

I want to make sure I understand your question, Margaret. Could you explain that a little more?

Yes. So the 3.75 units that you guys are shipping on average to your existing accounts of 2.5 and CP, that's gone up, I think, from like 3.05 maybe 18 months ago or something like that. So it's a pretty, pretty nice increase you're having. So I was just curious what the drivers of that were and if it was specific to some of your larger, more mature bases versus kind of study adoption across the account base.

Thanks for the clarification. It's pretty much steady adoption and growth across the board. Our top sites are doing more, and our lower volume sites are also increasing. The formula training, data and time, the time works to our favor. The highest volume centers are the one -- ones that have had Impella the longest. They continue to grow. They continue to do more patients, and more physicians tend to utilize it. And the growth also comes from bringing new patients into the cath lab around Protected PCI. So we're staying on the formula, but that's a nice -- it's nice to see that the longer they have it, it's pretty much spreading out across the country and continue to grow everywhere.

And then if I could sneak one more in. In terms of Japan, you guys are seeing some nice momentum early on right now. And I understand the decision to kind of keep it slow and steady out for the near term, but as you go out into '19 or '20, what kind of case volume would you expect at each hospital to be able to support?

Margaret, we'll give more guidance specifically for next year on the next call. But what we've kind of guided towards is, we look at the 6 months of approval this fiscal year and 12 months of next fiscal year is still the ramp. And as we continue to grow and add people and get good outcomes, we'll look at our third year to really be more of an accelerating year in revenue.

Our next question comes from David Lewis from Morgan Stanley.

This is Jay Chadha on for David. It looks like we've surpassed a 2% year-over-year penetration rate between the new shock initiatives, the RP PMA and then ECP and 5.5 coming online shortly. What do you think -- do you think you can accelerate above 3% for penetration on a year-over-year basis?

Jay, let me just clarify. So we're at 9% penetration in the U.S. for high-risk PCI and shock. What are you referring to from the 3%?

I guess the year-over-year increase. I guess this point last year, you were at maybe 7%?

Yes. Okay.

So I'm just wondering on a year-over-year basis, it looks like you added 2 points of penetration. Do you think that can accelerate to 3 points with everything coming online?

Well, we hope so. That's what we're shooting for. You're right, it's been about 1% almost each quarter going up, and we believe that as you enter the early majority of patients, there is somewhat of an acceleration. Now from our overall growth rate, the numbers are much bigger, but that's our intent, and our intent is obviously to get 100% of the 231,000 U.S. patients and 100% of the 25,000 patients in Germany and 100% of the 50,000 patients in Japan. And again, we scale that number to be patients that will benefit today that are of a relatively appropriate age and have the ability to go home with their own heart. So we're really focused on that population. You can find numbers that are tremendously bigger. And again, when a person dies of heart failure in a hospital that they die of pump failure, they die of organ failure. So essentially, if you make it to a hospital alive and that hospital has Impella, between the left side devices and the right side devices, we should be able to stabilize that patient to allow for other therapies. But again, we're focused on native heart recovery, and we are trying to get to 100% penetration, which means that we'll have drastic improvements in those growth rates.

Okay. And one quick follow-up. On the additional sales reps you're adding. Can you talk about the split between adds into new geographies versus deeper penetration in existing regions?

So in the U.S., we have a model that you have a quarterback, which is the account person, that's more of a conventional sales role, but that person's in scrubs and expected to support. And that person's augmented with a team that has a very senior clinical expert as well as somebody who may not have as much industry experience but also has worked in a hospital and has a clinical background. And as that volume grows, we continue to add more clinical people. And then we have a certain formula and threshold where we then split the territory, add a new salesperson, add more clinicals and grow it all over again. It's kind of the starfish mentality. You pull a leg and you grow a new one.

Our next question comes from Jayson Bedford from Raymond James.

Just a few. The National CSI effort, you mentioned, had an impact in the quarter. Just wondering, I realize it's not your program, but how many regions or centers are part of that effort today?

The goal -- and they have a website, if you go to their -- their goal is to have 50 hospitals around the country submitting data to them for analysis and publication. However, there are many hospitals that meet with this group and they're going to implement the protocol, but they may not collect the data and submit it to this organization. And then you have other groups that believe in it, are working with that group but they're collecting their own data. These are places like Inova Health System or MedStar down in Atlanta with Dr. Sal Mannino, who presented at TCT, who also showed their improvement from 50% survival to around 76% survival with nearly 100% native heart recovery. So the model works, and that's -- and again, so it's more about the concept of the protocol. And whether or not they're aligned with us or with the National CSI, that's really up to them. On our end, we're very focused on collecting the data specifically under this FDA registry program we have, the cVAD Registry study, so that we can continue to have that type of data to publish and also document and demonstrate the best impact on survival and heart recovery best practices.

Okay. We may have talked about this before, but what percent of your hospitals have or customers have a protocol in place right now, best guess?

Jayson, this is kind of the -- it's kind of a harder thing to have a binary answer. 222 sites have RP. Most of those sites have established protocols. But you can have hospitals that have protocols, but there's different physician groups and not all of them are aligned. But what we do see is that concept of a shock team is absolutely there. If places don't have protocols, they're putting informal ones together, they're looking at the clinical data. But to -- from a perspective of is it 100% documented, is it compliant with what the folks are doing in Detroit, that's where it gets a little bit -- it's more of a judgment call. But we think it's still 15% to 20% on our criteria of what we'd call an established enforceable protocol. Thanks for the question.

Okay. That's helpful. Is -- just a couple of more, if I can. Just in terms of the newly established reimbursement back late last year, has that had an impact on results or utilization in any way?

We don't believe the reimbursement has a major impact before or after. We don't sell that way. We're compliant to the system, but we really focus on the clinical value. Some hospitals can make money, some hospitals can lose money on any patient. These are very sick patients. And the way the system is set up is that an efficient hospital, the majority of the time, can break even or make a little money. But again, it comes back to the outcomes. And if you get better outcomes, there can be more margin for the hospital, that can be a lower length of stay. And what we do is we impact 2 of the 4 items that all hospitals are ranked on for quality. So Protected PCI helps with their heart failure, helps reduce readmissions as shown in the FDA study. For shock, we tend to -- we've shown the ability to have lower length of stay and, again, native heart recovery. And so we're really helping hospitals improve their metrics that are being tracked by CMS. And with the new reform, hospitals shifted from measuring quality at discharge to quality at 90 days. And that tends to be where you do best because we can significantly reduce those out of hospital, adverse events with native heart recovery.

And that does conclude our question-and-answer session for today's conference. I would now like to turn the conference back over to Mike Minogue for any closing remarks.

Great. Thank you, everyone, for your time today. If there's any follow-up questions, feel free, and go Patriots. Have a good day.

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