ABIOMED Inc (ABMD) 2018 Q4 法說會逐字稿

Good day, ladies and gentleman, and welcome to the Fourth Quarter Fiscal Year 2018 Abiomed, Inc. Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

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

Good morning, and welcome to Abiomed's Fourth 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 Todd Trapp, 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, Todd Trap will provide details on 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 everyone that this presentation includes forward-looking statements about the company's progress relating to clinical, regulatory and commercial matters as well as government regulation, litigation matters, capital and other expenditures and financial performance. Each forward-looking statement contained in this presentation is subject to 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 under the heading Forward-Looking Statements in the press release we issued this morning, our annual report on Form 10-K in the year ended March 31, 2017, and our most recently filed quarterly report on Form 10-Q. The forward-looking statements in this presentation speak only as of the date of this presentation, and we undertake no obligation to update or revise any of these statements. Thank you for joining us.

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

Thank you, Ingrid. Good morning, everyone. In Q4 Abiomed achieved record results and continued adoption of the Impella product portfolio in the U.S., Germany and Japan. We closed the fiscal year with strong momentum, and revenue growth of 40% to $174 million. For the full fiscal year 2018, Abiomed generated $594 million in revenue, with growth of 33%, and operating income at $157 million with growth of 74% year-over-year. This year, Abiomed marked several significant milestones, and I am proud of our patients-first execution and operational discipline from research to manufacturing to customer support. We earned multiple global regulatory approvals in the U.S., Germany and Japan on new products, new indications and reimbursement.

For today's call, I will cover growth in Protected PCI and cardiogenic shock and briefly discuss fiscal '19 expansion with new products, geographies and clinical studies. Q4 success was driven by U.S. patient utilization growth at 35% with Protected PCI in emergent patients at 26% and 43%, respectively. We set new overall U.S. utilization records for every category, best quarter, month, week and day for both Protected PCI and emergent usage.

Impella RP also delivered solid results in our second full quarter since the commercial launch with 48 new U.S. sites, and growth of 93% in patients and 154% in revenue. However, Impella adoption is a function of training, data and time. And as a result, we are still in the early innings with the penetration rate of approximately 9% of 231,000 patients in the U.S. alone. To elucidate this adoption process, I would like to share 2 patient stories.

Mr. Martin Smiley, 77 years old, had bypass surgery in 1989 and more recently began experiencing severe shortness of breath, leaving him unable to walk a few feet without feeling completely fatigued. A primary care physician eventually referred him to a cardiologist at Park West Hospital in Tennessee. Fortunately, Park West Hospital has a protected PCI coordinator that educates the community on high-risk PCI and identifies appropriate patients that are often turned down for cardiac surgery. The hospital's Protected PCI coordinator reviewed Mr. Smiley's clinical history and scheduled him for a consultation with Dr. Ayaz Rahman. On the day of the procedure, Mr. Smiley's heart was failing, and the PCI was performed with Impella CP support during the placement of multiple coronary stents. The procedure went smoothly and Impella was removed. Mr. Smiley was discharged home to his family, and his ejection fraction, a measure of the heart pump power, improved after the procedure. The improvement in ejection fraction is a significant driver of improved quality of life, cost savings and is a unique and validated benefit of Protected PCI. As a result, Mr. Smiley is now back at work, helping customers at Lowes.

My second patient story is about cardiogenic shock. Last November, former governor, Tom Ridge, now 72 years old, suffered a massive heart attack while attending a conference in Texas and received CPR at the hotel and in the ambulance for about 30 minutes. Governor Ridge arrived at the hospital in dire circumstances and was rushed directly to the cath lab. Upon arrival, the interventional cardiologists immediately and simultaneously inserted the Impella CP and opened up the blockage. After 4 days in the ICU, with Impella unloading his heart and supporting his vital organs, the device was explanted. He was later discharged with his native heart, and in improved ejection fraction and returned home.

This past February, I visited the governor in DC, where he was back at work and functioning without the need for an implantable LVAD or heart transplant. From a CMS population perspective, most patients above 65 years old are not candidates for heart transplant and prioritize heart recovery above all other treatment options, based on quality of life and cost. We believe our continued focus on best-practice protocols are driving improved clinical outcomes and adoption. To date, we estimate 200 hospitals have these multidisciplinary shock algorithms, 30 hospitals in 18 cities had joined the independent National Cardiogenic Shock Initiative, and we are in the process of converting 40 hospitals in our cVAD Registry to the protocol. The advanced heart hospitals and dedicated physicians are combining our Impella products with improved processes to help patients like Mr. Smiley and Governor Ridge, not only survive, but avoid the cascade of the most invasive and expensive therapies, because they returned to life with their native hearts.

Over the years, the FDA and CMF -- CMS have reviewed our clinical data and cost-effectiveness research and have expanded our existing FDA, PMA labels and allocated a dedicated MS-DRG for percutaneous heart pumps.

For highest PCI, our new label now accounts for patients with complex anatomy, severe coronary artery disease and comorbidities with or without reduced ejection fraction. Data supporting this expansion included an analysis of 229 consecutive patients from the cVAD Registry study. The majority of patients were older, more often female, had more hypertension with more lesions treated, including left main and were turned down for open-heart surgery due to risk factors. The data showed that high-risk PCI with Impella support was feasible, safe and achieved favorable outcomes for these patients. This combined patient experience was published in March 2018, in the American Journal of Cardiology, studying 891 patients.

The FDA also expanded our PMA approval for cardiogenic shock, resulting from cardiomyopathy, which incorporates peripartum, postpartum cardiomyopathy, SCAD and myocarditis. Abiomed submitted analysis from 93 patients in the cVAD Registry study and a comprehensive literature review, including 109 patients treated with Impella.

Both FDA expansions reinforced prior FDA studies demonstrating safety and effectiveness of Impella support in the elective, urgent and emergent patient populations. While we remain focused on the 231,000 U.S high-risk patient population, we acknowledge that these additional indications expand our addressable market and enable a wider range of patients in the future. We also anticipate steady adoption in both Germany and Japan for 25,000 and 50,000 patients respectively. In Germany, we grew 95% in Q4 and 70% for the year. In Japan, we exceeded our fiscal '18 goal and expect to add $10 million in revenue in fiscal '19 under a controlled launch.

Before concluding, I would like to turn briefly to some new pipeline opportunities. In Q4, Abiomed received European CE Mark approval for the Impella 5.5 pump and treated our first set of patients in Germany. The Impella 5.5 is a heart recovery pump, because it provides physicians a minimally invasive, 30-day, ambulatory, weanable, forward flow, unloading heart device with peak flows above 6 liters. The device is also designed for a 60-minute axillary implant that avoids a sternotomy. While not yet approved in the U.S., we expect the Impella 5.5 to further enhance Abiomed's product portfolio, and significantly advance the field of heart recovery, for both chronic and acute patients requiring longer-term hemodynamic support.

For our STEMI DTU FDA feasibility study, we are somewhat ahead of schedule and enrollment is near-complete with 46 of the 50 patients randomized. Therefore, we anticipate earlier completion of enrollment by mid- to late summer versus October.

We are excited to test our hypothesis that unloading with Impella before revascularization may reduce reperfusion injury in the setting of acute anterior myocardial infarction without shock. We look forward to analyzing the feasibility clinical data and, if successful, designing the larger pivotal randomized controlled trial.

In closing, we enter fiscal '19 with purpose and confidence in our mission to recover hearts and save lives. We finished the year achieving records on nearly every clinical and business metric and fortified our leadership position with expanded distribution, training facilities, manufacturing capacity, 317 patents, 311 patents pending and $400 million in cash. Fiscal 2019 is positioned to be another outstanding year, and we appreciate the investment from our shareholders. I'm also grateful to the dedicated employees and customers that have enabled us to serve our patient and achieve our corporate goals around heart recovery.

I would now like to officially welcome and introduce our new CFO, Todd Trapp. We are extremely pleased to have Todd on the team and know he will further improve our execution in the future.

Thanks, Mike. And before I get started, I just want to say, that I'm really excited to be part of the Abiomed team, and I look forward to meeting the stakeholders on the phone and in person and working closely with you in the future.

So now let's get into the financial results. In the quarter, we delivered revenue of $174 million, an increase of $50 million or 40% versus last year. U.S. Impella revenue rose 35% to $146 million, driven by a 35% increase in patient utilization. Outside the U.S., Impella revenue totaled $22 million and was up 107%, mainly driven by our performance in Germany. In the quarter, our German revenue increased 95% versus last year, due to continued patient utilization and a greater adoption associated with high-risk PCI. Additionally, worldwide service revenue was $6 million in the quarter, up 19% versus prior year. In the U.S., at the end of fiscal year 2018, the Impella 2.5 and the Impella CP have been placed at 1,197 and 1,172 sites of the targeted 1,400 hospitals. Additionally, the Impella 5.0 and the Impella RP are currently at 516 and 270 sites, respectfully. Both the 5.0 and RP are now being adopted by more sites and have significant runway.

Reorder performance continued to be strong in the quarter. U.S. reorders increased 35% to $140 million versus prior year, which translated into our reorder rate of approximately 100%. Average combined inventory at the hospitals for the Impella 2.5 and the Impella CP, rose slightly to 3.8 units per site, versus 3.7 in the prior quarter and 3.4 units per site in the prior year. Gross margin for the quarter was 82.7% compared to 84.6% in the same period of the prior year. The decrease was mainly due to higher manufacturing investments to support future top line growth as well as geographic mix. Our D&E expense for the fourth quarter totaled $21 million, a 31% increase from the prior year. The bulk of the increase was related to investments in new products, including enhancements and higher clinical costs related to STEMI and cVAD Registry studies.

SG&A expense for the fourth quarter totaled $76 million, an increase of $15 million or 26% versus prior year. Incremental investments to expand our industry-leading U.S. commercial team and to support the Japanese commercial launch were the main drivers of the increase.

Operating income grew 64% to $48 million in Q4. This translated into an operating margin of 27.3%, an increase of 400 basis points versus prior year. The strong margin expansion was due to higher patient volume and continued operating discipline, which confirms the leverage in our business model.

GAAP net income for the quarter was $37 million or $0.80 per diluted share versus $0.33 in Q4 of '17. The year-over-year net income increase was primarily driven by strong operating performance and a lower tax rate due to the impact of the Tax Reform Act, and excess tax benefits associated with our equity awards.

Our balance sheet remains very strong. In the quarter, we generated $49 million of cash from operating activities. As a result, we ended the year with $400 million of cash. Our top priority for deployment continues to be supporting organic growth initiatives, including building on our intellectual property advantage.

Now, I'll make a few comments on our record-setting fiscal 2018. For the year, we delivered revenue of $594 million, an increase of 33% or $149 million versus prior year. We saw broad-based growth in both the U.S. and outside the U.S. due to continued adoption of the entire Impella platform. For the year, operating income was $157 million, up 74% compared to the prior year. We delivered operating margins of 26.5%, while continuing to make the necessary investments to support our future growth initiatives. GAAP net income for the year was $112 million or $2.45 per diluted share versus $52 million or $1.17 in the prior year. The 100-plus percent increase was again driven by strong operating performance and a favorable tax rate.

Finally, we increased our cash position by $123 million during the year, while investing in our infrastructure, and manufacturing capacity and we remain debt free.

Lastly, turning to our outlook for fiscal year 2019. As noted in the earnings release, we expect 2019 revenue to be in the range of $740 million to $770 million, which translates to 25% to 30% growth for the year. The guidance is based on the following assumptions: continued penetration of the existing and expanded markets for Protected PCI in cardiogenic shock; accelerated growth in Impella RP post-PMA approval and approximately $10 million in revenue from Japan. The business continues to expand rapidly, and our growth rates are in line with our 5-year vision outlined back in 2015. We will continue with our patients-first sustainable growth model.

I would also like to remind investors of the seasonality of our fiscal year as we typically do when issuing guidance. In Q1, our field team was brought into headquarters for extensive annual training and also tend to take their vacations after a busy Q4. Q2 is a seasonally slow quarter for cardiovascular devices due to summertime slowdown in the cath lab and physician vacations. So we expect revenue at or just under the Q1 pace. In Q3, we typically see 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, we would expect second-half revenues to represent approximately 55% of our total year.

Turning to operating margins. We expect our fiscal year 2019 margins to be in the range of 28% to 30%, showing continued leverage in progress towards our 30% plus vision. Our platform of Impella products gives us the ability to make efficient investments in technology while delivering improvements in operating leverage. These investments will enable us to grow via new product enhancements, including sensing technology, geographies, clinical studies and product platforms, including Impella ECP, the Impella 5.5 and Impella BTR. These investments will continue to lay the groundwork for improving clinical outcomes and sustaining long-term growth. As it relates to the tax rate for fiscal year 2019, we are consistent with what we communicated during our last earnings call. Excluding the impact of excess tax benefits associated with share-based compensation awards, we expect the full year tax rate to fall in the range of 28% to 30%.

In summary, as we close out a successful 2018, we look forward to a new year of continued execution, as we build the field of heart recovery.

Operator, please now open the line for questions.

(Operator Instructions) Our first question comes from the line of Bruce Nudell of SunTrust.

We recently looked at 2015 in-patient data and saw 170,000 in-patients who received PCI, who weren't coded for cardiogenic shock, but either had systolic heart failure, chronic kidney disease or a very extended hospital stay. In this group, 25% or around 40,000 were coded for acute kidney injury, suggested of low perfusion and contrast damage. Overall mechanical support was only around 5% in the Cyrus group. Impella has been recently showing a protective kidney function, and lower ejection fractions, undergoing PCI. Is this an angle that the company is exploring with new perspective evidence development?

Bruce, the information you're referring to is -- lead author is Michael Flaherty, it was published in the Journal of Circulation Research in 2017, it has 230 patients and what it shows is that the use of Impella for low EF patients significantly reduced the risk of AKI acute injury, for Impella, it was 5.2 and the for the control arm, it was 28%. Impella also significantly reduced the risk of dialysis, which is, increases mortality, length of stay and cost. So the answer is, yes. We do have more extensive research that will be coming out over the next 2 to 3 years. And what we believe is happening, is the forward flow driving more blood flow to the kidneys, has a hormonal benefit, it increases urine production and it allows the kidneys to remove impurities in the blood. One of the Achilles heels of all of PCI and now also TAVR is acute kidney injury, because of the contrast, because of the stress to the heart and what the kidneys can do is sometimes shut down. So you'll be seeing, over the next 3 years, a lot of publications around the research, the basic science, but also you'll be seeing this in patients and studies that are happening both in Europe and the U.S. in the future.

Our next question is from Raj Denhoy of Jefferies.

Wonder if I could ask maybe on a couple of things, that couple of developments over the quarter. You know first the expanded indications or, I guess, the reduction of some of the turns through using Impella in both high-risk PCI and shock, the FDA changed the use criteria there slightly. Whether that's having much of an impact and your thoughts around that? And second on the reimbursement change that happened just a few days ago. The collapsing of Impella into one code at a slightly lower level. Are there any thoughts around, what that's going to do to adoption of the technology?

Sure, Raj, there's 2 big questions. So first on new EF. The patient population, if there are already surgical turndown and they have everything I described about comorbidities or complex anatomy or severe coronary disease, they don't have the option to go to surgery if something goes wrong. And we do think it will have an impact, and I think it will have an impact also in identifying patients that just do better with hemodynamic support. So it allows them to do longer inflations, potentially atherectomy, potentially reduce acute kidney injury, so we do think it will have an impact, and we're watching it as it goes out and it takes time for this information to filter. The second question on the reimbursement. What's happened is, CMS has now created a dedicated code for percutaneous heart pumps, it is now cath lab only patients as well as the ICU emergency patients, are all in DRG 215. They maintained the focus on biventricular support and they also gave -- permanently created a DRG for biventricular Impella. So we think the simplicity of having everything together will be beneficial, but we'll watch it and make sure that we have appropriate use and appropriate reimbursement. When they do the analysis, that is being proposed and potentially can take effect next October. They are usually looking at a subset of data that's 2 years old, and that data may or may not have the most recent trends of more emergency patients than elective patients. But the nice thing about the process is one, if a hospital gets better outcomes

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ensure that the hospitals can do the right things for the patient, and have a win-win for both the system itself with heart recovery, but also for patients that they can avoid having to go down the cascade of more surgeries and potentially a transplant.

Maybe just one quick follow up, you mentioned, since it is a dedicated code now with the initial reimbursement and about $71,000 for the Impella sites, that you gave reference to in the press release of the 8-K, I should say. Now that these are specific for mechanical support, would you expect that, that number over time is biased upwards, as CMS gets more reflective data of what these procedures actually cost?

As the way this system works is. As the costs or the patients get sicker and the cost goes up, reimbursement goes up, and what we try to do is bring those costs down by reducing length of stay and readmissions and additional resources. So as the balance goes, we work with it, but just to remind all our investors, 3 years ago, we were being paid at a lower rate for a mix between DRG 216 and 221, the coding was difficult, we did not have biventricular support with Impella. There essentially was no additional support, and many of the hospitals per transfer would not receive any reimbursement for patient management in explant of Impella. So we now have a dedicated system, we now have approval of essentially, an extensive array for elective urgent and emergent indications from the FDA, and now it's up to us to continue to execute and partner with our hospitals to get better outcomes.

Our next question is from Chris Pasquale of Guggenheim.

Mike, a couple of questions on the pipeline. Can you give us an update on the U.S. regulatory timelines for 5.5 and ECP? And then with the DTU trial approaching completion, is it possible we could see some data from that study at TCT, I know the primary end-point is at 30 days?

It is possible, I'll answer the last question first. It's possible for the DTU, it depends on how fast we can close out here, but we're potentially planning for that, it may be a little after, but that's the -- that's what we're looking to do and we're excited to look at the data. This is a epic study, because this is what we believe can impact the epidemic growth of heart failure. To remind our investors of today's standard of care for patients having heart attacks without shock, within 5 years 70% have heart failure and 40% die. So we think that helping to protect and do work with the heart muscle will have a profound impact on preventing future heart failure patients. So that -- we're very excited about that. We're looking forward to getting into the feasibility. Now we do have a lot of work ahead of us, we have to make sure that the feasibility is successful. We have to work with the FDA to design the pivotal study, and we have to do it the right way, and that's going to take time. So that's what we're working on, but we're very focused and excited about looking at that and analyzing that data. On the question on the 5.5, we are launching it under a controlled method in Germany this year. We have selected German hospitals that have established heart recovery protocols. And we'll give more details on the U.S. timeline in the future, but again it's not approved in the U.S. When we collect the data, we'll be working with the FDA to talk to them about how we'll enter the U.S. market, but we will definitely be studying it and collecting data initially at all our cVAD Registry sites, so that's the plan. On ECP, it'll also happen late midsummer timeframe as we've talked about. And we'll give more details on that as we move forward.

Our next question is from Isaac Ro of Goldman Sachs.

Question on R&D spend as it relates to your 2019 guidance. You mentioned the STEMI program is well ahead of schedule there and wanted to maybe get some context, as to how we should think about the investment they're ramping into '19. Are there -- now that you've got, sort of, ahead-of-schedule timeline, should we assume follow-up works for us to get pulled forward? So I just want to make sure I get that properly dealt into the 2019 expense line items?

Sure, Isaac, we expect to finish here, as I said mid- to late summer. We'll have to collect the 30 days MRI images and analyze the data, which means we're going to be submitting that information to the FDA, probably around the end of our fiscal year. In the back half, we'll start designing the pivotal study, again, if the feasibility study is successful. Which means, we'll be getting into next year, the next fiscal year to line up our randomized larger pivotal study, and we'll be able to give you the details of that study moving forward. I -- you don't need to plan for anything more extensive than what is currently in closing out the feasibility study.

Our next question is from Matthew O'Brien of Piper Jaffray.

Mike, I kind of think I know how you're going to answer this, but -- and you've been doing this for a while. But the guidance implies a meaningful -- the revenue guidance implies a meaningful slowdown, somewhere in the business, there is a lot of momentum Japan, Germany, RP, new indications, et cetera. So what is it that you're building in, outside of conservatism, that we should pay attention to it? I know it doesn't sound like it's reimbursement, but just anything specifically to call out there.

Matt, this is our sustainable growth target and I think it probably is one of the highest in all the med tech, if not the highest. And so we want to make sure its sustainable growth and we're continuing to improve outcomes. We are replacing technology that's been around for 40 years, and we're going for the global standard of care. If you look at last year, we gave a range of 25% to 29%, and this year we're giving a range of 25% to 30%. So we're actually increasing the top line forecast, we're definitely increasing the net increase in revenue. And we're also maintaining this best in growth rate at a higher base and we're doing it while improving operating margin. So again, it's sustainable growth it's strategic, but we have to continue to improve outcomes and go at the right pace to have that -- the success we want, which is to achieve the best outcomes for patients.

Our next question is from Jayson Bedford of Raymond James.

So just a question on Germany, the growth has obviously been quite strong. Just wanted to ask a few questions around the sustainability of the growth. Where are you in terms of coverage? Are there still pockets of the country, where you're expecting reimbursement? And when you look at the market opportunity for the 5.5, is it totally additive, or is there any cannibalization of your existing business there?

So Jason, on the first part, you mean Germany specific or overall?

Germany.

Germany. So the growth in Germany is a function of ausbildung, daten and zeit, which is training, data and time in German. And it's -- what's happening is, as you mentioned, we grew 95% in the quarter, you have a couple of factors. One is we've been adding to the distribution, and we have a training center now in Aachen, Germany. So that's been very beneficial to have physicians come in where we go through hemodynamic science best practices. We've also seen an increase in the mix of increase in high-risk PCI. Years ago, Germany was 95% shock patients and now we have high-risk PCI growing. The third is that it just continued reinforcement, that in Germany, the intra-aortic balloon pump is a Class III for cardiogenic shock, which means that it's harmful for patients. And then we're now active with over 200 hospitals and there are 600 to go in Germany, so we're making progress in opening new centers with our added distribution. And as we do that, we'll continue to grow both indications, but also -- we'll go deeper in new site and that drives strong growth itself. Your question on the 5.5, the answer is that it's a little bit of cannibalization, because it will replace completely the 5.0, but because it's longer term the CE mark is for 30 days, because its peak flow is above 6 liters, it will have an optical sensor because patients can get up and ambulate. There is a lot of interest in new science of unloading, we will match the Impella use, things with stem cells or immunosuppressant drugs, but there is no question that when you put the 5.5 in a patient, it completely unloads them, their kidneys make urine, patients feel better, and they can get up and move around because it's designed for the axillary implant and it avoids the sternotomy. So we're very excited. We're going to go slow and steady, we're going to collect data to publish, and we're going to work with the FDA early so they understand how this product will replace the Impella 5.0.

Our next question is from Margaret Kaczor of William Blair.

Mike, we've seen a pretty significant increase in shock utilization since TCT. So as you guys look at your data and adoption curve, is the shock adoption curve right now different than what you guys have seen for high-risk PCI? And maybe does that change if you look at those 15% or 20% of accounts, as it seem to have now adopted protocols, have their adoption and curves changed relative to other accounts?

Margaret, we've always believed and stated that cardiogenic shock adoption would take time, and we mentioned that on the first call, when we got approval. And it -- the reason is just because it requires a heart team, and it requires an approach and an implementation of best practices, so that takes a group of people. One of the things that's very rewarding for us is the Detroit CSI program, Cardiogenic Shock Initiative is now national. It's independent of Abiomed, and it's kind of a call-to-arms by physicians to enable not only the Impella, but better processes of putting the Impella in before the PCI, using a catheter to monitor the patient. And we just had a recent publication showing that the Impella CP has a even higher survival effect over the Impella 2.5. So there is lots of information in there, we love seeing the improvement in outcomes. And we really enjoy meeting these patients and seeing them having the ability to go home with their own hearts. So it's working well, it's growing. But again, the key to success and sustainable growth is getting these improving outcomes and native heart recovery.

Our next question is from Danielle Antalffy of Leerink Partners.

Mike, I was wondering -- and nice to meet you, Todd. Mike, I was wondering on STEMI, if you could talk a little bit about, what might happen if the feasibility study doesn't -- isn't successful? Does that mean you abandon STEMI altogether? What are the different options here? And also curious about, if it's not successful, what that could mean for current adoption in the existing indications and does that mean you're limited to just high-risk PCI and cardiogenic shock?

Danielle, thanks for the question. The current DTU study are patients that are not having cardiogenic shock, so we do not treat any of them today. The thesis that we're testing is not just the unloading benefits of Impella, where it takes the work demand and reduces the oxygen demand for the heart, it's the -- and there is a publication on this thesis. It's that the unloading of Impella preconditions the myocardium, so when the patient is revascularized, where they open up the blockage, that, that preconditioning of Impella will reduce the reperfusion injury that happens in the normal process and standard of care today, where they try to open the clogged artery within 90 minutes. And reperfusion injury results from that solution, because what happens is there is a process called apoptosis, which is programmed cell death, and that's why patients today that survive heart attacks, again, the average is -- the statistics are that 70% of these patients that survive their first heart attack will suffer from heart failure in 5 years. So we think that this has really a huge impact in looking at the way STEMI patients are treated. If it is not successful, it does not change the fact that Impella is proven to reduce the oxygen demand, it doesn't -- it's been proven to help increase coronary -- cardiac power, it reduced acute kidney injury and multiple other benefits that we've already studied with the FDA. What's unique about this again though is, it's new science on what unloading does in preconditioning and helping to reduce reperfusion injury.

Our next question is from Chris Cooley of Stephens.

Just one quick one for me. If you could help us understand the uptick in expectations for Japan. I'm assuming you're going deeper, within the existent facilities, but if you could maybe just expand upon your thoughts there on that marketplace, in terms of number of centers, the way you want to it roll it out and scale that business going forward?

Thanks for the question, Chris. As we mentioned it's going to be around $10 million in revenue for this fiscal year, should be around $16 million in expenses. I believe we have about 40 employees currently in Japan. We have our office there, and we also have a training center set up in Tokyo. We're going to kick off a meeting in May, which will be basically hemodynamic training course for our current users as well as the next generation -- or the next group of hospitals that will be getting Impella. We're planning for another 30, this coming fiscal year, and again, as you mentioned, we're planning on going deeper to get -- again get great outcomes and show the benefits of native heart recovery in a country that really doesn't have transplants or do LVADs or prefer -- and prefers not to do sternotomies. One note that is important, that just happened in Japan, is the Japanese Society Guidelines just came out with a classification, and they have downgraded the intra-aortic balloon pump to Class III in cardiogenic shock, which again Class III means, it's potentially harmful to patients and is not recommended. So, we're glad to see that, that guideline has been updated and we're very excited again to bring our best practices to Japan to drive native heart recovery as a standard of care. And we'll give more updates as we go, but again, we think that the Japan is the second largest market opportunity in the world and is custom designed to our mission of recovering hearts.

Our next question is from David Lewis of Morgan Stanley.

This is actually John Domesick, in for David. Had a quick question, just broadly on Impella adoption, I guess, both within hospitals and within surgeons within those hospitals. And data kind of points to Impella being maybe 85%, 90% penetrated in heart hospitals across the country. But do you have any sort of sense of what percent of cardiologists within these hospitals are using Impella? And some recent survey work we did showed intra-hospital penetration closer to 60%, but we just wanted to get your thoughts?

So the question is, just clarify is on, how many people use, I would say, you have to then look at which population you're talking about. If you're looking at interventional cardiologist, where that's our primary user, I would say, we have usually 3 to 5 champions at each center, 60% sounds a little high to me, relative to how many interventional cardiologists are there, and we're seeing that broadly increase, as we're doing training centers and programs on access and closure. There's a lot of physicians that are a little bit nervous to close a 12-French or 14-French hole. So, I would say, it's not 60% for interventional cardiologists yet. You also have multiple indications, so you may have an interventional cardiologist using it for high-risk PCI, but not for shock or vice versa. For surgeons, we have only penetrated about half the market with the 5.0, so the 5.0 has got a long way to go and again, we think the 5.5 will replace that and we'll be at all 1,000 heart hospitals in the U.S. alone. In the RP we're only 19% penetrated in the install base. So we have essentially, many years ahead of new doctors, new indications and new products into all the existing U.S. hospitals in our current install base. So we're very excited, but again as we train people, we train to get the best outcomes both for high-risk PCI and for cardiogenic shock.

And that does conclude our Q&A session for today. I'd like to turn the call back over to Mr. Mike Minogue for any further remarks.

Thank you, everyone, for your time today, and we appreciate your support for last fiscal year. If you have any follow-up questions, please feel free to reach out directly. Have a great day.

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