Q3 2021 ABIOMED Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the Q3 2021 IPO, Matt Its earnings conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question answer session to ask a question. During the session you will need to press star one.
And your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Todd Trapp, Vice President and CFO. Thank you. Please go ahead Sir.
Good morning, and welcome to <unk> third quarter fiscal 'twenty One earnings conference call. This is Todd Trapp, Vice President and Chief Financial Officer and.
And here with Mike Minogue, Abiomed, Chairman, President and Chief Executive Officer.
The format for today's call will be at force.
Michael will discuss third quarter business performance and operational highlights.
And then I will review, our financial results, which were outlined in today's press release.
After that we will open the call to your questions.
Before we begin I'd like to remind everyone that today's call includes forward looking statements.
The company cautions investors that any forward looking statements involve risks and uncertainties and are not guaranteed and the future and.
Actual results may differ materially due to a variety of factors identified in our earnings press release, and our most recent 10-K and 10-Q filed with the SEC.
We do not undertake any obligation to update forward looking statements.
With that let me turn the call over to Abiomed, Chairman, President and Chief Executive Officer, Mike Minogue. Thanks.
Thanks, Todd and good morning, everyone.
And at Abiomed, we continue to remain both focused and committed to our mission of recovering hearts and saving lives. Despite the challenging COVID-19 environment I want to thank our employees and our customers around the world and recognize their determination and efforts under these circumstances.
IBM and delivered a record quarter of $232 million and revenue up 5% year over year with.
We generated revenue growth and the U S and double digit growth in Europe, and Japan. Despite the Covid resurgence operationally, we were disciplined and focused on executing our fiscal year tactical plan with multiple regulatory milestones and two first in human clinical studies.
We achieved a 31% operating margin, while investing at record levels of $33 million and research and development.
Our balance sheet strength and to a robust 788 million and cash while maintaining and zero debt.
We also achieved a significant milestone this quarter as we surpassed over 1000 and Impella patents and currently have 851 patents pending and we believe Abbvie, Matt has one of the strongest IP portfolios and the medical device industry.
In summary, we executed our plan and had a solid quarter.
For today's call I'm going to provide three updates first I will outline our transition to the green phase in Q4 by leveraging our abiomed Ciudadano Covid playbook second I will highlight the robust clinical data released in October.
And finally, I will discuss our momentum with new products and regulatory approvals.
So first as a reminder to investors we designated a three phase red yellow green approach for fiscal year 'twenty, one to address the evolving COVID-19 environment.
And the Q3 and yellow phase we were focused on the acceleration of abiomed Ciudadano as we entered the pandemic.
This enabled us to achieve our tactical plan and reduce the COVID-19 impact on our commercial performance. These initiatives were accomplished without sacrificing our commitment to employee health or safety.
We ramped up our onsite antigen and PCR testing and both Danvers, Massachusetts, and Aachen, Germany for early virus detection and administered thousands of Covid tests.
This proactive testing reduced employee anxiety and allowed us to get production back to full capacity to build essential life saving heart pumps during a record quarter in our 40 year history as a company.
Because we provide essential patient support and training to our hospitals more than 25% of our U S. Field team has received a COVID-19 vaccine from their local customers and we look forward to that number growing as the vaccine becomes more available and the months they've had for headquarter.
And as employees.
In Q3, we executed on the milestones we control and grew revenue across all geographies.
As a whole hospitals today are managing better than they have previously during the pandemic with more testing better protocols and vaccinated caregivers. This allows for better patient management and treatment of both COVID-19 and non COVID-19 patients how's.
However, the virus resurgence in mid November impacted utilization, especially in the us due to ICU capacity and patient anxiety about seeking and hospital treatment.
At this point, we believe our Abbvie, Matt Ciudadano Covid playbook will allow for a green phase transition in Q4. Despite their early January ramp up and Covid cases. This playbook allows for patient monitoring and the cloud and makes our people more productive and valuable for the half.
Spittle R.
Our Impella connect online capability is now live at 686 hospitals in the U S and there are an additional 500 ready to connect once hospitals approved Wifi access.
Today.
More than half of our U S patients are monitored and the cloud with Impella connect this enables best in class 24 by seven and support on site on call and online.
As part of our Abiomed Ciudadano playbook, we monitor global and local trends at a state city and hospital level unemployed usage, new Covid cases, and ICU capacity.
This enables our flexibility with our people and resources to adapt quickly to essential and patients.
We have been working with physician societies, as well as hospitals to reinforce the importance and benefits of treating essential high risk and cardiogenic shock patients.
Also we are investing and educating the public with both online and broadcast television commercials to encourage patients to seek treatment for their heart disease.
Turning to my second topic, new clinical data and October at TCT connect we received and reviewed a robust set of clinical data showing improvement in outcomes.
For high risk Impella supported PCI data from protect three.
And restore E F demonstrated statistically improved outcomes, including better safety and improved heart function post treatment.
The improvement and heart function with more complete Revascularization is now objectively proven and high risk PCI with Impella support.
The protect for physician Executive Committee has locked the study protocol and we have already initiated site visits with first patient enrolled targeted for next quarter Q1.
We are grateful to these physician experts for the last year of study design work and affirmation of protected PCI and best practices.
For cardiogenic shock, we continue to see improvements and survival validated using best practice protocols, such as placing the impella before the PCI and minimizing items drops.
These best practices have been generated over the last five years and were derived from multiple prospective physician studies and real world evidence, including FDA studies.
These 'twenty and 'twenty updated cardiogenic shock best practices. Now include early identification of right heart failure with smart assist software.
And ex the escalation to bipolar support with Impella RP.
Within the quarter Impella RP revenue grew 21% versus prior year due to strength and patient utilization and expanded FDA emergency use authorization for COVID-19 complications, including pulmonary embolism.
Recent studies and both Italy, and Japan have also contributed to the validation of our cardiogenic shock protocols.
As a country wide initiative, Japan now has one of the highest survival rates for cardiogenic shock in the world, 77% survival and over 90% Native heart recovery and survivors.
No just four years ago, the culprit study from top European Heart hospitals, published and the New England Journal and Medicine.
Reported a 50% survival for cardiogenic shock patients using all devices as salvage post PCI.
These higher survival rates contributed to Japan's sales performance up 38% and revenue year over year. Despite COVID-19.
Moving to regulatory approvals and new products, our third and final topic, we made significant progress with two five 10-K clearances and to first in man studies completed within the quarter.
We received five 10-K clearance for Ecmo breathe Oxy, one system and treated our first eight patients with a mix of B V V E and S Pella cases, and the United States.
Feedback has been positive highlighting the ease of use portability of the console and early mobilization.
Additionally, we achieved two important milestones towards breaking the small bore barrier to reduce physician access and closure concerns.
First we completed the first five patients from our U S. F. D. A early feasibility study for the Impella ECP, a true nine French pump ideal for high risk protected PCI.
This safety data was submitted to the FDA and day proved us sufficient data to support the expansion of the Impella ECP trial to five more hospitals and 15 more patients.
Second we received five 10-K clearance for the Impella XR, she and with the Impella two five heart pump, we treated eight patients with the XR sheet outside of the U S and Q3 and have now transitioned the majority of our focus to the Impella CP for both five 10-K clear.
Orange and PMA supplements.
The XR sheet has flexible night and all grades that momentarily expand during impella delivery, and then recoil reducing closure challenges and complications at the access site.
These milestones are important steps to drive ease of use and expand our customer base and continue to drive better patient outcomes.
However.
It is important to note that bleeding and vascular complications and protect three R. F D. A study.
And we're less than 2% for both showing the technical and clinical progress made over time with training and education and innovation.
Our surgical platform continues to deliver strong performance driven by the Impella five five with smart assist our.
Our impella five five is a minimally invasive forward flow fully unloading heart pump designed for heart surgeons to implant directly with the chest open or through the axillary artery to avoid and invasive tsunami.
We created a dedicated surgical and heart failure team focused on heart recovery for acutely did compensating heart failure patients and shock.
This week at the surgical S. T S conference Dr. Ed So tests from Cleveland Clinic presented data from a large study of 356 Impella five five patients at 16 hospitals and the U S and Germany.
The study found a 79% survival rate with the majority of surviving patients recovering their native heart.
In Q3, our U S surgical business grew 48% year over year, driven by strength and patient utilization, we have now treated more than 1000 patients with the impella five five and.
And it's demonstrated an improvement and patient outcomes compared to historical rates.
While the Impella five five has exceeded our run time of more than 500 days and our engineering labs. The Impella BTR pump is designed for designed to run for more than one year and allow for home discharge with patient metrics in the cloud the Impella BTR pump.
And is now one year away from our anticipated first in human study, both five five and V. T. R have ideal designs because they are minimally invasive via the axillary artery and pump with the heart, providing optimal weaning capability and improved forward.
Flow to the kidneys.
I would like to and with a patient story from this summer.
And August Chavez items, a 29 year old lawyer from North Carolina tested positive for COVID-19, and quarantine for two weeks.
In September Chavez developed a fever and went to us local urgent clinical care.
Where are they found his heart was racing above normal and he passed out.
<unk> was immediately admitted to wakemed health with and injection fraction less than 20% and went into cardiogenic shock.
Doctor, New Paani and his team determined Chavez was experiencing cardiogenic shock from myocarditis likely due to COVID-19, the Impella CP was implanted to allow us hard to arrest. After three days of support the Impella was weaned and ex planted and care was cut.
<unk> by Blue Cross Blue Shield.
She average returned home with Us Native heart and now has a normal heart function today. He is back at work and enjoying and active lifestyle with his wife Ashley.
In conclusion abiomed with our dedicated customers continues to improve patient outcomes documented and global clinical studies, which are posted on our website as.
As we advance our product portfolio and best practices.
As we enter the final quarter of fiscal year 'twenty one we.
We remain focused on achieving our tactical plan and transitioning to the green phase.
And then as a stronger company today than before the Covid pandemic and us uniquely focused on recovering hearts and saving lives for growing high risk populations.
We are excited to close Q4, as abiomed, two dot O and enter fiscal year 'twenty, two with our best ever clinical outcomes from existing products existing indications and existing countries.
Next fiscal year, Abiomed will expand into new products, New studies, new indications and new countries.
Sincerely proud of our employees and grateful to our customers who put patients first every day. We also appreciate the continued support of our investors and remain focused on growing shareholder value.
I will now turn the call over to Todd.
Thanks, Mike and good morning, everyone.
As Mike mentioned and Q3, we delivered a record revenue quarter for the company of 232 million and increase of 5% versus prior year.
While our business continues to be negatively impacted by COVID-19 trends, we were able to deliver positive year over year revenue growth and our top three markets by sticking with the priorities and a COVID-19 playbook remaining focused and leveraging our strength for operating and this uncertain environment.
By region. The U S reported revenue of $189 million up 2% versus prior year, primarily due to positive sales mix.
U S patient utilization was down 2% year over year. However, we had tough comps last year and October, especially for cardiogenic shock.
As Mike mentioned, the COVID-19, resurgence impacted continued recovery and patient utilization during the quarter.
We started to see a broad based impact from the resurgence beginning in mid November.
Our ability to track Covid cases, and ICU capacity at local levels enabled us to see trends between higher new cases, and ICU capacity and the impact of utilization and recovery.
During the quarter, we were able to adapt and saw some areas begin to recover.
At the end of December and the U S. The CP is now and 1000 and 492 sites.
We have placed the impella five <unk> and 660 sites.
And the Impella five five with smart assist is now and 158 sites.
Up 37 sites versus prior quarter.
We believe that all 1100 heart hospitals will acquire this breakthrough technology.
Our controlled rollout of the Impella five five continues to deliver strong performance as our U S surgical portfolio reported a 48% increase and revenue versus prior year.
The Impella RP is now and 569 sites up 17 sites versus Q2.
RP had a strong quarter with revenue, increasing 21% versus prior year driven by patient utilization.
As a reminder, and July the FDA issued and EUA to expand the use of Impella RP to include patients suffering from COVID-19 related right ventricular complications, which is a great validation for this life saving device.
And the quarter the reorder rate was 104% the same percentage as the prior year.
Average combined inventory at the hospitals for the Impella two five and CP was approximately $4 seven units per site as compared to 4.6 and the prior quarter.
Outside the U S revenue totaled $43 million up 18% year over year.
Our European revenue increased 12% versus prior year, driven by higher patient utilization and several key markets, including Germany, Switzerland, and Italy and.
And a benefit from the Euro us dollar foreign exchange rate.
Within the quarter, both high risk PCI and cardiogenic shock grew mid single digits.
And Europe, we started to see and impact from the Covid resurgence early in the quarter.
And when certain countries began issuing national walk downs.
However, we were able to pivot our strategy and began to see some recovery and patient utilization and mid November through December.
The Covid pandemic continues to remain uncertain with differences by country on the timing of the recovery.
And Japan, we had another strong quarter and delivered $12 million and revenue up 38% over prior year driven by higher patient utilization.
We opened 14, new sites during the quarter, bringing our total to 156 sites out of a potential 350 impella hospitals.
We did see an impact and November as Covid cases began to rise. However, we saw some recovery in December.
Japan's performance has remained more resilient than other countries during the pandemic because our patients are mostly in cardiogenic shock.
Japan also has been able to leverage their best practice protocols and the COVID-19 environment in order to treat shock patients.
Cover their native Hearts and deliver record survival rates.
Moving to key financial metrics.
Our gross margin was 82, 3% and the quarter up 30 basis points compared to the prior year.
The year over year variance was driven by higher production volumes, which more than offset the investment to accelerate the rollout of impella connect.
One of our main objectives, and a red yellow green approach to navigating the COVID-19 environment is to continue innovating and investing as we execute our strategy and our tactical plan.
During the third quarter, R&D expense increased 29% versus prior year to $33 million.
We believe our targeted investments and technology and clinical data are critical for improving patient outcomes and sustaining long term growth.
SG&A expense for the third quarter totaled $86 million up 1% versus prior year.
We are managing our discretionary costs, while continuing to invest in marketing and training programs, including camp PCI and targeted advertising.
And to provide a safe environment for our employees.
And the quarter our costs included over half a million dollars for Covid testing and PPE for our people.
This spend is being offset from lower expenses, such as T N E and trade shows and among other postponed activities and the current environment.
And the quarter operating income grew 2% to $71 million translating to an operating margin of 38%.
We delivered strong margins, while making the necessary investments to support future growth.
GAAP net income from the quarter was $62 million or $1 35 per diluted share.
Versus $69 million or $1.51 and Q3 of 'twenty.
The year over year variance was driven by a mark to market on our Shockwave investment and a lower effective tax rate.
Our tax rate for Q3 was 23, 4% versus 28, 7% and the partner and the prior year, partly due to higher excess tax benefits and this year's rate.
Our balance sheet remains very strong we generated $79 million of operating cash flow and the quarter.
We ended December with a cash balance of $788 million up 32% over last year with no debt.
Our top priority for cash is to support organic growth initiatives and continued to build on our intellectual property advantage, which we believe will generate higher returns for our shareholders.
To continue to provide transparency. During this time, we want to give our investors color on our top line expectations for our fiscal Q4.
And the first few weeks of January the Covid pandemic worsened further impacting patient utilization.
However, as we have experienced during the Covid era, we do expect to see recovery and patient utilization and revenue during the quarter.
The patient population that we treat us high risk and our procedures are essential.
Although the timing and it's tough to call and we believe our Covid playbook allows us to treat many of these patients as they work their way back into the system.
Also we do anticipate a potential benefit as a COVID-19 vaccine becomes more widely available and infection rates decline.
With these factors in mind, we expect Q4 global revenue to be and the range of 225 million to 200 and tour and a $235 million, representing 9% to 14% growth compared to Q4 of last year.
So in summary, despite COVID-19 headwinds, we delivered a record revenue quarter.
We believe that our focused strategy will serve us and our stakeholders well on our path to delivering long term sustainable growth with new products, new indications and new geographies.
We are well positioned for the future with the resources resources to invest in innovation and clinical data, while delivering strong profitability with a robust balance sheet. We are optimistic about the future and the opportunity ahead as we continue to create the new field of heart recovery.
Operator, please now open the line for questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Standby, while we compile the Q&A roster.
Our first question comes from the line of Raj <unk> from Jefferies. Your line is now open.
Hi, good morning.
Wonder if maybe I could a follow up Todd with which you're finished with they're just kind of on the trends over the near term.
And I'm curious how things fell out over the months of November December early January and where you're still in a period, where you're seeing demand lower than you would expect and you're expecting a pick up or have you already started to see a resumption, maybe if growth that gives you confidence and the fourth quarter will be a bit better.
Yeah. Thanks, Ross for the question so as I mentioned and we did see start seeing the COVID-19 resurgence and mid November and it did I would say escalate and December and even further I'd say escalate probably towards the end of two and the last two weeks in December and and the first few weeks of January and so both new cases and deaths.
And so for US you know.
The impact you know on the hospitals and our procedural volumes because of patient tiers and ICU capacity. So I think like I said it did accelerate towards the end of December and enter into February and March and into January right now and so that's really what we're seeing from a trend perspective with with what we've seen in the past Raj as we know.
That when we do see these blips like we saw in Q2 with Florida.
And we saw a little bit and Q3 and the southeast and the mid Atlantic is that when we see blips that patients typically come back and again the timing of its tough to call us, but we do expect to see some of these patients that are we.
And we're missing and January come back in February and and into March as well.
Okay, and if it worked out.
And Robert just to be clear the forecast the range I've, given 9% to 14% and it takes into effect what we saw in the month of January.
Okay, hopefully you and I just wanted to ask my one question to you just on on <unk> and the timing there. So you're moving into this next phase five more sites you mentioned 15 patients and anything you can offer just in terms of how this continues to develop.
And this sort of a pilot study now you know what a pivotal looks like and what really the timing is of when you see P could get.
And you kind of fully approved.
And maybe also as a corollary to that you know as you expand and these are in these kind of follow up studies you know what it suggests in terms of the number of sites. It will have access and how to think about that becoming a more and important product for you.
Raj. Thanks for the question and I'll give you as much as we can confirm knowing that we don't have a prudent prediction yet with the up day on the final study we have to work our way through the good news is this is a breakthrough product. The first five patients went very quickly and we submitted to the FDA and they approved based on the day.
And we provided that it was it hit the marks for safety.
Now in the pilot phase. So we're now going to do another five centers. So up 10 centers total and will go to 20 patients total which looks like if you remember protect one which was a 20 patient population. So after that we will submit again with a pivotal where we will target high risk PCI patients.
We do not have confirmation about the size of that or whether or not we randomized to our own products or we're just going to compare to protect III will work directly with the FDA, but what you'll be then looking at is how does the device do as compared to impella on adverse events for access closure and safety to the.
Because the concept and the indication of high risk PCI has already been awarded to abiomed through Impella. So it really will be then comparing the differences between the two devices and their ability to maintain hemodynamics that being said I think we're ahead of everyone's.
Timeline from what what people thought was going to happen with ECP that has to do with great execution by the team great collaborations by the FDA and a real demand and interest by our customers to have a true nine French device for high risk PCI.
Great and thanks, I'm and squeeze one last one and just you gave some statistics around Impella connect the 600 sites. There that are currently using that.
Feature and there isn't anything you can offer in terms of utilization and those sites that have adopted that cloud based architecture versus those that haven't.
Are you seeing more pumps and those being used.
So Raj, it's hard to kind of just compare it because you're biased and that our top centers started first but historically, yes, we've seen more usage and most important and we've seen better outcomes and we've seen less and less certain user errors. So historically, if a site had our support and then got Impella connect we always saw a bus.
Amp and outcomes, partly because it was more collaborative and we were working with them and partly because they knew they had access to real time information and what's new is we're able to help with identification of of right heart failure.
And obviously, sometimes can be something that can be fatal for the patient and may not get picked up early so we're now utilizing the software.
And such and alarms and looking at patterns and to be able to predict or look at right heart failure. So we're excited about it again, most important its improving outcomes and ease of use and that is what drives us a technology to be the standard of care.
Great. Thank you.
Thanks Raj.
Thank you. Our next question comes from the line of Matthew O'brien from Piper Sandler. Your line is now open.
Good morning, Thanks for taking the questions just I guess, Mike for starters on five five that number and the quarter was obviously very strong can you talk about.
And any stocking that went on and versus utilization and then more importantly, what can and $5 five due from a growth trajectory perspective, maybe over the next couple of quarters just on its own and then potentially bringing other interventional lists and.
And to use C. P R RP or whatever it may be maybe this year and even into next year.
And so it's a good question and Matt Let me walk you through so the five five is smaller and thinner than the five Oh, it's a new technology platform and also has a sensor on it so it's actually easier to place to they actually already or if the chest is open for a patient coming off a heart lung machine. After open heart surgery that can drop and indirect.
And it's designed for surgeons and so there's a there's a huge demand for minimally invasive winnable full pump and that's what the Impella five five is a part of the new population that we can treat with it is this acute on chronic patient population. So we estimate conservatively. There's another 100000 and these patients in the US that's a sub.
Set of the <unk>.
Almost 2 million class III class four patients. So that's it that's an exciting component now we are opening new centers, but we don't tend to put a lot of inventory on the shelf because we don't do consignment and we are seeing just the strong growth and utilization overall and most important we're seeing the best outcomes historically documented.
And for acute on chronic heart failure patients anecdotally, we've even had patients that had been on extended support and seen recovery of their kidneys. So those are exciting trends.
And then from a.
From an overall perspective and your second part of your question is working back and forth with interventional cardiologists, and we do see our top centers. The cedars the Cleveland clinics are the north the northwestern and the top so I can go around the country top heart hospitals, where they combined and they partner at the heart team the Covid trend that we're seeing and 22.
'twenty is theres more surgical turndown patients going to the Cath lab. So we want to collaborate that heart team approach. So that you can do a protected PCI and reduce the length of stay for their patient reduce the having to stage the patient for two procedures. So that's a good benefit we also see the benefit of escalating those acute on chronic.
And in patients or those Ami shock patients that need more on the left side and we'll have more of a longer duration of weight, where theyre going to want to get up and walk around and so that's worked well, but in order to anticipate and and and and collaborate and and promote that more we've created a distribution does it designated for the heart Surgeons and heart.
Failure, and we've actually also added a heart failure physician in the company as well. So we're excited now for that next opportunity of those acute on chronic patients.
We also think that the unloading and we'll have a profound impact on both our acute.
Acute and chronic renal failure from some of these patients and and we do see this benefit we see is you see this heart team collaboration.
Matt if I could just jump in and add Matt if I could just add a few numbers as we started open it up to five five sites in Q3 of last year. So we opened up 26 sites last year. So obviously, we opened up a few more.
10, 10, or 11 more this quarter. So most of that I would say the growth and the $5 five is coming from patient utilization and I mean, I'll show you a little bit from site openings, but most of us coming from patient utilization.
Okay really helpful. Appreciate that and then.
And Mike I know Theres, a lot going on and between now and and BTR sheets and ECP.
But your comment and I think you said first in man a year from now is interesting to me.
Is there any way just generally speaking to frame up the process of studying that pump and how long it's going to take and what are you going to compare it to and I'll bet or anything along those lines because that's obviously an enormous new patient population for us. So the comment that youre getting close to first demand and there is.
Selling to me so I'd, just love to hear a little bit more about that.
Sure Matt the five five allows us to treat cardiomyopathy shock patients those acute on chronic. So these are these are heart failure patients that I've worn out hearts as compared to a patient and has the first symptom of a heart attack going into shock and ending up and the Cath lab, where they're gonna open the blocked artery. So this is more of that heart failure.
Your population.
And we feel very confident that extended unloading has a benefit now of the Impella five five is not labeled for six months of us even though we've had patients go a long period of time and and the engineering labs that will run consistently for more than 500 days, but you have to stay at the hospital. So it's really.
Testing the benefit of unloading and we do see benefit and four to five and six weeks of unloading for the BTR, you're now talking about something that can do a similar type of unloading and if you remember it is and how bad but unlike the today's L. Bad. So you don't have to do a sternotomy you don't core out the left ventricle the apex of the heart.
Art and take out the muscle fiber and deplete coronary flow the device goes across the valves and pumps with the heart. So it's ideal to wean off and with the sensors were able to see what's happening to the patient and wean off appropriately are optimally looking at wall tension. The other exciting thing is there are there there's future.
<unk> therapies, whether its entresto, which is a great drug whether its stem cells or other things to come and a duration of unloading through the axillary artery combined with other things. We believe is going to get a lot of these heart failure patients back the opportunity is enormous because it's really going to target the class III population.
That hasn't fallen off the cliff, yet and become class for us.
And there's tremendous new science coming around the benefits of unloading as well as some of the hormonal connections between the kidney so more to come on that from a timeline, we'll wait and see but we already have patients that are going on devices for extended period inside and outside the U S and while were not approved for bridge to transplant.
Based on you know us many of them will get a transplant and three to four weeks and they go right on to a transplant with the Virgin stern them, they've been up and walking around because it's implanted through that the axillary and the shoulder and it really opens up now and opportunity for chronic heart failure that hasn't been out there before.
Got it exciting thank you.
Thank you. Our next question comes from the line of Chris Pasquale from Guggenheim. Your line is now open.
Thanks, guys and Chris.
First I was hoping you could update us on unexpected and approval timing for the CP compatible ex sorry, I thought I heard you say that you were working on both a five 10-K and a PMA supplement for that price some clarity on the regulatory path there would be helpful too.
Yes.
Christy.
Tell us two five is the only device that has the extra <unk> five 10-K cleared on it and we're not doing anything different to the pump itself with the Impella CP, we will pre pursuing.
The XR sheets with a five 10-K clearance, but we also will continue to enhance the product to make that even a better device. So when we changed the impella components or change anything on the Impella CP. That's a PMA supplement and you should expect that it'll be done in parallel and you should expect that will continue over an extended period of time.
Okay, but when youre going to be able to have the extra XI compatible with the CPA is that still targeted for early FY 'twenty two.
It's probably more in the second half, but again there'll be other things coming on top of it. So we're going to we're going to go after both so you should see forsee and XR sheet clearance and then you'll also see some changes to the product to make that product work better with the XR sheets, and those will be PMA supplements, which should start and the second half of next fiscal year.
Okay.
And then Todd and I don't think I heard.
The breakdown between high risk PCI and shock and the U S. This quarter I'm, just curious given the ebb and flow with with Covid headwinds, whether there was a differential performance between the two segments of the business.
Yes, Chris Good question, and I think for high risk PCI and the quarter it was relatively flat.
And from Ami Cardiogenic shock.
Was down and down 2%, one thing to point out and and I mentioned in my prepared remarks.
Cardiogenic shock at a really strong October last year, where I think up over 30% for the month of October and so some of it is just more more comps and anything else and and then obviously we had.
From a high risk PCI standpoint, and a little bit of the impact last November December from each day. So I think it's more of a accomplishes and anything else Chris at this point and time.
That's helpful. Thanks.
Thank you. Our next question comes from the line of Danielle and Telsey from SBB Leerink. Your line is now open.
Hey, good morning, guys. Thanks, so much for taking the question Todd.
Just a question for you on guidance and just wanted to see if we could get some color from you around what's reflected at the low end and the high and as it relates to Covid recovery and then ask one follow up on margin.
Sure. Thanks for the call. The question Daniel So normally as you know, we don't provide quarterly guidance and we're just trying to be transparent with investors as much as we can and this uncertain environment. So as I mentioned in my prepared remarks, I mean, we do continue to see COVID-19 resurgence impacting the pace of recovery, especially in.
In January across I would say, mostly U S and Europe. So however, as we've seen in the past when these when we see patiently utilization impacted we normally see a recovery again, although the time and it's tough to call. So at the low end and my range, 99%, we just assume that we'd see a slower pace of recovery throughout the quarter from.
Where we are today.
And the high end of the range, 14% assumes some of these impacted cities and regions snapped back a little bit quicker and we get to that 14%. So that's really consistent with my guide last quarter, its low and as slow recovery higher and it comes back a little bit faster and a corner.
Okay. That's helpful. And then my next question on margins you guys have been doing a great job on the margin side of things and another quarter of really strong operating margin sorry, and you are excuse me you are investing more and you have been and I guess I'm just curious as you start to re ramp revenues and so you get out of Covid hopefully sooner.
Versus later, how to think about the operating leverage going forward, particularly since he's been investing even during that time and been able to deliver strong operating and I can't thank so much.
Yeah, Daniel So I think as you as I look at it like next quarter and quarter beyond I think we will continue to see the you know the absolute dollar increase.
Opex with revenue.
Think about next quarter. For example, we do typically see higher payroll taxes and fringe as a calendar year starts over and we're going to continue to invest in R&D and so I think we should stay somewhere in that 15% of sales as our clinical trials begin to ramp like <unk> and <unk>.
And pay for and we continue investing and new products.
Like breathe and BTR and the sheets and ECP. So I think as you go forward you will see our Opex creep up we will continue to spend more I would say on physician education camp, PCI, and more and more and more and marketing programs. So I think you'll see us.
That's up a little bit over the next couple of quarters and.
That's all I can say at this point and time will provide more color obviously at our next call with regard to margins for us for the next fiscal year.
Thank you.
Thank you. Our next question comes from the line of Jayson Bedford from Raymond James Your line is now open.
Hi, good morning.
Just a couple of quick questions can you help us reconcile the growth and Europe, meaning procedure growth versus dollar growth and I guess, maybe talk could you quantify the us it.
And impact there and was there any stocking related to the revenue growth and Europe.
Yeah.
Yes, Jason Good question I would say from an overall Europe grew 12% on a reported basis from a from and or FX perspective on an organic basis. It was closer to 4%. So we had a.
Pretty big tailwind from FX last year, you're right was around 111 versus average of $1 19 for the quarter. So I would say about eight.
<unk> eight points were due to FX.
So patient patients were up and the like I said mid single digits high risk PCI was up 4% shock was up 6% and.
And I would say that that's sort of the reconciliation.
And we saw some nice performance I would say out of Switzerland, Germany, Italy continue to see I would say patient growth and those areas and they were being offset by some of the hardest hit countries like U K, France, and Belgium, which were down obviously double digit so a little bit of uneven growth over and over in Europe, but overall pretty pretty.
It's pretty strong growth overall, when you think about with Covid and what's going on over there.
Okay.
And then.
You mentioned, the 48% growth and your surgical business and give us a lot of metrics. So don't want to be greedy here, but is there any way that you could give us and approximate size and that surgical business or maybe just even the split between FIFO and <unk> five in the us.
I mean, the over the split and it's about it's about 15% of our business, Jason and I can and without getting into the details I would tell you that the 505 us is growing over 300%.
And the size the FIFO is declining so it's 500 fives and becoming a bigger part of our business today and we expect that to continue as we go forward.
The five five contribution and bigger than the five O contribution.
Yes. It is.
Okay. Thank you.
Yeah.
Thank you. Our next question comes from the line of Chris Cooley from Stephens. Your line is now open.
Good morning, and Christmas for taking the questions.
Well, there's a lot of great detail this morning, when preclinical transparency.
And that's it.
Going into fiscal year around but.
I guess my first question just simply on the guidance.
Talk about.
And so and when we think about it.
And the surgical franchise versus high risk.
No.
Are we looking for similar trends here and the political force with the <unk>.
With us really being driven by these great outcomes from the T V.
And the <unk>.
And population as well as now with the growth and the ERP and <unk>.
Johnson with treatment of COVID-19, and I've just got a quick follow up.
So Chris I don't want to make sure I just understand your question is more around what do we expect in Q4 from a from a growth by surgical versus hybrids versus cardiogenic shock.
Moving to kind of look at the mix here.
Basically going forward through the fiscal <unk>.
Obviously, we're getting a good benefit from growth and the monetized and I'm just.
And to think about when we see a reacceleration in the kind of old.
Our growth and the high risk PCI segment as well.
Well I think the mix of business that we saw in and really in Q3 will continue into Q4 without getting into details by by product, but I expect to see another strong quarter out of our surgical business, both the 505 and and RP and the five Oh, So I expect us.
Our surgical business continued to perform well and.
And what we do.
Spec to see ultimately at the end of the day high risk PCI and cardiogenic shock us.
Snap back from where we are right now and and get better and February and March.
Yes.
Understood and then maybe just.
Clinical solutions.
Mike in your prepared comments at the outset.
You mentioned the direct to consumer marketing both on the TV side as well as through digital media just was trying to get a better feel for the scope of that.
And kind of how that would roll out and.
And why now thanks, so much.
Yes.
Thanks, Chris for the question.
Have had selected commercial's over the years, where we aligned and with protected PCI centers.
What we're doing now.
It's really more of a general awareness campaign, where we're partnering with the local hospitals.
We're talking to the society and specifically Sky is the interventional Cardiology Society, and the chairman of Sky's doctors, Cindy grind and so she has given several talks on the benefits of treating these essential patients and the need Sky also conducted a survey and.
National Survey and it showed that patient anxiety was keeping people from going to the hospital one of the points was 51% of the people and the survey did not feel comfortable scheduling a medical procedure. During COVID-19. So we're running these commercials, we're getting positive feedback both from the hospitals.
Our customers are because again they are general awareness, but it allows us then to connect those patients that need to be treated and to be clear our high risk PCI patients are not elective their essential they are classified by CMS and by the societies as essential because these people are having chest pain and in many cases they are admitted.
To the hospital and what I would remind our investors that we tried to be so transparent and give you as much detail as we can on our patients. There is a gray area between our high risk PCI patients and urgent patients and is non semi and that's admitted to the hospital day, compensating and someone having and am I going into shock because of a blockage or.
And because of a virus. So we always give you the top numbers, we try to break it down but theres certainly now a blending of all of those together.
And again these people need to be treated and they have a high mortality rate if theyre not treated and so that's that's what the messages for but we have stepped it up and we're going to maintain it into the next fiscal year, because we think it's very helpful. Overall.
Thank you.
Yeah.
Thank you. Our next question comes from the line of Marie Thibault from B P. I G. Your line is now open.
Hi, Good morning, Thank you for taking my questions.
Just one.
Sort of high level question for you here to start.
We think about abiomed to point out is movement into the green phase here.
Is it fair for us to think about post COVID-19.
And that being able to return to us or the mid teens procedure growth you were seeing and the you asked before some of the disruption in late calendar year 2019, just wanted to get kind of a feel for how you're thinking about ex COVID-19.
Hi, Matt.
That's a that's a good question and a normal question. So first of all what we want to do is we want to outperform the rest of our peers. So we want to have positive growth and then the best metrics on gross margin operating margin and of course, some of the best clinical data coming in and and pursuing.
And new indications new product. So we've got lots of catalysts and as that happens we will maintain a lot of the benefits that we we implemented during COVID-19 with Abbvie and med ciudadano things that make us better at training and education, a regulatory submissions clinical studies and we do think we will have.
A lot of catalysts catalysts on the Ecmo, which is new catalysts on some new indications going after this acute on chronic heart failure population will be collecting more data and submitting for VT ablation and then in the in the EP lab.
And then of course, we've got the XR sheets that helped minimize access closure concerns.
We also just have regular education on access closure showing that the rates now for bleeding and vascular complications can be below 2% with training and then you have the ECP RP growth five five.
And then you also have some new countries. So we're excited and we believe that we will maintain that that.
And that top tier growth.
Our formula and we think that today, we're a much better company because of Covid and we will get the benefits of of Abiomed Trudeau and fiscal 'twenty two and beyond.
That makes sense, Mike. Thank you for that and obviously I'll hang on for fiscal 'twenty, two guidance and I'm trying to be patient there one follow up then on international.
The trend around Japan looks to be sustainable given all the.
Data drivers you have going on there and some of the best practices that are being implemented there. So.
So I wanted to check if that made sense as a sustainable growth driver going forward and then.
And if I could get detail on the new countries that abiomed has items. Thank.
Thank you.
So Murray you're correct I mean, Japan had a really strong quarter at over 12 million of revenue up 38%. Most of that was driven by patients patients were up 37% and the quarter. So again, we've opened up a 156 sites we still have another.
Up to another 350 to get into so we do expect to see us.
Long sustainable growth and Japan again for us where it's about getting the best patient outcomes. So we can have be the standard of care are there for the next 10 years. So we're very excited about our performance in Japan and more to come in that area and in terms of countries outside.
The next one is always tough to call right, we are planting seeds and a and a lot of different countries around the world. If you think about Singapore, and Hong Kong, and India, and the Middle East and there's just a variety of them and so the gating item for us and these countries as reimbursement. So we will typically go into these countries work with some of the key opinion leaders work with.
The physician societies.
And just it's a long sales process. So it's hard to call, but we our plants and a lot of seeds and we.
And we still have a lot of growth to go Oh U S. Besides our top three countries that we're focused on which are Germany, and U S and Japan.
Thank you for that Tom.
Thank you.
Thank you. Our next question comes from the line of Margaret Kaczor.
Cooler from William Blair. Your line is now open.
Hey, good morning, everyone and thanks for squeezing me in here.
Wanted to maybe follow up a little bit about the cloud and a real time monitoring that you guys referenced on the front end of the call. So number one I know at this point you guys are sort of giving away the connected system, but how frequently can we expect new software launches from the program and would you charge for some of those new features.
And then I guess more specifically as we look at calendar 'twenty one.
You know what kind of updates should we look for whether kind of just generic or more predictive algorithms.
Margaret Thanks for the question and just to clarify sometimes it's a confusing thing for some investors is smart assist all the software and we have.
On the system itself allows us to when we log in to see that and to utilize that and talk to their physicians about that and it helps us predict things such as potential right heart failure Impella connect once that information is and the cloud and its streaming and allows us to do artificial intelligence and collect the data and so.
And that can be done at a quicker pace that means on some of those tools. We can do it from our phone or iPad. We don't have to go out to every single center and log and add that software to all the consoles and so the analogy I'd give is smart assist is Cobra Kai and Impella connect is Netflix and so.
So we're going to we're going to strike hard and we're going to we're going to try to do everything we can at the hospital bedside with smartest says, but the debt the ability for artificial intelligence to take data from all over the world on our patients and match it with outcomes to ex plan will give us tools and their future.
We may add four or may add to charge for it but currently because of Covid and everything is giving away. All the hardware has already been put in our cost of goods. That's why we have 500 sites. We just have to turn on and Wi Fi and we know that making ease of use and better outcomes is the formula for success is a formula for adoption longer term, we will have some.
New models for AI, we might have new models guarantee and certain outcomes, whether it's improved <unk> for high risk PCI, a reduction and readmissions for high risk PCI or maybe even better outcomes and if someone commits to follow the protocols and report that data. We can provide more of these AI tools. So it's a lot of opportunity we already have a very good gross.
And we're already profitable so we're gonna do things that make the best sense for the patient and our customers.
Because again, we believe we're going to be the standard of care for high risk PCI and shock in the short term and then we're going to expand on all these other indications later.
Okay. So if I can follow up on that and on that and the follow up question. So number one should we assume kind of new updates.
Specifically over a four quarter period and doesn't matter I guess.
Do you need new new.
Yeah add ons new shelves.
To add onto the system and then.
As you're thinking about launching some of this is it about convincing new clinicians and they tell us to use the system or is it about expanding the number of patients currently.
Existing trained clinicians.
Expanding number of patients they use abiomed out thanks.
Margaret our strategy number one is to make our team more productive and flexible and get better outcomes for their patients. So you can imagine and a COVID-19 environment with restrictions.
It's a pretty great tool when our clinical wrap and the field all of US on gets attacks and it tells them that theres a patient on support at this hospital. They can click on a button and they can see the console immediately and and watch how the patient is doing so as they drive to the hospital or the as they get a call from the physician and real time, they're looking at what's happening so.
And that's the big part AI is certainly gaining a lot of traction in the medical community really the only challenge is people that have cyber security concerns and what we do is we explain to them that the impella connect and our software is FDA approved is HIPAA compliant. It's a one way transmit out so that it's.
Not <unk> back in and we just got to continue to work with them and and it allows us to really do a great job of of connecting their outcomes with their questions and on the same impella connect portal, we can look up a patient meaning a physician we can look up how they've done and the past what type of patients. We can look up hospital.
And it gives us a level of information that allows us to help them improve their outcomes and and that's that's the key to this tools and the and the software, it's really ease of use and better outcomes, but the level that we go down is to start with our benefit to our people benefit to the physicians and we just have to overcome a little bit of the I T.
Fear at the hospital.
Thanks, guys.
Thanks Margaret.
Thank you at this time I am showing no further questions I would like to turn the call back over to Mike Minogue, President and Chairman Chairman and CEO for closing remarks.
Thanks for your time today, I would like to remind our investors that our corporate pitches on our website, where it advances the slide <unk> also for the clinical data that I discussed today and my script. Those slides are posted on our website and we appreciate your time have a great week.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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Sure.
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