Q2 2022 ABIOMED Inc Earnings Call

October 28, 2021

[music].

Okay.

Good day and thank you for standing by welcome to the second quarter 2022, and beyond that earnings conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one on your telephone please.

Please be advised that today's conference is being recorded.

If you require any further assistance please press star and then zero.

I would now like to hand, the conference over to your Speaker today, Nicole Matt manager of Investor Relations. Please go ahead.

Good morning, and welcome to Abiomed second quarter fiscal 2022 earnings conference call. This is Nicole <unk> manager Investor Relations and I'm here with Mike Minogue, <unk>, Chairman, President and Chief Executive Officer, and Todd Trapp, Vice President and Chief Financial Officer.

Format for todays call will be as follows.

First Mike will discuss second quarter business and operational highlights and then Todd will review, our financial results, which were outlined in this morning's press release.

After that we will open the call to your question.

During the call we will discuss certain financial information on a non-GAAP basis. It's non-GAAP information is provided to enhance your overall understanding of our current financial performance.

The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP.

A reconciliation between GAAP and non-GAAP results are presented in the tables accompanying our earnings release.

Finally, I would 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 in the future.

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 <unk>, Chairman, President and Chief Executive Officer, Mike Minogue.

Thanks Nicole.

Morning, everyone.

During the second quarter, we made progress on advancing our innovation expanding clinical evidence and leveraging our premier commercial field team in a challenging environment with Covid and hospital staffing shortages.

In Q2, Abiomed delivered $248 million of revenue up 18% year over year, driven by 16% growth in the U S and record revenues in Europe, and Japan up 24% and 19% respectively.

The growth was driven by higher patient utilization and continued strength in our U S surgical business.

We believe delta.

Hospital Labor shortages had regional impacts beginning in August and continuing into September as a result, only 75% of our U S regions grew year over year for the 25% of the regions negatively impacted we believe based on prior experience, we will see a recovery in those regions and the.

Future.

In Q2, the shortage of hospital staff, especially nursing was the new dynamic that we had not experienced during the Covid pandemic as a result, the Q2 revenue missed our internal July expectations.

Overall hospitals today are managing the treatment of the pandemic better, but impella usage in the Cath lab is still impacted by ICU capacity limitations hospital staffing shortages in the U S caused some health systems to reduce cardiac procedures were temporarily closed facilities. Despite these head.

[noise] winds faced within the quarter the majority of U S regions remained resilient and recorded growth.

In Q2, we adapted within the quarter by leveraging our abiomed Ciudadano playbook, which included monitoring specific trends on new Covid cases, and hospital ICU capacity. This gave us the ability to adapt quickly to support high risk or emergent patients.

Assist in patient transfer from spoke to hub or support the ICU and patient with an abbvie a med representative bedside or on the phone with Impella connect.

Operationally, we achieved a 24% operating margin while investing a record level of 41 million in research and development to continue to advance our pipeline of life saving devices.

Our balance sheet remains robust with $862 million in cash and zero debt and our patent portfolio continues to gain strength with 1297 patents and over 1100 patents pending we believe <unk> has one of the strongest IP portfolios in the medical device industry.

And we will add to it as we continue to innovate.

On today's call I will highlight advances in innovation.

Progress on regulatory approvals and how abiomed Premier field team is providing heart hospital teams breakthrough technology landmark clinical studies and 24 by seven support during a challenging time.

At Abiomed, leading in technology and innovation is one of our four principles during the quarter. We celebrated the two year anniversary of the FDA PMA approval for the Impella five five with smart assist.

This is our minimally invasive forward flow fully unloading heart pump designed for heart surgeons with direct or axillary implantation and less than 60 minutes.

This game changing technology has enabled minimally invasive implantation with ambulation for more than 3000 patients in the U S and has achieved greater than a 70% survival in a very sick cardiogenic shock patient population.

As a result in Q2 U S surgical revenue grew 60% year over year.

Today Impella five five is 27% of U S heart hospitals were 306 of the 1113 hospitals.

Furthermore, we are eager to bring this technology to Japan and have already applied for P. M D a approval.

We believe the Japanese market is ideal for Impella five five given its ability to provide minimally invasive longer term unloading support enabling native heart recovery in a country culturally adverse to heart transplants and invasive sternotomy.

We expect to receive Japanese P. M D. A approval for Impella five five by this April 2000.

2022.

In Q2, we also expanded our abiomed breathe oxy one system to a total of seven U S sites and have treated 53 patients, which concludes phase two of our pilot site product launch.

Clinical feedback primarily from heart surgeons on this compact cardiopulmonary bypass system has been positive based on the ease of use with a simple intuitive interface and the light portable design, allowing for patient Ambulation, we'll continue introducing this device at a measured pace and bring our disciplined approach.

Two clinical data and innovation to the Ecmo space.

On the regulatory front, we achieved multiple milestones first we launched Impella RP with smart assist at four sites in treated patients within the quarter. This smart pump is the next generation of our FDA approved right heart device with a sensor and exclusive weaning capability.

We also continue to make progress on the Impella RP with insertion through the internal jugular vein or I J in the neck as compared to the femoral vein in the leg. This is the preferred placement for heart surgeon heart Surgeons and allows for early patient ambulation.

We expect to file an impella RP PMA supplement at the end of the fiscal year.

Second in August the FDA granted breakthrough device designation to Impella ECP. This designation means the FDA will prioritize impella ECP regulatory review processes, including design iterations clinical study protocols and PMA application.

To date, we have enrolled 26 patients in the pilot study at four hospitals.

On the interaction with the FDA, we believe the high risk PCI pivotal study will require a single arm with up to 225, Impella ECP patients at approximately 30 sites.

We expect to lock in these details this quarter and enroll our first pivotal ECP patient in March and April around the same time as our first Impella BTR patient in our F. D. A early feasibility study.

Moving to my last highlight Abiomed Premier commercial team has positioned us as the leading heart recovery company.

Validated with our breakthrough technology landmark clinical studies and 24 by seven clinical support.

We're also actively engaging the referring community with our direct to patient initiative and hub and spoke model to bring awareness and treatment options to this underserved cardiac disease high risk patient population.

Our impella connect remote monitoring and 24 by seven support has been valuable to the health care providers during the COVID-19 resurgence.

A nurse labor shortages, because we assist with patient management as I see us become strained.

Impella connect software is now live in more than 85% of our U S sites, allowing for the majority of our U S patients on support to be monitored in the cloud by the field the call center or the customer.

Outside of the U S. Our Impella connect software is now live at 37% of our Japanese sites and 14% of our European sites today.

Today No other company in this space offers this level of support and expertise.

Before I share a patient story I want to remind listeners that 15 million Americans live with cardiac disease and it is the number one cause of death in the U S. With 875000 deaths per year. Additionally, cardiovascular disease remains the leading cause of death in women.

Yeah.

Now our Impella patient Frannie Argolis 61 is a mother grandmother and nursing supervisor from Henry Guo Virginia.

Earlier in the year Frannie experienced job pain, then collapsed at home.

Friday's husband called 911, and the pyramid medics transported her to where she works at St. Mary's Hospital in Richmond, Virginia, the cardiologist remove blood clots in the Cath lab and place to stand in France, right coronary artery during the procedure she went into cardiogenic shock.

And the cardiologists doctors, Darren Appleton, and Peter row inserted the Impella CP with smart assist to support her left ventricle well.

Well on support smartest technology triggered section alarms alerting physicians to check for right heart failure further testing confirmed right ventricular failure and the physicians inserted impella RP to provide biventricular support after one day for Annie's left ventricle function improved.

And Impella CP was removed seven days later, Impella RP was weaned and removed and three days later Frannie returned home.

Today, Fannie has normal heart function with an E F. A 55% and is back to work as a nursing supervisor and living an active lifestyle with her grandchildren.

As a heart recovery patient her insurer medical mutual will avoid paying for the most expensive and invasive lifetime procedures that come with L beds and heart transplant.

Yeah.

In conclusion in Q2, we made progress on product innovation and regulatory milestones, while leveraging our commercial field team and the abiomed two dato playbook in a challenging environment.

I mean that remains focused on disciplined execution and sustainable growth as we continue to pursue our goal of becoming the global standard of care to recover hearts and save lives.

To our employees and customers you are the best in the industry. Thank you for your dedication and commitment to putting patients first and to our shareholders. Thank you for your continued support.

I'll now turn the call over to Todd.

Thanks, Mike and good morning, everyone.

In the quarter, we delivered revenue of $248 million, an increase of 18% versus prior year.

Despite the challenges of the Delta variant and hospital labor shortages, we delivered double digit growth across all geographies with record revenues in Europe and Japan.

By region, the U S reported revenue of $200 million.

Up 16% versus prior year, driven by higher patient utilization and continued strength in our surgical business.

U S patient utilization increased 8% year over year with growth in high risk PCI and double digit growth in cardiogenic shock.

As Mike mentioned, we believe Delta and labor shortages had a more significant impact on patient utilization within the quarter, which caused us to miss our internal goal.

We will continue to leverage our abiomed two point old playbook to adapt in this environment and assist the hospitals icu's.

Our product penetration continues to drive adoption and revenue growth.

As a reminder to investors all of the following details on product installed base is summarized in our quarterly slide deck.

In the U S. At the end of September the Impella, two five and CP have reached 1549 sites.

The Impella five <unk> has been placed in 666 sites in.

And the Impella five five with smart assist is now in 306 sites up 49 sites versus prior quarter.

The full market release of the Impella five five with smart assist continues to perform well with U S revenue growing 116% year over year.

Finally, the Impella RP is at 634 sites.

In the quarter, the reorder rate was 102% slightly above prior year.

Average combined inventory at the hospitals for the Impella two five and CP was approximately four eight units per site slightly above the inventory levels, we saw last quarter.

We continue to see a favorable impact on revenue from sales mix in the U S, resulting in about four points of growth.

Outside the U S. We delivered record revenue of 48 million up 27% year over year.

Our European revenue increased 28% to $33 million versus prior year, driven by higher patient utilization sales mix and timing of orders.

However, Germany was slightly impacted by extended physician vacations combined with nursing shortages in select areas.

Despite these headwinds our European business delivered record revenue in our second quarter.

In Japan, we also delivered a record revenue quarter of $12 million up 19% year over year.

Impella utilization remained strong up 33% versus prior year, despite headwinds from a COVID-19 resurgence and the Summer Olympics.

Within the quarter, we opened nine new sites, bringing our total sites to 180.

Out of a potential 350 hospitals.

Moving to key financial metrics gross margin was 82, 3% in the quarter compared to 81, 5% in the prior year.

The year over year variance was driven by sales mix and higher production volumes.

In the second quarter R&D expense totaled $41 million, an increase of 34% versus prior year.

Year over year growth was driven by investments in small board devices like Impella, ECP and XR sheath.

Future heart failure technologies, such as pre cardiac and Impella BTR.

And stingy GPU and protect for randomized controlled trials.

SG&A expense for the second quarter totaled $103 million up 30% versus prior year.

Driven by investments in our direct to patient initiative.

Customer training and additions to our premier distribution team.

In the quarter non-GAAP operating income was $60 million down 1% versus prior year translating into an operating margin of 24, 4%.

This reflects growth investments tied to our continued focus on extending our lead with innovation advancing clinical evidence and further enhancing our distribution team.

Non-GAAP net income for the quarter was $47 million or $1 <unk> per diluted share versus $46 million or $1.01 in Q2 of 'twenty one.

The year over year improvement was driven by higher interest income and a lower effective tax rate.

We had another solid quarter on cash as we generated $61 million of operating cash flow or.

Our balance sheet is robust as we ended the quarter with $862 million of cash and marketable securities.

Now turning to our outlook.

The impact of the pandemic and new challenges with hospital staffing shortages.

Certain conditions remain.

In order to provide full transparency to our investors, we want to give insight on our revenue expectations for the second half of the year.

The Delta variant and hospital labor shortages in the U S impacted August September and continues to put pressure on impella procedural volumes in October.

Abiomed started the fiscal year with a range of $990 million to $1 3 billion with growth of 17% to 22% versus the prior year.

After a record Q1 and a solid July we upgraded our guidance to $1 <unk> 3 billion to $1 5 billion with growth of 22% to 24%.

Given our current visibility talk till October which appears to be trending towards approximately high single digit revenue growth year over year.

We expect Q3 global revenue to be slightly up from Q2.

This assumes some improvement in delta rates and hospital staffing in November and December.

We now expect fiscal year 'twenty two revenue to be in the range of one point or $1 billion to $1 <unk> 3 billion, an increase of 19% to 22% versus prior year.

And slightly above our original fiscal year 'twenty two guidance.

We expect non-GAAP operating margin to be in the range of 24% to 25%.

In summary, while we navigate through the uncertainties, we remain focused on investing in innovation and clinical research and operational execution to achieve our fiscal year 'twenty two goals.

We remain confident in the long term outlook for abiomed as we continued to improve outcomes recover hearts and save lives.

Operator, please now open the line for questions.

Thank you.

As a reminder to ask a question you will need to press Star and then one of your telephone. So we're talking a question. Please press the pound key.

Please standby, while we compile the Q&A roster.

And our first question comes from Anthony <unk> from Jefferies. Your line is open.

Thanks, and good morning, everyone. A couple of questions. The first will be just on on shortages in guidance and we're hearing this on a couple of calls this quarter just wondering for Impella sites, specifically how pervasive.

Nursing shortages are in the ICU use again at the Impella sites and then when you sort of look at the <unk> fall.

And the 20 million downward revision of guidance is there a way to maybe splice between.

The delta headwinds in <unk> and into the next couple of quarters whats allocated toward Delta and whats allocated toward nursing shortages and we'll have a couple of follow ups on the pipeline. Thanks.

Great.

Anthony Thanks for the call. Its a good question, it's something that we track as we've as we said in the call here, a 75% of our U S sites grew.

So we have a playbook to adapt to Delta what was new was a little bit of the shortages are.

Staffing so the procedures Wanna be done ER physicians are engaged but if they don't have the surgical text or the cath lab tests or ICU capacity that that limit you. So that impacted about 25%. If we look at our just the same metric for cardiogenic shock, 83% of our regions grew.

So we're a little more resilient and that plays to our ability to be relevant and help the patients and also help to the ICU and the nurses there with training with support with online <unk> and anything else that we can do bedside.

I think about the next part of the year I think we've got the Delta.

Somewhat managed as the hospitals know how to do this better they they're just assuming they're going to continue to have beds allocated for.

For Delta and don't forget that we treat some of those most severe sick delta patients with our emergency use authorization for the RP or Ecmo Vv Ecmo, which is the majority of our breath patients or at Capella. So we're still there providing support.

The shortages I think what's going to happen is it's going to be incremental theyre going to continue to prioritize the sickness of the sick patients which is us.

Some of our most of our patients and our I think the hospitals are resilient, but theyre going to need help and that's where the abiomed field team Impella connect IQ database.

And the training as well as the networking between the hub and spoke and transfer will be helpful.

Quick follow up there Mike would be if you have using your crystal ball and what you guys see I mean, how deep into 2022 do you think the nursing shortage issue will last and what do you think the fixed will be in and just quickly on the on the pipeline.

Any expectations for timing on the launch of XR sheet on CP, specifically into calendar 'twenty, two and and what should we be watching for into next year for the transition of ECP from early feasibility to the pivotal study. Thanks again.

Sure Anthony So remember the it's the Delta variant with ICU capacity and the nursing shortages. So thats currently impacting less than 20% of our hospitals and we do think that comes back and we have seen that come back. So I think as time goes on that will get minimized I also think it's an op.

Fortuity for abiomed because of our field team our clinical expertise, our bedside support call Center and Impella connect.

We can help augment what they're doing and assist them in and that shortage and I think it's going to get better and I think hospitals are more resilient now. So we see this as something that will allow us to continue to grow and we are well positioned as they continue to train new nurses and will probably be part of that process.

On the XR sheath, nothing has changed relative to our prior as you heard on the call. We have a we have a list of new products and new approvals. So we're trying to prioritize for the call here what are the biggest ones are the most important ones and ones that are happening in the next six months. So ECP is.

Great progress I think is that it's ahead of schedule from everything we've been stating we announced today that we expect to have the five five <unk>.

In Japan by April which it is.

<unk> been commented on and I think that five five is gonna be a breakthrough product in Japan because of the culture, there and the aversion to Sternotomy and heart transplant.

The BTR pump is there's it's a minimally invasive discharge about all of that there's nothing like it in the world. It's what physicians and surgeons have wanted for 10 years, and we expect to be doing patients first in man here in the U S through the early feasibility in March and April.

We havent commented about the pre cardio, but that continues on.

With the <unk> and we're looking forward to go into phase III on the on the Ecmo. So with all of that technology, we have to continue to execute control, what we control and it just points to the fact that we are the leaders now for the heart team.

Essentially every single heart team out there is working with Abbvie met on a product in the Cath lab, the surgical suite or the ICU or in the cloud and we have the landmark clinical studies to back up the data as well. So we're excited for that and I think we're going to continue to see more momentum.

And whatever happens in the future will be well positioned and will support our hospitals.

Thanks again.

Thank you. Our next question comes from Margaret Taser from William Blair. Your line is open.

Hey, good morning, everyone. Thanks for taking the questions.

Margaret I was hoping to go first and so a little bit more detail on how October looked it sounded like things may be were improving and then you know.

Based on the Q3 comments, you sort of expecting something similar for the full quarter, but not necessarily improving from what you guys are seeing in October so it isn't.

That the right read or there are some comps that were maybe not anticipating and then what does that imply for the implied fiscal fourth quarter outlook.

Are those similar dynamics that you referenced.

So Margaret this is Todd thanks for the question I think it was your read is right I mean, we in my prepared remarks, we said that October was up mid single digits from a growth perspective, obviously for us to be slightly up from Q2 into Q3, we're somewhere in that seven 8% topline growth. So we do it.

To see it improve a little bit from October as we get into November and December and that's what we're hearing from our field team. We think some of the headwinds from some from <unk>.

Delta sort of subside over the next two months, but that's the expectation.

As we get into Q3 and as I look at Q4, when you look at the low end of the range I think we assume that as the business continues to recover and we see a modest or a gradual lift from Q3 to Q4 again as delta cases improve and hospitals are able to manage.

I'd say manage better their labor shortages, which are reducing some of the limitations on the ICU capacity. So I think your read is right.

And again, we're just trying to be as transparent and provide the investors with what we're seeing so far in the month of October.

Okay.

That's helpful. Thanks, and then just as a follow up I wanted to talk a little bit about five five launching in Japan, and then the breed launches as well because it does seem to be moving nicely. So any I guess for some brief any additional details on the rollout so far any surprises or something that potentially could accelerate that launch and then in Japan.

For that five five could it be as material there as it is in the U S. Both from a pricing and demand perspective, thanks guys.

Thanks, Margaret and those are the questions that our engineering and clinical team are both working on so starting with breathe.

We have been.

Tracking all the patients and the Ecmo space is interesting because it does not require any clinical data. It's a five 10-K.

Clearance only.

So we are approaching that space as a PMA company, we're looking and collecting the data as a PMA company, we're looking for best practices what.

What we recently did in Europe as we did our first patient under an ex teller software, where we're combining the software. So you can optimize and the systems talk to each other and you can win that patient.

And know what's happening as you unload the heart and also perfusion oxygenate the body. So theres, some really amazing things that we're going to be able to do currently and also some things we're going to do in the future with AI also what we're starting to work on and we've done our first patient where we have impella connect running from a helicopter.

Sort of ambulances are starting connect with Wi Fi. So we're putting impella connect on the Ecmo device, so whether youre ecmo only impella rec Palo will be able to transmit that data into the cloud and whether the person is being is that a hospital or being transferred on an ambulance or in helicopter that'll be an exclusive feature and we're excited.

Did it bring all of this innovation and knowledge and clinical expertise to that space.

Five five it's just a it is a breakthrough product I mean, you have the ability.

Do you have a full that so I've been in this in these space 18 years and what the heart Surgeons always wanted was a minimally invasive winnable that and with the Impella you get that and the fact that it's forward flow means that as the pump is working its resting the heart, but as you want to reload the heart as you turn it down it allows the heart.

Naturally start to pump with sensors on the device that we can see how the heart is recovering.

And it's really revolutionary because it's all the other <unk> and Ecmo devices are are essentially dumb devices, you put them in and you really don't have any way of knowing how the heart is doing and what's most important for these patients is you get survival with native heart recovery, because survival is the low bar and even if.

You survived many of these papers don't even give heart recovery numbers in these patients end up in hospice care or or maybe even those that are lucky they can get a transplant. So the amount of information we're doing around recovery will be accelerated in Japan, where they believe in stem cell they've been they've had advanced publications in science.

Of hemodynamic unloading and pressure volume loops, and we think it will be material the revolutionary treatment and it will be in a country that really focuses on heart recovery more than anything else and we're super excited to bring their product to their to Japan.

Great. Thanks, Scott.

Sure.

Thank you.

Next question comes from Chris Pasquale from Guggenheim. Your line is open.

Thanks, Good morning, guys Mike.

Because if I look back at the good old days before we had all this macro volatility your second quarter tends to be about flat sequentially, plus or minus a couple of million dollars. So I'm a little surprised to hear that this quarter's result was significantly below what you were thinking.

Can you break down the $20 million guidance reduction between this quarter's shortfall as you saw it and how much you're taking out of the back half of the year.

Sure, Chris and Youre right that is something we look at and if youre looking at the numbers on the guidance you know our normal 47% 53 puts us at a at a higher range. If you look at our guidance, we're essentially back to where we started the fiscal year, but we have lowered or we have increased the lower end of the <unk>.

So we started the fiscal year with 17% to 22%.

Upgraded it to 22% to 24 after Q1, which was incredibly strong and we had great momentum.

The playbook is working.

We haven't yet seen a little bit of the August impacts starting with maybe some extended vacations Delta ramp and then also shortages.

That are out there and staff. So I think what happened is in in July.

It hit in August August was a little bit down and that carried into September Youre also right that we usually do see this summer quarter dip a little bit usually that dip is in patients where.

Where we are a little down or flat, but we tend to open more centers do more training and we do have a lot of new products that were opening.

We've already mentioned, so that's where we expected to see a higher number than we achieved.

It is the third highest quarter, we've ever done in and revenue in patients but.

But we thought we were going to do better and I think.

What we're what we're trying to give you transparency to is that the model of the 47% to 53%.

Is just probably not going to be perfect model. This year because of not just COVID-19, but some of the shortages, but as we're working through the shortages and as I think of the hospitals are responding I think we're going to end up getting back to where we were in the good old days and have just an incredible strong second half of the fiscal year.

Yeah.

Okay. That's helpful. And then you mentioned that Impella is used to actually treat some of these COVID-19 patients. It would be helpful to understand a little better how material a factor that is particularly in a quarter like this where we saw a surge in COVID-19 cases can you quantify at all how much you think that contributed in the second quarter.

We know Chris we track every patient and all.

All the trends Unfortunately, the patients that we treat are really sick. So that's that's bad for the patient in the hospital.

But what that does is that starts to.

<unk>.

Take the beds and at extended stay we will take out a lot of our protected PCI patient availability and thats, where the hub and spoke and moving patients around it's helpful. So if something happens in the in the spoke hospitals, we might help with getting that patient transferred to a to a bigger a hub hospital, what we all.

Also saw we track small medium and large hospitals is the trend in September was the medium hospitals tended to be more impacted.

And while we saw the growth happen year over year, and especially in shock those medium sized users of ours were impacted a little more maybe they werent as resilient with their protocols or maybe they were more impacted by the nursing shortages or the facilities were minimized, but I think as we.

As we look at the total picture.

Cardiogenic shock patients, whether they have COVID-19 or not that's what's happening and when you think of myocarditis shock or COVID-19 youre talking about problems with the lungs, the heart and kidneys and that's what our products are designed to do and that's what our products are FDA approved for so we continue to look at this as just.

Broader.

Heart failure population and specifically to Covid.

<unk> seen the majority of these patients getting ecmo, where they do Vv ecmo, where it's pure oxygenation not necessarily heart support, but thats a great question.

Okay. So I guess, what I'm hearing is maybe at the margin that's offsetting some of the lost volume that's being squeezed out by the capacity constraints, but net net it's still a headwind overall.

Correct.

Okay. Thank you.

Thank you. Our next question comes from Matthew O'brien from Piper Sandler Your line is open.

Good morning, Thanks for taking the questions sorry to keep going on the guidance side of things, but I wanted to tease out is $20 million reduction from Q1 to Q2.

I think you had said last quarter the bottom end of the range as what you expected if COVID-19 was at ease.

Even so thats about $10 million of the 20 I'm sure Covid, it's probably a little bit worse than you expected here in the quarter and likely for the rest of the year. So.

It seems like the 20 reduction maybe I don't know 12 of that is COVID-19 related maybe somewhere in the five to 10 range is is staffing shortage related to the back half of the year. So is that a reasonable assessment of what's going on here and then with this kind of five to 10 million for half of the year impact from a shortage perspective.

Our hospitals able to adjust here heading into fiscal 'twenty three is to offset what the 10% to $20 million headwind on the staffing sorted side I'm sorry for the long question.

Yeah.

Yes, Matt let me just there's a lot of questions. So let me just kind of walk you through again.

<unk> tried to laid out during the script with regards to the earnings but again as you sat here and we got through our first quarter rate. Our first quarter was a record quarter for abiomed on both revenue as well as patients right and then we got into July and we had I would say a really solid July both from a.

Normal seasonality perspective, and expectations on both revenue and.

In patients and so if you just look at our our annualize our Q1 performance at the time you get to over $1 1 billion and then as Mike mentioned right. We typically have normal seasonality right. So it's typically 47% first half, 53% second half and that came into our process. So after the first four months of the year, we felt that.

Really good about the revised range of 103 to 105 at that time, and then the Delta surge impacted us in the month of August and it really hit some of our larger markets I E, Florida, and Texas as well as some of the other regions in the southeast and then what was new.

For Us in August was this dynamic of hospital labor shortages and so.

We did not encounter that headwind in the previous pandemic and our previous pandemic and so I think the labor shortages are temporary but they are putting more pressure on procedural volumes across the U S and I think these two headwinds as I mentioned really impacted August September performance and caused us.

To Miss our internal forecast by I would say that $5 million to $7 million range with that said, we did still deliver 18% growth versus prior year and as a reminder, we did have positive growth in Q2, and Q2 quarter of last year. So I think it was we thought it was prudent to really update our guidance at this point in time to $1 1 billion.

To one $3 billion, which again was slightly above our initial guidance and again all we're trying to do is be as transparent with you as we can during these unusual times.

Okay. Thanks for that and then Mike on the pipeline side of things with all these headwinds on the Covid side staffing shortages is there any potential impact to being able to enroll studies or are yet.

Get anything done as far as the pipeline goes and then on ECP is that something you are talking about 225 patients is that something you can enroll in 12 to 18 months, there is going to take a little bit longer than that thank you.

So Matt Great question. So a lot of questions, let me start with our customers and our our trial is our.

Totally passionate and committed to these studies and while other companies are not doing studies or put them on pause we have.

Multiple rct's and post approval studies running so we we did do.

18 patients on protect four we now have I'm Gonna give you up to date numbers. We have 24 randomized patients in <unk> four we have 28 in the registry for that protocol and we have 18 sites that are fully enrolling up and up and running.

So that's pretty impressive in the quarter with everything we just went through on Delta and <unk>.

And shortages on stem <unk>, we are we.

We did it over 10 patients in the quarter. We have 36 sites that are enrolling and we're at 99 patients were going to have a 100 patient recognition here and that continues to move so we're excited about that.

The last component of your question I believe was the ECP.

And we are going to make it a priority we're going to with the sites that are there we're going to have them enroll.

And the fact that that will have a nine French device means of peripheral vascular disease and many of these other things that might cause certain challenges.

It'll it'll cast a wide net and we're going to ask the centers that are in that study is to prioritize and to go efficiently, but there is tremendous demand and excitement for that product as well. So the one thing regardless of whats happening our job is to continue to adapt and execute.

<unk> taken advantage of the internal things, we can control, whether it's innovation or the clinical research and we feel that nothing stops innovation.

So as we continue to innovate and improve outcomes for patients. We're incredibly confident in the timelines that are out there for new products and these clinical studies.

Great. Thank you.

Thank you. Our next question comes from Danielle and policy from SBB Leerink. Your line is open.

Hey, good morning, everyone. Thanks, so much for taking the question.

Mike.

Todd.

The cost of the labor shortages, just giving it some thought.

I feel like now is the time more than ever that you guys are able to leverage impella connect and the capability there and I'm just wondering if youre seeing any incremental traction.

Or adoption.

I know, it's a net negative COVID-19, the net negative but incremental adoption because of your your impella connect capability and the hospital labor shortages, which do you feel like that's not an easy fix and Impella connect offers a very good solution.

Anything you can say qualitatively around that would be great.

Danielle Thanks for the question I think it's very insightful question because you recognize in what we've been investing in is to provide a level of support that doesn't exist in the industry, whether it's bad side or in the cloud or capturing the data or even training nurses. So as the nurses that are coming into the ICU they're newer.

We can we can work with them, we can do hands on training. They can go online and do CME training.

And we can coordinate specialized care. So we continue to do that well I just wanted to be clear, though that the delta Varian had the massive impact and what made it more complicated for us in the playbook was the labor shortages that did not impact 75% of our sites the impact was more.

<unk> of 25% of our sites and for shock it impacted less than that 17%. So I think that what we're doing is we're whittling away at it and we're trying to minimize it with exactly what you're talking about with our bed side support with our smart assist it makes the managing the patient easier with <unk>.

<unk> connect putting that in the cloud so that our experts are nurses, our call center and our local people as well as the physicians can review that patient without being bedside, and then quantitatively put numbers on it and track. It. So I think all the things we've mentioned and you're pointing to that does give us an advantage and <unk>.

Laos the hospital.

To benefit from our services and that's where this this this network approach our ability to have their premier field team is really coming.

Coming into play and I think we will continue to help us drive positive growth.

Thanks for that and one quick follow up on the BTR, that's really great news and a big step forward I know, it's very early we're just talking about first in man, but it feels like something that could get breakthrough designation. So what should we be thinking as far as time to potential commercialization I mean are we still.

Talking five plus years away or could it be sooner than that thank you so much.

Daniel the way, we look at the early feasibility studies as it brings a technology into the U S years ahead of when it would have done in the old days, and we really want to credit the FDA for this really innovative and amazing program.

It's actually transformed the medical device field.

And what that also means to US is you can come in and we will be applying for breakthrough for the BTR pump as well just similar to the ECP is it allows the FDA to prioritize to put resources to be flexible and to have a fast faster cycle, but allows you to enter in almost in like a prelaunch.

And again on all of these studies as you get into the pivotal U R.

It's a controlled study, but you are generating revenue the hospitals are getting DRG payment and in our own space is kind of how we launch anyhow, we go slow and steady because its so important to learn to get great outcomes and I kind of see it as such.

Somewhat of as they are.

Our preclinical launch, but it puts these technology into the hands of these U S physicians and it really helps drive this heart team approach and as you can see from from our portfolio.

You now have products for the Cath lab surgical suite EP lab and of course, the ICU all running in the cloud and I think that just is a great advantage for us to bring technology earlier into the U S.

Thank you.

Thanks Danielle.

Thank you.

Our next question comes from Peter Chickering from Deutsche Bank. Your line is open.

Hey, guys. Good morning, Thanks for taking my questions. So one more guidance question here and I do apologize, but focusing just on ICU capacity hasnt that been getting better in October versus August and September and why are you not seeing more improvement in.

In October and also what are you assuming around ICU capacity changing for November and December versus.

Cobra.

Yes, it's a good question and thanks for it I think obviously, we are tracking the ICU capacity by by city by State by Hospital and I think we are seeing improvement in a lot of areas over since what we saw September heading act into October with that said if you look at some of the <unk>.

States like Carolinas Carolina is if you look at their ICU capacity over the last 678 days, they've gotten worse and so I think there's going to be a lot of these areas, where youre going to see areas like North, Florida, Texas, Obviously, we've seen improvement in those metrics in the month of.

September as we get into October, but you see some other flare ups and like I said Carolinas some areas in northern New England that are just.

Due to pop up so overall I'd say, it's getting better.

But we continue to believe that Youll see these hotspots pick up, especially as people move inside during the winter months it might move up to the coastal of it but again, it's something we're tracking every single day.

Okay fair enough.

For Impella growth going forward, we've seen a lot of hospitals start to use ecmo.

Due to Covid that previously didn't use it do you think as hospitals become more ECP mccandless of mechanical support that will help drive impella adoption and have you already begun seeing it. Thanks so much.

Yeah.

That is something we track and again, we've done over 15000 patients with Palo over the years and now we have our own ecmo products. So that trend will continue but that trend works both ways one is.

A physician that is struggling with a 14 French hole just on the Impella, which has a nine French catheter, that's something that Ecmo is 17% to 19, French large tubes, all the way through so there is definitely an intimidation and then issue there with bleeding.

In Ecmo thats in the literature, as well as inflammatory response and risk of stroke.

Relative to the overall process I think it's good because people are learning about mechanical circulatory support people are thinking quicker about how do I get to that support theres been a publication that talks about the centers that have shocked teams. They do a better job of getting better outcomes. They <unk>.

<unk> talked about it they use less and what they mean less is they're using less probably escalation of INO trups and just balloon pumps and theyre moving quicker to the best practices of pre PCI and shock or escalating looking for right heart failure or using ecmo or <unk>, where you need oxygenation. So I think that's.

<unk> been very positive and again on on Covid. The majority of those patients are Vv Ecmo and so I think there's also some education thats been happening around just the oxygenation and the need for oxygenation versus cardiac support. So it's all been positive and again, we continue to do everything we can.

Can to support patients, whether they have lung problems or heart problems.

Great. Thanks, so much.

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

Hi, This is Ravi.

Robbie in for Jayson Bedford adequate question about.

So in the U S revenue grew 16%, but the patient usage trailed growing only 8% I think Todd mentioned about.

400 point of that is from mix, but is there any other dynamics playing into that discrepancy between revenue growth and patient utilization.

Yes, I can walk you through the high level walk so you're right patients.

We're up 8% in the quarter, we did see about four points of favorable sales mix. So again thats just the transition from Impella FIFO to Impella five five with smart assist as well as the continued switch from Impella two five to <unk>, where we have a higher average selling prices so thats about.

Four points of I would say topline growth, we did see a slightly higher reorder rate in the quarter.

101 versus 102, that's probably a point or two and then we had some higher deals in the quarter from a year over year perspective, and that would probably be another a point or two so that's really the walk from patients to revenue in the U S.

Got it do you guys mind, providing that for Europe as well because I think we're seeing a similar dynamic there as well.

Yes, so in Europe, I would say, it's a couple of things. It's again, we had some pretty pretty solid growth in patients. We are seeing a little bit of a higher reorder rates in.

In Europe as a result, it's pretty lumpy goes from one quarter could be 94, this quarter was a little over 100%.

So I would say, it's reorder rates as well as we are seeing a benefit of some favorable sales mix over in Europe as well as we transition from CPC seven to CPC eight with smart assist we are seeing a little bit of a price increase as well there so little bit of the same dynamic that we saw.

In U S. We are seeing in Europe.

Thank you that's helpful.

Obviously, you guys have a plan to launch five five in Japan.

In terms of additional international expansion is there a timeline on slide five in Europe.

Or any other new Jersey, new geographic geographically. So you guys are targeting.

So 505 launched in Europe, So that is in Europe already.

We are looking and bringing other technology to to the rest of the world, which would be the RP with smart assist.

Our ecmo product.

And those geographies.

<unk> to grow.

I think that's not helpful and finally with the extra seats 2.5, you guys launched about two quarters ago.

Has that been doing have you guys seen any impact on volumes from that.

Patients that are looking to have the ability to feel better and also potentially get better and that's a that's a subset of what we would call. The acute on chronic heart failure patients. Those are also the patients that are I think the second highest admission into the hospital to some extent, we're going to start trading those patients earlier with Pricara.

Idea, which is Ah preload reduction device that.

It can be put in in the ICU with the heart failure cardiologists and for those who get worse. They may go onto five five and for those that are just going to require longer term support.

The Impella BTR is not FDA approved but that is the intent to go through the study each of them utilize this technology for those patients as well they will that technology has vastly improved over the years. However, it still requires a sternotomy and coring out of the left ventricle.

And it doesn't provide forward flow. So in some cases the valves are sewn shut and what we're trying to do is give that patient and that physician full support with the minimally invasive axillary implant through the shoulder allow the patient get up and walk around and adviser many options of recovery and other therapies that they can utilize.

Thanks.

That's all for me.

Thank you.

Marie <unk> some <unk> your line is open.

Hi, good morning, and thank you for taking the questions I wanted to highlight a question here on five five apparently seemed like a bright spot in the fiscal second corner as it has more a few quarters now and I wanted to try to see if you could parse out for us how much of a contribution that may concern of the overall U S page.

Saint usage in the quarter and whether there were any differences in dynamics between.

Five five usage and and some of the Cpus, such as far as kind of Covid and nursing shortages.

[laughter].

<unk>, so just as a high level the.

Five five individually grew 160% year over year, and it was up 7% quarter over quarter.

The entire surgical business the five O five $5, 60%. We also had some growth in the Impella arty and what your what the impact that it's having is.

Becoming quietly quite frankly, a preferred provider for heart surgery, especially at the top centers Cedars North Northwestern Cleveland clinic.

<unk> as you go around the country and we're not necessarily looking at it as a single product. We're looking at as a way to solidify our partnership with the hospital and bringing the heart team together because those surgeons also do high risk cabbage, where they potentially need support and those surgeons in some cases turned down page.

<unk> that then get referred over for PCI.

One example is at.

At Cleveland Clinic in their protocol. If you are at a cute on chronic patients. So the patients I just talked about you have worn out hearts you have advanced coronary or disease and you did compensate at that facility. They are likely going to stabilize you with a five five then they're going to do an evaluation of what treatment they are going.

To do and some of those patients go to the Cath lab with the five some of those patients go to the E. P lab with a five five and some of those patients go onto cabbage and so it's really a designing a protocol that allows for the ability to stabilize the patient protect the heart and the kidneys and then bring whatever treatment adjunctive therapies.

In the best interests of that patient Todd could comment if he wants to make a point on the breakout on the numbers.

In terms of if you look at the U S surgical business. It represents about 18% of our revenue today and of that five five is 92% of that make up. So if you look at our growth in the quarter I'd say, it's a combination of also the opening new sites, but we're also treating 27% to 30%.

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