Q3 2022 ABIOMED Inc Earnings Call
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Hello, and welcome to the <unk> FY 'twenty to Q3 earnings call.
My name is Katie and I'll be coordinating your call today.
If you'd like to ask a question during the presentation you may do so by pressing star one on your telephone keypad.
Now I know, it's your highest nicole enough to begin Nicole. Please go ahead.
Good morning, and welcome to <unk> third quarter fiscal 2022 earnings conference call. This is Nicole night manager Investor Relations and I'm here with Mike Minogue, Chairman, President and Chief Executive Officer, and Todd Trapp, Vice President and Chief Financial Officer.
The format for today's call will be as follows first Mike will discuss third quarter business and operational highlights and then Todd will review our financial results, which were outlined in this morning's press release.
Well open the call to your questions.
During the call, we will discuss certain financial information on a non-GAAP basis.
This non-GAAP information is provided to enhance your overall understanding of our current financial performance the.
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.
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 adding that as chairman President and Chief Executive Officer, Mike Minogue, Thanks, Nicole and good morning, everyone.
<unk> delivered record revenue of 261 million in the quarter, a 14% year over year in constant currency. Despite.
Despite a slower start in October due to the Covid resurgence in hospital labor shortages have you achieved record revenue.
These results were driven by patient utilization records in both the U S and Japan up 10% and 35% year over year, respectively.
Even with the headwinds our abiomed Ciudadano playbook allowed us to adapt and execute rose sequentially and sport the most patients ever in a quarter. These.
These results would not have been possible without the dedication of our customers and employees supporting critically ill patients 24 by seven on site online and in the cloud with Impella connect.
From a financial perspective, we achieved a 25% operating margin, while investing $41 million in research and development.
We remain fanatical and focused on creating breakthrough technologies advancing clinical research and guidelines and improving real world outcomes by supporting hospitals with a premier clinical.
Jim.
And our long term outlook is robust and strengthened by our balance sheet with $932 million in cash and zero debt with over 1300 patents and over 1300 patent spending.
On today's call I will highlight how we are executing our abiomed ciudadano playbook and the current COVID-19 environment and provide updates on our patented breakthrough technologies.
Have you met Ciudadano is helping our hospital partners by supporting their staff to improve patient outcomes for many of the sickest heart and lung patients.
Our company provides a unique and exclusive service with their premier clinical field team educating training and supporting hospitals 24 by seven.
This support is even more critical as hospitals today struggle with labor shortages COVID-19 impact of reinfection rates and ICU capacity all impacting in procedural volume.
For protected PCI today, the majority of our patients transition to the non ICU unit after the procedure.
This compares to a majority of our past high risk PCI patients before COVID-19 that routinely went to the ICU post procedure.
To improve physician access and closure outcomes or single access procedure for protected PCI has grown with education and training.
In Q3, 55% of our high risk PCI patients received single access and strong clinical signal now exists for lower bleeding rates and quicker recovery.
This 55% single access so as single hole for both the PCI procedure and the Impella compares to 4% of our high risk PCI patients with single access before Covid.
These new high risk protocols help open beds in the ICU for emergency shock patients, who tend to be younger and higher priority for treatment.
Our ability to share Impella in cardiogenic shock best practices has improved real world outcomes validated in multiple studies from the U S, Japan, Italy and Germany.
Recently, a cardiogenic shock 24 hospitals Multicenter U S. Observational study published in Jack demonstrated that centers with shock teams, we're more likely to obtain invasive hemodynamics use advanced types of mechanical circulatory support like Impella and less I E B P.
Resulting in lower risk adjusted mortality for patients.
Our hub and spoke strategy continues to demonstrate that community spoke hospitals are growing theyre impella patient volume.
This shift to treatment in outlying centers allows scheduling availability.
And flexibility for referring physicians and patients when large transplant hospitals get overwhelmed with COVID-19 patients.
As a result, we've seen community volume growth, both sequentially and year over year.
Covid has also accelerated the rollout of Impella connect our remote monitoring technology. Today. This technology is now available in 1560 of our hospitals worldwide and approximately 90% of weekly U S. Patients are monitored in the cloud. This allows our field team to support our patients.
24 by seven even with Covid hospital restrictions and labor shortages, which helps ease patient management and optimize care in the ICU.
In addition, we adapted our business model to include more online training and education by launching our password protected user community called camp PCI.
Camp is an online and interactive education and training endeavor that host live cases allows for confidential user interaction and has a dedicated clinical research community for our semi did you and protect it fault protect four studies.
Can't PCI is led by a faculty of experts in the field of cardiology, creating a virtual platform for experts to share a lot of cases best practices and techniques.
For ICU nurses and cast in surgery Technologists. In addition to onsite training and education, we offer online training modules and credits at our Abiomed Academy Heart recovery website.
Now turning to our innovation update.
The Impella five five with smart assist received Japanese P. M. D. A approval we're excited to bring this game changing technology to Japan, a country, where we recently hit our 5000 patient milestone.
Culturally the Japanese are adverse to heart transplants and invasive sternotomy as this.
This makes the Japan ideal for Impella five five given the possibility to provide minimally invasive longer term unloading heart support enabling native heart recovery.
We expect this first Japanese impella five five patient to be treated this spring.
The Impella ECP received category B status from the FDA and we established our pivotal protocol. We also received FDA approval for the Impella BTR early feasibility I D. E study clearing the way for their first patient in the world.
The Impella BTR will provide patients a home discharge option with over one year on full hemodynamic support in.
In the early feasibility study 10 patients will be enrolled at up to five hospitals and supported by Impella BTR for up to 28 days. The first Impella BTR patient is expected to be treated in March or April of this year in the U S.
Have you met has also entered the ecmo space with our innovative <unk> technology.
During our initial limited market release and study we have treated 61 patients have a 71% survival for respiratory failure and I've logged 873 patient days. The average duration of use is 14 days and 80% of patients have been for Vv Ecmo a majority with COVID-19 .
Complications we've worked closely with these leading hospitals to provide support gather feedback and learn best practices on every patient.
In general we are pleased with overall survival blood compatibility durability of the pump lung unit human IMAX flow rates and ease of patient ambulation base.
Based on our early patient study and analysis, we've identified areas of improvement around electronics of the console and have implemented a voluntary recall at our seven hospitals until this field corrective action is completed we're not expanding our number of patients or new centers. The console upgrades may require.
A five 10-K clearance and so we're working with the FDA on the next steps.
We also announced the successful results of the first in human early feasibility study of the pre cardiac system published in circulation heart failure the.
The multicenter prospective single arm study examined 30 patients with acutely did compensating heart failure or a D. H F who were assigned pre cardi a therapy for 12 or 24 hours.
The study met its safety and feasibility endpoints and documents that pre cardiac system can rapidly reduce cardiac filling pressures and augment urine output by intermittently occluding the superior vena cava.
This product has also been awarded category B designation by the FDA.
This technology may enable the heart and kidneys to work more effectively potentially providing therapy for patients nonresponsive to diabetics estimated to be approximately 300000 of the 1 million U S. A D H F admissions per year.
We summarize all of these studies for our shareholders and posted on our quarterly slide deck.
Our leading in innovation and technology principle to be smaller smarter and more connected remains a cornerstone of our sustainable success.
The J P. Morgan Health Care Conference I gave more detail about our innovation and the presentation is available on our investor website.
Before concluding I'd like to highlight a patient story.
John couple of doses 85 is the husband father and retired attorney from Jacksonville, Florida.
John previously had mitral valve replacement, but was living an active lifestyle and enjoying retirement, when John began experiencing shortness of breath and intermittent chest pain in August 2021, He went to see his cardiologist, who diagnose John with heart failure.
Tests also revealed multi vessel disease, and a lesion and has left anterior descending artery.
John was evaluated for cabbage or open heart surgery, but due to his age and previous surgery was deemed too high risk for another surgery. John was referred to Doctor Samara Garris who've identified John as a candidate for protected PCI procedure with Impella, Dr. Gareth inserted the Impella heart.
Pre PCI to provide hemodynamic support why placing stents and performing a complete revascularization.
The Impella heart pump was removed in the Cath lab and John was transferred to the C. C. You unit for overnight observation.
John left the hospital the following morning and was home in time for lunch today, John has a normal heart function and feels better than he has in years, he and his wife and plan to travel resume their passion regarding and spend time with their six grandchildren.
In conclusion, our focus on extending our lead in innovation advancing clinical evidence and building a premier Kurt Marshall team enables the pursuit of becoming the global standard of care for human support.
We are now in the final stretch of our fiscal year 2020 two.
As we crossed the $1 billion revenue threshold. We know it is our commitment to patients first that has inspired our innovation improved our outcomes and led to our success I'd like to thank our employees customers and shareholders for their continued support.
I will now turn the call over to Todd.
Thanks, Mike.
In Q3, we delivered record revenue of $261 million.
Up 13% on a reported basis and 14% in constant currency versus prior year with double digit growth across all geographies.
As Mike mentioned, we saw a month over month improvement within the quarter instead.
Instead of global monthly revenue record in December .
In the U S revenue grew 12% to $212 million.
This performance was driven by 10% growth in patient utilization.
And favorable sales mix.
We saw strength across our broad based portfolio with Impella, CP up 9% and <unk>.
Pella, RP up 15% and Impella five five up 65% in the quarter.
As we discussed on our last earnings call.
Some of the headwinds we encountered in this summer specifically the impact of the Delta variant and hospital labor shortages continued into October which put pressure on procedural volumes.
However, we executed our playbook and saw a recovery in patient utilization in the last two months of the quarter, while continuing to face ongoing hospital labor shortages and the emergence of the omicron variant.
Our execution led to a quarterly record for patients.
Any monthly revenue record in December .
In the U S. At the end of the quarter. The Impella CP has reached 1567 sites.
The Impella five O is at 666 sites, while the Impella five five with smart assist is now in 349 sites.
43 sites versus the prior quarter.
Finally, the Impella RP is at 650 sites.
As a reminder to investors details of our product installed base are summarized in our quarterly slide deck.
In the quarter the U S reorder rate was 103% slightly below prior year.
Average combined inventory at the hospitals for the Impella two five and CP was approximately 4.8 units per site flat.
Flat with the inventory levels, we saw last quarter.
Outside the U S revenue was 49 million up 22% in constant currency versus prior year.
Due to strength in both Europe and Japan.
In Europe , we generated $32 million of revenue up 18% in constant currency versus prior year.
This growth was driven by strong performance in Italy, Spain, Belgium, and the Middle East.
Which more than offset softer conditions in Germany, due to COVID-19 and ongoing nursing shortages.
Our European business also continued to see a positive benefit from sales mix as we fully transition to Impella CP with smart assist and begin to launch Impella five five and Germany.
In Japan, we delivered a record revenue quarter of $14 million up 27% year over year in constant currency driven by strong impella adoption.
Patient utilization increased 35% versus prior year.
In the quarter, we opened seven new sites, bringing our total to 187 out of a potential 350 hospitals.
Japan saw Covid cases significantly decline in Q3 after the surge in August around the Summer Olympics. However in January we saw omicron cases escalate to record levels in Japan.
In the third quarter gross margin was 81, 8% down 50 basis points versus last year due to manufacturing investment pre.
Primarily more operators in both Danvers and Aachen to support our sales growth.
R&D expense for the quarter totaled $41 million up 24% versus Q3 of last year, driven by accelerated investments and breakthrough technologies like Impella ECP and pre cardia.
And randomized controlled trials, such as stemming D T U and protect for.
SG&A expense was $108 million in the quarter up 25% versus prior year.
The year over year increase was driven by head count additions to our commercial team, our direct to patient initiatives and higher spend on education and customer training.
In the third quarter non-GAAP operating income was $65 million down 9% versus prior year translating to an operating margin of 24, 9%.
As we said at the beginning of our fiscal year. We are all in on investments in innovation clinical research and building a premier distribution team.
As we pursue our goal of becoming the global standard of care for hemodynamic support.
non-GAAP net income for the quarter was $52 million or $1.13 per diluted share versus 54 or $1.17 in Q3 of 'twenty one.
The year over year variance was driven by accelerated growth investments, which offset a favorable tax rate.
In the quarter, we generated a record $90 million of operating cash flow and ended December with $932 million of cash and marketable securities.
Our top priority for cash remains supporting organic growth initiatives and strengthening our intellectual property advantage.
Now turning to our guidance.
Despite the rise in omicron and ongoing hospital labor shortages.
Given our performance in Q3, we have increased the lower end of our fiscal year 'twenty two revenue guidance.
Two one point O two 5 billion to 1.3 billion Rep.
Representing 21% to 22% growth versus prior year.
Yeah.
This guidance projects Q4 revenue to be in the range of 263 million to 268 million up 9% to 11% versus a tougher comp last year.
As a reminder, abiomed reported 17% growth in Q4 of the prior year during the Covid pandemic.
This range assumes improvement in patient utilization and hospital capacity in February and March consistent with the trends that we've seen throughout the pandemic.
We expect non-GAAP operating margin to be in the range of 24% to 25% consistent with our prior quarter guidance.
In summary, we delivered a record quarter and are executing on our abiomed 2.0 playbook.
We are investing in innovation focused on clinical research and continue to add to our industry, leading commercial team, which we believe will drive long term sustainable growth.
As we enter the fourth quarter of our fiscal year 'twenty. Two we are optimistic about our ability to continue to reach our goals.
As we create the new field of heart recovery.
Operator, please now open the line for questions.
Thank you.
To ask a question. Please press star followed by one on your telephone keypad now.
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We take our first question from Margaret Texel from William Blair Margaret. Please go ahead.
Hi, everyone. This is Brandon thanks for taking the question if I could just start first on guidance Todd maybe just to follow up on the updated guidance can you just talk a little bit about.
What gets you to the high end of the range and the low end of the range I appreciate kind of assuming a little bit of an improvement in COVID-19 is that the one main factor that we want to keep in mind here is there anything else that gets us the behind the low end of the range.
Yes. Thank you for the question I would say at the low end of the range of 263, we assume some sequential improvement in February and March but more of that bolus of patients coming in and probably towards more in March and maybe even into early April where I think the high end of our range of $2 68.
Which is again, a 3% sequential improvement is that we see some of that softness that we've encountered in January come back more in that February timeframe.
And so that's really the high end at $2 63 versus the $2 68, and again I. Just again, a reminder, that I mentioned in my prepared remarks, we're coming off of a more of a challenging comp with Q4 of last year being up 17%, but that's kind of how we look at it from a low end of the range lie in the range.
Got it and then the the international update on a on the guideline changes are really encouraging and curious if that changes or open any opened any new doors for you in the international markets, especially in Europe , I think when we talked in the past maybe some of those it seems like you guys had been making some investments.
And trying to open market access in those international markets. So curious if you guys could update us on maybe what what new European markets might be next what's what kind of timelines or we're looking at and what efforts are going on there too.
When up new markets. Thanks.
Thanks, Brandon for the question. This is Mike we have been planting seeds, all around Europe , and parts of Asia, and although Germany got hit with the Army Kron and also had some labor shortages, we had record Ah patients and revenue in Italy, Benelux, Spain, and some of the other.
European countries. So we're seeing strong growth there and we continue to plant seeds are around Asia. Obviously, Japan is a is very important to us but you also saw that we got the Impella five five approved in Hong Kong. So.
That's key and again, we're also allows us to have the quality control, we insist wherever we go we want impella connect so anywhere in the world. These patients will be in the cloud will be able to monitor them and the ICU along with the hospitals and the physicians.
Alright, thank you.
Next we have a question from Matt O'brien from Piper Sandler. Please go ahead.
Hey, Good morning, guys. This is drew on for Matt and thanks for taking the questions.
I know you're still in your fiscal Q4 here youre, probably not providing guidance for 'twenty three today.
But you are making a ton of investments into the business just wondering what your your general comfort level.
Is with where the street is on for fiscal 'twenty, three, especially on the margin side with some of those investments and some of the macro headwinds out there or anything you want to call out as far as models, though.
Yeah as you said in the question that we really can't comment yet on fiscal 'twenty, three but we will give that out in the next earnings call, but you know innovation drives growth and we've been we have three breakthrough designated products. We have two ongoing studies to drive class one.
And we also have more penetration for Iris PCI.
Which as you know over 400000 potential patients shock in the U S loans over 200000 patients.
<unk> is targeting a 4 million patient population worldwide, which we don't treat today pre cardiac gives us another 300000 patients just in the U S.
And so we we have to continue to grow the innovation, we have to continue to strengthen our clinical research and also with the goal of getting class one requirements for high risk PCI cardiogenic shock and semi D to you, which are class one guideline essentially means that it drives and request.
Not only did the hospitals should treat the patient that way, but the the government systems will usually compensate for it.
And lastly, as we have built a premier field clinical team connected real time in the cloud with Impella connect and we're using all that data to process artificial intelligence algorithms that help us see how the patient is gonna do predict right heart failure and measure hemodynamics from the pump itself. So we feel very confident.
As we've always said one of our goals is to be one of the fastest growing most profitable medical device companies in the industry.
Okay very very helpful. Thank you.
And then just on five five it looks like you're still around halfway through the five O conversion process here in the U S. Maybe.
Maybe you could just give us some update on how utilization is trending in those accounts I'm. Just you know what the playbook is as far as addressing new surgical accounts. Once you get through that conversion and then just how do we think about Japan.
Japan from a revenue acceleration perspective.
Thank you.
Yeah.
Yeah, I mean, you're right in terms of the penetration where we are in the U S.
Five O. We're in over 666 sites and we're about half of that right now for five five so we got a long runway of growth ahead of us when I look at the five five itself most of the.
Performance in the quarter was really driven by patients as opposed to quote unquote more site openings are patient growth for five five in the quarter was over 70%. So we continue to see a.
Really the growth in the five five being driven by patient utilization versus necessarily site openings.
And your second question with regard to Japan, we expect to do our first patient in 505 in Japan, Some time fiscal year 'twenty, three and again, we're going to go slow and steady train educators get the best possible outcomes.
We're very excited to bring that pump to Japan, and we think it's going to we're going to be the standard of care. There for the next 10 years, but we're going to follow the playbook that we've always fault go slow train educate gets great Pos our outcomes and then.
And we'll go from there.
So this is Mike and I attended a heart failure conference. This week in New York City, and there was hundreds of people in person and online and it's become very clear that for this chronic heart failure patient population, there's really nothing between.
These uninterrupted drugs and in implantable invasive either <unk> or transplant and what what I think they are the community is looking for is a longer term.
Emily invasive winnable heart pump that you don't have to call out the apex of the heart and with Impella. Its a forward flow pump. So as it works it works with the heart and as you start to try to win the hard back as you lower the impella flow the left ventricle pumps with it itself. So you still get the pulse utility it's training your heart to come.
Back we have sensors on the pumps. So we can see that the pressure in the left ventricle, which is also helpful. For the physicians. So you you have an optimized science now to get the weaning protocol right because if you get it right you can potentially return the patient back to a baseline heart function and while the Impella is running.
You're able to help their kidneys produce urine and come off the uninterrupted drugs completely which are somewhat toxic to the system. So this is an entirely new treatment therapy. The five Oh did not run as long it was not as smaller as powerful it didn't have sensors and it didn't have the ability to use the smart assist our software programs itself. So.
Youre going to see what we believe will be the Impella five five at every single transplant center in the World and Youll see it at every single Heart surgery Center in the World that does advanced surgery on high risk patients and as a reminder, last year in the United States The surgical society maybe.
<unk> balloon pump a class III or harmful for patients that have post cardiotomy cardiogenic shock. So they can't come off the heart lung machine and you're also seeing the impella used for those patients as well specifically around the shock and again, giving them the ability to get up and walk around so we're very excited about it we're excited to have the product approved in Japan and.
Theres another longer term version of the same technique coming with the Impella BTR pump bridge to recovery that will now be a pure bad through the axillary artery will allow the patient to go home and still be monitored in the cloud and to help that patient again get their hard back to baseline there is no other product in the world.
Like Impella five five.
Thank you.
Yeah.
The next question comes from Chris Cooley from Stephens. Please go ahead.
Good morning, and thanks for taking the questions and congrats on the record quarter.
If I may just I'd like to actually go back up and focus a little bit more on the innovation pipeline to start.
Micro Todd if you could just elaborate a little bit more for stone on the Ecmo data, but you sure pretty encouraging there almost 71% survival rate.
Just want to clarify, though you think that the electronic changes you identified I'm assuming these are.
Ease of use could you maybe just elaborate a little bit more there and why you think that would maybe lead that to be a oh refiling requirement with the agency and what that could do to timelines and then I'll have a quick follow up.
Yeah.
Sure Chris So thanks for the question for those that don't know the Ecmo product has been around in general for more than 25 years. They were grandfathered in by the FDA and Ecmo is approved as a heart and lung machine sort of less than six hours. So while it took us over 10 years and over.
$100 million to get the approval for shock on Impella.
It's a 90 day five 10-K submission when we did that we got clearance, but we're treating the ecmo product as if it was a PMA product like impella. So over the first 61 patients. We were present in every single patient we are tracking the data and we found with the console itself. So nothing to do with the outcomes or the blood.
Contacting or that the most important component of our product as the pump lung unit, which is allows the patient to get up and walk around.
On the electronics and circuit.
We want to ensure the reliability is there and we're going to upgrade some of those components and so what we're gonna do is with the FDA. If we have to submit for the testing of that through the five 10-K that'll be a resubmission for the console. If there's a note to file it we'll do that but again we think.
This technology should be a PMA, we report things in her bed side that we know some of the other ecmo companies do not report because we are present, even with all of their pumps when they do tell us and we want to make sure that this is the best product, especially around emulating the patient and also around Vv ecmo.
Because we see the benefit of that in working with that color. So we're again confident and pleased with our clinical outcomes, but as a company that has thousands of consoles all over the world. There's a certain level of reliability that we want to see and so that's why we're we're bringing back we also recognize there's an ethical bar here since men.
Companies do have ecmo products already out there that are that are doing the job for the patients we want to make sure that our product is as to the standards like Impella and ER and that's what we're working on so it may not be a fighting a clearance. It may be a note to file, but we're gonna be cautious, but we're committed to being the innovative leader.
And ecmo or especially around at Capella and recently there were some presentations at another online virtual conference, which reiterate again the benefits of a tell us so the combination of heart and oxygen support over Ecmo only.
Not just on survival, but also it's a significantly increases the chance that the native heart can recover.
Compared to just in Ecmo, only loop, which tends to pump against the heart.
I appreciate the additional color there Mike Thanks for thanks for clarifying that and then just lastly from me on the innovation front.
It's been historically quite successful when we think about deploying cash in investing in early stage technology I can think of one publicly traded company that's done extremely well for you.
Just curious as you talk about continued investment in innovation.
<unk> pipeline, obviously with Ecmo pre cardiac et cetera, but should we expect to see additional investments there in the AR and the private portfolio are there opportunities. There now that are presenting themselves that you could augment existing either I T. Our capabilities or alternatively, just the the channel there for heart recovery.
That we should be thinking about here from an investment perspective going forward. Thanks again.
Hi, Chris This is Todd I'll take that one I think when we look at our deployment strategy for the cash I think we continue to assess what's the right strategy and we look at several factors, including our cash balance and what are some of the investment options that are out there is as well as overall market conditions and I think what's great about it.
Have you ever had is that we have a strong balance sheet that really allows us to fund both internal and external opportunities with that said I still think our top priority remains investment just in our organic growth opportunities given the amount of opportunities we have within our four walls. You know with that said, we will continue to look to augment organic growth as we look to invest in some new.
New technologies really around our core competencies and so.
I think M&A is part of our strategy, especially investments in early stage companies and if you look at last quarter, we have over $100 million of investments on our balance sheet and so again, we'll continue to look for differentiated technologies that can increase impella utilization and improve patient outcomes and again looking at the technology that can bring additional value to our patients.
It's really in the Cath lab in the ICU or the CPU, but we'll remain disciplined on our approach and stay close to our core.
Thank you.
Thanks, Chris.
The next question comes from Chris Pasquale from Guggenheim. Please go ahead.
Thanks, Mike a record December makes you guys a bit of a positive outlier across the sector there, but it sounds like from Todd's comment that January was weaker for you like it was for most med Tech companies can you just talk a little bit about what you've seen over the past months and how's the impacts compares to prior COVID-19 waves, we've gone through.
Sure Chris So the were given a little color on January we did have a record in December and we think it is a little bit of the the the abiomed judo two dato playbook right. So we were able to be there in the cloud the hospitals do allow the abiomed representative.
Tentative as in though so we're a little bit unique from that perspective, but the fact that we can be monitoring patients with phone support.
And Impella connect is also helpful. We did adapt and find ways at hospitals not to have to put all our high risk PCI patients in the C or the ICU versus the CCU or a step down or a hybrid and that does give focus and the hospitals are now prioritizing the resources the labor shortages into the patients that are.
The emergency patients at the ICU that our priority in treatment that tends to be some of our younger shock patients. So that's what happened in December .
In January the numbers and everyone can see the news you saw that omicron set new records.
In December going into.
Into.
January and it wasn't so much just the COVID-19 , it's the omni crown impacted with the labor shortages also impacted the nurses and doctors that are still there and.
And so that caused a little bit of some pullback on some of these procedural issues around either cath lab surgical suite.
It's not to the level it was in October relative to year over year. It's a.
We're a little more comfortable year over year, but we also recognize that sequentially.
It did impact a little bit in January but we do feel confident in Q4, we feel very confident in the final final quarter of the fiscal year, especially for February and March and we also think that the model is working with and without COVID-19 with and without the resurgence.
To provide a solution for hospitals to treat the sickest patients to support them in the Cath lab in the surgical suite and also most important to help support the nurses and physicians and train people onsite or online.
So we feel very confident in Q4.
Okay.
And then thanks for including the clinical slide in the deck. It's helpful to have all the information of one piece one.
One place rather I don't think I heard an update on the timing of first in human implants with ECP. When do you expect those to begin.
Did you say ECP Chris.
Yes, I'm sorry, the pivotal for ECP I suppose the equivalent yes, so I mean.
Yeah. So obviously, we did do the first in man already we've done.
You know over and.
Over 25 patients already we are locking in our or we have locked in the pivotal protocol, we expect to do our first patients in that protocol in March and April .
There's this March and April .
So a lot of stuff going on is we did that slide for you that the benefit of having all this new innovation and are these studies as its exciting and its growth for the future. The downside is it's likely very tough in kids using so we will continue on every quarter.
This tracking slides and if you haven't seen it to investors. It covers everything study detail patient enrollment total sites in status. We will update. This this slide every quarter for our investors to make it easy for you to track and see all the new products in the studies.
Okay.
Yeah.
We have our next question from Mary to bolt from P. D. E. Please go ahead.
Hi.
Thanks for taking my questions and congrats on a very nice quarter.
I will ask one here.
And then the commentary we're hearing from some of your peers are Carl.
Hearing about heightened pressure.
Pressure on supply chain inflation, I'm hiring powerful platform I wanted to hear a little bit about how adient.
Yeah.
Thanks, Larry for the question excuse me. Thanks from me for the question. So I think when you look at it from an inflation perspective, just a reminder to investors we do not have a high material content as a percentages as a percentage of our cogs compared to some of our other peers, but like everyone else we are seeing.
Some pressure on price increases, mostly I would say in the electronics side on the logistics side and I think overall the team is doing a nice job looking to negotiate some of the increases away. So we have certain cases, we've locked in prices.
We're up to a year and in other areas, we're looking to really pre buy some of our raws and some of our components really before some of the price increases go into effect. We're also being proactive just looking at how we can reduce for example, intercompany shipments and you'll obviously be proactive to bid out to some of the other international freight carriers, So I think that procurement.
Team is doing a nice job there working aggressively to minimize some of this inflationary pressure, but it's there. We're also seeing some pressure on wage inflation, but I think we've taken that into consideration for our operating margin guide for the year of 20% to 25%.
Okay. That's great very helpful and maybe a related question here you mentioned you know that.
Okay. So much going on in the pipeline do you have a lot of clinical trials.
Our ongoing.
Wondering if you're eating up a lot of new center, alright, you're gonna anything else or R&D.
Whether there are efforts, you're making beyond impella connect beyond Florida single access procedure.
Our customers will be.
Staffing for it.
You know on a go again.
<unk> points.
A continuing problem even beyond.
Yeah.
Okay.
Hum.
Okay.
Okay.
Sorry, I think I got the question was a little bit of noise or static on the line there but the question is are we doing more and if there are other things we can do for the hospitals to help them out.
The way I would answer that is you have labor shortages, which we identified in our last earnings call. You also have the spread of Covid, which impacted more of those people that are remaining and what that means for abiomed is you might have some less experienced or turnover nurses or traveling nurses. So we do still.
Provide with Covid with restrictions hospitals led us in because we are providing this training we are bad side and so we are continuing to train nurses and physicians and Cath lab techs on site. We then have the ability for both physicians nurses and tax to log into a virtual platform and they can.
Get credits and we can train them.
And then we also have a per DM bullpen.
Bullpen of of employees that we hire that they get Super training. So that it also allows us to as we add places and add more people, we get qualified for Dms, but why those per Dms are out there in the community. They are a little bit more of a subject matter expert. So we're doing all those things, but there's again.
We're just trying to engineer in as much as we can ease of use and that's what smart assist us that's what ECP will be for access closure for five five having the sensors.
Are the things that make it easier for you to manage that patient in the ICU. If you have a patient that can get up and walk around that's an easier patient to manage so that's our five five even with our ecmo product. It doesn't require the same amount of nurses to help get a patient up and walk around we have a built in oxygenated concentrated.
You don't have that big tank, along with it and everything we're doing again around smarter smaller more connected is to just make the learning curve easier on everyone.
<unk> management experience more positive and it usually ends up with improved outcomes as a result.
Very good thank you.
Our next question is from Jayson Bedford from Raymond James. Please go ahead.
Good morning.
Also thanks for the.
Pipeline slide there that's helpful.
Wanted to ask about your.
Quarter here in terms of loss.
Last call you talked about the proportion of your sites that didn't grow those likely to improve in the quarter and maybe you can just comment on utilization across across the customer base in New York.
Sure Jason Thanks for the question this quarter, 84% of the regions grew.
100% of the West region, So we divide the country up into eastern West So the omicron really impacted.
More of the East coast.
And again.
The West coast, 100% all grew year over year. So they were less impacted we saw strong overall growth in shock. So that was up 14% year over year and high risk PCI was up 5% year over year, it was mostly down or lower in the east coast.
It did not and which had a bigger impact of Ami crime and then for the overall, what we continue to see whether it's in the east or the west is a positive trend that our small and medium sized customers are doing more at their facility. It gives more flexibility. So if a patient doesn't work.
To drive into the city to the transplant center, which might be the COVID-19 hub. They can do the procedure there whether it's high risk PCI or if it's a shock patients. They can put an impella device in that patients stabilize a patient and then transfer that patient if theres a bed available to the ICU at the transplant hospitals. So we've learned a lot about.
How to how to interact and how to move bases around and if I look at the last quarter, which you are talking about to this quarter. There are two territories that were down that we highlighted and one's in Texas and the other one was in the Midwest and both of those returned and had strong growth. So the answer is yes and that's.
One of the benefits.
We're able to track as some of these high risk patients, we do try to track them and schedule them in advance and if they don't get treated where they're still in the system and so we're we're glad to see that they are able to ramp back up in these areas and treat those patients.
Okay.
Helpful, Mike and just.
On a similar vein in terms of getting back to normal what do you think the rate limiting factor here is just on your growth maybe the bigger concern demand just simply reluctance of folks coming into the hospital or is it more of a staffing a dynamic issue.
That's impacting growth.
Yeah.
Jason I think that the normal process is is going to continue to drive our growth and so the normal process will be these flare ups. These are the anxiety. Unfortunately, what's happened with people waiting longer is they tend to be sicker when they show up at the hospital.
Whether it's high risk PCI or whether it's a certain patient population turned down for cabbage, so maybe they're going to get a high risk PCI.
The resistance to do staging now with staging was a big part of PCI, meaning that they get a procedure done and they come back 45 days later and get another one so thats a that that becomes.
That's positive for Impella and that they will try to do everything in one procedures. So there's and then on the shop side I think the shock protocols.
We're going to continue to grow for the lung problems, we expect Vv ecmo to continue to be a.
The standard use of care for Covid complications and of course, we have emergency use authorizations for COVID-19 with our right side device and our AG pallor combination use it so where does the new normal is that abiomed suites, the heart the lung and the kidneys, whether it's from the am I or whether it's from Covid.
Save the sickest of both populations.
Okay, Mike It doesn't sound like.
Hospital staffing dynamics are impacting your growth at all is that fair.
Well, Jason you could always have more growth, but the.
The hospital staffing will slow us down so in the examples of what I talked about is that 84% of the reason agree with the other 16% they might have not had enough cath lab tax or surgical tax or ICU nurses. So it likely impacted us more on high risk PCI less on shock, but over time.
We become part of the partnership with the hospital and they depend on us and we depend on them to work together to optimize the outcomes, whether it is shock or whether it is high risk PCI I don't think that's going to change in the short term and I think companies that can offer this kind of 24 by seven service are going to be welcomed in and I think that's part of our biz.
This model.
Okay. That's helpful. Thanks, Mike.
The next question comes from Dana Telsey from SVP Leerink. Please go ahead.
Hi, good morning, everyone and congrats on a on a really good quarter.
What's working season.
Mike just a question for you and then Todd I have I have a follow up for you five five continue to our expectation.
You're clearly getting strong adoption there I'm just curious if youre seeing any sort of increased receptivity on the impella two five and CP side of things in the interventional cardiology community, where <unk> is being adopted thinking of sort of a halo effect.
When the cardiac surgeons are adopting five five is getting interventional cardiologists on board or is that too much of a stretch kit to make.
Do you know it definitely helps so I'd encourage all the investors if they want to truly understand the five five and how it's changed the practice in surgery and for the heart team is on our Investor website. There's a presentation by Dr. Ed <unk>, who chairs surgery at Cleveland Clinic, and you can kind of see.
The hybrid between sometimes these spaces decompensate they are their heart failure patients, they're not having their first heart attack. They have they have some worn out hearts and after they put the impella five five and now they have options and therapies that they can utilize whether it's some patients are sent to the EP lab for VT ablation.
Go on for open heart surgery, and some go to the Cath lab and have a PCI depending on the protocol there and that heart team mindset is where there is benefit because youre, giving the heart surgeons a tool. They didn't have before you don't have to commit somebody to a transplant.
And it's very clear that when we have this kind of innovation all the surgical departments at the transplant centers are working with US now and therefore in the hub and spoke model. It gives us the ability to really partner, whether referring in the cath lab patient to that center or surgical patients.
It strengthens our relationship so I think it's just great to have this innovation, but you you hear us talk about the heart team now and what most people are starting to understand is there's two types of shock patients. One is the acute amide shocks. So someone has a heart attack. That's their first symptom. The other is a chronic heart which is.
Worn out overtime that needs therapy, sometimes that therapy is protected PCI, sometimes that therapy is cabbage or other items and it really does give now more options to the entire heart team and that's the benefit.
Got it okay. Thank you for that and then Todd. This question probably for you and I. Appreciate this is Harry.
He asked around how to think about 2023.
Just looking at numbers your cake.
Taking the midpoint of your 2020 Q guidance range versus fiscal 2019 is about 10%, but it looks like the street is.
I'm, assuming a bit of an acceleration to the mid teens ish range for fiscal 'twenty, three and you know I guess I'm just trying to I know youre not making payments here, but just qualitatively is there reason to believe on presumably less easy comps, maybe even a little bit tougher comps just given how.
Our growth has progressed through COVID-19 in fiscal 'twenty three is it fair to assume girls can accelerate off of the last three year CAGR or is that maybe a little bit too optimistic.
Okay.
Well, Daniel I'd love to answer that question, but.
As Mike mentioned, we will provide full year guidance on our earnings call. It April but when I look at the large opportunity to have with us in terms of some of the catalysts for next year and growth drivers that I can point to again I come back to Impella five five right. We're still again in only half the sites, where we have impella five Oh, we have RP with Iga.
We got ECP, we got.
Obviously.
O U S growth. So I think we have a lot of catalysts. We have a brief we have a lot of catalyst either products or new geographies really to get into as I think about next fiscal year and I think some of the headwinds that we have we face this year with regard to Delta and omicron are going to subside as we get into next year and so and also the inverse.
Once we've made we've added a lot to our commercial team probably heads are up 70 heads year over year. The direct to patient initiative that will undergo so I just feel like we have a lot of catalysts Stokes the fire to help drive growth next year and again, we'll provide more formal guidance in.
In April after our Q4 earnings call.
Got it no that wasn't a helpful way to frame it. Thank you for that Pat.
Okay.
Yep. Thanks Danielle.
We have a question from Mr. <unk> from Morgan Stanley Cecilia line is now open.
Great. Good morning, and thank you for taking the question I wanted to ask just on your comment around 55% single access high risk PCI, just where do you think or.
Think about that going in a post COVID-19 world and somewhat tied in with that too, but just sheath.
Christy P any updates around your expectation for them.
Thank you.
Thanks for the question.
It will continue to go up because it's a superior technique on the Impella CP.
As I said, we're collecting the data, but we have a strong signal that it's better clinically it lowers bleeding and has faster recovery. We also have improvements coming to our sheath theres going to be two improvements coming for two different options that we will be able to capitalize on reducing the French size of the hole.
Making the single access part of that design and also having a solution for the patient to go to the ICU, where you don't have to Peel away a sheath.
Longer term.
That will be incredibly helpful. However, the impella ECP is the easy button for high risk PCI has a nine French pump going in and coming out and we see the Impella CP is the ideal pump for a.
Ami cardiogenic shock patients that gets treated in the Cath lab and goes to the ICU for four days and you're really focused on winning them back. So we feel very good about the.
The XR sheath as well as the single access in combining the two is going to help.
Deviate some of those concerns for those late adopters that are concerned with closing of 14th rental.
Okay. Thank you and if I could just follow up on Japan. The strength you saw in the quarter utilization at 35% can you just speak to what you saw in the quarter, specifically how much of that was.
Any kind of Covid backlog come coming back in and as you look out ahead, a SIFI then factoring five five in the back of the calendar year. How you think about the ramp in adoption overall in Japan and thank you for taking the questions.
Yes, actually I'll answer the first one about Japan in terms of the bolus of patients I would say most of it most of that come just from a reorder rate. So our patient growth in Japan has been north of 30%.
Last several quarters. So again I think this quarter up 35% again, it's mostly reorder rates from a revenue standpoint also we opened up.
Fewer sites, but I don't think any of the revenue is really coming in from a bolus of patients and then as I mentioned earlier the $5 five we're going to go slow and steady.
Probably not a big growth driver for US next fiscal year, because again, we're going to enroll.
Certain sites, we're going to educate the physicians trained get great outcomes and continue to.
Roll off thereafter, so it's the playbook, we fall and we're going to continue to fall in Japan was a five five launch with smart assist.
Great. Thank you.
Our next.
<unk> comes from Imran Zafar from Deutsche Bank. Please go ahead.
Hi, Good morning, Thank you very much for taking my question.
I wanted to ask a couple of follow ups on five five.
First I guess.
In Japan for a second.
Are you going to be pursuing separate reimbursement.
Four of five five or are you just simply going to be using what's the existing codes for impella. There I guess my question is are you going to be getting a premium reimbursement ultimately for five five.
Okay.
And Ron we are working with NHL W now and pursuing a add on payment.
And specifically looking at and creating an opportunity to identify the potential of native heart recovery.
In Japan today, they do have incredibly high reimbursement for stem cells and Youll also likely see some of the patients that are getting stem cells be combined with a therapy with the impella unloading as well.
Okay. Thanks, and then in terms of U S. Five five launch.
Can you talk a little bit more about.
What's driving the patient growth and how much is coming from.
Placement of five point overseas.
Conversion of heretofore Eldad cases, and then and then maybe also just remind us how big the BTG population is in the U S. Thanks.
It is growing.
And has grown over 100% <unk> five has grown over 100% in spite of Covid.
It it it runs longer it's smaller it's easier to put in it's more powerful it gives information with smart assist and it allows the shock patients that have de compensated.
To be able to stabilize them get them off of their Ina tropes get them up walking around or riding a bike or getting ready for rehab and again I would reiterate is a great presentation on the investor website from last year by Dr. <unk> from Cleveland Clinic, and you can kind of see how it has become.
The way they stabilize these chronic patients.
And with regard to transplant that that actually has been growing in spite of the fact that it doesn't have actually the premium position as a status too so ecmo in central Mag devices or status one so they get their earlier implant and the balloon pump is status too so when impella.
Patients get transplanted with the Impella five five.
They're getting it through status, two which means they are sicker, but the average wait time in the U S. For transplants is now around three to four weeks and so whether they get transplanted or whether they get back to baseline.
This is a different option. If you chose Ecmo you basically you have the patient on their back do you have adverse events inflammatory and risk of stroke. These are all documented.
And the patients really aren't getting up and moving around so you're taking a transplanted heart of precious item with only 2000, a year in the U S and you potentially give me into a patient that might have a lower success rate and for implantable devices. They are down because they are status III and that is a that's a great product.
And a blessing for people that don't have very long wait times are looking to live out more years through destination therapy. So again, I think what youre going to see over time is that all the transplant centers will be will be reliant on the impella five five and most important start to think about native heart recovery or getting the patient back to.
Baseline compared to the options they have today.
Okay, Great and then just.
One last one there was a new a retrospective study.
<unk> been in the last few days.
Sort of.
<unk>, a higher mortality rate with Impella works in the balloon pump a little bit reminiscent of it drove us or you saw in Jama a couple of years ago.
Obviously, not something we've seen in selling protect too, but I. Just I guess my question is is there is there any acute rescue them.
You know volume impact.
Maybe you can answer it if I remind me if there was any such impact up in the Derma paper was published a couple of years ago.
Sure. So they drove a paper actually is when you go into the details it reinforces our best practices that drove the papers actually balloon pump patients that are less sick that do not get that do not get escalated to ecmo or to impella compared to balloon.
<unk> patients they get escalated to impella and impella patients that get it before during thereafter, so it's not a balloon pump to Impella comparison, when we look at that same period, we see statistically higher survival, where you put the impella in before we bought the NCD our data for 2008.
In 2019, because those are the only years they actually had the impella data. The original drove a paper factually doesn't have and whether or not it's only a balloon pump or impella or color and.
So that also reiterate that the impella put it in before the PCI has higher survival. So there is some noise out there, but even the noise agrees with our best practices and that's why the leaders in this space published their actual data and are in the studies.
Perfect. Thank you very much.
I can confirm we have no further questions I'll hand, it back to al speak a team for any closing remarks.
Okay.
We just want to thank everyone for the time today stay safe and if you have follow up questions feel free to reach out and have a great day.
This now concludes today's call. Thank you all for joining you may now disconnect your lines.
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