Q4 2022 ABIOMED Inc Earnings Call
Impella BTR early feasibility.
A study and I'm happy to announce that the first patient in the World is currently being supported with this breakthrough technology.
The Impella BTR will provide patients a minimally invasive.
<unk> Flo smart heart pump with the potential to allow home discharge and durability of over one year.
Between the Impella five five and BTR abiomed projects, a $4 billion U S. Total addressable market based on an additional 100000 U S patients.
Impella ECP is another breakthrough technology, it's nine French size may enable more physicians to provide critical human support to coronary artery disease patients, enabling safer PCI procedures and more complete revascularization with an ultimate goal of improving there.
Injection fraction or heart function now shown and protect one protect two protect III and restore es as well as other papers and studies in Italy, Germany and other parts of Europe .
As a reminder, our investor event on Impella, ECP, including presentations from Doctor Amir Kaki and Dr. Chuck Simonton are now available on our Investor website.
Turning to the right heart support earlier in the year, we launched Impella RP with smart assist in the U S. This smart pump is the next generation of our FDA approved right heart device with dual sensor technology and exclusive winning capability within the quarter. We also filed our PMA supplement for the Impella.
P with insertion through the internal jugular vein or Iga in the neck distance.
This insertion technique allows patients to get up and walk while on support also called ambulation, which improves outcomes and thus is preferred by heart surgeons.
Like a flywheel, the excitement and energy from our innovation drives momentum and interest in our products and their clinical data.
We have exciting clinical trials underway, including protect for an <unk> protect.
Protect four will be the most extensive study ever done in the Cath lab, not just on high risk PCI, but on PCI overall and will lay the foundation with success for a class one guideline.
Each year there are over 100000 patients in the Cath lab that are staged for multiple <unk>.
Or received incomplete revascularization or suffer acute kidney injury or are readmitted to the hospital within 90 days.
Additionally, there were over 300000 patients in the U S. Each year that are turned down for Cabot surgery, and not referred to an interventional cardiologist or PCI.
In 2020 study published in circulation heart failure authors reviewed testing for coronary artery disease in older patients with new onset heart failure and found that 61% of patients hospitalized with this condition did not receive testing for <unk>.
Coronary artery disease, either during the index hospitalization or in the 90 days before or after admission. This data highlights an opportunity to improve care by identifying appropriate candidates for optimum CAD medical therapy and Revascularization.
As a reminder, our protect two and protect III patients on average are 70 years old so relatively young and many years ahead that can benefit from the quality of life improvements with an improvement in ejection fraction.
We believe data generated from protect four in combination with educational efforts direct to patients and physicians opens up a $9 billion U S market opportunity for Impella supported high risk PCI.
Finally, I would like to highlight some of our goals for fiscal 'twenty three.
First we will continue to innovate smaller smarter and more connected devices to improve outcomes and ease of use to be clear. The reason smaller devices are important is because they lowered the risk of bleeding and vascular complications, which we believe will increase impella utilization, especially with the late majority.
Alrighty.
Second coming out of Covid, we plan to accelerate enrollment in key clinical studies prioritizing impella ECP pivotal <unk> and protect for and last in leading the field with clinical publications like protect III and restoring that add to our <unk>.
Extensive prospective database of real world evidence protect III and restored <unk> demonstrate that the new tools and techniques that physicians with expertise utilize allow for a proven improvement in their clinical outcomes with a improvement in their injection fraction at.
90 days.
Lastly, we remain focused on commercial excellence, including engagement with the heart team physician education and patient identification for multiple FDA approved indications.
Our patients first culture remains the foundation of our success, so before concluding I'd like to share a patient story.
Bobby <unk> 31, a father husband and sales Representatives from Conway, Arkansas lives and active lifestyle. When he is not working at his computer Bobby can be found renovating his home riding bikes with the three kids and playing on his men's softball League.
Bobby tested positive for COVID-19 in early January 'twenty through 'twenty, two and within days, we experienced shortness of breath chest pain. He called 911 was transported by ambulance to the local hospital medical teams evaluated body, Bobby and determined his heart was severely week. He was transported to St Vincent and Lei.
Rock, Arkansas for escalated care upon arrival physicians identify that Bobby was in cardiogenic shock due to myocarditis with a severely low ejection fraction below 10% a life threatening condition.
Dr. Thurston Bauer implanted the Impella five five to support his heart and allow it to arrest Bobby's condition improved and he was able to walk in the unit while on Impella support after eight days Impella was weaned and removed Bobby return home to his family and today has nor.
<unk> heart function.
Bobby is back at work and enjoying time with his wife, Carly and their children just months. After this life threatening condition I got to meet Bobby as he visited Abiomed headquarters in early April as a guest speaker to share the story of heart recovery to all our employees at our global annual company meeting.
In conclusion, as we start fiscal year 'twenty three abiomed has flywheel momentum our innovation has never been better.
Our clinical evidence is established and we have the premier commercial organization.
<unk> Ciudadano playbook allows us to adapt and execute and lead and manage and focus on improving patient outcomes as we pursue the ultimate goal of being the global standard of care I am thankful for our employees and customers courage dedication and leadership during fiscal year.
<unk> 22.
I will now turn the call over to our CFO Todd Trapp.
Yes.
Thank you, Mike and good morning, everyone.
In Q4, we delivered record revenue of $270 million up 12% on a reported basis and 13% in constant currency versus prior year with double digit growth across the U S Europe and Japan.
As Mike mentioned, we were able to deliver these results and achieve our innovation clinical and commercial milestones. Despite the ongoing pandemic by executing our abiomed two <unk> playbook.
In the U S revenue grew 11% to $218 million.
This performance was driven by a 9% increase in cardiogenic shock patient utilization.
High risk PCI grew 1% based on a slow January as we saw an impact to patient utilization due to the omicron variant and hospital labor shortages.
Within the quarter as we executed our playbook and Omicron cases declined we saw a positive impact on performance with monthly sequential improvement and delivered a record revenue and patient month in March.
Our U S surgical business had another strong quarter with 46% revenue growth driven by continued demand for the Impella five five with smart assist.
As of the end of fiscal Q4 in the U S. The Impella CP is in <unk> hundred 88 sites.
The Impella five <unk> is 666 sites, while the Impella five five is now in 396 sites.
Up 47 sites versus the prior quarter.
Lastly, the Impella RP is 665 sites.
As a reminder to investors details of our product installed base are summarized in our quarterly slide deck.
U S reorder performance in the quarter was slightly above 100% and average combined inventory at the hospitals for the Impella two five and CP was four nine units per site.
<unk> with the inventory levels, we saw in Q3.
Turning to outside the U S. In Q4 total revenue was $52 million up 22% in constant currency versus prior year.
Due to strength in both Europe and Japan.
Our European revenue increased to a record $35 million.
Up 18% year over year in constant currency.
This performance was driven by solid growth in Germany, Belgium, and Italy.
Our European business also continues to see a positive benefit from sales mix, primarily from the transition to Impella CP with smart assist.
In Japan, we delivered a record revenue quarter of $14 million.
Up 34% year over year in constant currency.
As mentioned during our last call. We saw omicron cases escalate to record levels in Japan in the month of January and hospital restrictions were put in place.
Despite these headwinds our Japan business remained resilient delivering 29% growth in patient utilization versus prior year.
In the quarter, we opened four new sites, bringing our total sites to 191.
Moving forward gross margin for Q4 was 89% flat compared to prior year due to higher production volume, which offset investments and operators to support our future growth.
R&D expense totaled $44 million, an increase of 37% from the prior year.
The increase was driven by strategic investments to advance our clinical evidence through protect for an <unk> randomized control trials.
And our game changing technologies like Impella, ECP, Impella, RP, Iga Breeze, Impella BTR and pre cardio.
SG&A expense for the quarter totaled $110 million up 9% versus prior year.
The increase was due to targeted investments in our distribution team our patient therapy awareness campaign and continued training and education.
In the quarter non-GAAP operating income grew 4% to $65 million translating to an operating margin of 24, 1%.
non-GAAP net income for the quarter increased 8% to $53 million or $1 16 per diluted share.
Versus $49 million or $1 <unk> in Q4 of 'twenty one.
The increase was driven by operational performance and a lower effective tax rate.
In Q4, we generated $79 million of operating cash flow and approximately $285 million for the year.
As a result, we ended the fiscal year with no debt and $975 million in cash up $131 million or 15% versus last year, while making multiple strategic investments.
Turning to our full year performance for fiscal year 'twenty, two we delivered revenue of 1.32 billion.
22% year over year.
Which exceeded the high end of our original guidance.
Throughout the year, we were able to deliver double digit growth each quarter.
And set revenue records in three out of the four quarters, despite the ongoing headwinds.
By geography U S revenue grew 21%.
While Europe , and Japan revenue grew in constant currency, 27% and 28% respectively.
non-GAAP operating income for the fiscal year was $257 million up 12% compared to the prior year.
Which equates to a 24, 9% operating margin.
As we said at the beginning of our fiscal year, we will continue to be all in in investments in innovation clinical research and building a premier distribution team as we continue to pursue our goal of becoming the global standard of care.
In fiscal year 'twenty, two we invested $163 million in R&D up 34% year over year.
Additionally, we added 92 heads towards distribution team and launched our patient therapy awareness campaign.
non-GAAP net income for the year increased 16% to $204 million or $4 44 per diluted share.
Versus $175 million or $3 84.
In the prior year.
Lastly, turning to guidance for fiscal year 'twenty three.
As noted in this mornings earnings release, we expect full year revenue in constant currency to be in the range of 13% to 17% growth.
Our foreign exchange assumptions in our forecast are the euro rate at one eight and the Japanese yen rate at $1, 28, which will impact year over year reported growth rates by approximately two percentage points.
This translates to 11% to 15% growth on a reported basis.
This guidance assumes that COVID-19 moves more to an endemic state and that future ways do not have a material impact on the business.
As we typically do when issuing guidance I would like to provide some color on our expectations to the seasonality of our fiscal year.
In Q1, our global Finance team came together to celebrate the year and had extensive in person annual training.
Our field team also tends to take their vacations in Q1 after a busy fiscal year end.
As a result, we expect Q1 'twenty three to be around $277 million up 12% on constant currency.
Q2 is a seasonally slow quarter for cardiovascular devices due to the summertime slowdown in the Cath lab and physician vacations.
So we expect revenue to be just at or a little bit over the Q1 pace.
In Q3, we typically see significant sequential lift based on increased hospital activity and physician engagement.
And in Q4, our March quarter, we have our best results as we ended our fiscal year.
Turning to operating margin, we expect our fiscal year 'twenty three margin to be in the range of 23% to 24% as we remained focused on innovation advancing impella clinical evidence and building out our premier distribution team.
In fiscal year 'twenty, three we expect to accelerate enrollment in key clinical studies, including Impella ECP pivotal <unk> and protect for.
Which will drive a significant portion of our investment.
In summary fiscal year 'twenty, two was a record year for the company despite tougher than expected macro conditions. We are pleased to have delivered over 20% topline growth a second consecutive year of growth during the pandemic.
Additionally, we remain fiscally disciplined achieving top tier non-GAAP operating margin of 24, 9% in.
And increasing our cash position to almost $1 billion, all while continuing to make the necessary investments to drive abiomed long term sustainable growth.
We look forward to our new years, driven by innovation robust clinical evidence and continued execution as we build the new field of heart recovery.
Operator, please now open the line for questions.
Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad and let's open to ask your questions. Please ensure that you want me to take away first.
Our first question today comes from Matthew O'brien from Piper Sandler. Please go ahead Matthew Your line is open.
Great. Thanks for taking the questions just for starters tied a little bit more on the guidance for the year on a constant currency side of things, it's better than I think most people were expecting a great to see.
Can you talk about the components between U S and O U S and is it still primarily a five five.
Growth driver this year or are we expecting a little bit more pick up like we saw maybe a cardiogenic shock or high risk PCI.
Yes, Thanks, Matt for the question, so I would categorize our growth initiatives. This year in fiscal year 'twenty three really into three distinct buckets first is our core U S. Interventional cardiology business. So you think about our CP in RP products, and we expect to see growth pick up in this area, especially in the <unk>.
Have given our distribution team expansion, our direct to patient campaign, all the training and education initiatives and just more clinical publications for example around <unk> three and restore yes that clearly highlight the benefits of a complete re acquisition in a single setting. We also have some new products like RPI.
Jay some enhancers like Bicarb and breathe in ECP in the second half of the year.
Second I would say the second pillar of growth is really around our U S surgical business and if you remember three or four years ago that was about 6% of our business today is close to 18% and it grew about 60% in fiscal year 'twenty two and we expect continued strong demand for our 505 pumps from the surgeons in fiscal year two.
23, again were in only 60% of the 500 sites in 36% of the hospitals with surgical suites in the U S. So we expect to open up more sites and usage per surgeon is increasing and then I would say, Matt our third pillar of growth is really O U S into today that.
220% of our business now is outside the United States and it continues to grow faster in the U S and so we're launching 505 in Europe and in Japan that should help augment our growth rates as well as continued penetration within existing products, given our low penetration rates.
So the low end of the range factors these growth initiatives and at a more measured pace over the course of the year and at the high end assumes traction earlier in the year from these initiatives.
Yes.
Got it thanks for that and then Mike the comments you made on flywheel momentum caught my attention I'm just wondering if you're in a lot of centers, you've got a lot of different products now and more coming are you starting to break down are you starting to see significant momentum in breaking down barriers.
Clinicians that historically, where we're opposed to use an abiomed start to come on board and start to use more and more product aggressively. Thank you.
Matt. Thanks for the question. This week I've been at <unk>, which is the international side of heart lung and transplantation, but they've spent a lot of time talking about recovery and I think the big difference is today, we are a heart team company and heart recovery has arrived as the primary goal, whether it's high risk PCI.
Or cardiogenic shock from heart attacks, or mark or <unk> or even acute on chronic heart failure with cardiogenic shock and so.
I've also attended ACC and Tht in New York City, a month ago and I've been on the road seeing customers all over the south and West and we really do have tremendous momentum in the flywheel. What it means is we've personally I've worked 18 years to get to this coming fiscal year, where we are.
Got the best products in the most momentum on engineering, we have the most the most established science in this space and the best studies in process and we do have a premier field team that is 24 by seven bedside support on the phone and in the cloud with Impella connect so we feel very confident about it.
Fact that we can enable better outcomes for patients. We can also use our playbook to help hospitals with their labor shortages. So it just it's a it's a really a great time for the company.
Got it thank you.
Thank you Matthew.
Our next question today comes from Marie Thibault from BTG. Please go ahead Martin Your line is now open.
Yes.
Yeah. Thank you so much I did want to ask one more here on sort of the U S procedure recoveries and maybe more specifically on the high risk PCI.
Cases, it sounded like that was.
No what was particularly soft early in the quarter and I'd love to hear how that I guess.
The quarter and what Youre seeing so far in April .
Yes, Murray I would say that if you went back and looked at our high risk PCI volume in January it was probably the lowest from a patient perspective, all year and again it was highlighted because of what happened with omicron in a hospital labor shortages and I think when you looked at it sequentially from January to February .
During to March we definitely saw significant sequential improvement over the over those last two months again, given the fact that these patients arent quote unquote truly elective their essential and what we've seen over the last two years really is that when we see these hotspots pick up these patients come back into the system, sometimes the timing is tough to call.
But we did see them come back into our system and I would say late February and absolutely in the month of March.
Okay, great to hear and then one on accelerating trial timelines, we're obviously very excited for Impella ECP.
Are you willing to give us any hints at the potential timeline with that and also a two parter here on sort of the larger RCT that youre running longer term do you think the effect of the do people need to wait to see that data or do you think that sort of thing that with education and training. Some of the learnings are already starting to leak out.
Thanks again.
Thanks for being so the question I don't think people need to wait relative to the fact that impella is exclusively approved by the FDA safe and effective for high risk PCI and all forms of cardiogenic shock. The protect III data shows that the newer contemporary patients are sicker older and they are having better proceed.
<unk>, they are leaving less ischemia, theyre, having lower vascular complications lower bleeding.
A higher improvement in their ejection fraction. So I don't think its debatable anymore on ejection fraction and the improvements in fact, if you look at the history of PCI studies with Stenting, you see symptomatic relief, but we have now multiple studies, including FDA studies that demonstrate consistently an improvement in ejection fraction, which is.
Is how you improve their quality of life protect III was published and we have some summary on it on the summary slides on it in the.
The earnings release, and we also have restore EF, which has been presented an abstract has also been accepted for publication. So we think a lot of that information is going to be very helpful.
I think anyone on this call that's done research over the years would insist on a high risk PCI patient, having support with Impella. So that the patient doesn't have to be staged or risk of acute kidney injury.
Where any type of hemo knocked failure and the goal of why you get high risk PCI, so that youre eef improves and so if youre going somewhere and they're not going to do complete Revascularization, then youre not going to get the goal and you're better off getting cabbage, which is proven to improve your ejection fraction.
For cardiogenic shock.
We are exclusively approved for that Hemodynamically. It makes clinical sense, we have best practices that have been published and validated in the U S.
In Germany in Italy in <unk>.
Denmark and also now in Japan. So what we have is exclusive FDA approvals, we have exclusive patents, we as a premier field team. The only thing that we're working for the future that we don't have now is a class one guidelines, but I don't I'm not aware of a single medical device in the in the in the field that has all of those.
Ponant that one so were going for the gold bar for a class one but in the meantime, there is tremendous amount of evidence and validation from the FDA that our technology for these patients that's what makes them safe and effective.
Yeah of course I understand that.
For Glenn for the Golden Goldman Alere.
On the ECP timeline just huh.
Have to ask.
Yes, so the.
We also did a summary slide that's posted on the website because we do have the opportunity to have multiple studies, we're continuing to enroll in ECP. So the I'd E. Pivotal protocol was approved in March we now have to do we.
We have to get I'm, sorry, the <unk> FDA approval was in March we have to get IRB approval at the hospitals for this this protocol. We also have the final or the latest version of the product. So we're enrolling patients right now in the pivotal protocol and we're going to transition that to the pivotal study.
With the IRB approvals of the hospitals, but remember that we're doing up to a certain amount of patients not a set number of patients and that will be determined by the outcomes as they go. So we're excited where we appreciate the FDA, allowing us to stop.
<unk> nearly feasibility and transition it I think it's a great program will give a better.
Better forecast as things tie out, but we do think that the momentum will continue even at an accelerated pace and in April we saw our best two weeks, we've had in enrolment for both <unk> and protect for and we think.
The hospitals are getting back in the flow of enrolling and once we get a little bit more stabilization of that we'll give better outdate or updates, but in the meantime, we give a summary every quarter of every study where we are on patients for the quarter total patients and also a number of sites.
Great. Thank you so much.
Thank you Mary our next question today comes from Margaret Texel from William Blair. Please go ahead Margaret Your line is now open.
Good morning, everyone. This is Brandon on for Margaret Thanks for taking the question.
Just kind of go back I'd like to talk about guidance for a second but maybe just talk through what gets you to the high end and the low end of the range and maybe in particular to talk about some of the macro topics that are pretty pertinent today.
We've had staffing shortages that other medical device peers have talked about we've talked we've had inflation.
Inflationary pressures things like that so.
What gets you to the high end or the low end and then how do some of these macro issues play into that guidance.
Thanks, Brandon for the question so as I mentioned earlier on.
Again, we have these three areas that we're going after right. We have our core U S. Cart interventional cardiology business, we have our U S. Surgical business that we expect to see some nice growth on as well as continued outpaced growth in the U S and really the low end of the range assumes that the factors these growth initiatives come in over the course of the year.
At a more measured pace. The high end assumes that we get just get traction from these investments earlier in the year and so if you think about our core U S intervention cardiology business I mean, we've made significant investments over the last 24 months right in the areas of distribution team expansion in our direct to patient campaign training and.
Patients I would say more and more of these clinical publications. So it's just really how we phases in over the course of the year depends.
It depends on whether we get to the low end of the range or the high end of the range.
And then your second question around it I think it was around more.
Yes.
What's your second question more around inflation, sorry go ahead.
Yes, I guess just even staffing.
Obviously kind of a one of the topics and the medical device space, just dealing with staffing and then even just inflationary pressures.
Because even wage inflation is kind of impacting staffing scenario as well.
How those are impacting the business and where that's contemplated in the guide.
Brennan This is Mike Thanks for the question the labor shortages, we expect to be.
Standard if you all remember we were one of the first companies to talk about the labor shortages independent of Covid variance.
But we have a lot of things to offer them. So we offer them bedside support we have phone support 24 by seven as well and then we have 95% of our U S patients running in the cloud, which makes us more productive it makes the hospitals more productive and then we have extensive training for camp PCI, which they can do virtually the physicians can.
And watch live cases, or then recorded cases, we have extensive programs website and virtual training with accreditation for the nursing staff.
And I think that what we're continuing to see is a is kind of a partnership where they work with us and are establishing we're seeing a stronger trend now and momentum around the especially the U S to establish shock protocols, because there's been publications showing the improvement in outcomes reduction of length of stay.
And there really is I think the Covid protocol mindset is transferring over and we're seeing more and more hospitals work on shock teams and our teams for utilizing our technology.
Okay.
Got it and then just and granted they bring in terms of the RP jugular it sounds like yes.
Go ahead, no I was going to answer your question on inflation that was your second questions. So I just wanted to just make a couple of comments on that yes. As a reminder, we don't have a significantly high material content on our pumps, but with that said we are seeing some pressure on price increases mostly in the logistics and electronics area, but I think our sourcing team overall.
Is aggressively working to minimizing inflationary pressures theyre looking to negotiate some of them away we've locked in prices in certain cases for up to a year and we've actually pre bought some rosin components before the price increases went into effect. So we are seeing some pressure as well on wage inflation, but I think have taken that consideration and our operating margin.
For the year based on the visibility of what we see today.
Got it thanks, and I'll leave it there thats a lot of a lot of answers. Thanks guys.
Thank you Brandon.
Our next question today comes from Danielle <unk>.
<unk> from SVP Leerink. Please go ahead. Your line is now open.
Good morning, everyone. Thank you so much for taking the question congrats on a really strong end to the end to the year end.
It looks like great momentum going into fiscal 'twenty three.
Had two questions first Mike in the past you've talked about some building momentum at the spoke hospitals as the hub hospitals manage COVID-19 patients or keep beds opened.
As Covid searches are waiting its omicron came off in the back half of the quarter did you see what what we had hoped to see which ones the spoke hospitals sort of sustain the volumes.
Or anything you can say about the hub versus this folks and the growth that you saw in the quarter and then just one follow up on the cardiac surgery.
Danielle Thanks for the question that's exactly what we continue to see coming out of Covid. The smaller to mid sized hospitals picked up the pace a little bit during COVID-19 , because the larger hub centers tended to be the COVID-19 hub centers.
Also the way we established our distribution is to make sure that we're more regionally based.
With teams that can coordinate the transfer of patients from the hub and spoke.
And it's really been a great.
It's been a great benefit in our distribution, but also in the flow of patients and just one last reminder, CMS actually establish the network payment. So a spoke hospital can put an impella and receive pay and the hub hospitals can accept sufficient on impella support manage that.
<unk> X plant the device and also receive DRG to succeed where theyre compensated for the management and the management of the patient and the expiry of the Impella in the ICU. So.
It is something that's been very helpful. In our growth, but also most important its improving outcomes in these regional markets for cardiogenic shock patients.
Got it Okay, and then on the cardiac surgery business I mean that has just been a phenomenal growth.
Growth driver over the last two years and even though.
Pandemic, it's amazing to see so and $4 billion Tam I'm, just curious Mike as you take a step back here and look at the business and three to five years.
Yeah.
It's gone from 6% to 18% of the business, what's the mix of the business do you think in five years' time with the potential growth still to be had on the cardiac surgery side of things. Thanks, So much.
Thanks, Andy I don't look at percent because I expect to have significant growth in high risk PCI and shock and definitely on the surgery business.
Being a usage LTE all week.
The surgeons will tell you the heart failure cardiologist, who will tell you that this is a crisis heart fails or crisis, whether it's acute on chronic heart failure, which will address with pre cardiac and impella or if it's chronic cardiogenic shock or long term heart failure itself with the 505 and BTR. So we've put a slide up and on.
On the quarterly series and Youll see actual scale, how small the impella BTR pump is in.
What it means one we're seeing with the 505 the best outcomes. We've seen in these kind of chronic patients. We're also seeing a large percent get back to baseline and have their kidneys recover and then longer term what the BTR allows us to get not give up on recovery and allow patients to go home being discharged and remember these are smart pumps.
So the data is running in the cloud with the BTR pump we have two sensors. So we're getting actual pressure in the left ventricle in aorta, which means we can win the hard back.
Scientifically which is you are not able to do with any conventional <unk>. So besides the fact that it's smaller it's smarter and more connected the ultimate goal for these patients that are 70% above that are not able to get a transplant is to really get them back to baseline protect their kidneys and go back to quality of life at home.
Got it thank you guys.
Thanks Danielle.
Yes.
Yes.
Thank you Danielle next question today comes from <unk> Zafar from Deutsche Bank. Please go ahead.
Your line is now open.
Hi, Good morning. Thank you very much for taking my question and congratulations on a great quarter.
First a quick question on guidance I'm wondering how.
Contributory clinical trial revenues are in your guidance, both the ECP and BTR.
So whether you have any clarity from FDA regarding our continued access registry for UCP.
Yeah.
I'll take the first question in terms of the guidance I would say.
We haven't really factored in much from a from a revenue perspective with regard to BTR really really ECP at this point in time in our guidance.
Okay.
Okay.
Continued access registry any clarity there.
Yes, the Enron.
Product ECP is category B. So it's reimbursable. It we went from early feasibility into this pivotal protocol, which will become the overall pivotal as we ramp up to 217 patients. The continued access protocol will happen when we're done enrolling or where we lock it down.
And yes, then we will continue to keep those centers open and continue to treat patients at those centers. So that's when we get to the tail end of the enrollment.
Enrolment, but we're very focused as a priority on getting ECP enrolled.
Okay. Thank you and then my second question is around the longer term.
Margin outlook.
First one on gross margin.
When you look out three years to four years and presumably ECP dominating your percutaneous pump business are there any reasons to think that gross margin profile should change versus the current.
$2 five in terms of any differences in manufacturing of componentry and things like that.
As the current business. Thanks.
So sorry, I'm, Ron just to point out so what we think is that the.
Impella ECP will be an ideal protected PCI product that likely eliminate the balloon pump in the Cath lab for many of these patients, especially for those physicians, who are uncomfortable with access closure of a 14 French hole with a nine French catheter on Impella CP. So we think that that's going to that's going to help expand the use.
Impella ECP for high risk PCI Impella CP is probably going to continue to be the best cardiogenic shock patients.
Technology, so a patient that's going to have.
Two to four or five days in the ICU, we'd see the the 505 is the best device for that longer term chronic patient that gets up and walks around and then of course BTR can be.
Our goal of over a year, where the patient has the option to be discharged home. So as the new products rollout you always have a learning curve. So your costs are a little bit higher and as the other products continued to evolve you tend to bring the cost down so I don't see it as a change one way or the other but what I am saying is we have the ability to have.
Price points now whether we're in a in high risk PCI or whether were in cardiogenic shock or weather or in Japan versus the U S versus parts of Europe . So that's the way we're going to manage our gross margins, but we have been.
For over the last 10 years.
On the top.
Companies as far as best in class on gross margins and we take great pride in that and it shows the value of this technology overall.
And then I'm sorry, if I could just ask a follow up on operating margin. Obviously this year is going to be a big investment year, just given the multiple clinical trials flowing on international expansion et cetera.
When we look at fiscal 'twenty four is should we start to see some normalization in operating margin by then Todd in terms of moderating R&D and operating expenses in general thanks.
Okay.
Well Enron I just provided guidance for fiscal year, 'twenty, three but I think when I look at fiscal year 'twenty for at some point in time. These clinical trials will start to moderate and then start to come down and so when I look at R&D as a percentage of sales this year as it can be close to 18%.
Hopefully if we are able to execute on our clinical trials in terms of enrollment and site openings post COVID-19 , it's going to be a big year and then hopefully starting next year, maybe the year following that it will start to moderate and come back down and then longer term R&D will get back into that 12% 13% of sales.
Yes.
Awesome. Thank you so much guys.
Thanks, everyone.
Yes.
Thank you.
Our next question today comes from Cecilia furlong from Morgan Stanley . Please go ahead, Sir your line is now open.
Okay. Thanks for taking the question. This is calvin on for Cecilia.
On what Youre seeing in terms of potential for deferred protected PCI cases to flow back in from from here on out how much of a choice backlog PUC.
Waiting on the sidelines, perhaps not as pronounced that some of the more deferrable Netex Med Tech names that we've seen just curious what kind of potential benefit that would have on your recovery.
Yes.
I would say.
Probably very little I mean, we saw a lot of that come back in March. So we had some impact in January and like we've seen over the last two years. They do come back and it comes back in the next few months. So I would say very little backlog in my opinion as we get into fiscal year 'twenty three.
Got it.
I just also wanted to check in on Ecp's I know based on the government website update theres, probably at least a year and a half out till we see some sort of potential approval, but just curious if you have any early thoughts on ECP pricing versus the other models you know assuming stable reimbursement I'm just curious how youre positioning ECP small from a hospital profits.
Ability standpoint versus the other impella is down.
Down the road and thank you yes.
Yes.
We're still in the process of finalizing sort of what the pricing is but it's going to be somewhere around the CP rate from an initial standpoint.
Yes.
Got it alright, thanks, so much.
Thanks.
Thank you Kevin Our next question today comes from Jayson Bedford from Raymond James. Please go ahead. Your line is now open.
Yes.
Hi, guys. This is <unk> on for Jason I quickly wanted to ask about number of centers in the <unk>.
So you had mentioned regions that are above pre pandemic levels is it fair to assume that exiting March most of the centers are above pre pandemic levels and I have a follow up on that out.
International grew.
Both as well.
Yes, I think it does.
Safe assumption that most of the sites.
We're in right now absolutely above pre pandemic levels.
We set a record in patients and revenue this quarter. So yes.
We're above pre pandemic levels at this point in time.
Alright, great and the 2% FX headwind was a bit higher than we were thinking so is that.
Fair to assume that we can you guys comment on U S versus international growth expectations for our fiscal year 'twenty three.
Yes, I guess I'm surprised it's 2% is big because when you look at where the euro rate was last year. It was one 1% and 2% on average, but when we did our forecast financial forecast, we assumed one point OA.
Today, its one O 105.
And more importantly, the yen yen Thats last year averaged $1 16 in the month of April and went up to 128. So we're seeing a significant dollar strengthening against the euro and the yen and.
I'm pretty sure we're not alone in seeing that.
Yes.
Got it.
The updated guidelines.
<unk> just for.
For cardiogenic shock, if they had any impact on.
Revenues outside of Germany, as well or is that it's been mostly up a German phenomenon.
So the guidelines are for all of Europe , and nearly every country in Europe set a record for the year and for the quarter as well, so theres likely some uptake to it its pretty recent but.
It is a positive sign and yielding higher now than a two way as a class one.
And that's that.
Not the normal guideline for most medical technology.
Got it and is that something that you guys expect that to change in the coming years or is there like some kind of timeframe expectation for that.
For the class one those are that's based on the completion of our studies recent studies.
Thank you very much.
Yes.
Thank you. Our next question today comes from Michael Pollock from Wolfe Research. Please go ahead, Michael Your line is now open.
Hey, good morning, Thank you for taking the questions just two quick ones.
Breeds last quarter you mentioned.
Working on a console upgrade for your Ecmo platforms curious for an update there how does the work going and when might you think you'd be back to more of a commercial posture.
And the Ecmo space.
For the <unk> product.
To be second half we are working on the.
Upgrading some of the electronics on the consoles itself, we feel confident and very positive about the clinical outcomes were finally, a little bit more IP, we're making some improvements to the product says we're as we're waiting to go back to this process.
And in Europe , we've already Val.
Validated the software for auto at Capella, which allows the impella console to know Theres, an ecmo device being utilized so it can differentiate the pressure coming because you remember an ecmo device for that VA Ecmo was actually pumping retrograde against the heart.
So between at Capella.
And breathe coming out in the second half, we feel like we're going to be well positioned not only to recover hearts and save lives, but to recover hearts and lungs and save lives.
Yeah.
Thank you and for Todd Todd Whats the reasonable tax rate adjusted tax rate input for models. This year and the guidance just to level set there. Thank you so much.
Could you just quantify reduce 25% for modeling purposes.
Thank you.
Thanks.
Thank you Michael and our final question today comes from Chris Cooley from Stephens. Please go ahead, Chris Your line is now open.
Good morning, and thanks for taking the questions just wanted to follow back up on growth you had very impressive growth.
Growth or both in Europe , and Japan, as we're exiting the year.
I wanted to touch on the Japanese market in particular, and Tom If you could give us any color there in terms of.
Are you at an inflection point when you just think about like just.
The launch of the Impella here in the U S. In terms of its adoption curve or is it just a function of just critical mass in terms of the facilities just kind of any additional color you can help us with as we kind of think about driving our international growth expectations for the coming years. Thank you.
Yes, as we mentioned in our prepared remarks, we had another really strong quarter in Japan with record revenues and record patients. Despite some of the headwinds there. So we delivered $14 million, which was up 34% on a constant currency basis pretty consistent with what we saw last quarter patients were up 29%.
7% quarter over quarter. So Chris has just been Japan has been a wonderful country for us to launch our technology and today. We're in 191 sites Theres still over 350 sites for us to get into so I still feel like we're in the early innings in Japan and as we know as you know we're excited to really launch the 505 there.
This upcoming fiscal year and so we're at 2020 sites LMR and again, we're really excited to bring this technology to Japan and expect another strong year out of Japan in fiscal year 'twenty three.
Yes.
Thank you.
Sure.
Yes.
Yes.
Thank you Chris Alright. It concludes today's Q&A session I will now hand, the call back to Michael <unk>. Please go ahead.
Thank you everyone for taking the time to join our call today. If there is any follow up questions. Please reach out directly have a great day.
This concludes our BMS fiscal 'twenty terms to fourth quarter earnings call. Thank you for joining you may now disconnect your lines.
Thank you.
Sure.