Q1 2023 ABIOMED Inc Earnings Call

Hello, Ladies and gentlemen, thank you for standing by today's conference will begin momentarily to allow as many participants as possible to join thank you.

Please wait the conference will begin shortly.

[music].

Good day and thank you for standing by welcome to the Abbvie Ahmed FY 'twenty three Q1 earnings call. All lines have been placed on mute to prevent any background noise should you require any assistance. Please press star zero on your telephone keypad and an operator will assist you during.

During today's call there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad I will now turn the conference over to Nicole <unk> head of Investor Relations. Please go ahead.

Good morning, and welcome to <unk> first quarter fiscal 2023 earnings Conference call. This is Nick Cornett head of Investor Relations and I'm here with Mike Minogue, Abiomed, 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 first quarter business and operational highlights and then Todd will review our financial results, which were outlined in this morning's press release after that we will open the call to your 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 consideration consider it in isolation or as a substitute for results or superior to results prepared in accordance with GAAP reckon.

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

Finally, I would like to remind everyone that today's call includes forward looking statements.

The company cautions investors that any forward looking statements involve risks and uncertainties and are not guaranteed in the future.

Actual results may differ materially due to a variety of factors identified in our earnings press release, and our most recent 10-K and 10-Q filed with the SEC.

We do not undertake any obligation to update forward looking statements.

With that let me turn the call over to <unk>, Chairman, President and Chief Executive Officer, Mike Minogue.

Thanks, Nicole and good morning, everyone in the first quarter of fiscal year 2023 of your med delivered a company record of $277 million in revenue up 10% on a reported basis and up 12% in constant currency year over year with quarterly records across the U S. Europe and Japan have you met has achieved a record.

Revenue in five of the last six quarters, despite ongoing headwinds with Covid variance hospital labor shortages.

<unk> chain constraints and most recently contrast media shortages.

Are you Mad Trudeau has proven to be resilient, because our technology and 24 by seven hospitals support addresses the growing epidemic of heart disease in multiple emergency patient populations in the Cath lab and surgical suite.

Within the quarter, we supported a record number of patients in the U S and had the second highest patient utilization in Europe and Japan.

We remain focused on innovation and strengthening clinical evidence investing $41 million in research and development, while achieving 23, 8% operating margins. Our IP portfolio continues to grow with 1487 patents and 1610 patents pending we ended the.

Quarter with just over $1 billion in cash and maintain zero debt. Additionally, this morning, we announced a new 200 million share repurchase program.

A component of our capital deployment strategy upon completion of our anticipated closure of the prior $200 million plan.

Okay.

Our continued strong financial and operational performance as a result of our disciplined execution of our abiomed Ciudadano playbook, which enables us to innovate breakthrough technology advanced clinical research and support record levels of patients in this dynamic environment.

For today's call I'd like to highlight the continued strength of our surgical products driven by heart recovery with Impella five five.

We were a few publications of clinical data that validate the benefits associated with Impella supported PCI procedures.

And finally, we will cover the progress we've made in our pursuit of classroom guidelines with multiple pivotal trials starting with surgery.

In the U S surgical revenue grew 49% year over year.

Driven by a 66% increase in the Impella five five this revolutionary surgical Heart conference Martin assess provides unique advantages for the chronic heart failure patient population suffering from cardiogenic shock.

As presented during our June Investor call with doctors, Jean Wilcox and David Dallas, Sandro from Northwestern Memorial and Mass General Hospital, respectively. This game changing technology has improved patient outcomes with 75% survival rate across all indications and 60%.

Ah patients returning home with their native heart.

These outcomes are particularly meaningful because these patients previously faced irreversible heart failure, which ultimately would have required a durable implantable L bad or heart transplant.

I encourage all investors to watch this webcast on our Investor website.

In Japan, we continue to find success with our controlled rollout of the Impella five five with overwhelmingly positive surgical feedback we've witnessed survival rates and duration of support similar to that in the U S. In the early stages of our product launch we anticipate the expansion of this innovation to new sites and surgeons in Japan.

Setting the stage for heart recovery in surgery and protocols for the future.

Turning to recent clinical data restore E F. A prospective multicenter study evaluating best practices in contemporary high risk PCI practice will be published later this month and Jay Sky.

It was most recently presented as an abstract at a large cardiology meeting.

At their 90 day follow up study participants had a 29% relative improvement in their baseline <unk> left ventricular ejection fraction and overall, 76% reduction in New York Heart Association class III and class four heart failure symptoms.

And then overall, 97% reduction in Canadian Cardiovascular Society class III or class for angina symptoms. The restore EF study combined with protect one protect two and protect III FDA studies and multiple independent physician studies.

On the straight definitive proof that Impella supported high risk PCI can lead to a more complete revascularization and considerable left ventricular ejection fraction improvement, which improve heart function and quality of life for the patients.

Am I cardiogenic shock has one of the highest mortality rates in the fields of medicine. These are patients sometimes showing up at the hospital getting CPR and rushed to the Cath lab.

The survival rate has remained approximately 50% without impella and associated best practices for the last 20 years.

Impella technology is designed to not only improve survival, but enable heart recovery.

Impella best practices, such as placing impella pre PCI, so before the physician places stents.

Been developed by the recognized physician experts in the field of circulatory support and is published in multiple clinical studies over the last decade from the United States, Germany, Italy, Denmark and now Japan.

In May the International Journal of Cardiology published a meta analysis of Impella pre PCI versus post PCI implantation and Ami cardiogenic shock.

This publication summarized 13 papers totaling 6810 patients and demonstrated a statistically significant lower mortality with impella implantation before the PCI or the physician placing stance.

Multiple impella studies demonstrate greater than 70% survival with greater than 90% Native heart recovery.

Heart recovery after Ami cardiogenic shock and improves patient quality of life and makes Impella one of the most cost effective therapies in the CMS Medicare population as well as private insurance.

Lastly, I'd like to highlight our progress towards advancing clinical evidence through multiple pivotal trials, we had a record quarter for patient enrollment for both protect for semi due to you starting with protect for in Q1, we rolled enrolled 91 patients protect for it. It's one of the most comprehensive studies.

Ever done in the Cath lab. This landmark trial will compare the benefits of an impella supported high risk PCI versus high risk PCI without impella support.

Researchers will measure complete revascularization.

Prudent and patient quality of life and ejection fraction.

For this dummy did you pivotal trial, we enrolled 45 patients in Q1, if successful this trial could expand our indications into heart attack patients without cardiogenic shock, which represents a 200000 patient population in the U S and 4 million patients worldwide.

<unk> that we do not treat today.

I'm also excited to announce that in July we received FDA IDE approval for recover four this is an F. D. A randomized controlled trial comparing all cause mortality at 30 days and patients with semi cardiogenic shock with an impella base treatment strategy strategy initiated prior to PCI.

Versus a non impella based standard of care treatment strategy. Our teams have worked closely with the FDA to generate the protocol focused on exception from informed consent or ethic, which we believe will help enrol patients in what has historically been a difficult patient population to enroll due to ethical and logistics.

The concerns.

The study details are posted in our earnings slides.

Our current Rct's are built off of a decade of prior studies and best practices with the goal of achieving class one guidelines the highest level of medical guidelines for high risk PCI cardiogenic shock and stomach.

If successful we believe will be the only company in med tech with exclusive FDA approvals and dedicated IP portfolio and class one guidelines.

Before concluding I'd like to share a patient story Ethan Bradshaw 30 years old is a state trooper from North Carolina motivated by a family history of heart disease, Ethan takes pride in living a healthy lifestyle. He exercises several times each week and as the Brazilian jujitsu instructor.

On February 24, 2000 2022.

After experiencing chest pain and numbness in his arm at the gym Ethan drove himself to current scale Medical center.

Upon arrival in the emergency room, even collapsed medic.

Medical personnel shocked Ethan multiple times and performed CPR before transferring him to four sites Medical center in Winston Salem, North Carolina.

He was in cardiogenic shock when he got to the categorization lab with a reduced and fraction ejection fraction of 20%. So his heart was working about a third of its strength.

Dr. Samuel Turner implanted the Impella CP with smart assist before the PCI and placing stance. After two days of support Ethan its heart function show dramatic improvement and the Impella was weaned and removed utilizing smart assessed.

After three weeks in the hospital eats and returned home with his native heart.

Eaton's heart function returned to normal and then May you return to the line of duty.

In July five months after his heart event Ethernet his wife Mackellar welcomed a baby boy Ryan.

Today Ethernet Mackellar are visiting our headquarters in Danvers will then meet with employees and share their inspiring story of heart recovery as part of our annual patient summit.

Yeah.

In conclusion at Abiomed, we are developing a new field of heart recovery and relentlessly pursuing better clinical outcomes and class one guidelines.

In Q1, we made progress toward our goals and we remain focused on developing smaller smarter more connected devices and accelerating enrollment in key clinical studies and building commercial excellence as we continue through our fiscal year I.

I would like to thank our employees and customers for their commitment to advancing the standard of care.

And recognize our shareholders for their continued support.

I will now turn the call over to Todd Trapp, our CFO .

Thanks, Mike and good morning, everyone.

In Q1, we delivered record revenue of $277 million up 10% on a reported basis and 12% in constant currency versus prior year with.

With strong growth across the U S Europe and Japan.

We executed our abiomed 2.0 playbook to deliver these record results despite tough year over year comparisons and headwinds from hospital labor shortages contrast media supply constraint in foreign exchange rates.

During the quarter, we saw the U S. Dollar continue to strengthen which resulted in a more unfavorable impact on revenue compared to exchange rates at the time of our last earnings call and a two point impact on first quarter revenue versus prior year.

Starting with the U S. Total revenue increased 9% year over year to 227 million despite the challenging environment due.

Due to a 6% growth in patient utilization and favorable sales mix.

As you reminded to investors, we grew revenue, 54% in Q1 of last year.

Hey, Amit Cardiogenic shock continues to perform well with 10% growth in the quarter on top of 41% growth in the prior year.

High risk PCI was down 1% due to challenging comps a 51% growth in the prior year and the impact from both hospital labor shortages and contrast media supply.

Our U S surgical products had another strong quarter with 49% revenue growth driven by continued demand for the Impella five five with smart assist.

At the end of our fiscal Q1 Impella CP is in 1598 sites in the U S.

The Impella five five is now in 444 sites.

Up 48 sites versus the prior quarter out of the potential 1100 hospitals with surgical suites.

Lastly, the Impella RP is 675 sites.

Details of our product installed base are summarized in our quarterly slide deck.

Our U S reorder performance in the quarter was 101% in line with the prior quarter and prior year.

Average combined inventory at the hospitals for the Impella, two five and CP with four nine units per site.

Flat with the inventory levels, we saw last quarter.

Outside the U S revenue totaled $51 million.

Up 11% versus prior year on a reported basis.

27% in constant currency.

European revenue increased 19% year over year in constant currency on top of 50% growth in the prior year due to patient utilization and favorable sales mix.

We continue to see strong patient growth in countries and regions like Italy, Belgium, Austria, and the Middle East.

Our Japan business delivered revenue of $13 million in the first quarter revenue.

Revenue increased 39% year over year in constant currency, a new record driven by a 25% growth in patient utilization and site openings.

In the quarter, we opened eight new sites, bringing our total to 199 out of the potential 450 sites.

This compares to the four site openings last quarter and five site openings in Q1 of 'twenty two.

Gross margin in Q1 was 81% compared to 82% in the same period of the prior year.

Primarily driven by lower production volume in manufacturing investment to support our future sales growth.

Yes.

R&D expense for the first quarter totaled $41 million up 7% year over year the.

The increase was driven by the investment in both protect for <unk> randomized control trials associated with site openings and patient enrollment.

Partially offset by a reduction in our contingent consideration liability.

SG&A expense for the quarter totaled $118 million, an increase of 14% versus prior year, driven by head count additions to our commercial team our patient therapy awareness campaign and continued training and education.

non-GAAP operating income was $66 million in the quarter, which translated to non-GAAP operating margin of 23, 8%.

Versus 26, 2% in the prior year.

The variance is due to ongoing investments in innovation clinical research and commercial excellence as we pursue our goal of becoming the global standard of care for hemodynamic support.

non-GAAP net income for the quarter was $57 million.

This translated to earnings per share of $1 25, an increase of 14% versus Q1 of 'twenty two.

Our year over year performance was driven by higher interest income and adjustment to the carrying value of our strategic investments and a lower effective tax rate.

In the quarter, we generated $68 million of operating cash flow and ended June with just over $1 billion of cash and marketable securities.

Our top priority for cash remains supporting organic growth initiatives and strengthening our intellectual property advantage.

In terms of guidance keep in mind that our fiscal year experiences seasonality.

Our Q2 is usually a slow quarter for all cardiovascular devices due to the summertime slowdown in the Cath lab.

We expect Q2 revenue to be in the range of 12% to 14% on a constant currency basis.

This translates to a modest decline from a Q1 record revenue performance of $277 million, primarily due to a $2 million to $3 million of sequential FX headwinds at current rates.

In addition, we anticipate December quarter to be impacted by extended vacation from physicians nurses and our workforce.

Coupled with ongoing hospital labor shortages.

As we transition to the back half of the year, we typically expect to see sequential lift in Q3 based on increased hospital activity and physician engagement.

And as we finished the fiscal year our March quarter.

We expect to deliver our best results.

As noted in this morning's earnings release, we are maintaining our full year constant currency revenue guidance of 13% to 17% growth.

At current FX rates, we now expect reported growth rates to be 10% to 14% for the fiscal year.

This guidance continues to assume that COVID-19 moves more to an endemic Steve in that future waves do not have a material impact on the business and hospital labor shortages begin to moderate.

As we move into the second half of the year.

We are also maintaining our full year operating margin guidance of 23% to 24%.

Yes.

In summary, we delivered a strong first quarter through disciplined execution of our Abbvie made 2.0 playbook. Despite the challenging environment. We remain focused on executing our fiscal year 'twenty three goals on innovation clinical evidence and commercial excellence as we continue.

To build the new field of heart recovery.

Operator, please now open the line for questions.

Thank you, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad. If you would like to remove yourself from the queue. You May Press Star one again one moment. Please for your first question.

Your first question comes from the line of Margaret Kaiser with William Blair. Please go ahead.

Hi, everyone. This is Brandon on for Margaret Thanks for taking the question just.

Looking towards this this fiscal 2023.

The encouraging results and able to really hold that guide.

A lot of the medical device peers are kind of seeing a slower recovery than they would have start thought starting the year.

So curious if you guys have any comments on that and kind of whats sticking out for you guys. That's allowing you to hold that guide and giving you confidence in that guide despite what seems like.

Slightly.

Slightly slower recovery than much of the industry thing.

Hi, Brian This is Mike Thanks for the question.

Forecast put a little bit of.

An opportunity for things to happen in good and bad I think most people were surprised a little bit with the contrast media shortage was definitely impacted a little bit of our.

Our revenue as well, but we are as a business have a elective business with high risk PCI, but we also have an emergency business and as you can see from Q1, where double digit growth because of our emergency patients in the Cath lab and surgical suite and we are confident in high risk PCI is going to come back and it always does and that'll be further up.

But what's also exciting for us and for the year is every quarter that goes by this fiscal year, we get closer to more launches more new products and more clinical data. So the RP I Jay will be available by the end of our fiscal year will be a new product for surgeons for right heart failure.

Excited to launch the LP sheath remind everyone. This is a smaller sheath that's compatible.

Compatible with single access, it's going to reduce the whole by a French and a half I think it's going to be very helpful for high risk PCI and overall shock patients treated in the Cath lab access.

The big issue for for people and we're very positive and excited to have that product in the U S market, we're going to have a brief launch ended the year. So again. This is probably one of the best devices for ambulation.

Smallest as the size of it.

Basically a briefcase and we're very confident in the blood compatibility and durability.

We did do our second patient on BTR.

During this quarter, but we're going to have more progress on that and hopefully through the <unk> first we will be able to start generating revenue with reimbursement as a category b by the end of the year and of course, we're taking the opportunity right now for the IRB and the administrative legal contracts to.

To continue to enroll in ETP, because we're in the pivotal protocol and.

We're gonna make enhancements.

As we go forward. So we feel like we're in a very good place going into Q2 and very confident in the year not just because of the clinical data, but also the new innovation coming.

Thanks, Mike.

Just as.

Looking into the surgery side and 55 I mean, those those two continue to put up great growth numbers, despite with getting a larger business and the comps keep getting a little bit harder.

Can you just talk about what's driving the underlying momentum there, whereas growth coming from is it coming from new accounts or is it coming from going deeper into existing accounts, maybe it's a little bit of both but.

What what do we what can we expect from that those two products.

The product segment.

And how should they trend through the rest of the year. Thanks.

Great. Thanks, So theres a population out there that's not am I shocked by chronic heart failure shock are acutely decompensate in heart failure shock. So these are they're frequent fliers.

And what's happened is the Impella five five has become the go to product. So you have these seven year olds coming in Theyre not they didn't take their uninterrupted or their diets off in their D. Compensating.

And this gives the surgeons the ability to put something in minimally invasive lead through the axillary so less than an hour.

Patients can get up and walk around the device has sensors and they can get these patients back to what's the baseline or acute recovering while protecting the heart unloading it and giving renal perfusion to the kidneys. So it's really been a great product. It's it is a revolutionary product because now you have a minimally invasive winnable heart pump all.

Prior heart pumps required a sternotomy and then you have the core out the apex of the heart and then you bypass the blood out of the heart rate to the aorta. So it's not ideal for older patients or patients that want recovery.

For your question of where the volumes coming it's more patients it's more centers.

The devices device does run longer and the engineering Weil as it runs.

Extensive periods of time.

And it really has transformed heart failure and the heart team to try to recover these chronic patients and protect their kidneys I would encourage all investors to watch Dr. David della Sandro and Dr. Jean Wilcox, both from northwestern and mass general because they really go deeper in that question and they show some live cases, so I hope everyone has.

The opportunity to see that.

Thank you.

Your next question comes from the line of Matthew <unk> with BTG. Please go ahead.

Hi, Mike Todd. Thank you so much for taking the questions. This morning I wanted to start here.

A quick question on sort of the contrast media shortage impact I Wonder if you could size that for us quantify it for us and.

Where it is now do you feel that it's been fully resolved with most of your centers.

Thanks for the question.

As we talked about each quarter, we've had a positive evolution of our customer base during COVID-19 because the smaller hospitals had to pick up more of the work relative to emergency patients and also even the high risk PCI.

And we that's how we're able to maintain positive growth during the first year of Covid.

That trend has been continuing however, what we saw in the quarter was that the smaller centers didn't have access to the contrast, and thats what potentially impacted.

Impacted a little bit of our high risk PCI, Todd can give the numbers on it.

Whereas the bigger centers had access so it was spotty. It was it was all over the U S and we believe that the majority of that's behind us, but certainly.

We're going to continue to monitor the situation John do you want to comment on.

The numbers, yes, so maria to the best of our ability, we think it's somewhere around 150, plus plus plus plus or minus a few but the 150 patients in the quarter, which obviously would have impacted our overall patient growth by about two points and as Mike mentioned, it mostly occurred in our high risk PCI business and so again, if you think about.

While reported Thats, an additional 150 patients is worth about five points of growth on high risk PCI. So that's to the best of our ability.

So what we came up with is the impact from contrast media in Q1 and as Mike mentioned it was mostly at the smaller hospitals.

That's really great detail thanks for that.

And then here my follow up I wanted to talk a little bit about your operating spend you've you've had some very nice control on R&D and I think I heard that you're manufacturing.

You are investing in manufacturing and adding sales head count. So I wanted to hear a little bit more about where those new sales reps are going to be focused.

What what areas, you're expanding capacity manufacturing capacity and how you achieve some of that R&D control. Thanks for taking the questions.

Yes, so for marine in terms of in terms of sales heads for the quarter I think it was somewhere in that 18 19 heads.

We continue to I would say invest more on the surgical account team just given where we are from a penetration standpoint, we're at 440 hospitals out of the 1100, So thats really where I would say some of our investment went on the commercial team.

We are still I would say looking to potentially go to a few more regions a few more franchises and again that boded well for us during Covid is as you know that we grew smaller hospitals at a faster clip just because we had more feet on the ground with regards to gross margins at 81% in the quarter again.

We are adding a little bit more I would say on the hourly workers as we think about ramping up our volume in the second half of the year.

Thank you.

Your next question comes from the line of Peter Chickering with Deutsche Bank. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions can we you sort of talk about the Impella ECP trials for many it get some updated enrollment numbers there if possible and then from a product perspective, any major revisions to either hardware or software during the quarter.

Okay.

Sure. This is Mike Thanks for the question on the ETP, we've closed out the early feasibility protocol and in March we had the pivotal protocol approved so we're continuing to enroll patients. We're collecting all that data we're going to utilize all of that data in our submission.

The IRB process and the legal and administrative work at hospitals.

Ross the board for those that don't.

All of this is is a lot more complicated and at best it's a three month.

Enorme it can be six months, so as we're working through that we have three IRB approved but we don't have a single site that has approved the site activity we are making.

Taking the opportunity to make a few enhancements that will continue to make on the product and we'll do that throughout the pivotal so thats.

That part will happen that's the benefit of doing this early feasibility. That's also the benefit of working with the FDA on something that has again breakthrough designation status as a product.

Okay, Great and then Europe , and Japan, very strong growth year over year. It actually accelerated sequentially. Just curious is this more details of those markets and what do you assume within your guidance for the rest of the year.

Yes.

Yes.

The Japan market is ideal for our focus around native heart recovery.

By providing now the Impella five five we allow the heart surgeons to have a longer term pump a device that are in the engineering base cause run over a year.

Japan protocol is they tend to keep their patients in the hospital and with their focus on myocardial recovery in stem cells, we are going to be coordinating and partnering with those institutions, where we'll do extended unloading with five five which we know immediately shrinks the left ventricular.

Geography, or a geometry of the left ventricle. We know we get we rest of heart. We also know we get renal perfusion. So we're going to be doing continued advanced protocols now for getting back these chronic patients.

And yet the society and the physician community. There is very excited about this not solve a.

Research and we will be there in October I'll be there in October and we're out again traveling the shows are up and running.

So we're in Japan, we're in Germany, and we're all over the U S and progress in our research is moving forward.

Great. Thanks, so much.

Your next question comes from the line of Chris Pasquale with Nephron Research. Please go ahead.

Thanks.

Congrats on getting recover for prudent and making some nice progress on the other studies this quarter, it's great to see like it's been challenging to do randomized trials in cardiogenic shock prior attempts and ended up with some messy data I see there.

She got an extension from informed consent, which should help with enrollment beds or other things you've done with the design of this trial to ensure that you end up with a well balanced.

Trial, and a clean look at the clinical value of Impella in that population.

Sure Chris So the Abiomed has attempted all of the cardiogenic shock studies in this space in 2008 2009, we did recover too.

In the U S and as you mentioned, we were only able to enroll one patient that was based.

Based on the ethical and logistical challenges back when people thought the balloon pump did more flow in Europe , they've been able to consent. These patients because they do have an exception. They can have two physicians make a decision where they don't have to go to somebody getting CPR or find a family member to consent to patients that was the culprit study that showed that.

Mortality is 50% when you don't have a protocol in place and you try to avail of these patients out and it was also the shock II study, which is published in the New England Journal of Medicine that was a balloon pump and that showed the balloon pump not only had zero benefit in clinical outcomes. It did not even improve the hemodynamics because the human <unk>.

Amex for the balloon pump is generated by uninterrupted drugs, which work, but they they they work the heart harder and they also cause arrhythmias, which makes it a balloon pump not working almost is detrimental and dangerous.

Now we've tried to impress we tried multiple times in Europe , we tried to see for paper all of those studies started with the concept of randomization. None of those studies were actually randomized because as they got further into this study that physicians felt it was unethical or the consent was too difficult. So they just started.

They would they ended up not being.

They are not randomized studies, despite the fact that some of the.

The authors of certain publications say they are and Theyre not there are studies, we funded them.

So we went to the FDA and we're working with them now for a year and a half two years. They are the authority on these.

What's called Epic exception for informed consent there the ruling body as far as an authority. They worked with us to get that step that they can now consider patients in cardiogenic shock can can utilize the epic channel. However, we still need the local arby's to approve it.

We also need the physician to do it we recognize not all physicians will randomize. These patients however, they're the leaders in this space the published leaders in this space the ones that treat these patients have developed this best practice protocol, which they've also published and they want to pursue this study and what's new.

Is that a lot of these centers some of them use ecmo as first pass as the way they treat shock not just oxygenation, so and the other arm. They will have the option to do Ecmo anyone's ecmo. It will actually be the first study ever done with the FDA that will measure the adverse events of Ecmo and Ecmo has <unk>.

Saving components to it in an oxygenate the body when it's not ideal for.

For cardiogenic shock, where you have a human AG problem. It actually can cause other issues. So that will be in the other arm oxygenation will be a protocol and really the the customer base it will determine with recover for.

Their ability to randomize their ability to execute and this is where all of these other studies that we've been doing around pre PCI, we feel like we have the formula for success.

Best practice protocols on Impella for shock of identifying shock really putting impella and before the PCI looking for right heart failure and monitoring Hemodynamics has now been published in duplicated over a decade. So we're excited to recover for it.

Okay.

Thanks, So if I remember correctly one of the issues with Empress was also that a lot of patients who got enrolled already had some evidence of brain injury admission. So we're getting some too late so anything to deal with that issue and try and make sure that these patients still has a chance at the time of getting support.

Sure so.

There was 48 patients 24 of the patients got Impella. The majority of those patients only four got Impella before PCI four out of the five lift so we have an 80% survival in the impress Unfortunately, they stopped and randomized <unk> 815 patients within the 48 were not randomized, we're not sequential and more than half of these patients.

We're in cardiac arrest, which is not ideal that this is not a cardiac arrest pump and many of them got randomized after they had done the PCI and even had a balloon pump in so that impressed and severe shock is really cardiac arrest. The original impressed that we only did 18 patients was that protocol and we're looking to rule out cardiac arrest.

From this study they will not be in the recover for protocol and as you know Chris There is a range of mortality in shock and that and the society intervention cardio Sky has a classroom a through E and that you can have a range of mortality at 3% and E. And you can have an 85% mortality rate of in and stay.

So it really is that that metric and that's one of the challenges with these databases that when people write a paper from data from seven years ago is the balloon pump arm is bias because the patients that get sick on the balloon pump come out the other go to Ecmo and are ignored and Ecmo Youll notice is not in these analysis by people that are.

Pulling databases or they go into the Impella arm and they are now in the Impella arm, but they don't disclose that and it also includes balloon pump patients that get bailed out in the Impella arm. So we have all the data the world's experts are writing our papers in our protocols and other ones that treat.

To meet that but to the folks that want to put out databases, we encourage them to publish their own data and come join our studies and randomized.

Thanks.

Your next question comes from the line of Matt O'brien with Piper Sandler. Please go ahead.

Morning, Thanks for taking the questions just for starters Mike.

To put a finer point on 505, I mean that was a meaningful acceleration sequentially with that product.

You've talked a little bit about centers in utilization, but can you just put a finer point on what youre seeing as far as some of the centers that have been using five five for maybe a year now as far as there.

Their trend and then.

Are these new systems and centers that are coming on are they adopting even faster just based on what some of the other centers are seeing as far as outcomes.

Yes.

Yeah, Matt. Thanks for the question I guess, the best way I would answer that is encourage everyone to watch the webcast. We did with the experts because they go into detail and show some of the examples of why they now use five five whereas in the past they might have done lots of either <unk> or considered patients for el badge of transplant.

Do think you pointed out is it's still growing and whats most.

Gratifying to see is that with the volume Youre also seeing the high survival rates high recoveries are being maintained.

Please.

The Impella five five is a full of added it has as good a flow or better flow than all the other VAG from the past because it's forward flow and it really does now add to the ability not just to get the patient often better than when the heart, but re route to routinely see now patients that have that kidney has come back.

The kidney is recover and what's also interesting is patients that don't get better that their cardiomyopathy is to advance we do see them listed for heart and kidney transplant and during the two to four week wait we see the kidney is also come back and how these patients are just getting a heart transplant and they don't require a kidney transplant.

There's more research and clinical data to come but it's clearly a breakthrough product and again for those that have covered the <unk> space, there's not anything in the world like the Impella five five a minimally invasive winnable forward flow heart pump.

And it's really it's a great tool for the heart surgeons, especially with the emergency patient population today that they don't know what to do that's one of the biggest admissions into the hospitals.

Got it and then just wanted to put another finer point on ECP.

I think you've got the pivotal study going.

The first is well I think collectively because you didn't include those first patients in the.

So you are up to 31 patients total so to make sure that that's right and then.

You're making some tweaks to the product there's no delay in the product is still expecting kind of.

Hmm.

Same timelines as you were expecting before I just want to make sure that that's clear thanks.

Yes, thanks for the question to clarify ACP, so the <unk> study.

Those down after 26 patients in March we got the ITE pivotal protocol approved so we're now collecting data on ECP using the pivotal protocol, while we're getting all the centers up for IRB and the vehicle.

Activity site contracting we are making some enhancements, but we're still collecting data and we did five cases in Q1 and that data is under the pivotal protocol. So we will absolutely be utilizing that remember it's a single arm study up to 217 patients and what we're trying to show is as safe.

For high risk PCI as the Impella, two five and CP that we have data from the protect II protect III.

Got it thank you.

Your next question comes from the line of Mike Polak with Wolfe Research. Please go ahead.

Hey, good morning. Thank you for taking the question I will follow up on that.

The enhancements Mike can you just maybe shed a little more light on what that means.

What enhancements are being made and how significant or not are they for the ECP product.

Well, we make constant enhancements, Mike and for competitive reasons and and all the things we're doing we don't disclose those but we've been making enhancements and improvements on their products since the very first patient.

Over a year ago, one of the benefits of being in an early feasibility studies that gives you that flexibility the other benefit of having a breakthrough designation is that you can make these enhancements as Hugo worked.

We're confident in the enhancements are lined out and but we're always going and we will continue to make enhancements as we go through this study and will continue to file more patents around everything we do.

If I can for my follow up ask on slide five and just kind of center activations in the U S 440.

Round numbers centers in the in the June quarter.

Of.

The data you've provided in the past on 5660 centers, but there's 1100.

<unk> suites in the U S I guess.

As you roll this forward over the next couple of years and continue to.

Commercialize 505.

Yes.

Well the kind of center network stop at the five O.

Level or do you think there's a good chance that you're in more centers eventually with $5. Five then than you were on fiber thanks for taking the questions.

Yes, Mike This is Todd I'll, just I'll answer that one in terms of the five oz sites. If you just went back and looked at the last several quarters, we really havent opened up many five oz sites every new site. We open up now is going to be with a 555 and so if you just went back and looked at the last three or four quarters, we've been averaging somewhere.

Between 45, and 50 site openings for for $5 five and I think that should continue I think in the next.

The next several quarters that that cadence. So I don't think youre going to see us opening many more sites with five Oh, it's just going to be more going forward in the 505 and again, we have 1100 hospitals with surgical suites in the U S. We have a long runway of growth ahead of us just with the 505.

Okay.

Okay.

Your next question comes from the line of Jayson Bedford with Raymond James. Please go ahead.

Okay.

Hi, good morning, just.

One for Todd and then a couple for Mike.

Todd.

On the contrast dynamic I appreciate the detail there, but just the missed patients and <unk> are these patients. Unfortunately lost or do you think these procedures spill into <unk>.

Okay.

It's a great question, Jason I think it's something where we're trying to to men measure ourselves I think unfortunately, there's probably a portion of those patients that might have been staged and not also be coming back into the cath lab, but we think a portion of them will come back at some point in time again similar to what we've seen over the course of the pandemic that these patients arent.

Quota essential.

I mean elective their essential and they need to be treated so we do expect some of these patients to come back into the system. Some time in let's say Q2, the timing of it all is tough to call but.

I'd say theres a portion of that we expect to see to come back into the system.

Okay. Thanks, and then Mike just on ECP, a couple follow ups.

From the five patients enrolled in the pivotal protocol in <unk> will they be included in the 217 patients.

While.

Yes rich.

Remember, it's up to 217 patients.

So all the data we collect is being compared to the numbers that we know and can match on protect II and protect III on both Impella, two five and CP and what we're comparing is 30 day mace, but we're also looking primarily at access closure and safety valve is information.

So that's what we're working on and we already have high risk PCI indication.

And we're looking to get the ECP through that process. So we can put the ECP into protect for as well as the <unk> study, which is our intent.

Okay.

When do you expect to enroll the first patient in the pivotal.

The pivotal protocol, but the pivotal.

Yeah. So the pivotal protocol is the difference will be that the center now has IRB approval and all of the site activity, but we are collecting the data that we will collect in the pivotal and so that's the benefit of doing this procedure and having the early feasibility. So we are collecting data now that we'll be using.

Okay.

Okay.

I'm still just trying to reconcile the difference between the pivotal protocol in the pivotal.

And maybe so the difference is the difference is we're utilizing the pivotal protocol approval at the existing centers that we're in the early feasibility study. We are collecting the data now that was in that will be independent all that we didn't collect and the early feasibility study as we transition and.

These sites up with the IRB approval and the site activity then that will that will just continue and while we're waiting on that we're making some enhancements in the product. We went out to 50 centers and the first 25 that can get through the process on the IRB will be in this study.

But everything we're doing now the data we're collecting will be utilized for the PMA because it is the pivotal protocol.

Gotcha, Okay. Thank you.

Your next question comes from the line of Cecilia furlong with Morgan Stanley . Please go ahead.

Alright, thanks for taking the questions. This is calvin on for secure just two really quick ones from me.

First just on.

Particularly on your <unk> side of the business and I'm, just curious how meaningful of a headwind has staffing pressures staffing shortage has been to PCI procedure volumes has the impact sort of intensified has it improved and just whats incorporated in your reiterated outlook around staffing impact.

So gavin the staffing issues is across the board in Med Tech it impacts our essential high risk PCI patients more than emergency the emergency patients our priority that's where they go and then what we've also done is tried to minimize the need to go to the ICU for high risk PCI versus <unk>.

<unk> stepped down and so similar to other people, but the one benefit that was apparent and as shown this quarter is emergency patients are the priority they get treated and that's what drove our double digit growth both in the surgical suite in the Cath lab.

Okay.

Thanks, and then the second one is on.

So I think yes final rule again it was a positive outcome for you guys I think rates continue to be stable to slightly slightly up following a pretty good proposed rule as well I think.

Specifically for DRG three I think it's associated with Palo was up 10%, which is a high growth number compared to historical periods and also other DRG. So just.

Any read through there is this a sustainable trend that we can perhaps see going forward. Thanks, so much.

Yes, I think we're in a great place right now.

For the appropriate reimbursement because the system.

Set up by the by CMS and the physician experts has allowed a system of treatment for the sickest patients to be treated with DRG, one so thats biventricular impella or a patient that needs oxygenation and human name spat support that DRG three that's ex pellet, that's around 10% to 14% of our patients every quarter.

And Thats growing and we have new software now that integrates and lets the impella know that ecmo onboard. So they can when we have patients that are just getting high risk PCI for and to support as you know three to four hours. That's DRG 216, and then of course, we have those that are in cardiogenic shock that are we're going to acquire three to four days in the <unk>.

ICU and Thats DRG 215, and last is that even the hub and spoke so our ability now as.

The largest distribution team and the most.

The group of the most experts out there that can be bedside or can get the hospitals can get phone support and again, we're tracking nearly all our patients in the cloud in the U S. So we have this incredible network that we're able to also support patients at one smaller hospital and then assistant transferring that patient to a large center with the Impella already.

In and Thats now.

The hospitals that received a patient with Impella can bill for DRG 268, and that gives them reimbursement to monitor and manage the patient in the ICU and X planted device. So we really appreciate.

And that the physician societies and the experts as well as CMS has really been very thoughtful about allowing heart recovery to occur but again.

<unk> is one of the most cost effective technologies that Medicare pays for and all of our FDA studies incorporate those 65 year old patients and above so it's taken us many years to get here, but we're appreciative because heart recovery can thrive now in the community.

Great. That's helpful. Thank you.

This concludes the question and answer session I will turn the call to Michael Minogue.

Well. Thank you everyone for your time today and if you have follow up questions. Please reach out and have a great day.

This concludes today's conference call you may now disconnect your lines.

Please wait the conference will begin shortly.

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