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ABIOMED Inc. (ABMD) Q4 2019 Earnings Call Transcript

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ABIOMED Inc. (NASDAQ: ABMD)
Q4 2019 Earnings Call
May. 02, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2019 Abiomed Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Ingrid Goldberg, Director of Investor Relations. You may begin.

Ingrid Ward -- Head of IR

Good morning, and welcome to Abiomed's Fourth Quarter Fiscal 2019 Earnings Conference Call. This is Ingrid Goldberg, Director of Investor Relations for Abiomed. And I'm here with Mike Minogue, Abiomed's 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 Minogue will discuss fourth quarter business and operational highlights, and then Todd Trapp will review our financial results, which were outlined in today's press release. After that, we'll open the call to your questions.

Before we begin, I'd like to remind you that our presentation today includes forward-looking statements as it relates to the discussion of our outlook. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of the future. Actual results may differ materially from those expressed or implied in forward-looking statements due to a variety of factors. These factors are described under forward-looking statements 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 our call over to Abiomed's Chairman, President and Chief Executive Officer, Mike Minogue.

Mike Minogue -- Chairman, President and CEO

Thank you, Ingrid, and good morning, everyone. By now you've seen our press release, and I want to begin by recognizing that our performance in Q4 did not meet our expectations. I take full responsibility for our disappointing performance given a soft March. And I will discuss momentarily the changes and plan of action we have already initiated to correct the course.

In the quarter, we generated $207 million in revenue, up 19%. We had anticipated a tough comparison given the 40% growth in the prior year period, but our results were short of our goal of 25% growth or $218 million. Operating margins for Q4 were strong and expanded to 31.6%.

For the full fiscal year, revenue of $769 million increased 30% versus the fiscal year 2018. Additionally, operating margins increased to 29.2%. In fiscal '19, we remain one of the fastest-growing GAAP profitable medical device companies.

Abiomed has a long and proven track record of execution, posting over 20% in organic revenue growth for 18 consecutive quarters or 4.5 years while significantly expanding full year operating margins from 12.5% to 29.2%. During this time, we also invested nearly $1 billion in innovation, clinical research and distribution. We remain confident in our business and our short to long-term outlook. We're confirming that our investment thesis remains fully intact.

For today's call, I will cover 3 topics: first, I will discuss the Q4 lessons learned and the actions already taken for Q1; second, I will cover the impactful new publications on high-risk PCI and cardiogenic shock; last, I will discuss 2 recent regulatory approvals announced today on FDA approval for our STEMI DTU Pivotal Trial and Japanese PMDA approval of the Impella CP.

So first, on Q4. It is important to note that our business typically sees significant sequential performance in Q4. Unfortunately, this is -- did not occur because of the slower growth in March in patient utilization. We believe this occurred as a result of customer confusion stemming from the February 4 FDA letter to healthcare providers from the FDA coupled with our response to prioritize Impella RP and shock, which unintentionally distracted our focus away from Protected PCI execution. Unfortunately, this FDA letter to healthcare providers was misinterpreted by some media outlets and healthcare providers who inaccurately reported that Impella RP, or Impella, was being recalled or had overall safety issues that were being reviewed by the FDA. This was clearly not the case, which we clarified in our ACC press release, March 18.

We believe this noise negatively impacted our elective high-risk PCI patients in the cath Lab specifically in March. We also believe competitive companies likely capitalized on the confusion with our customers. Additionally, contracted survey companies called our customers to inform them of the FDA letter and questioned if they would reduce using Impella until final resolution. However, our internal shift in focus did likely yield improved clinical outcomes for Impella RP patients and resulted in a record quarterly revenue for Impella RP. There are other miscellaneous items that may have had an impact in the quarter, but generally, they fall into 2 categories: external noise or internal focus.

We have already made the following changes to address the March performance. The Impella RP post-approval study was presented and press released at the ACC meeting on March 18. The FDA now differentiates patients in the Recover Right protocol from salvage patients with right ventricular failure in shock for 48 hours or more. To be clear, the patient's in the postapproval study that met the FDA criteria for right heart failure had similar outcomes to the FDA RP Recover Right Study, which led to the exclusive FDA approval. With the postapproval study submitted to the FDA, we anticipate a final closing FDA letter to healthcare physicians to be issued to our customers by the end of our fiscal year Q1 that stresses the importance of early identification of right ventricular cardiogenic shock and reinforces our safe and effective approval for Impella RP.

Additionally, we have taken the following steps, which we believe will eliminate noise and highlight the clinical benefits of Impella for both interventional cardiologist and the heart failure community, which includes heart surgeons. We capitalized on the timing of our annual Abiomed Field Meeting with 3 days of training, with over 400 employees and on all the new publications for high-risk PCI and shock. This meeting was last week.

We also highlighted our last 2 press release -- press releases on both high-risk PCI and cardiogenic shock. We have created 2 new U.S. regions for our core business, increasing the number of territories and account managers allowing us to go deeper with interventional cardiologist. We added 4 new MDs to our medical office to expand our training and education programs in headquarters at our Heart Recovery Institute and regionally in the field, and we also expanded our distribution channel focused on the heart team, including heart surgeons, to maintain our momentum on Impella 5.0 and Impella RP and prepare for future Impella 5.5 launch. We believe these actions we have taken will help reduce the noise. However, it will likely require at least a quarter of execution to eliminate all confusion on the Impella platform.

For this reason, we are disclosing today that our U.S. April growth rate showed improvement over March, but it is not yet where we want it to be. We will rise up. We have more work to do to educate our customers on improving outcomes and recent publications. And we will leverage the final pending FDA confirmation letter.

Our business is based on the integrity of our products, the relationships we have with hospitals and physicians and our reputation. When there is confusion in the market about the safety of our products, it takes time and effort to get back on track.

Moving on to our second topic. As stated, we actively invest in real world clinical evidence to identify and validate best practices in our Impella quality assurance database of over 100,000 patients and prospective cVAD Study of over 5,000 patients. In April, clinical data was released on patients captured in our IQ database showing that the median survival rates have improved since our FDA shock approval to 67% from the prior survival of 51%. We believe this is based on statistical improvement in the use of Impella best practice protocols.

Recently, 2 new high-impact publications were published on cardiogenic shock and high-risk PCI that validate improved outcomes demonstrated in our prior IQ, cVAD and FDA studies. The Inova Heart and Vascular Institute in Virginia recently published on their best practice heart team shock protocol with early mechanical circulatory support in AMI cardiogenic shock in JACC, authored by Tehrani -- Dr. Tehrani. At Inova, survival at 30 days rose from 44% to 82% over 18 months.

Furthermore, for Protected PCI, a study published on April 9 in the Journal of Interventional Cardiology by Dr. Burzotta included 86 complex high-risk patients who received an Impella supported Protected PCI. The study found at 6 months after the Protected PCI, the number of patients with left ventricular ejection fraction greater than or equal to 35%, increased by 205% from 22% to 67% of the patients. This matches our PROTECT II FDA study that demonstrated, again, improvements in the ejection fraction with complete revascularization.

One recent patient story we would like to highlight is Dr. Babu Eladasari, a 67-year-old physician in Illinois. He experienced chest pain and became unconscious. While an ambulance rushed him to Edward Hospital, he received CPR and was shocked 3 times. Drs. Cahill and DeMartini immediately identified Dr. was in cardiogenic shock with an ejection fraction of 5%, very low, and placed the Impella CP device before inserting coronary stents. Following the hospital shock protocol and escalation, the Impella RP was then inserted to provide biventricular support. After 3 days of support, Dr. Eladasari was weaned up by Impella. And 2 weeks later he was just discharged home with a normal ejection fraction of 55% and with his native heart. Today, he is back at work, active and presented to our field team at our annual meeting last week. This is why heart recovery is so cost effective and recognized as an indication and as a dedicated DRG by CMS.

Last, I will discuss the 2 recent regulatory approvals announced today. Today, we are announcing that the STEMI DTU Pivotal Study was approved based on our first submission and requested protocol. The pivotal study will compare Impella unloading for 30 minutes prior to reperfusion to today's reperfusion only standard of care treatment called door-to-balloon time for STEMI heart attacks. Our primary endpoint is infarct size as a percent to LV mass at 3 to 5 days evaluated with cardiac MRI. And this will be utilized for FDA approval of an indication. We will also follow these patients out to 2 years with clinical endpoints around heart failure, quality of life and cost effectiveness. We believe this study will take up to 4 years, includes 668 randomized patients at up to 60 sites. It will cost approximately $25 million to complete enrollment, and that includes the 2-year follow-up. We believe a successful study will transform the treatment of heart attacks and reduce heart failure for hundreds of thousands of patients per year.

As a result, it is important to execute this study with the highest scientific rigor to ensure a successful study will conclude with a class 1 recommendation to reach an additional 200,000 U.S. heart attack patients and over 4 million patients outside the U.S.

I am honored to announce the STEMI DTU Steering Committee includes the following esteemed experts in the field: Dr. Navin Kapur, Dr. Bill O'Neill, Dr. Gregg Stone, Dr. Jeff Moses and Dr. James Udelson. Additional details can be found in our press release issued this morning.

Turning to Japan. I am also pleased to announce today that we received approval by PMDA for the Impella CP. We're excited to have this higher flow pump help patients survive and recover their hearts in Japan.

In conclusion, we have never had a time with more positive studies of improving patient outcomes for high-risk PCI and cardiogenic shock. We believe our path to becoming the standard of care is based on innovation, improving outcomes and appropriate use. Based on the improving outcomes and innovation, I have never been more confident that we are creating the new field of heart recovery with the Impella heart pump platform.

I want to thank our shareholders for their investment in Abiomed and interest in our innovation. I also want to thank our dedicated customers and employees for helping Impella becoming the standard of care in helping patients return home alive with their own hearts.

Now I will turn the call over to Todd to review the financials.

Todd Trapp -- VP and CFO

Thanks, Mike, and good morning, everyone.

As Mike mentioned at the beginning of the call, we delivered revenue of $207 million in the quarter, an increase of 20% on a constant currency basis versus the tough comparison of 40% growth last year. By region, U.S. revenue grew 16% to $177 million driven by a 14% increase in patient utilization. U.S. patient utilization was impacted by a soft March primarily in high-risk PCI. Outside the U.S., revenue totaled $30 million, up 45% on a constant currency basis, which was driven by strength in Europe and our controlled rollout in Japan. In the U.S, at the end of our fiscal Q4, the Impella 2.5 and CP have been placed at 1,234 and 1,362 sites, respectively. The Impella 5.0 has been placed at 594 sites, while the RP is at 446 sites in total.

Reorder performance in the quarter was also strong with the rate slightly above 100%, consistent with Q3. Average combined inventory at the hospitals for the Impella 2.5 and CP was 4.3 units per site, again, consistent with the inventory levels we saw in Q3.

Outside the U.S, we are seeing continued growth in Impella adoption. In Q4, our European revenue increased 30% in local currency due to higher patient utilization in Germany and greater adoption in other countries like Switzerland, Italy and France. Our performance in Japan continues to be in line with our high expectations. We opened up 12 new sites in the quarter, ending the year with 59 sites and delivered $5.4 million of revenue in the quarter.

Moving forward, gross margins for Q4 was 83.2%, up 50 basis points compared to 82.7% in the prior year. The increase was driven by higher volume, which more than offset manufacturing investments and sales mix. In the fourth quarter, R&D expense totaled $26 million, an increase of 20% from the prior year as we continue to invest in new product development for the Impella 5.5, the expandable sheet and Impella ECP. We are also investing in clinical data collection study using our cVAD Study. This ongoing prospective FDA audited study helps us validate best practices in both high-risk PCI and cardiogenic shock. These R&D investments will help drive future growth for the company.

SG&A expense for the fourth quarter totaled $81 million, up 8% versus prior year. The increase was due to an expansion of our commercial team and support of our Japanese launch.

In the quarter, operating income grew 37% to $65 million, translating to an operating margin of 31.6%, a new record for the company. Margins expanded 430 basis points due to higher volume, our continued operating discipline and a onetime settlement which occurred in the prior year. The margin performance confirms the leverage and sustainability of our business model. GAAP net income for the quarter was $74 million or $1.60 per diluted share versus $0.80 in Q4 '18. Net income increased 100% driven by strong operating performance in our mark-to-market investment in Shockwave and a lower effective tax rate. Shockwave impacted our reported EPS by $0.51 this quarter.

Our balance sheet remains very strong. In Q4, we generated $72 million of operating cash flow and approximately $250 million for the year. As a result, we ended fiscal year 2019 with $513 million in cash.

Now turning to our full year performance. In fiscal year 2019, we delivered revenue of $769 million, an increase of $175 million or 30% versus prior year. We saw broad-based growth both in the U.S. and outside the U.S. due to continued adoption of the Impella platform. For the year, operating income was $225 million, up 43% compared to the prior year. We expanded operating margins 270 basis points to 29.2% while continuing to make the necessary investments to support our future growth. Net income for the year was $259 million or $5.61 per diluted share versus $2.45 in the prior year. The 100-plus percent increase was again driven by strong operating performance, our equity investment in Shockwave and a favorable tax rate. Finally, we increased our cash position by over $110 million during the quarter and remain debt-free, all while investing in our infrastructure and manufacturing capacity.

Lastly, turning to our fiscal year 2020 outlook. As noted in the earnings release, we expect revenue for the upcoming year to be in the range of $900 million to $945 million, which translates to 17% to 23% growth for the year. The revenue guidance is based on continued penetration of the existing expanded markets for Protected PCI and cardiogenic shock in both the U.S. and in Europe and approximately $30 million in revenue from Japan. We will provide another update to our guidance on our next earnings call.

I would also like to remind investors of the seasonality of our fiscal year as we typically do when issuing full year guidance. In Q1, our field team was brought into our headquarters for extensive annual training and also tends to take their vacations after a busy Q4. Q2 is a seasonally slow quarter for cardiovascular devices due to the summertime slowdown in the cath lab and physician vacations. In Q3, we typically see significant sequential lift based on increased hospital activity and physician engagement. In Q4, our March quarter, we typically have our best results as we end our fiscal year. Therefore, we would expect second half revenues to represent approximately 54% of our total year.

Turning to operating margin. We expect our fiscal year 2020 margin to be in the range of 29% to 31%, showing the benefits of our business model. Our platform of Impella products gives us the ability to make efficient investments in technology while delivering improvements in operating leverage. The investments in new product platforms including Impella 5.5, Impella ECP and Impella BTR; new product enhancements like CP optical, SmartAssist and Impella Connect; new geographies; and new clinical studies including STEMI DTU, DanGer Shock and NCSI will continue to lay the groundwork for improving clinical outcomes and sustaining long-term performance.

For modeling purposes, I would assume a normalized tax rate consistent with fiscal year 2019 at approximately 28%, excluding any impact from excess tax benefits.

So in summary, 2019 was another solid year for Abiomed as we delivered 30% top line growth and operating margin north of 29%. Throughout the fourth quarter and into early April, I was able to spend time with physicians and the field teams in the U.S, Europe and Japan. It was really incredible to experience firsthand the interest from physicians on the science of unloading and the benefits of native heart recovery with Impella. We look forward to another year of solid growth, accompanied by strong operating margin and cash flow generation.

Operator, please now open the line for questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from Danielle Antalffy from SVB Leerink. Your line is open.

Danielle Antalffy -- SVB Leerink -- Analyst

Hey, good afternoon, guys. Thanks so much for taking the question. Mike, I know you gave a lot of airtime to explaining what happened in March, but I guess, if I could, it actually looks like RP had a relatively decent uptick sequentially. And our text weren't really indicating that there was going to be any impact on the left side, so -- to the left side business because you have a relatively concentrated user base. So I guess my question is if you could just dig a little deeper on was this an execution issue on your guys part? And were these like low volume users? Any color you can give on where the impact really was would be helpful.

Mike Minogue -- Chairman, President and CEO

So Danielle, your checks are partially correct because we did not see as significant of an impact on RP. Now the patients were not up with a very strong patient month in January, and the patients recovered for RP in February and March. But the focus drove us to have a record quarter on Impella RP revenue, as I mentioned. For 5.0 in the surgical side, we also set a record, but we did see a drop in our shock indications around cardiomyopathy, something along the area -- more of the heart failure patients, so we put focus on that. But what happens to your point is a little bit of an internal focus is that took our eye off the ball of -- for Protected PCI. And if there is confusion on safety, and to remind those folks that hasn't seen the FDA letter, we understand why it was done. It was our data that we have been providing to the FDA on the importance of protocols. However, the FDA letter to the physicians, which was a press release and tweeted out, ended after saying why they thought that -- it could still be used with risk-benefit, and then that exclusive FDA approval is still ended with "It's important to note that the Impella RP postapproval study and FDA's evaluation into this issue are ongoing. We do not know the root cause for the high mortality, and the results are not adjusted for potential co-founders."

So it's still out there a little bit, and that confusion, if there is anything with safety, would impact patients that they might use the device selectively. So that is why Protected PCI is the one where they might hold off. We do think what you look at for the -- for March, which is a frustrating thing because March set a record of the most patients we've ever done in company history, but it wasn't the increase we expected, and it was because the growth on Protected PCI really slowed. And because that hit in March, we made changes and we disclosed today that we have seen improvement in Protected PCI in April. We have seen an improvement overall in April. It's not where we wanted to get to yet, and then so that's why we're being prudent. You see that the forecast is 6% lower than what we had anticipated for Q4, so 19% versus 25%. And you'll see that next year's guidance is 17% to 23%, about 6% lower from the midpoint of what we probably would've done. And that's why we'll give a formal update and forecast at the end of Q1.

Danielle Antalffy -- SVB Leerink -- Analyst

Okay. That's helpful. And thank you very much by the way for providing the commentary on April growth. That's helpful. Just curious on whether you can give, even if it's anecdotal, something around what gives you confidence that things are improving, and this isn't sort of a break in the story for whatever reason here. Whether it's just talking to physicians and where you think you are in the process of reeducating physicians here. Is it a center by center situation where you have to go in and reeducate these guys? And, I don't know, any color you can give on where you are in the process and what gives you confidence beyond the fact that April has started to improve.

Mike Minogue -- Chairman, President and CEO

Danielle, the thing that gives me the most confidence is our products are continuing to improve outcomes. Our products are continuing to increase ejection fractions with high-risk PCI. Our products are continuing to increase survival with native heart recovery for shock patients. This is not 1 less day in the ICU. So everything we've been focused on as a company to improve outcomes only gets better, and we've had 2 press releases that have highlighted new information for showing that it validates 5 to 10 plus prior studies, which includes FDA studies as well as our cVAD registry to continue to reinforce that.

The second thing is I have been in the field extensively. I attended in February, Medical Meeting CRT in DC. I attended ACC in Florida. I attended ISHLT, that was in Florida. ACC was in New Orleans. I have been on the road in 5 states. And what I hear is that there's great interest. They are seeing the improvement in outcomes. They are putting protocols in place and duplicating what's happening at NCSI and what's happening in Inova, but there was always questions about concern on the FDA letter. Was it RP only? Is it the whole Impella platform? Should they be concerned about something else? And so that was a bit concerning, but I also know that what they're -- what they're continuing to use -- and again, we see the lift in April. But we really want to leverage and utilize the final letter that will come from the FDA, which we expect to see this Q1.

Danielle Antalffy -- SVB Leerink -- Analyst

Thank you.

Operator

And our next question comes from Bruce Nudell from SunTrust. Your line is open.

Bruce Nudell -- SunTrust -- Analyst

Mike, I have 2 brief questions. One is clearly evidence development in elective high-risk PCI is a key commercial imperative for the company. Is there a better way where you thought about a way to kind of package everything and just make that convincing statement to doctors?

And my second question pertains to the proposed rule. Do you suspect that when the dust settles that reimbursement will be around cost? And that the ultimate reimbursement level won't be a hindrance to adoption with adoption really being driven by perceived clinical imperatives?

Mike Minogue -- Chairman, President and CEO

So Bruce, let me make sure I answer the question. You have 2 questions. So one is on elective, the other is on reimbursement. So on the elective population, we have an FDA randomized controlled trial that shows that complete revascularization with Impella increases the ejection fraction and the quality of life for the patient at 90 days post study. That is one of the few and, to our knowledge, only angioplasty PCI study that shows a permanent improvement in heart function for patients. When you have open heart surgery and you have CABG, they utilize a vein so they do get complete revascularization, so you do see an improvement in the ejection fraction, which is why that has been the gold standard. However, at a certain point, the patients either turn down for surgery because of the risk factor or they don't want to have a sternotomy process. So everything we have from PROTECT I, PROTECT II, this new paper from Burzotta as well as all the information that's in the cVAD consistently show and match the history of PCI that the best outcomes from -- come from complete revascularization.

We do see it as signal and we do see in our studies that unloading with Impella reduces acute kidney injury. And therefore, what we end up with is a better outcome for our patient. And if you target which patient is that most appropriate, we think that that's a 70-year-old and above, which is what -- was the average age for the patients in PROTECT II. And we continue to compare the data from PROTECT II to our data in cVAD to show that patients are doing more complete revascularization and leaving less ischemia. So that's very positive. I don't think that the level of evidence has an area where we -- you don't see a benefit of doing complete revascularization as well as the fact that the Impella is safe and effective for these patients.

Your second question was on reimbursement. So the reimbursement would not have an effect on high-risk PCI because what we have now is a system of payment for Impella under DRG 215. So the hospital charges end up determining the reimbursement. So if you have higher hospital charges, you get higher reimbursement. What we've done now over that last 2 years, as the system catches up with the database, is you have a little bit of more patients that are high-risk PCI, which tend to have a little bit of a lower hospital charge than the patients that have cardiogenic shock. In the cases of cardiogenic shock, if they do lose money and there's -- there will be outlier payments for those hospitals, and it almost hedges itself, so if it goes too low, the following year, when they go back and measure cycling 18 to 24 months back, you'll see that reimbursement go higher.

However, what's a little bit of a confusion, I think, out there is that Impella now has a complete system of reimbursement. The system is set up so that you have Impella for 215 for either elective or shock when it's one pump, either left or right. You have DRG 1 when you have biventricular Impella, which is in the case of Dr. Eladasari, he's a biventricular patient. He is now home with his own heart. He didn't have more surgeries. He didn't get an LVAD. He doesn't have to go through a transplant, and he's back at work. So that -- he's had savings of probably up to $1 million over 12 months with the best quality of life he could've hoped for with an ejection fraction at normal 55%.

They also have the ability for patients to be treated in one outlying center and now transferred to the heart recovery specialty center. So that's a different DRG, that's 268. So the system is in place. The systems have been placed to improve outcomes and lower cost. And again, Abiomed has a lot of clinical data around cost effectiveness to demonstrate that in the case of shock, keeping someone alive and recovering the heart is probably the most cost-effective application in all of CMS. If it's not the most cost-effective, it has to be one of the top percentage of those patients.

Bruce Nudell -- SunTrust -- Analyst

Thanks so much.

Mike Minogue -- Chairman, President and CEO

Thanks Bruce.

Operator

And our next question comes from Chris Pasquale from Guggenheim. Your line is open.

Chris Pasquale -- Guggenheim -- Analyst

A couple of quick ones on the quarter here, and I just wanted to clarify something on STEMI. For the quarter, Mike, you talked about Protected PCI volume being particularly impacted. But based on the revenue breakdown in the release, it doesn't really look like the growth rates were that different. So could you just provide some more clarity there?

Mike Minogue -- Chairman, President and CEO

Sure. So STEMI is the study. We don't actually -- we don't treat STEMI patients. And it wasn't necessarily for the quarter. In the month of March, our expectation at the -- in March, the last month of the fiscal year, is we always see a ramp. What happened this March is we saw the growth slow significantly only on Protected PCI. There was other impacts and things that we've already mentioned, but Protected PCI in the month of March had slow growth. That being said, and the frustrating part is March still was our top patient month in the history of Impella, but that was driven more by the shock patients. And the drop in growth in the Protected PCI was kind of a hole in the bucket that took the March number down.

Chris Pasquale -- Guggenheim -- Analyst

Okay. We can follow up off line on that. The changes that you talked about sound like they deal mostly with reconfiguring the sales force. So if this is really just a short-term communication and customer education issue, then why is that the right response? The prior distribution system seemed to be working quite well for you guys until very recently.

Mike Minogue -- Chairman, President and CEO

Well, we didn't reconfigure, Chris, we added and enhanced and expanded. So we've added 2 new regions so that we can have more focus and go deeper into those accounts. And with the new region leaders, you give them more territory manner, so that's adding more of what we've been doing. And we will stay laser focused on both high-risk PCI and cardiogenic shock. We did add more MDs to do more training and education around these best practices and protocols because they do improve outcomes for patients. That's been documented several times. And we have expanded our distribution channel that calls on heart surgeons and the heart team because we have some momentum on 5.0, RP. And we are preparing for the future 5.5 launch.

And to your question is we have seen an impact in April. As we've mentioned, April results and specifically around Protected PCI have shown improvement, but we still have to remain focused on eliminating any of the confusion out there. Another thing we will leverage, and a big component of transitioning, is to get the final resolution letter from the FDA, which we do expect to get in Q1.

Chris Pasquale -- Guggenheim -- Analyst

And then just lastly, on STEMI. The 3 to 4 year time line, is that just to complete enrollment? Or does that include the 2 year follow-up? And if it is just for enrollment, why so long?

Mike Minogue -- Chairman, President and CEO

So on the STEMI study, it's a 3 to 4 year study. And with that information, we will submit for a FDA approval for the indication if the successful -- if the study is successful. Obviously, we have to achieve our primary endpoint. We also think that the gold standard of a study, and if we want to have a class 1 recommendation that can be applied and change and transform the standard of care worldwide, we'll want to follow these patients out to 2 years around things around heart failure, quality of life and cost-effectiveness. And if we do that, that will give us more leverage to drive a change globally. There's over 4 million STEMI heart attacks outside the United States, and the standard of care that we're trying to augment, not eliminate, is door-to-balloon time, which in the cardiovascular space, is the most adhered to protocol in measurement and metric applied in every cardiac hospital around the world.

Operator

Thank you.And we'll take our next question from Raj Denhoy from Jefferies. Your line is open.

Raj Denhoy -- Jefferies -- Analyst

Hi, thanks. Good morning. I also want to say welcome back, Ingrid. Good to have you back. So Mike, maybe I could just start on the RP issue again. It's a little incongruous that RP was up sequentially in the quarter and yet you saw this fall off in PCI on the left side. I'm curious if maybe you could just offer a little bit more in terms of why RP would grow but PCI would fall given that the letter was on RP that kind of precipitated all of this?

Mike Minogue -- Chairman, President and CEO

So Raj, there's 2 things. So first is there's a seesaw effect that we've had for years, which is, if we have too much focus on high-risk PCI, sometimes it affects shock. If we have too much focus on shock, sometimes it affects high-risk PCI. So as I mentioned in my prepared remarks, there are other things that fell into the quarter but it all happened, and the biggest hit was in the month of March. So by putting focus on RP and shock, we ended up being -- doing the seesaw effect away a little bit from Protected PCI as we close the year.

There are other things that were going on in the quarter. There was some cath lab slowdown. If you look at the numbers by Boston Scientific or Edwards in their cath labs, so it appears as the cath lab's were a little slower. In the past, that didn't have the same effect on us because it gave us more cath lab interest in time to do high-risk PCI patients. But again, in March itself, we did see the impact. And now if you are a physician and you do have any concern, you're less likely to use Impella on a elective case than you would on an emergent case. In the FDA physician -- letter to the physician professionals, it does mention that they should continue to use the Impella based on the risk-benefit. But an elective patient doesn't have the same level of risk, and so I do think it's -- as I mentioned, it's both internal and external. Internally, we were more focused on shock. We did see the improvement in overall RP revenue. We did not see the lift in patients that in February and in March compared to what we saw in January, so we had stronger patient growth in January for RP. But we did see the focus return a higher revenue number. We also saw a little bit of lift on 5.0, but we saw a little bit of a drop on our cardiomyopathy type of shock patients. So it's -- again, it's back to the seesaw effect. It really comes down to our focus in execution. And for that, we've got to do better.

Raj Denhoy -- Jefferies -- Analyst

Okay. That's fair. Maybe just a couple of other ones too. So Japan, you noted the increase in sites there. The revenue there was -- that $5.4 million, I think, was flat on last quarter. And so I'm curious if there's anything behind that. It was stocking last quarter, anything that might have driven it to be -- buy down what it was last quarter?

Mike Minogue -- Chairman, President and CEO

I think it's -- we got a little ahead of ourselves in Q3 and Q4, so we just want to continue to maintain the focus so we get good outcomes. We're excited to have the CP approved. It's a more powerful pump. We will launch it in a controlled manner because it is more powerful, and it has a bit of a larger femoral access hole. But we're also working forward to get Impella Connect as fast as we can into Japan, which we should have this year, so we'll be able to remotely monitor real-time these patients.

What we're also going to -- what's going to happen in the U.S. is we already have Impella Connect at pilot hospitals. We'll continue to add that with SmartAssist, which is the software on the console that gives us the ability to see how the patient is doing, look at pressures in the left ventricle, look at cardiac output and cardiac power. This gives the Impella the opportunity to really wean a patient and look at contractility of the native heart, something that has never been a potential or capability of any VAD in the history of VAD. So being able to wean someone's heart back will give them the maximum opportunity to not only stay alive but also go home with their own heart.

Raj Denhoy -- Jefferies -- Analyst

Great. Great. And then just one for Todd on just the guidance. So the 17% to 23%, just -- you gave some commentary, I appreciate, on the cadence of that over the course of the year. But in terms of growth rates given the way the comps were last year and given this issue that hit you guys last quarter, should we really think about the -- maybe first quarter or the first part of the year being closer or below that 17% range? And then maybe ramping to above it by the end of the year?

Todd Trapp -- VP and CFO

Yes. Raj, I think it's a great question. And if you remember last year, the way the profile played out over fiscal year '19, our growth rates were 36%, 37% in the first half and then 30% and then 20% in Q4. So I think the way, from a modeling standpoint, probably toward the low end of that range in the first and second quarter. And then ramping up in Q3 and Q4.

Raj Denhoy -- Jefferies -- Analyst

Okay. Great. Thank you.

Operator

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

Margaret Kaczor -- William Blair -- Analyst

Hi. Good morning folks. Thanks for taking the question. So first up, I just wanted to tag a little bit more on the guidance question. You mentioned it will take at least one more quarter before hitting normalization. So should we expect both Q1 and Q2 to see a little bit of this impact? And as you guys look at kind of the low end of the guidance, does that assume improvement later in the year? Average is what the high end assumes.

Todd Trapp -- VP and CFO

Yes. So Margaret, I would say that's the truth. Right now, we would say the first half of this year, we would say just some of the noise that we saw coming exiting out of March would continue at least into Q1, maybe a little bit in Q2. And then in the second half of the year, we have -- some of the things that we're working on right now is we're going to be launching Impella Connect in the May time frame. That should obviously take some hold in the second half of the year as well as the launch of 5.5 toward the end of -- in Q4 and toward the end of the year. And so I think that's the reason why we think from a linearity standpoint, Q1, Q2 probably closer to the low end of the range and then ramping up in the second half of the year.

Margaret Kaczor -- William Blair -- Analyst

And then for folks that you were able to speak with in the quarter, you guys referenced seeing a little bit of that confusion. For those that you did reach out to, were you able to see those volumes normalize in April? Or is this account still requiring a little bit more time and need that FDA closing letter? And I think again, Danielle may have asked at the beginning, but how many of those customer were you able to reach out to at this point?

Mike Minogue -- Chairman, President and CEO

Margaret, the issue is that we didn't know the folks that had concern until it was too late in March. So it's not the -- it is not the majority of people, and that's what we've been working on and focusing on since February. That was the focus we put out in getting the word out on RP and both in cardiogenic shock. And again if patients who get RP are also in cardiogenic shock, there is subset either of right side failure or they're biventricular. So that population is what we're driving and we're communicating on.

The -- what happened though is in March itself, the Protected PCI business slowed to a very low level, the growth-wise. And once we figured out that the sites that conveyed their concern, the month of March was over. And that's why we put actions in place, analyzed it, and we're tracking it daily and weekly. And that's why we're disclosing today that April Protected PCI is up. It's not exactly where we want it yet but it is up from March and that the peers are making progress. We've already made a bunch of the other changes in place, and we feel confident that the technology, the innovation and the improving outcomes are -- there are the most important things if you want to continue to drive growth to be the standard of care. And we didn't hear from anyone, and you haven't seen any papers or publications that that's not happening. And into contrary is the papers continue to reinforce the ability to get better outcomes for patients if you followed protocol or you use hemodynamic support to get complete revascularization. And that's what gives us the most confidence.

And obviously, we have a very good relationship with the FDA. We are the only one's tracking these patients, so that's the irony of this situation. We track our commercial patients. We track our -- we have an ongoing postapproval study in the cVAD, and we're going to continue to track that because we believe the product itself with the process helps improve outcomes for patients, and so we just have to continue to get good outcomes at hospitals. We did not hear people tell us that they saw bad outcomes or they were concerned. They just were worried that, based on that letter, based on the surveys that they may have been called on, they were worried there was something else that was going on. And we're trying to reiterate to them that we are seeing an improvement in outcomes. The innovation continues to improve. And again, we'll -- we definitely will leverage the final letter from the FDA stating that the device is safe and effective and encouraging all customers to look for early identification of right side failure.

Margaret Kaczor -- William Blair -- Analyst

Good. And then just one more for me. In terms of the sales and support team structured today is it looks like -- is this something that you guys are concerned making a change on that in the future? And maybe if you could review for us how you do customer training and clinical support? Finally, and how the scene might look differently maybe in a year or 2?

Mike Minogue -- Chairman, President and CEO

So Margaret, we're not changing. We're expanding and enforcing and reinforcing. So adding more MDs, we're doing more courses back here at headquarters, we're doing more meetings out in the field. We continue to have the mobile learning lab traveling around the country. We're sponsoring more sessions before and after meetings. And what the big concern is when you look at where we are now is it's access closure, and those are things we can train, we can educate and that we can work on, along with our technology in the future. But those are things we're continuing to drive because we want as many patients to get Impella that can get it, whether it's it put in through the femoral artery or put in with the use of Shockwave for the femoral artery or whether they do it percutaneous to the axial artery or surgically through the axial artery. So that's a lot of the training we're doing. But adding the new physicians and the new indications is really to just do more of what we've been doing and make it more effective.

Operator

Thank you. Our next question comes from David Lewis from Morgan Stanley. Your line is open.

David Louis -- Morgan Stanley. -- Analyst

Thank you. Just a couple of questions. Mike, I just want to come back to 2020 guidance and sort of give a sense for investors on how risk-adjusted the number is. So I'm just sort of curious how should investors think about RP trends for 2020? And then specifically as it relates to high-risk PCI and emergent, does the guidance assume you get back to, let's say, third quarter-like trends for emergent and PCI. And if so, sort of when do you think that occurs? Or is it sort of more significantly risk-adjusted, assuming you don't get back to those levels for a variety of different reasons?

Mike Minogue -- Chairman, President and CEO

So David, thanks for the question. In Q4, we had anticipated a tough comp. So we had 40% growth the prior year, so we had driven for a 25% growth number. And we missed it by 6%, so we did 19%. The reason we missed it is because in March, we had very slow growth in high-risk PCI. Now if we look forward into next year, what we've done is we've adjusted what would have been our normal approval of 24 to 28 range. And we've moved it down at the midpoint 6% to 20%, which is then 17% to 23%. So we're being transparent about what we've done. We've moved things down 6%. We are seeing an improvement in April. We will give another, either reaffirm this guidance or a new guidance at the end of Q1, and we're doing everything we outlined to improve the training, the perception. And also we're working with the FDA to hopefully get the progress and get the letter out closing the RP position letter. So those are the things we're working on. And that is, I would say, the risk adjustment per your question. It is taking what happened in Q4 and just moving it into Q1.

David Louis -- Morgan Stanley. -- Analyst

Okay. Very helpful. And then just thinking about profitability for 2020, maybe Todd. Besides the incremental R&D expense that you had -- you specified, what are the sort of the other factors for 2020? Is it simply just higher R&D and slightly slower sales growth? Or are there incremental cost tied to some of these reinvestments or market stabilization issues that Mike talked about here in the first or second quarter?

And as you think about profitability now for 2020, how should we now think about the trend line on sort of go-forward basis? After 2020, do we get back to that regular steady cadence of margin expansion? Or do you see these reinvestments you're talking about from an R&D perspective extend to beyond 2020?

Todd Trapp -- VP and CFO

Yes. Good question, David. And I'll start off by saying we do expect to expand margins this year. Okay? But from an investment standpoint, let me just walk you through a few of them this -- in fiscal year '20. As Mike mentioned, we are looking to add more heads to the organization this year, somewhere in the 250 range, especially in the sales and marketing area. And we're expanding the surgical distribution team. We're adding 2 new regions, as Mike mentioned, which really allows us to go deeper at the sites with the interventional cardiologists, and we also brought in 4 new MDs to assist in the educational efforts. We also have a significant carryover from headcount additions that we made last year, so we -- our headcount increased 220 heads last year. We're rolling out CP optical with SmartAssist, and that's a company with higher material cost and really cost to upgrade the hardware and software on our AICs.

With that said, we'll see a little bit of pressure on our gross margin, but we're able to leverage OpEx to drive margin expansion in this year. We are also making a little bit more SG&A investments in Japan as we scale up the business. And we have more clinical cost around STEMI DTU, DanGer and cVAD. So I'd say it's a little bit of a heavier investment for this year, but we do expect to see margin expansion. And again, at the midpoint of a range, we'll be at 30% operating margin business on a GAAP-reporting basis.

Operator

Thank you. And our next question comes from Matthew O'Brien from Piper Jaffray. Your line is open.

Matthew O'Brien -- Piper Jaffray. -- Analyst

Good morning. Thanks for taking the questions and Welcome back, Ingrid, as well. I guess the one thing that people are kind of scratching their heads at a little bit this morning is this commentary that you may provide new guidance at the end of Q1. Is that -- would that be on all metrics? Or just the top line metrics? And it could go up, it could go down. I mean, how do we think about that?

Mike Minogue -- Chairman, President and CEO

So Matt, we think it's prudent to be transparent and candid. We did not have the March in high-risk PCI that we expected to have. So we're letting people know what we've adjusted. It's a 6% adjustment off of what we thought would happen in Q4 for next year. We are disclosing today, which we don't normally do, April, so you get a feel of we are seeing some progress.

And at the end of Q1, we will either reaffirm that number or we'll adjust it but we want people to understand the logic of why we moved our fiscal year guidance down likely 6% from -- because of the miss we had in Q4 of 6% on what we had anticipated between 25% growth and 19% growth.

Matthew O'Brien -- Piper Jaffray. -- Analyst

Okay. Fair enough, Mike. And then just 2 more for me, and I'll them both together. There's been a lot of focus on Protected PCI and how that came up short, but you've been talking about how shock did well. Can you just give us some sense for what happened with shock specifically in the quarter? And the comfort level and outlook for that business?

And then second question is, again, I think the shock here is the guidance for the year being 20%, and you've been doing 30% plus for several years. No, you can't do that forever, but is this kind of the new norm we should think about for Abiomed on the top line going forward?

Mike Minogue -- Chairman, President and CEO

So to be clear, the numbers are not where we wanted them across the board, which also includes shock. We did have a specific issue in March around Protected PCI. I don't think the new normal is what happened in March, and I think what's happening in April is we're seeing some progress over that. But we also know that we've got more information. We've got better technology that is exclusive FDA approvals. The population is growing. There is a lot of energy around shock overall. And there's still a lot of balloon pumps and inotropes used on patients that never even get Impella.

So we have to stay focused on both shock but also high-risk PCI. High-risk PCI requires us to get referrals in from the communities similar to TAVR. And for that, we just need to continue to ensure our customers have a lot of belief in the quality and safety of our products, and we have to continue to help them improve outcomes. So that's the focus. It's patient at a time. But we also work it down through the regulatory, through the formal studies and ensuring that we're listening to our customers and provide them the support they need to get good outcomes.

Matthew O'Brien -- Piper Jaffray. -- Analyst

Very helpful, thank you.

Operator

Thank you.And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Mike Minogue for any closing remarks.

Mike Minogue -- Chairman, President and CEO

Thanks. So I want to thank all the investors on the call for your interest. We will be working hard to move forward. And if there are any other specific questions, we're happy to take them one-on-one, and we'll be around today and next week to clarify any questions or components of the call. Thanks for your time. Have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.

Duration: 59 minutes

Call participants:

Ingrid Ward -- Head of IR

Mike Minogue -- Chairman, President and CEO

Todd Trapp -- VP and CFO

Danielle Antalffy -- SVB Leerink -- Analyst

Bruce Nudell -- SunTrust -- Analyst

Chris Pasquale -- Guggenheim -- Analyst

Raj Denhoy -- Jefferies -- Analyst

Margaret Kaczor -- William Blair -- Analyst

David Louis -- Morgan Stanley. -- Analyst

Matthew O'Brien -- Piper Jaffray. -- Analyst

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