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Edited Transcript of ABMD earnings conference call or presentation 26-Oct-17 12:00pm GMT

Thomson Reuters StreetEvents

Q2 2018 Abiomed Inc Earnings Call

Danvers Oct 26, 2017 (Thomson StreetEvents) -- Edited Transcript of Abiomed Inc earnings conference call or presentation Thursday, October 26, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Michael R. Minogue

ABIOMED, Inc. - Chairman, President & CEO

* Robert L. Bowen

ABIOMED, Inc. - Consultant

* Steve McEvoy

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Conference Call Participants

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* Bruce M. Nudell

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Christopher Cook Cooley

Stephens Inc., Research Division - MD

* Christopher Thomas Pasquale

Guggenheim Securities, LLC, Research Division - Director and Senior Analyst

* Danielle Joy Antalffy

Leerink Partners LLC, Research Division - MD, Medical Supplies and Devices

* Jayson Tyler Bedford

Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst

* Malgorzata Maria Kaczor

William Blair & Company L.L.C., Research Division - Research Analyst

* Rajbir Singh Denhoy

Jefferies LLC, Research Division - MD, Equity Research and Senior Equity Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen and welcome to the Q2, 2018 Abiomed Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Mr. Steve McEvoy, Vice President and General Counsel. You may begin.

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Steve McEvoy, [2]

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Good morning and welcome to Abiomed's second quarter of fiscal 2018 earnings conference call. This is Steve McEvoy, Vice President and General Counsel for Abiomed and I'm here with Mike Minogue, Abiomed's Chairman, President and Chief Executive Officer and Bob Bowen, Former Chief Financial Officer and Consultant to Abiomed. The format for today's call will be as follows.

First Mike Minogue will discuss strategic highlights from the second fiscal quarter and then turn to our key operational and strategic objectives. Next, Bob Bowen will provide details on the financial results outlined in today's press release. We will then open the call for your questions.

Before we begin, I would like to remind everyone that this presentation includes forward-looking statements from the company's progress relating the clinical, regulatory and commercial matters as well as government regulation, litigation matters, capital and other expenditures and financial performance. Each forward-looking statements contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.

Additional information regarding these risks and uncertainties appears under the heading Forward-Looking Statements in the press release we issued this morning and our annual report on Form 10-K for the year ended March 31, 2017. The forward-looking statements in this presentation speak only as of the date of this presentation, and we undertake no obligation to update or revise any of these statements.

Thank you for joining us and I now pleased to introduce Abiomed's Chairman, President and Chief Executive Officer Mike Minogue.

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [3]

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Thanks, Steve. Good morning, everyone. In Q2, Abiomed increased quarterly revenue by 29% to $132.8 million and improved U.S. patient utilization by 33% year-over-year, setting a new overall patient record in our summer quarter. In the U.S., we set a new record for total patients, a new record for emergency patients with 34% growth and second-highest total for elective protected PCI with 32% growth. In Germany, revenue grew 64% year-over-year and we set a new record for the most patient supported in the quarter as well.

Our operational discipline and execution yielded gross margin of 84% and operating margin of 24%, while generating an additional $30 million in cash. Abiomed has the cash position of $390 million and maintains no debt while amassing 291 patents with another 258 pending. We also achieved new regulatory milestones of U.S. PMA approval for the Impella RP and the first Impella patient treated in Japan.

Of note, this quarter truly represents the dedication of our employees and customers as a selflessly [health] support patients during these challenging months of natural catastrophes and tragic events. I'm proud of the team's ability to consistently adapt and execute as we transform the standard of care and build the field of our recovery. This continued execution validates Abiomed as one of the fastest growing MedTech companies with increasing GAAP profitability.

For today's call, I will provide an update on the growing populations of high-risk patients that benefit from percutaneous circulatory support and treatment to enable native heart recovery.

I'd like to start with the recent high risk PCI patient story that highlights the clinical need for utilizing Impella to enable complete revascularization during PCI. Bill [Shrimple] is 66 years, has a long history of heart complications and suffered a heart attack in 2008. Up until 2016, Bill's most prominent symptom was troubled breathing with any activities, which left him without energy and unable to work. Multiple physicians told Bill there was no procedure that could release his shortness of breath.

In 2016, Bill was fortunate to referred to Dr. Tony DeMartini, an interventional cardiologists at Edward Hospital in Illinois, who explained the potential benefit of a protected PCI. With Impella support, Dr. DeMartini was able to perform a complete revascularization and placed multiple stents. After treatment, Bill now breaths more normally, has regained his quality of life with an improved ejection fraction. He now rides his bicycle with his wife, can work out on the elliptical and leads a more active life with his many grandchildren. This hospital has a protected PCI coordinator that educates the community on protected PCI and Bill has become a heart recovery advocate for other patients.

This is another example of a patient that was in and out of hospitals, turned down for open-heart surgery and believed he had no options to improve quality of life. We currently project that each year there are 121,000 U.S. patients suffering from heart failure due to advance coronary artery disease that can benefit from projected PCI. These high-risk patients, averaging 69 years old also cost CMS a tremendous amount of money and require extensive resources both in and out of the hospital on their journey to terminal heart failure. At Abiomed, we have consistently communicated that Impella adoption is a function of training, data and time and we continue to make investments in education to reach patients like Bill to share clinical updates at protectedpci.com.

Moving on to data, there were 31 recent publications referencing Impella. One important report was from an independent expert healthcare consulting company called The Advisory Board, recently acquired by United Healthcare under (inaudible). The paper titled Coordinating Care for complex coronary artery disease patients includes 2 sections. The first section describes the challenges of treating complex coronary artery disease patients, CAD, and identifies the growing proportion of PCI patients that are clinically complex and chronic. The second section validates that improved patient identification methods are needed to capture treatment for a higher volume of complex CAD paitents. The Advisory Board recommends a multi-disciplinary heart team approach to minimize care variation and improve quality outcomes. This report is aligned with our Abiomed mission of improving outcomes and we are assisting hospitals in establishing protocols and programs for protected PCI and Shock [kits].

Turning to cardiogenic shock indication, we believe there are over 100,000 AMI cardiogenic shock patients at U.S. hospitals each year. Recall the cardiogenic shock carries one of the hospital highest mortality risks, which has not improved in over 20 years. This high mortality cardiogenic shock population grew 53% from 2010 to 2014 to approximately 60,000 patients in this STEMI shock Medicare population alone. This does not include all other types of shock, non-STEMI patients or patients younger than 65 years old.

Another key clinical paper was published this quarter by Dr. Michael Flaherty of University of Louisville titled early initiation of Impella in AMI complicated by cardiogenic shock improved survival, published in JACC Cardiovascular Interventions. The conclusion of this meta-analysis found that early initiation of Impella in AMI cardiogenic shock decreased in hospital or 30-day mortality by 48% compared with late initiation. Abiomed is helping hospitals improve outcomes with the fine best practice treatment protocols derived from the largest clinical data base of real world evidence for high-risk PCI in cardiogenic shock patients. This library of clinical evidence includes everything from observational tracking of our Impella Quality [Assurance] Database called IQ and this is of our commercial patients through our ongoing FDA audited cVAD registry studies to past FDA studies and other publications representing over 60,000 patients over 20 years with over $100 million invested.

Abiomed now offers a platform for percutaneous heart pumps supporting both sides of the heart to enable heart recovery. As we move to full commercial availability of Impella RP, we are committed to improving survival and native heart recovery for right and biventricular heart failure. Additionally, our progress continues with our STEMI DTU FDA study, higher flow Impella CP enhancements and first in man studies for new innovative products like Impella 5.5 and Impella ECP plan for next calendar year.

Turning to Japan, today we also announced the first patient treated with Impella marking another significant milestone for our company. For Japan this fiscal year, we will maintain a very controlled and very conservative pace to end the year with 10 hospitals to ensure quality, compliance and rigor in our training and regulatory processes. There is already strong demand to receive government committee approval for Impella with 83 hospitals having initiated the application process, 38 hospitals having submitted the application and 15 hospitals approved today.

Turning to guidance, we are again increasing the low end of our fiscal year 2018 revenue forecast to $565 million to $575 million, an increase in revenue of 27% to 29% from the prior year. We are also increasing our fiscal year 2018 guidance for GAAP operating margins to be in the range of 23% to 25% from 22% to 24%. Before closing, I would like to mention that we're looking forward to our largest customer meeting at TCT where we will be holding an Investor event on Monday, October 30.

In summary, we are executing our plan for sustainable growth while improving patient outcomes for advanced coronary artery disease, the leading cause of death. We remain financially and operationally sound and we will continue to drive best in class growth metrics and margins. Abiomed is focused on today's execution with 8% total penetration of the current 221,000 U.S. patients and an additional 75,000 patients combined in Germany and Japan.

Additionally, we are also very confident in future potential growth opportunities of several hundred thousand patients with new indications, new products and new geographies. I'm proud of our employees and appreciate their dedication to recovering hearts and saving lives. We are also thankful to our customers and shareholders for their continued support.

I will now open the call to our former CFO and current Consultant, Bob Bowen. Welcome back, Bob.

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Robert L. Bowen, ABIOMED, Inc. - Consultant [4]

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Thank you, Mike. Good morning, everyone. Today, I would like to share details on the strong growth Abiomed achieved during the second quarter of fiscal year 2018. Fiscal second quarter revenue increased 29% to a $132.8 million. U.S. Impella revenue rose 27% to $113.6 million driven by 33% increase in patient utilization. Outside the U.S., Impella revenue totaled $13.8 million and was up 61% predominantly from our focus on Germany where revenues increased 64% versus last year. Additionally, worldwide service revenue of $5.4 million was up 20%.

In the U.S. as of the end of the fiscal second quarter, the Impella 2.5 has been placed at 1,171 of approximately 1,400 targeted hospitals sites, for penetration rate of 84%. Impella CP has been placed at 1,093 hospital sites for a penetration rate of 78% and Impella 5.0 has been placed at 484 sites for a penetration rate of 35%. We received PMA approval for the Impella RP in the U.S. in late September and as a result introduced Impella RP to 44 new sites during the second quarter. The Impella RP has now been placed at 186 sites for a penetration rate of 13%. In total, we opened 104 new sites this quarter as compared to 131 sites in the prior year or 27 fewer sites, which reduced initial stocking sales by approximately $2 million compared to last year.

Reorder performance was strong for Q2 with U.S. reorders up 31% to $107.2 million with the reorder rate of approximately 100%. Average combines Impella 2.5 and Impella CP inventory at hospital sites rose slightly to 3.7 units per site versus 3.6 in the prior quarter and 3.2 in the prior year. Our busier sites carry more inventory as each pump must have a backup pump. For example, sites that have 2 patients on support would be required to have 2 additional pumps on hand.

Gross margin for the quarter was 84% compared to 83% in the prior year. The increase in gross margin was due to fewer console shipments as well as product and geographic mix and was partially offset by the introduction of new catheter manufacturing lines, the hiring and training of new operators to support growing demand and the impact of a higher euro as much of our manufacturing is in Germany.

R&D expense for the second fiscal quarter totaled $19.4 million up 7% from the prior year. The bulk of this spending increase came from investments in new products and product enhancements that further capacity and efficiency as well as research costs from our STEMI DTU FDA feasibility study and cVAD Registry.

SG&A expense for the second fiscal quarter totaled $60.1 million, up 13% from the prior year. Our plans for the remainder of fiscal 2018 include continued investment in our industry-leading field team and we expect to maintain our hiring pace of up to 10 additional U.S. field employees for quarter during the balance of fiscal '18.

Operating income for the second fiscal quarter was $31.8 million or 24% of revenue compared to $14.5 million or 14% of revenue in the prior year. The increase in operating margin was primarily due to the revenue growth combined with operational discipline, which confirms the leverage in our business model. We will continue to invest in new products product enhancements and new markets while prioritizing revenue growth and maintaining our profitability objectives.

GAAP net income for the quarter was $24.5 million or $0.54 per diluted share, compared to GAAP net income of $8.9 million or $0.20 per diluted share for the prior year. Second quarter fiscal 2018 GAAP net income benefited from the adoption of the new accounting standard that was implemented at the beginning of fiscal 2018, which required that $4.5 million or $0.10 per share of excess tax benefits related to employee share-based compensation awards be recorded as a benefit to income tax expense. We expect excess tax benefits to have the largest impact in the first half of each year as this is when most restricted stock units [vest] and the benefit calculation is very sensitive to our stock price. We expect a more normalized effective tax rate during the second half.

The balance sheet remains debt free and we ended the quarter with $319 million in cash. Our top priority for use of cash is to support our organic growth with product innovation, distribution and manufacturing and to continue to build our substantial advantage in intellectual property. Additionally, Abiomed utilizes cash to reduce dilution from stock compensation maturity.

Abiomed looks forward to continued execution in the balance of our fiscal 2018. We have important task in front of us as we further penetrate protected PCI and cardiogenic shock markets, roll-out Impella in the Japanese market and launch Impella RP with the recent US PMA approval. Abiomed will continue its pursuit of industry-leading innovation, growth and execution.

On a personal note, I am very proud of the progress the entire Abiomed team has made in the last 2 years and it is very special to be back working with the team during this transitional period as we search for a new CFO.

Operator, would you please open up the line for questions.

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Questions and Answers

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Operator [1]

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Thank you. [Opeator Instructions). And our first question comes from Raj Denhoy from Jefferies. Your line is open.

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Rajbir Singh Denhoy, Jefferies LLC, Research Division - MD, Equity Research and Senior Equity Research Analyst [2]

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I could just maybe start just the basic question on the whether you saw any impact in the quarter from the hurricanes and the other events in the quarter, just to get out of the way?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [3]

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Raj, we certainly had many of our employees that had challenges in the different areas of the country and we also saw some of our physicians in hospitals struggle to adapt to the catastrophes. We likely had some effect, but because we have over a 1,000 hospitals and strong growth in Germany and growth of emergency patients, we were probably less effected than some of the other companies. On a manufacturing side, we manufacture here in Danvers, Massachusetts and Aachen, Germany and we have full redundancy.

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Rajbir Singh Denhoy, Jefferies LLC, Research Division - MD, Equity Research and Senior Equity Research Analyst [4]

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And maybe just for my follow-up. I'm curious, you gave the anecdotes story of the patient and you alluded to the benefit of having the high-risk PCI coordinator in that respective hospital and I'm curious is anything else you can give us in terms of how brought that program now is and how many of these high-risk PCI coordinators you have out in the field? Maybe you can tell us in terms of how the growth in those centers compares to places where you have yet the put one of those types of people in?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [5]

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Sure. So in the high level, we've talked about training, data and time for adoption, but as we implement this, you end up talking to hospitals about product, process and program. So the Impella is a product. We've identified ways to improve the process and by doing after actual reviews with that process, you can improve your program and you can grow your program. It's fortunate that our message resonates and reinforces the Advisory Board report, which is not a respected company report that most hospital CEOs and CFOs will read and what we found is that places where we have a program we have higher volume what we do have better outcomes as well.

From a specific protected PCI coordinator role, we've had approximately 50 hospitals send employees back here to our Abiomed heart recovery institute. Let's say about half of those have true job descriptions and roles and responsibilities around dedicating programs. What they do is they streamline the identification and treatment plans for high-risk PCI patients, that is some of the administrative burden and they work on outreach programs and in-reach programs within the hospital themselves. As you would expect where we have that our volumes are even stronger, our growth is stronger and we're able to track the outcomes and give reports back to hospitals on how they're doing relative to their own internal metrics.

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Rajbir Singh Denhoy, Jefferies LLC, Research Division - MD, Equity Research and Senior Equity Research Analyst [6]

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So that number of 50, where do you think that can go over time and it sounds like it's dependent upon the hospital sort of wanting one of these, but again, what is that number go over time in your mind?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [7]

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As we initially launched this our target is to get our top 100 sites that we can partner with. We want to see the increase in volume and the majority of the growth go to our established sites that have the expertise and have programs in place.

In many cases we will overlay our local commercials that take people back to protected PCI and talk to them about what and they can find their sites on the website. I do not expect all sites to be at the high-end of what we consider a protected PCI program. It's essentially [tabour-like], but for high-risk PCI. In the outline community we want those hospitals to be proficient with Impella as well, but we also want them to have Impella for the support of emergency patients. And if the patient requires more extensive support in the ICU, they have the option to transferring those patients to these hard recovery hospitals that we're going to build the bulk of the programs around initially.

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Operator [8]

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Thank you. Our next question comes from Matt O'Brien from Piper Jaffray. Your line is open.

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Unidentified Analyst, [9]

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Thanks, this is Kevin on for Matt today. Thanks for taking the questions. Wanted to start on Japan, still really early days there with the first case, but it would be great to hear more about physician interest on that product. The market specifically and I know you've been fairly conservative on the contribution there, is there any update on that or any update on the timing of the ramp?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [10]

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Kevin, get the overview as I gave some numbers in my prepared remarks, just sort of kind of go through that. The way it works is a hospital have to submit to the government and the physician maybe in order to get approval to qualify to get into the Impella program. And so far since we've received approval on reimbursement, 83 hospitals have already initiated the application process, 38 hospitals have submitted the application and 15 hospitals are already approved today.

For your question on the model, our model had $1 million slated for fiscal year '18, we're planning to get to $10 million by the end of the fiscal year, so our fiscal year ends in March. And the number one thing that ensure success in MedTech is good outcomes and that's especially true in Japan. So we want to make sure that we have a controlled launch, because we plan to use these sites as training centers and we also plan to continue to bring in other new products like CP and RP and in the future [5.5] and BTR. Japan is the second largest medical device market. There is tremendous demand and interest in percutaneous treatment as well as avoiding transplants and sternotomy. And we think that there is not only 50,000 patients per year, but we think we can be the standard of the care for the next 10 years plus. So we want to be cautious in how we enter the market and ramp up more significantly in the years 2 and 3.

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Unidentified Analyst, [11]

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And then lastly from me on the RP device, significant growth in the new centers clearly, just can you talk a bit more about the opportunity there for RP more broadly? And then secondly, how does that translate to utilization in the future, so does it take a couple of quarters, what are you generally see in terms of that trend?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [12]

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So, a couple things in RP. First is the total addressable market that we have projected is 10,000 patients per year. The indication is for people who develop acute right-side heart failure or right-sided failure following an LVAD or infarction or open heart surgery. It is a smaller population than on left side technology, but there is a huge need and in many cases the use can be considered life saving. We also have patients that are profound shock and have by ventricular failure, which makes it supports our left side business. We did 44 sites this quarter. Moving forward, will likely be shipping 30 to 40, but that will be dependent on the ramp from the prior quarter on the training. Many of the accounts were waiting for the PMA, so we felt that we needed to fulfill their orders in the last few weeks of the quarter and it's about 4% of revenue and we are going continue to train 30 to 50 physicians per quarter at our training center. But it's an important to remember that the focus of this launch is still going to be on training and rigor and with -- as with all our launches, our goal is to have sustainable growth, while optimizing patient outcomes. So we're very excited about this technology. We know it's a great product and there is nothing like it in the market.

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Operator [13]

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Thank you. Our next question comes from Chris Pasquale from Guggenheim. Your line is open.

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Christopher Thomas Pasquale, Guggenheim Securities, LLC, Research Division - Director and Senior Analyst [14]

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Mike, I just want to follow up on Japan a little bit. So thanks for the metrics there on the number of centers who have started the process. Can you just remind us how big you think that market could eventually be in terms of the number of sites, they really should be doing these procedures down the road?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [15]

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Chris, the initial phase approval is for -- up to 350 hospitals. We think there are 50,000 patients today that we would consider eligible candidates for Impella and that's on basically just a bulk of the high-risk -- extreme high-rick PCI, urgent and in cardiogenic shock. And the technology itself fits to the culture of interest in the way patients are treated. They really do not have a transplant or LVAD training program and they are culturally opposed to sternotomies. In the history of Japan, they are very focused on hemodynamic science and native heart recovery and we think it's just a natural fit.

So we're going to stay focused on the message of heart -- native heart recovery, educating people on pressure volume loops and the science of hemodynamics and we do think it's going to be a tremendous opportunity, not just for our current products for new products in the future that would be upside to the 50,000 patients I mentioned.

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Christopher Thomas Pasquale, Guggenheim Securities, LLC, Research Division - Director and Senior Analyst [16]

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How developed is the high- risk PCI market in Japan relative to the USA. The cultural aversion to sternotomy, I think is a great point, but they also haven't had some of the advanced technology for actually dealing with those patients effectively until very recently. So where are they on the spectrum relative to what we've seen in the U.S. in more aggressively revascularizing those high-risk patients?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [17]

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Japan would be ranked probably the highest relative to treating complex artery disease in the catalog, because of what you mentioned. They also do extensive work on CTO, chronic total occlusion and they have availability of cath labs, so they're able to do 2 to 4-hour procedures when required. So it is a natural fit and then do -- they will benefit from having hemodynamic support. In some cases, the way we -- when physicians look at this, in surgery there is something called on-pump or off- pump, the on-pumps are one machine, Impella brings that on-pump support in the cath lab and the safety net that they've been lacking. The way physicians make up for that is they get in and out very quickly where they reduce their contrast or they stage the patients so instead of having one procedure, they have 2 to 3 procedures in 120 days. So we're obviously very excited for Japan.

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Operator [18]

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

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Malgorzata Maria Kaczor, William Blair & Company L.L.C., Research Division - Research Analyst [19]

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First of all, I was curious if we could follow-up on Germany, you guys reported a phenomenal growth rate there this quarter. Is there anything that you're doing on the ground that's driving that or is it just ongoing adaption as you'd expect?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [20]

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Margaret, it's mostly ongoing adoption. So to remind everyone, 3, 4 years ago the Shock II study was completed and published and the New England Journal of Medicine. That study showed that the intra-aortic balloon pump had the same outcomes as just inotropic therapy in cardiogenic shock patients. That study also showed there is no beneficial hemodynamic effects of using an intra-aortic balloon pump and I think that, that drove the guidelines more towards Class III indication for cardiogenic shock, which means it's harmful to use a balloon pump in cases of AMI shock. Because of that and because of our increased distribution, we're continuing to see great adoption.

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Malgorzata Maria Kaczor, William Blair & Company L.L.C., Research Division - Research Analyst [21]

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Just as we start to look forward as well internationally, can you -- do you think you can still keep that growth rate up in Europe, which is just largely -- which is largely in Germany and could it potentially be also connected at all to the optical sensor limited launch that you had in the country?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [22]

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Well, we only give guidance 6 months out, but we do believe we're going to be one of the fastest growing MedTech companies for several years, because as we continue to penetrate the U.S., Germany and Japan, we've got years of upside with new indications and new products. But obviously, the rest of the world has a need for percutaneous hemodynamic pump that can enable complete revascularization. So we think we have lots of upside, and the key to that success is to be the standard of care to have sustainable growth and to continue to improve outcomes with mindset of product, process and program.

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Malgorzata Maria Kaczor, William Blair & Company L.L.C., Research Division - Research Analyst [23]

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And then just a follow-up, on the P&L, the operating margin line is obviously pretty good, from that do you think it's a little bit more of the timing of the SG&A spend as you look at that second quarter in dollars or you think this is the new level at which we should start to build our miles often?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [24]

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Margaret from an operating margin it did rise. One of the things we have guided people to is to use that 80% to 83% range for gross margins, we did update and increase our operating margin targets 23% to 25%. So we do think that the new normal. And to remind people on our 5-year vision, the plan was to get to or exceed 30% margin by halfway through our fiscal 2021. So we're on track for that as well.

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Operator [25]

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Our next question comes from Danielle Antalffy with Leerink Partners.

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Danielle Joy Antalffy, Leerink Partners LLC, Research Division - MD, Medical Supplies and Devices [26]

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Welcome back Bob, it's great to hear your voice again. So just a question on RP, wanted to think about -- now that you have the full PMA approval, how should we think about new site adds and utilization per site of those that you come on with RP? Do you think this is a situation where you accelerate these new patients as I know you're very focused on training, it's a more technical product, it sounds like to training is even more important with this product; but does it accelerate new site as and at the sites that you adopt RP, how much incremental utilization do we see there -- 1 more device per quarter, is it 5 more devices per quarter, just wondering?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [27]

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Dannielle, we expect to ship 30 to 40 per quarter and that will depend on the ramp from the prior quarter. It's important to remember that our forecast for the year included timing for approval and what we plan to have is a ramp. The same field team that supports the left side patients will support the right side. So we have to -- we're going to augment that with our national training team, but we have to make sure it doesn't become somewhat of a distraction on the left side in the other products. So we've got to balance both.

We think we've got the plan for that and the forecast where we already based that into the number. The last quarter it was 4% and we think it's going to be 4% and increasing over time and you'll get more visibility to each quarter on what we ship. Just as a side note for this quarter, we actually shipped 27 less new sites, primarily we did a lot more last summer around 2.5 and CP.

So we started with a bit of a deficit just in newer sites, but what you are going to start seeing is the sites in RP increasing as some of the other sites start to flatten out as we've got better penetration. But we do expect to see lots of new sites for RP, increasing sites for 5.0, preparing for the Impella 5.5. and of course we think all the sites will have all of these products, at least all the heart hospitals -- 1,000 hospitals who have all the Impella portfolio products.

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Danielle Joy Antalffy, Leerink Partners LLC, Research Division - MD, Medical Supplies and Devices [28]

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And then I wanted to see if you could give any color on what you're seeing. I know, still early days, but what sort of impact you're seeing from having the dedicated DRG codes. Are you seeing hospitals or existing sites more liable to form specific high risk PCI like you were mentioning in your example -- high risk PCI coordinators and things like that and implement protocols, because of the DRG codes or are we not really seeing that yet?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [29]

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I think the big [tip] for most of the hospitals is that these patients are there, they're growing to a greater proportion of their overall PCI population and you have 10 types of patient some are the elective high risk PCI, some are STEMI urgent patients, some are AMI cardiogenic shock or people that have myocarditis and programs are now being established because you not only can grow their volumes, but if you focus on it, you have a dedicated DRG and the better the outcomes the higher the margins. So I think hospitals are getting ahead of it.

In the case of our shock patients that have high mortality risk, they may only be 5% to 10% of the population in the hospital, but they can cost upwards of 30% to 35% of all their costs. So it's a very sick population and if you can get to early enough with best practices, you can not only keep him alive and send them home earlier, but you can send him home with their own heart and that becomes one of the most cost effective applications in all of MedTech.

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Operator [30]

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And our next question comes from Bruce Nudell from SunTrust Robinson Humphrey.

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Bruce M. Nudell, SunTrust Robinson Humphrey, Inc., Research Division - MD [31]

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After we initiated, we spoke to pretty informed clients and there is a subset of clients who are fearful that reimbursement incentives are causing kind of clinical risk drift downward in the high-risk PCI ex-cardiogenic shock. We looked explicitly through a couple years ago and there was no signal that the patients look really sick, they had very long lengths of stay. But could you talk about more recent data as to the clinical profile of the high-risk PCI patients, are they in fact as sick as they used to be and is there any like public data source to confirm that just to allay fears of uninformed piece of the client base that is concerns about that issue?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [32]

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Sure, Burce. Thanks for the question. We have commercial visibility to nearly 95% of our clinical patients and we track ejection fractions both in the IT database as well as the U.S. cVAD registry studies and we can confirm that the average ejection fraction in the 20% range, which is essentially probably too low.

Our approval and indication is not less a cut off number, but our studies were from ejection fraction of 35% and below. But there are certain cases where you may even use Impella because you have such a complex procedure or you have a patient that has prior renal failure or remember all these patients -- many of these patients are going to be surgical turned down. So there's no alternative to go to surgery. So from that perspective, we have transparency to the patients themselves and relative to your independent question of is this happening, are these patients sicker?

The report, I mentioned, from the Advisory Board, specifically calls out and shows that there is a increase of patients that have more comorbidities and have multi-vessel disease and they're still again -- they're still 69 years old on average, but they need to be treated with complete revascularization and in some cases 2 things can happen. One is they turn down, they never get to the cath lab and two, is if the get to cath lab they make it staged or a person may get in and out as best they can and when you do that you don't get the benefits of complete revascularization.

And to remind everyone in PROTECT I and PROTECT II, which were FDA studies that had independent audits, we saw an improvement in ejection fraction at 90 days for these patients. To our knowledge, we haven't been able to find and document angioplasty PCI studies that show a permanent improvement in ejection fraction. PCI does have benefits -- real clinical benefits in symptomatic relief -- relief of chest pain and more activity, but to see a permanent improvement is a unique clinical outcome, when you can do complete revascularization on the sickest patients that have the most advanced coronary artery disease.

So as the example of Bill showed, he now has a quality of life and again back to the FDA study PROTECT II, more than half of the Class III and Class IV patients were able to move out of that range and improve their quality of life. So the answer is yes. There are more patients that are sicker and yes they do benefit from complete revascularization.

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Bruce M. Nudell, SunTrust Robinson Humphrey, Inc., Research Division - MD [33]

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And my follow-up is the way we model the market is that we had temporary mechanical circulatory support in total growing around 7% and Impella has a percent of the total growing as well, but it wasn't solely cannibalization of balloon pumps. So its really growth of the market at around 7%. Could you just -- how do you guys think about the balance between numerical displacement of isolated balloon pumps versus overall market growth?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [34]

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Bruce that's a key metric we track. So think of high risk PCI like TAVR. We bring new patients to the cath lab to get complete revascularization or protected PCI. So those patients in the past weren't getting balloon pumps. And this is a whole new market, this is a whole new growth area and that's been reinforced in multiple surveys and that's also reinforced by the Advisory Board study. In the emergnecy type patients, the low hanging fruit is the AMI shock patients that used to get the intra-aortic balloon pump. But the intra-aortic balloon pump was still only used around 40% to 45% of shock patients in the hospital.

So as we get better indentification and treat a protocol that drives the native heart recovery as the ultimate goal, we're looking to have not only what the balloon pump had in shock patients, but better now that people understand the effects of unloading and getting complete revascularization in the case of emergency patients. So from a perspective of simplifying our message over the years with Wall Street, we've just said here's the intra-aortic balloon pump population that used to be 140,000 patients here in the U.S. now, it's probably down to 60,000 to 80,000 in the U.S. We want to penetrate and we want complete adoption of that, but there is new patients that are upsides of the plan that are out there that need hemodynamic support and that's part of our training, data and time education initiatives.

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Bruce M. Nudell, SunTrust Robinson Humphrey, Inc., Research Division - MD [35]

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Thanks so much.

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Operator [36]

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

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Jayson Tyler Bedford, Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst [37]

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Good morning and thanks for taking the question. Bob, nice to have you back. Just a couple of quick ones here. You saw a nice bump in emerging revenue growth in the quarter. I'm wondering if you're seeing any impact from the Detroit CSI initiative there? Have these data generated interest from other geographies? And is there any way to quantify the interest if possible?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [38]

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Jayson there is a lot of excitement around the Detroit CSI to remind everyone thats independent of Abiomed. This was a 5-hospital system in Detroit that wanted to test the best practices that we have identified in our IQ database as well as the cVAD registry. And what they did is put the protocols in place that match the best outcomes, prospectively and what they were able to do is following a specific protocol. They were able to achieve again best in class outcomes not just survival but nearly a 100% at native heart recovery. And those best practices were identifying the patient, the hemodynamic of the patient minimizing the use of [uninterpreted] therapy, utilizing the Impella before the PCI to stabilize the patient, and then obviously there was a level of experience at this center.

Now that this has been explored and presented by this independent group, they have changed and formed a new entity called the National CSI Initiative and it is spreading to cities across the country, gaining a lot of momentum. I think you'll see some presentations by these physicians and physician groups at TCT. And in the case of Abiomed, we are prepared to help any hospital implement a program to match this protocol and we're requesting all of our cVAD Registry sites to formally adopt this CSI protocol so we can continue to collect real world ongoing data under FDA audits to match how we can improve outcomes for these patients.

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Jayson Tyler Bedford, Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst [39]

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Okay, that's helpful Mike. And then just quickly price in the quarter, ASP is pretty stable year-over-year?

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Robert L. Bowen, ABIOMED, Inc. - Consultant [40]

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Yes, ASP's are stable.

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Jayson Tyler Bedford, Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst [41]

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Thanks Bob.

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Operator [42]

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Thank you. Our next question comes from Chris Cooley from Stephens. Your line is open.

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Christopher Cook Cooley, Stephens Inc., Research Division - MD [43]

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Thank you. Good morning and appreciate you taking the questions. Good to have you back Bob. Just 2 quick ones from me at this point. At the outset Mike, just wanted to go back and revisit the RP at 186 sites now, is that 1,400 number really realistic. I guess what I'm thinking about is just when we look to the level of expertise in multiple facilities across the states those that actually had these types of programs. Just kind of curious if you really think that 1,400 number is the any game for RP just in terms of the potential sites. And I had just a quick follow-up, as it pertained to TCT was curious, I know you're going to be presenting on the panel while there, but data you are most excited about that we'll see next week? Thank you so much.

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [44]

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Chris your first question was on the number of sites. There is about 1,400 hospitals that have cath labs, but there is a 1,000 hospitals that have cath labs and surgery suites. Our primary target for the RP is that all 1,000 hospitals that have both heart -- that are heart hospitals that have both cath labs and surgical, will want and need the Impella RP. There is no other option, there's no other percutaneous way to pump blood for the right side of the heart. The right side of the heart is recoverable. However, if it fails its usually a terminal result for the patient.

Over time, the other remaining hospitals as they get sophisticated or they have physicians that work at both centers or they want the options to treat a profound shock patient, stabilize them and transfer to another facility, will start to see some of those sites add-on and that's what's happened with the left side technology. That's why we're over a 1,000 hospitals now at the left side technology. But our primary roll-out -- our primary focus right now is those heart hospitals that have both and there's about a 1,000 of those.

Relative to TCT, we are most excited to see the presence and the knowledge of Impella as well as how we can enable complete revascularization. There'll be talks and presentations on how you identify these protected PCI patients, how they're growing. You'll see talks on how we're improving overall outcomes not just for protected PCI, but with the CSI protocol. And I think this is a pretty amazing thing to have a product that not only is a technology game changer, but to be able incorporated and partner with hospitals and doing things like tracking the data during after actual reviews and having standardized protocols. Because we're talking about not just one last day in the ICU, we are talking about saving an other patients life and sending them home with their own hearts. So these are big clinical goals.

We will obviously talk about launching RP and more of the clinical data on that. And we will show a little bit on our new products the Impella 5.5 is an absolute breakthrough technology. We think it's going to further grow our business and expand our relationships with heart surgeons in heart failure. The Impella ECP is on track for May time-frame, that's a [9 French 4 liter] heart pump that will be ideal for protected PCI. And we have a lot of enhancements of higher flow and an optical sensor on the Impella CP. So lots of innovation, lots of clinical data and lots of talk about the TCT.

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Christopher Cook Cooley, Stephens Inc., Research Division - MD [45]

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Thank you.

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [46]

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Thanks Chris.

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Operator [47]

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

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Unidentified Analyst, [48]

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Good morning. This is is Jay [Chad] in for David. Thank you for taking the questions. Could you just talk to us about some of the early feedback you're getting on the optical sensor for CP in Germany and is there any update on the timeline for a launch in the US?

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [49]

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We do have early feedback. We've had the optical sensor in Europe now under a pilot phase for a little bit over a year. The feedback is very positive, which is why we're making plans to incorporate it across the platform. It will also be on the 5.5. The optical sensor gives us ability to know in real time where the pump lies and in the future it will enable us to do something we call Smart Assit, where the pump will have some knowledge of what's happening in the left ventricle and flows and help us really manage the patient and wean off the myocardium, maximizing the opportunity for native heart recovery.

We expect the optical sensor to be incorporated into our platform in the U.S. the following fiscal year. But we think with such an ease of use and a great benefit that it will also further help us have adoption and better outcomes and just as a specific example the setup time is also shortened with the optical sensor so on average we think the set of time in the future for Impella will be 90 seconds -- 90 seconds. And for those that have followed us from the beginning, our original setup on Impella started at 15 minutes, worked its way down with the new console got down to 2 to 3 minutes and will be looking at the 90 second setup time here with the optical sensor.

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Operator [50]

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

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Michael R. Minogue, ABIOMED, Inc. - Chairman, President & CEO [51]

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Thank you everyone for your time. We look forward to seeing those that are attending TCT and if you have any follow-up questions, please let us know. Have a great day.

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Operator [52]

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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.