ABIOMED, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2021 Abumad Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Todd Trapp, Vice President and CFO. Thank you. Please go ahead, sir.

Good morning, and welcome to Abbey Med's third quarter fiscal 21 earnings conference call. This is Todd Trapp, Vice President and Chief Financial Officer, and I'm here with Mike Minogue, Abbey Med's Chairman, President, and Chief Executive Officer. The format for today's call will be as follows. First, Mike will discuss third quarter business performance and operational highlights, and then I will review our financial results, which were outlined in today's press release. After that, we will open the call to your questions. Before we begin, I'd like to remind everyone that today's call includes forward-looking statements. The company cautions investors that any forward-looking statements involves risks and uncertainties and are not guaranteed in the future. Actual results may differ materially due to a variety of factors identified in our earnings press release and our most recent 10-K and 10-Q filed with the SEC. We do not undertake any obligation to update forward-looking statements. With that, let me turn the call over to Abbey Med's Chairman, President, and Chief Executive Officer, Mike Minogue.

Thanks, Todd, and good morning, everyone. At Abiy Ahmed, we continue to remain both focused and committed to our mission of recovering hearts and saving lives despite the challenging COVID environment. I want to thank our employees and our customers around the world and recognize their determination and efforts under these circumstances. Abiy Ahmed delivered a record quarter of $232 million in revenue of 5% year over year. We generated revenue growth in the U.S. and double-digit growth in Europe and Japan, despite the COVID resurgence. Operationally, we were disciplined and focused on executing our fiscal year tactical plan with multiple regulatory milestones and two first in human clinical studies. We achieved a 31% operating margin while investing at record levels of $33 million in research and development. our balance sheet strengthened to a robust $788 million in cash while maintaining zero debt. We also achieved a significant milestone this quarter as we surpassed over 1,000 Impella patents and currently have 851 patents pending. We believe Abimed has one of the strongest IP portfolios in the medical device industry. In summary, we executed our plans and had a solid quarter. For today's call, I'm going to provide three updates. First, I will outline our transition to the green phase in Q4 by leveraging our Abiomed 2.0 COVID playbook. Second, I will highlight the robust clinical data released in October. And finally, I will discuss our momentum with new products and regulatory approvals. So first, as a reminder to investors, we designated a three-phase red, yellow, green approach for fiscal year 21 to address the evolving COVID-19 environment. In the Q3 yellow phase, we were focused on the acceleration of Abimed 2.0 as we endured the pandemic. This enabled us to achieve our tactical plan and reduce the COVID impact on our commercial performance. These initiatives were accomplished without sacrificing our commitment to employee health or safety. We ramped up our onsite antigen and PCR testing in both Danvers, Massachusetts and Aachen, Germany for early virus detection and administered thousands of COVID tests. This proactive testing reduced employee anxiety and allowed us to get production back to full capacity to build essential life-saving heart pumps during a record quarter in our 40-year history as a company. Because we provide essential patient support and training to our hospitals, more than 25% of our U.S. field team has received the COVID-19 vaccine from their local customers. We look forward to that number growing as the vaccine becomes more available in the months ahead for headquarters employees. In Q3, we executed on the milestones we control and grew revenue across all geographies. As a whole, hospitals today are managing better than they have previously during the pandemic with more testing, better protocols, and vaccinated caregivers. This allows for better patient management and treatment of both COVID and non-COVID patients. However, the virus resurgence in mid-November impacted utilization, especially in the U.S., due to ICU capacity and patient anxiety about seeking in-hospital treatment. At this point, we believe our Abimed 2.0 COVID playbook will allow for a green phase transition in Q4, despite their early January ramp-up in COVID cases. This playbook allows for patient monitoring in the cloud and makes our people more productive and valuable for the hospital. Our Impella Connect online capability is now live at 686 hospitals in the US, and there are an additional 500 ready to connect once hospitals approve Wi-Fi access. Today, more than half of our US patients are monitored in the cloud with Impella Connect. This enables best-in-class 24 by 7 support on-site, on-call, and online. As part of our AbbeyMed 2.0 playbook, we monitor global and local trends at a state, city, and hospital level on Impella usage, new COVID cases, and ICU capacity. This enables our flexibility with our people and resources to adapt quickly to essential patients. We have been working with physician societies as well as hospitals to reinforce the importance and benefits of treating essential high-risk and cardiogenic shock patients. Also, we are investing in educating the public with both online and broadcast TV commercials to encourage patients to seek treatment for their heart disease. Turning to my second topic, new clinical data. In October at TCT Connect, we received and reviewed a robust set of clinical data showing improvement in outcomes. For high-risk Impella-supported PCI, data from PROTECT3 and RestoreEF demonstrated statistically improved outcomes including better safety and improved heart function post-treatment. The improvement in heart function with more complete revascularization is now objectively proven in high-risk PCI with Impella support. The PROTECT4 Physician Executive Committee has locked the study protocol, and we have already initiated site visits with first patient enrolled targeted for next quarter Q1. We are grateful to these physician experts for the last year of study design work and affirmation of protected PCI best practices. For cardiogenic shock, we continue to see improvements in survival validated using best practice protocols, such as placing the impella before the PCI and minimizing inotropes. These best practices have been generated over the last five years and were derived from multiple prospective physician studies and real-world evidence, including FDA studies. These 2020 updated cardiogenic shock best practices now include early identification of right heart failure with SmartAssist software and escalation to bipella support with Impella RP. Within the quarter, Impella RP revenue grew 21% versus prior year due to strength in patient utilization and expanded FDA emergency youth authorization for COVID complications, including pulmonary embolism. Recent studies in both Italy and Japan have also contributed to the validation of our cardiogenic shock protocols. As a countrywide initiative, Japan now has one of the highest survival rates for cardiogenic shock in the world, 77% survival and over 90% native heart recovery in survivors. To note, just four years ago, the culprit study from top European heart hospitals published in the New England Journal of Medicine reported a 50% survival for cardiogenic shock patients using all devices as salvage post-PCI. These higher survival rates contributed to Japan's sales performance up 38% in revenue year over year despite COVID. Moving to regulatory approvals and new products, our third and final topic, we made significant progress with two 510K clearances and two first-in-man studies completed within the quarter. We received 510 clearance for ECMO-breathe Oxy-1 system and treated our first eight patients with a mix of VV, VA, and ECPELA cases in the United States. The feedback has been positive, highlighting the ease of use, portability of the console, and early mobilization. We achieved two important milestones toward breaking the small bore barrier to reduce physician access and closure concerns. First, we completed the first five patients from our U.S. FDA early feasibility study for the Impella ECP, a true nine French pump ideal for high-risk protected PCI. This safety data was submitted to the FDA and approved as sufficient data to support the expansion of the Impella ECP trial to five more hospitals and 15 more patients. Second, we received 510 clearance for the Impella XR sheath with the Impella 2.5 heart pump. We treated eight patients with the XR sheath outside of the US in Q3 and have now transitioned the majority of our focus to the Impella CP for both 510 clearance and PMA supplements. The XR sheath has flexible nitinol braids that momentarily expand during Impella delivery, then recoil, reducing closure challenges and complications at the access site. These milestones are important steps to drive ease of use, expand our customer base, and continue to drive better patient outcomes. However, it is important to note that bleeding and vascular complications in PROTECT3, our FDA study, were less than 2% for both, showing the technical and clinical progress made over time with training, education, and innovation. Our surgical platform continues to deliver strong performance, driven by the Impella 5.5 with SmartAssist. Our Impella 5.5 is a minimally invasive forward flow, fully unloading heart pump designed for heart surgeons to implant directly with the chest open or through the axillary artery to avoid an invasive sternotomy. We created a dedicated surgical and heart failure team focused on heart recovery for acutely decompensating heart failure patients in shock. This week at the Surgical STS Conference, Dr. Ed Soltes from Cleveland Clinic presented data from a large study of 356 Impella 5.5 patients at 16 hospitals in the U.S. and Germany. The study found a 79% survival rate with the majority of surviving patients recovering their native heart. our U.S. surgical business grew 48% year over year, driven by strength in patient utilization. We have now treated more than 1,000 patients with the Impella 5.5 and demonstrated an improvement in patient outcomes compared to historical rates. While the Impella 5.5 has exceeded a runtime of more than 500 days in our engineering labs, the Impella VTR pump is designed for designed to run for more than one year and allow for home discharge with patient metrics in the cloud. The Impella BTR pump is now one year away from our anticipated first in human study. Both 5.5 and BTR have ideal designs because they are minimally invasive via the axillary artery and pump with the heart, providing optimal weaning capability and improved forward flow to the kidneys. I would like to end with a patient story from the summer. In August, Chavez Adams, a 29-year-old lawyer from North Carolina, tested positive for COVID-19 and quarantined for two weeks. In September, Chavez developed a fever and went to his local urgent clinical care where they found his heart was racing above normal and he passed out. Chavez was immediately admitted to Wake Med Health with an injection fraction less than 20% and went into cardiogenic shock. Dr. Nupani and his team determined Chavez was experiencing cardiogenic shock from myocarditis likely due to COVID-19. The Impella CP was implanted to allow his heart to rest. After three days of support, the Impella was weaned and explanted and care was covered by Blue Cross Blue Shield. Shab has returned home with his native heart and now has a normal heart function. Today he is back at work and enjoying an active lifestyle with his wife, Ashley. In conclusion, Abhimayit, with our dedicated customers, continues to improve patient outcomes, documented in global clinical studies, which are posted on our website, As we advance our product portfolio and best practices, as we enter the final quarter of fiscal year 21, we remain focused on achieving our tactical plan and transitioning to the green phase. Abiy Ahmed is a stronger company today than before the COVID pandemic and is uniquely focused on recovering hearts and saving lives for growing high-risk populations. We are excited to close Q4 as Abiy Ahmed 2.0 and enter fiscal year 22 with our best ever clinical outcomes from existing products, existing indications, and existing countries. Next fiscal year, Abiy Ahmed will expand into new products, new studies, new indications, and new countries. I am sincerely proud of our employees and grateful to our customers. who put patients first every day. We also appreciate the continued support of our investors and remain focused on growing shareholder value. I will now turn the call over to Todd.