Abiomed, Inc.
Q4 2017 Earnings Call Transcript

Published: 4 May 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Q4 2017 Abiomed 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. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ingrid Goldberg, Director of Investor Relations. You may begin.

[Ingrid Goldberg:]

Thank you. Good morning and welcome to Abiomed's fourth quarter fiscal 2017 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 Mike Tomsicek, Vice President and Chief Financial Officer. The format for today's call will be as follows. First, Mike Minogue will discuss strategic highlights from the fourth fiscal quarter and then turn to our key operational and strategic objectives. Next, Mike Tomsicek 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 about the company's progress relating to clinical, regulatory and commercial matters, as well as government regulations, litigation matters, capital and other expenditures, and financial performance. Each forward-looking statement 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 in 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, 2016. 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. I am now pleased to introduce Abiomed's Chairman, President and Chief Executive Officer, Mike Minogue.

[Michael R. Minogue:]

Thank you, Ingrid. Good morning, everyone. In Q4, Abiomed had another strong quarter of continued adoption of the Impella family of devices with $124.7 million in revenue, representing growth of 33%. U.S. patient utilization increased by 30%, driven by continued growth in both Protected PCI and emergent patients, which grew 26% and 37%, respectively. For the full fiscal year 2017, Abiomed generated $445.3 million in revenue, representing a net increase of $116 million or growth of 35%. Abiomed remains one of the fastest-growing GAAP profitable medical device companies and fiscal 2017 was another successful year, as we achieved our corporate goals. We received FDA PMA approval for cardiogenic shock, Impella CP approval for high-risk PCI, IDE approval for our STEMI Door to Unloading study, and approval in Japan. We achieved CMS approval for dedicated DRGs and expanded our clinical evidence to over 400 publications. We ramped up our distribution in the U.S. and Germany and increased manufacturing and training capacity in both Aachen, Germany and Danvers, Massachusetts to meet future demand. We also launched the Abiomed Impella Quality Program that helps improve real-world clinical outcomes with best practice protocols and education, while surpassing 50,000 patients treated in the U.S. Abiomed continues to have a solid balance sheet with a cash position of $277 million and no debt, enhancing our ability to invest in and defend our intellectual property with 274 patents and currently 241 pending. I am proud of our dedicated employees and grateful to our customers and shareholders that have enabled our company to create a new era of medicine, focused on the field of heart recovery. Fiscal 2018 is positioned to be an outstanding year. For today's call, I would like to cover two FY 2018 topics

[Michael John Tomsicek:]

Thanks, Mike, and good morning, everyone. Today, I'd like to share details on the strong growth we achieved in both revenues and margins during the final quarter of our fiscal 2017, make some observations on the past year as a whole and then turn attention to guidance for fiscal 2018. Fiscal fourth quarter revenue increased 33% to $124.7 million. U.S. Impella revenue rose 32% to $108.2 million, driven by a 30% increase in patient utilization. Outside the U.S., Impella revenue totaled $10.7 million and was up 58%, predominantly from our focus on Germany, where revenues increased 63% versus last year. Additionally, worldwide service revenue of $5.2 million was up 18%. In the United States, as of the end of the fiscal year, the Impella 2.5 has been placed at 1,138 of approximately 1,400 targeted hospital sites for a penetration rate of 81%. Impella CP has been placed at 1,016 hospital sites for a penetration rate of 73% of total hospitals. Impella 5.0 has been placed at 453 sites for a penetration rate of 32% of total hospitals. And Impella RP has been placed at 127 sites for a penetration rate of 9% of total hospitals. Reorder performance was strong for Q4, with U.S. reorders at $103.3 million and growing 34% versus prior year and the reorder rate was approximately 100%. Average combined Impella 2.5 and Impella CP inventory at hospital sites rose slightly to 3.4 units per site versus 3.3 in the prior quarter and versus 2.9 units per site in the prior year. This slight increase was driven by heavier use of Impella in existing sites, necessitating more pumps on hand to maintain service levels. Gross margin for the quarter was 84.6% compared to 84.4% in the same period of the prior year. Gross margins reflect stable pricing and demonstrate our ability to add manufacturing capacity without losing efficiency. R&D expense for the fourth fiscal quarter totaled $16.3 million and was approximately 13.1% of revenue. The bulk of the spending comes from investments in new products, product enhancements, and new manufacturing processes that further capacity and efficiency. SG&A expense for the fourth fiscal quarter totaled $60.1 million, up 32.8% from the prior year. Our plans for 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 per quarter during fiscal year 2018. The addition of clinical and commercially-focused staff allows us to go deep in existing accounts and support the use of Impella in our hub-and-spoke model. Operating income for the fourth fiscal quarter was $29 million or 23.3% of revenue compared to $19.8 million or 21.1% of revenue in the prior year. GAAP net income for the quarter was $14.9 million or $0.33 per diluted share, up from GAAP net income of $11 million or $0.24 per diluted share for the prior year period. During Q4 fiscal 2017, we reserved nearly $3.1 million in R&D tax credits or $0.07 per diluted share, as our ability to utilize these tax benefits in future years is uncertain. The company has approximately $34 million in net deferred tax assets, primarily due to NOLs, but these net operating losses from share-based compensation are not included. Staying on the NOL topic, beginning next quarter, we will adopt the accounting standards update entitled Improvements to Employee Share-Based Payment Accounting. Under this new standard, excess tax benefits and deficiencies associated with employee share-based compensation will no longer be recognized as additional paid in capital on the balance sheet, but instead will be recorded directly to the income tax expense or benefit for the reporting period in which they occur. The adoption of the new accounting standard is likely to introduce positive fluctuations to net income, changes to our tax provision and positive impacts on earnings per share this year, especially in Q1. But this standard does not impact Abiomed's operating income or cash tax paid. The balance sheet remains debt-free and we ended the quarter with cash and marketable securities growing $18.1 million to a balance of $277.1 million during the quarter, where we purchased the Aachen facility for around €11 million plus additional closing costs. Our top priority for use of cash is to support our organic growth and to continue to build our substantial advantage in intellectual property. I'll close my review of results with a few observations on a record-setting fiscal 2017. Total year sales were $445 million, an increase of $116 million on the top-line and growth of 35% versus prior year. Operating margins improved versus the prior year ending at over 20% with substantial investment in staff and capacity. Finally, we remain debt-free and grew cash $64 million to $277 million during the year, while ramping manufacturing capacity and doubling our Danvers' footprint, all impressive results. Turning to guidance. As noted in our earnings release, we expect our fiscal year 2018 revenue to be in the range of $555 million to $575 million delivering 25% to 29% growth on the year. This guidance is based on the following assumptions

[Operator:]

Thank you. Our first question comes from the line of Raj Denhoy from Jefferies. Your line is open.

[Raj Denhoy:]

Hi. Good morning.

[Michael R. Minogue:]

Good morning, Raj.

[Michael John Tomsicek:]

Good morning.

[Raj Denhoy:]

Wonder if I could maybe start a little bit on the guidance, 25% to 29% is certainly a strong growth. But I think there had perhaps been an expectation given what you've been doing recently that maybe something in the 30% range would be possible. And so, I guess, I'm curious how you would have us think about that initial guidance for 2018. Is that a conservative outlook? Maybe just some more input there would be helpful.

[Michael R. Minogue:]

Sure, Raj. So, guidance is guidance and what's possible is what's possible. This is my 52nd earnings call and the 14th time I have forecasted revenue for the year. And we've exceeded expectations in six of the last seven years. So, just to give you an analogy of how I look at it, we're running a marathon right now at a pace and we believe that that pace will allow us to end as a top finisher. And in any given quarter, as we discussed, we can run faster and grow by a few more million because we have so many new products and indications and potential sites. So we continue to be one of the fastest-growing GAAP profitable companies in med-tech, but we're going to maintain our focus on patient outcomes and sustainable growth. And in the end, we'll maintain a pace and maintain our blueprint to ensure our success to $1 billion in U.S. revenue and beyond. So, I mean, that's kind of the way we look at guidance and we're very focused again on making sure that we're growing as the universally adopted standard-of-care in the U.S., in Germany and soon to be in Japan.

[Raj Denhoy:]

Okay. Great. That's fair. And maybe just on that last point, Japan. I think, again, maybe perhaps expectations are always a little different than what you guys are thinking. But the guidance for $1 million out of Japan – $1 million of revenue out of Japan, maybe you could just give us again an update on the timing there? And it does seem to be taking a little bit longer for that to start, so just some help there would be good.

[Michael R. Minogue:]

Sure. Japan is the second largest med-tech market in the world. They really do not do a lot of sternotomies and avoid transplants. So heart muscle recovery is the primary focus and goal for these patients and they have a significant clinical need to do high-risk patients in both the cath lab and EP lab. Therefore, having hemodynamic support will enable a lot more treatment, enable complete revascularization and help many heart attack patients that are going into shock. That being said, Japan is a country where we want to ensure that as we start with 10 centers, we establish the protocols upfront, have the rigor in the training, so that as we expand to other sites in future years we can maintain the pace of sustainable growth with great outcomes and then continue to expand our other products and our other indications into the entire Japanese market. And to remind everyone is we do have the CP. We have the RP which we'll be submitting at some point in the future. And then we also have the world's smallest heart pumps for chronic patients that we're working on that we'll also be bringing longer-term into the future. So we're very focused on launching in Japan the right way, making sure that both PMDA and MHLW are pleased with the way we launch and the way we train the Japanese customers. And we want to again ensure we get the best outcomes we can for Japan. The net effect is that in years two and three that's where we start to see the ramp and the Japanese ramp will look very similar to what we've been doing here in the U.S. for Impella RP.

[Raj Denhoy:]

Great. Thank you very much.

[Michael R. Minogue:]

Thanks, Raj.

[Operator:]

Thank you. And our next question comes from the line of Danielle Antalffy from Leerink Partners. Your line is open.

[Danielle J. Antalffy:]

Yeah. Hi. Good morning, guys. Thanks so much for taking the question. Mike, I was wondering if you could talk a little bit about what you're seeing. So obviously we saw the Detroit Cardiogenic Shock Initiative. You're hearing more about protocols – centers implementing protocols that involve a mechanical circulatory support or even call out Impella specifically. Of the centers that you have protocols, can you talk about growth trends of Impella in those centers and maybe even at a high-level growth trends of like high-risk PCI and what to expect from a growth perspective as more centers adopt these protocols?

[Michael R. Minogue:]

Sure, Danielle. So I think a couple things on the question is we think that the best way to grow Impella is to improve outcomes for patients and that can be for enabling high-risk PCI patients to receive complete revascularization and protection from problems with acute kidney injury or keeping somebody alive after a heart attack that goes into shock and sending them home with their native heart. The strategy comes back to what we've been talking about called the hub-and-spoke execution. And what that means is that we want specialized centers that we would consider heart recovery centers – we would like them to be the leaders in Protected PCI. We would like them to be the hub of the spoke hospitals that are treating patients, but may want to send patients for further support to their facility. And we want all the centers that take patients that are having acute myocardial infarction and potentially who can go into shock have the ability to have Impella support. So in Europe now, you see that the balloon pump is Class III for AMI cardiogenic shock, which means it's harmful. And we've recently seen a trend in a state that in order for a hospital to be considered a trauma center to take AMI shock patients or AMI patients that they need to have some type of strategy for percutaneous hemodynamic support. And as this progresses, our job, as a company, is to support the hospitals and to help them improve their outcomes. And what the Impella IQ Program gives us now is the ability to partner with them to look at best practices and to align the hub-and-spoke, so that the patient can be pre-treated appropriately at the right hospital. And what's exciting is that the American Hospital Association and CMS has now helped us establish basically a systematic payment structure that's based on resources to support patients. So that's why the DRG establishment for the cath lab or the ICU support or biventricular or even transfer from one hospital to the other is very important to our overall strategy. So it's a long answer to your question, but the net effect is that all the sites that are implementing programs are growing. And, again, the specialized hospitals tend to do more of the Protected PCI. But by establishing a network, we can improve outcomes in communities for essentially all of these types of populations.

[Danielle J. Antalffy:]

Okay. That's very helpful. And then my follow-up question is just as you think about your existing centers and sort of going deep in those centers getting those centers to do more volume. How do you go about doing that? Is it about training more of the staff at the existing centers? What drives increasing growth at the existing centers and some of the higher volume centers?

[Michael R. Minogue:]

I think the key to success again in growing that is our formula that we've talked about for a while, which is training, data and time. And on the data, the ultimate in data is really having FDA approvals as safe and effective and then having dedicated DRGs for the treatment of these patients is very helpful. So that's standardized. On the training, we continue to train each quarter. We had 16 publications in the quarter. Now we're over 400. We touched almost 1,000 physicians in the quarter for educational programs to symposiums. And on ease-of-use, we continue to make changes and updates to our console and products to ensure that the nurses to the physicians find the implantation and management of an Impella patient easier every time they have an experience.

[Danielle J. Antalffy:]

All right. Thanks so much, guys.

[Michael R. Minogue:]

Thanks, Danielle.

[Operator:]

Thank you. And our next question comes from the line of Chris Pasquale from Guggenheim. Your line is open.

[Chris Pasquale:]

Thanks. Mike, what did you learn so far about the thought process CMS went through in coming up with the proposed payment rate for DRG 215? And how are you guys planning to approach the comment period, as you try to influence where the final rate comes in?

[Michael R. Minogue:]

Chris, thanks for the question. There is two things that we want to highlight. So the first is that we're very pleased that the structure has been established for the multiple types of patients that we have. It's complex in many ways for investors to understand the DRG system, but it's even more complex for Abiomed, because, as you all know, we have multiple types of patients. We have young kids with viruses. We have post-partum cardiomyopathy at times. We have AMI cardiogenic shock for 50-year-old dads. We've got 69-year-olds that have high-risk PCI that are turned down for surgery. And we have patients that have to be treated both just in the cath lab to the ICU to be transferred. And so that part of it over the last 18 months has been sorted out and we're incredibly pleased with the progress we've made. Specifically around the analysis that was done for the proposal for payment for next year for 215, what we have discovered is that it's a very small sample size that was run as a comparison. It did not include our Impella 2.5 and CP populations. And, therefore, we're working with CMS in the comment period to understand why such a small patient population or patient sample dropped significantly and what is the potential alternatives to do that. But what you also have to remember is we now have DRGs for just the cath lab as well as biventricular. So, some of those patients in the past would have – the biventricular patients would have been in 215 and those are now going to be moving to DRG 1 and 2. So I'm very confident what we're going to come up with is a fair plan. And I think what's important for folks to remember is that the DRG system is designed to allow efficient hospitals to breakeven or make a little bit of money. So the better the outcomes, the better the margin for the hospital and this is why our protocols are so important and why we're partnering with hospitals to improve on all the patient populations.

[Chris Pasquale:]

Thanks. And you touched on my next question there a little bit, but can you talk a little bit more about the opportunity for RP, especially now that the BiVAD support code is in place? It would seem like the potential for that product is probably greater than it was back when you started the PMA process.

[Michael R. Minogue:]

Chris, the Impella RP is a product that provides a solution that in many cases can be considered lifesaving. We have patients that are in profound shock and that needs support on the right side as well as the left side. I do believe that the opportunity is significant. And I think with the alignment of biventricular payment at the CMS level, as well as some of the clinical data that has been published or is coming out, it will demonstrate that there is a real clinical benefit for these patients. One of the other nice discoveries that we've made with the Impella RP is that the right side tends to have a thinner muscle wall and therefore is more recoverable. So, therefore, if you can get a patient through the time of injury and risk, the right side usually recovers 100%. And that's very important to send these patients home with their native heart. We will be launching this as a PMA, which is a lot easier than launching under a humanitarian device exemption, which requires every hospital sign in IRB and requires a lot more administrative work. So, I think, things are aligning now with both reimbursement and the regulatory approvals. And we look forward to the second half of the year going from 127 sites today to upwards of 1,000 sites in the future.

[Chris Pasquale:]

Great. Thanks.

[Operator:]

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

[Michael R. Minogue:]

Good morning, Chris.

[Chris Cooley:]

Apologies. Can you hear me now?

[Michael R. Minogue:]

We can hear you now.

[Chris Cooley:]

Super. I apologize for that. Just maybe a couple quick modeling questions at this point in from me. Is it possible just to get a breakout on the fourth quarter, just in terms of growth between high-risk and shock? And Mike was kind enough to give us a little bit of finite detail regarding Japan's expected contribution in the coming year. Just following on what Chris asked, just in that last round, in terms of any additional color just in terms of the magnitude of the incremental contribution from RP as we go through 2018. Thanks much.

[Michael R. Minogue:]

So, Chris, if I understood you right, you wanted to know – and it was stated in Mike's section that Protected PCI growth was 26% and emergent growth is 37% with overall patient growth at 30%. Is that what you were looking for, Chris?

[Chris Cooley:]

Yeah. That's it. Thank you.

[Michael R. Minogue:]

And that from an RP standpoint, we'll let the regulatory process and the approval take its course. We'' see the exact timing of it. We've guided to October, but then we'll rollout the plan for site qualifications, training and share more specific information as those results come to pass later in the year. But we're not prepared to, sort of not knowing exactly when the approval date will be give you specifics for the year on RP.

[Chris Cooley:]

Thank you so much.

[Operator:]

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

[David Ryan Lewis:]

Good morning. Mike, I want to start off with sales force progression utilization. Just sort of just sticking back over the last six months to nine months where you've kind of broke from your ratable strategy of adding reps. You added dramatic numbers of reps. I'm just kind of curious. Where do you see those reps in terms of their developments because we're seeing great rates of growth? We're not seeing significant acceleration of the business and that could just be – frankly the revenue numbers are a lot larger now. All these reps came into a time when they are anniversarying large significant label expansions with the PMA. So, maybe just help us understand a lot of reps were added. How you think the development has come here as we're now kind of nine months post and what we should expect here into 2018? And then I had a quick follow-up.

[Michael John Tomsicek:]

Yeah. I am not sure which Mike you are aiming at there, but I'll take a crack at it. We did add a bolus of reps, I think, that you identified in the beginning of the year in preparation for our shock launch. Really around the beginning of the last year those people were put in place and they've come up to speed nicely. We've broken down our franchises in the field as I'd say to give the ability to go deep into accounts and still have the capacity to generate new business. And that's worked well. Our efficiency for franchise is where we want it to be. Towards the end of the year, we added people a little bit slower as we focused on execution coming into the end of the year, but we picked up the pace again. And we'll add substantial resources to our commercial and clinical teams at 10 or possibly in excess of 10 per quarter during the course of this year on average. So that process is going along. And as I often say, I'm proud of the flexibility and the way that our commercial team keeps pace. We don't end up with sort of sudden or all at once recalibrations. We're constantly sort of fine-tuning and breaking down territories to make sure that we have time to go deep in the ability to generate new accounts.

[David Ryan Lewis:]

Okay, very helpful. So – and then for Mike Minogue. Mike, your principle competitor obviously is having some difficulties. I wonder if you think about your 2020 plan and the likelihood that PHP could be delayed longer than many expected. How does that shift if at all your strategic thinking around the pipeline or spending over the next couple of years?

[Michael R. Minogue:]

David, we'll let Abbott update on how they are doing with their own timeline, but this is not a timeline product that has a short leg to it. So you've got multiple tasks to complete. You have to finish the study and then there is again multiple indications required for FDA approvals. Relative to our plan is in 2020 and beyond – we anticipate that at some point we'll have competition. In the short-term, we don't see anything. In the mid-term, we don't see anything that we would consider competitive from an innovative perspective. And our real goal is to obsolete our own products by continuing to advance them, which, later this year, I'll give an outline of some of the new improvements, enhances both for ease-of-use and product performance across the portfolio from the Impella CP with the optical sensor to the ECP product, which I just had a program review in Germany last week, which is a 9 French 4-litre pump. And, of course, we've got the Impella 55 and the Impella BTR coming, which will allow us to enter into that chronic heart failure space for Class III patients. So, we look at ourselves as our biggest competitor. And we're going to continue to innovate. We actually do – we do like having Abbott in the space. They're a good company that focuses on education and they continue to bring more awareness to both Protected PCI and the limitations of the intra-aortic balloon pumps. So, we're excited for well beyond 2020.

[David Ryan Lewis:]

Mike, just last one from me, if I could. Just on STEMI DTU, the enrollment period for that trial, given the patient number, is a little longer than we would have expected. Does that just tell us a lot about the difficulty and sort of changing the standard-of-care for what you're trying to achieve? And then I think, in 2015, you talked about pivotal results or approval for that product or that indication, I should say, kind of mid-2020. Does that still make sense? Thanks so much. I'll jump back in queue.

[Michael R. Minogue:]

Thanks, David. I don't think we've given any specifics on the timing of it. We just said it's not included in our blueprint to $1 billion 2020 plan. But specific to the study itself and the timing is we've projected up to 18 months. So, obviously, if we can do it quicker than 18 months for the enrollment, we will. It is difficult today for just getting IRB approved in general for all med-tech companies. I think you've seen that trends. But once we get all 10 sites then we'll try to be moving as quick as we can. But the component of your question that you touch on is very insightful, because this is a dramatic difference in treating patients today which their hospitals are focused on Door to Balloon time. And that balloon is the angioplasty balloon, which they've shown that if you can open up somebody's coronary artery within 90 minutes, you'll maximize or optimize the ability for these patients to stay alive. The problem with that approach is that we are improving survival, but there is a growing epidemic of heart failure happening, even with the latest and greatest of innovation across the board. And the statistic show that, within five years of someone suffering the first heart attack, 70% have heart failure and 40% of those patients die. Now we believe part of that challenge is because we're treating the plumbing with the coronary approach with stenting-only and there is an effect that's happening with reperfusion injury in apoptosis that is creating more muscle depth. So that's our thesis. And, again, if we end up showing our thesis is true then you're talking about a dramatic change to now Door to Unloading for heart attack patients that today do not get Impella and are not in cardiogenic shock. But we have a long way to go. There is a lot of risk in any study, but we believe the science of the foundation is very solid. And we're definitely excited to potentially enter into a market where we can reduce heart muscle damage in patients that are not yet in cardiogenic shock.

[David Ryan Lewis:]

Thanks, Mike. Very clear. I'll jump back in queue.

[Michael R. Minogue:]

Thanks, David.

[Operator:]

Thank you. And our next question comes from the line of Jayson Bedford from Raymond James. Your line is open.

[Jayson T. Bedford:]

Good morning. I just have a few kind of follow-ups here. On the RP, you are in 127 hospitals now. You mentioned being more aggressive once you receive the PMA. I'm just wondering. Is the realistic denominator really 1,000 plus hospitals? Meaning, are there this many hospitals out there that are suited to deal with this patient population?

[Michael R. Minogue:]

Jayson, the quick answer is yes, because, in the U.S., you have 1,000 heart hospitals and heart hospitals have sites that have both cath lab and surgical suites and clearly needs right side support or biventricular support. There is an additional 400 hospitals that have cath lab only and we'd agree that for those places not all of them will have it. However, there is also guidelines, Class I recommendations that for sites that are going to do PCI or accept patients that do not have a surgical suite that they need to have a hemodynamic strategy and a transfer policy. So for those sites, they likely would still want to have a biventricular approach to enable a patient to be stabilized and transferred to one of those 1,000 heart hospitals.

[Jayson T. Bedford:]

Okay. Okay. Just getting back to an earlier question on the data produced out of the folks in Detroit and the potential of the standardized protocols. Right now, what percent of your customers have established protocols in place?

[Michael R. Minogue:]

Last call and what we generally say, it's about 10% of the sites is what we'd consider to have an enforceable standardized protocol. And what that would mean is they've got high-risk PCI. They've got right side support with Impella and that matches up with our RP sites. We have other sites that might have generic protocols, but you have to also understand that some of these hospitals have different physician groups. So while they might have a protocol getting alignment with all of the different centers is somewhat challenging. And that's why the Detroit CSI initiative is so exciting because here you have competitive hospitals with competitive physician groups aligning to say that we are going to create a protocol that we believe not only gets the best survival, but gets the best heart recovery outcome for the patient. And this is very similar to what happened years and years ago with the Door to Balloon time metric. And the Door to Balloon time metric again shows the best outcomes with opening the coronary within 90 minutes. That protocol didn't come about with a randomized study. That came about by physician group studying and looking at real-world evidence to improve outcomes. But just like Door to Balloon time is not effective at 290 minutes, Impella is not effective when a patient has been in cardiogenic shock for two days, three days, has had three inotropes and a balloon pump and they already are in organ failure. So what we're trying to do again is systemically get folks to look at the observational data, as well as the data that's reinforced in the cVAD Registry that shows the best way to improve survival and get the outcome of heart recovery is a formula of reducing inotropic escalation, having hemodynamic monitoring and placing the Impella and stabilizing the patient before you do the PCI. So those are keys to success. And what's nice about the Detroit initiative it's also independent. It's a physician group. We'll continue to work with hospitals with our IQ Program, but the Detroit initiative is driven by the leaders in the space.

[Jayson T. Bedford:]

Okay. That's helpful. And maybe last one for me. Mike, you alluded to sensing technologies a couple times. Can you just remind us where you are with Opsens in integrating that product both internationally as well as in the U.S.?

[Michael R. Minogue:]

So, I can formally announce today that our fiber optic sensor on the Impella CP is CE Mark approved. And we'll be launching under a limited release in Germany over the next two quarters. And then we plan to launch in the U.S. at the very end of our year with the Impella CP optical. And to explain again, why it's so important is the optical sensor allows us to have real-time sensing of the location of the Impella pump relative to where it is against the aortic valve; is it above or below, is it in the left ventricle or above the aortic valve. And that's really important to maximize the flow. It's definitely an ease-of-use aspect for patients that are in the ICU. And it will also give us in the future more ways to do smart pumping, so we can actually help wean the patient off and maximize the opportunity of heart muscle recovery.

[Jayson T. Bedford:]

Okay. That's very clear. Thank you.

[Operator:]

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

[Matt O'Brien:]

Thanks. Good morning. Thanks for taking the questions. Mike or Mike T, can you just go through a bit more on the puts and takes to the guidance for the year, just in terms of what you're contemplating, maybe reimbursement change, negative effect or a pause or something along those lines? Or the number of units per site has been increasingly steadily. Maybe that starts to level out or the mix benefit that you're getting with more shock growth versus the RP contribution, the modest – the Japanese contribution in the fiscal year, just some of the headwinds and tailwinds that are contemplated in the guidance and then potential leverage to get you to the higher end of that range, if not above it.

[Michael John Tomsicek:]

Sure. So, again, our approach to guidance is to issue numbers that are responsible from a patient care standpoint and achievable from a business standpoint. And this is what leads to good patient outcomes and sustainable growth over the long-term in the market that we're serving – in the market that we're leading in the field of heart recovery. We talked about several factors that are contributory to our growth. I think the most important factor remains the sharing of training data in time, in the Protected PCI and cardiogenic shocks space. So, our ability to continue to grow that is factored in. You mentioned the RP program. I'm not going to share at this point in time the specific numbers associated with RP, but our impressions that are factored in and the small contribution of Japan given when we're launching our issues. We do model the size of sales force we need to get to in order to achieve our growth objectives. I think that's important for us. We recognize the fact that, as I said in the script, we're currently posting quarterly numbers as large as our annual numbers just a few years ago. And we grew $115 million in annual revenue this year. We grew $100 million in annual revenue last year. That's not slowing from a scale standpoint, but there are some big numbers involved. So those are the main factors. We do not believe reimbursement dynamics are having an immediate impact on it. We don't sell based on – it's not our policy at all to sell based on reimbursement. And we think there is a fair reimbursement out there for our products. So, it's really our ability to get on and communicate the message and share the information. And there is a lot of positive developments around technology and ease-of-use that will help continue our growth. But we do respect the fact that the numbers are getting large and we'll continue to run the company for a sustainable growth.

[Matt O'Brien:]

Okay. And then as the follow-up – that's helpful. I appreciate that. On the international side, I know it's a focused market. You've been bumping along in the high 8s the last couple quarters and it accelerated to 10.5 this quarter. I'd love to hear what drove that acceleration specifically. And how we can think about – and I think Mike talked about this a little bit about the progression or kind of a predicate adoption to think about from a new market perspective, as you're entering Japan, especially since that market size is so much larger than what you're doing in Germany today or the number of patients in Germany today?

[Michael John Tomsicek:]

Yeah. Just commenting on the international growth, really proud of the progress that we've made in Germany and that's the driver for growth. It bears repeating. We frequently say that we are not in Europe. We are in Germany as a focus. And really it's a Protected PCI market. We've been driving there and we've been adding substantial staff and resources as the reimbursement – hospital to hospital specific reimbursement conditions have improved in Germany. We're really excited to be treating patients that previously were untreated. And that's what's driving our growth from an international standpoint, because as mentioned in my part of the script our growth is in the 60% range in the German market, which is excellent. The predicate market for Japan – let's wait and see how that comes to pass. I don't know that from a revenue ramp standpoint, RP would be a good mile, but I would say that in RP we selected centers. We spent extensive time training. We were very sensitive to outcomes and that we are getting proper patients. And we're training both the cardiologists and heart surgeons. And I think there'll be elements of similarity there, where we'll be very gated and very deliberate in the beginning to establish those good outcomes and then grow from there. But the model is that the first 10 sites that we choose in Japan have to be training sites. And they will, in some form, form a foundation for ourselves going forward in training the number of hospitals we eventually want to get to in Japan, which is more like 200 or 300.

[Matt O'Brien:]

Understood. Thank you.

[Michael R. Minogue:]

Matt, this is Mike Minogue, and just to add to that. I was in Germany last week. And in the old days, Germany was mostly just the emergency patients. And today we have emergency patients and Protected PCI. So the Protected PCI population now is 30% or more in any given quarter of our patient population in Germany, which is a really important component to our execution and training. The second is an anecdotal story. While I was there in Berlin, I met with one of the top centers. And it is now becoming more obvious to many of the folks and the physicians in heart failure community the importance of heart recovery. And I met with a physician that has been driving heart recovery and works at one of the largest and busiest LVAD centers in all of Europe. There was a patient that had AMI cardiogenic shock, was starting to have organ failure and – but the interventional cardiologist believe the person was recoverable, worked with the surgeons who agreed to give him five days to try to recover the patient. And as the story goes, I actually met the patient. His ejection fraction is now back up above 40%. He had been discharged from the hospital and is bringing a lot of attention to another alternative, another therapy for these kind of patients. And just to remind everyone, in our indication from the FDA, we are given the approval for heart recovery, which means that this is the only technology, the only type of heart pumps that exist in the world that have that exclusive indication.

[Matt O'Brien:]

Very helpful. Thanks, Mike.

[Operator:]

Thank you. At this time, I am showing no further questions. I would now like to turn the call over to Mike Minogue for closing remarks.

[Michael R. Minogue:]

Thank you, everyone, for your time today. If there is any follow-up questions, please reach out to us. Have a great day.

[Operator:]

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