Abiomed, Inc.
Q3 2015 Earnings Call Transcript

Published: 28 Jan 2015

[Operator:]

Good day ladies and gentlemen, and welcome to the ABIOMED Third Quarter 2015 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 is being recorded. I would now like to turn the conference over to your host, Ms. Ingrid Goldberg, Director of Investor Relations. Ms. Goldberg, ma'am you may begin.

[Ingrid Goldberg:]

Good morning and welcome to ABIOMED’s third quarter of fiscal 2015 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 Bob Bowen, Vice President and Chief Financial Officer. The format for today’s call will be as follows. First, Mike will discuss strategic highlights for the third quarter and then turn to our key operational and strategic objectives. Next, Bob will provide details on the financial results outlined in today’s press release. We will then open the call for your questions. Before turning the call over to Mike, I would like to remind everyone in the call that this presentation includes forward-looking statements about development of ABIOMED’s existing and new products, the company’s progress towards commercial growth and future financial performance as well as future opportunities and expected regulatory approvals. These forward-looking statements contained in this presentation are subject to the risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading forward-looking statements and the press release we issued this morning and in Part 1, Item 1A. Risk Factors in our Annual Report on Form 10-K and the year-ended March 31, 2014 and part to Item 1A risk factor in our quarter report on form 10Q for the quarter ended December 31 2014. Both of which are filed with the SEC and are available at www.sec.gov and on our website at www.abiomed.com. The forward-looking statement in this presentation speaks only to the original date of this presentation and we undertake no obligation to update or revise any of these statements. Thank you for joining us and I’m now pleased to introduce ABIOMED’s Chairman, President and Chief Executive Officer, Mike Minogue.

[Michael Minogue:]

Thank you, Ingrid. Good morning everyone. ABIOMED had a break quarter on every financial and clinical metric and achieved our best ever results with 62 million in revenue and 34% growth. U.S. patient utilization set new highs with a robust 46% growth rate driven by record number of patients in every region of the United States and in all three categories of patient support prophylactic, emergent and others. These outstanding results are a testament to our customers, our Impella technology and our dedicated team. It demonstrates the growing clinical need for percutaneous heart pumps that improve patient care and enable minimally invasive procedures. This quarter revealed a leap incident adoption curve with a net $10 million sequential increase over the last quarter’s revenue. ABIOMED has now grown top-line revenue double-digit year-over-year for 21 straight quarters and our results this quarter demonstrate a glimpse into the potential of becoming the standard of care in the United States. We are committed to this ultimate long-term goal and we will continue to prioritize and invest in our field and headquarters capabilities. So while we are pleased with the progress we remain focused on operational discipline and executing our plan. For today’s call we will provide an update on the continued progress of our regulatory processes. In regard to our Impella 2.5 PMA submission we are pleased to report today that ABIOMED has passed all the FDA operational and manufacturing audits for both Impella 2.5 and Impella RP in both our Danvers, Massachusetts headquarters and Aachen Germany manufacturing facility. As we announced last quarter the FDA has agreed on the indication for use in high risk PCI for the Impella 2.5 premarket approval and ABIOMED no longer anticipates the requirement for an FDA panel before our PMA approval projected for February or March 2015. To remind our investors our stated plan has been submit for PMA approval for high-risk PCI for the Impella 2.5 and complete all the mandated FDA audits for clinical data operations and manufacturing. Following approval of the Impella 2.5 the Impella 5.0 and CP will be submitted as PMA supplements. Until the 515 process is completed, the Impella 5.0 and CP will remain on the market under the existing 510k clearances. At ABIOMED we have long believed that the road to the standard of care requires training and clinical data and the potential Impella PMA approval allows for more flexibility and focus on these initiatives. We have amassed a library of clinical data with over 225 publications from FDA studies, our physicians and our Impella registry. In addition Impella was referenced in our sixth AHA/ACC Guideline for Acute Coronary Syndromes as noted in detail in the Press Release. This third quarter also demonstrated the growing trend in the field to identify a new population of patients for the cath lab that can benefit from extensive revascularization and may require hemodynamic support for high-risk procedures. Some of this patient population has likely been turned down or not considered for surgery by our heart team because of age, or prior surgical risk factors and with an FDA approval ABIOMED will now be able to assist in this appropriate patient identification process. In many ways the heart approach and acted for the percutaneous valve procedure will act as a platform for the screening and treatment of high-risk PCI as well as right side heart failure. To address this heart team concept we will continue to invest in our U.S. and German distribution and expand our educational and training resources. Today we are also pleased to announce the FDA approval of the Impella RP ahead of our projection. For the RP launch the heart team will also be the key to our approach. We will host the entire heart team in conferencing the heart surgeon, heart failure cardiologist, interventional cardiologist and lead nurse of each hospital at our headquarters to complete our two day training course followed by a rigorous certification process at their hospital. We will have a controlled introduction of new hospital sites each quarter to ensure appropriate patient selection and optimal clinical outcomes. This model will follow the success release of the Impella CP introduction which grew 106% this quarter. There is no other product like the Impella RP and it will acquire position teamwork. For the multiple types of patients requiring hemodynamic support to the right side of the heart. The Impella RP headquarters training has already been scheduled for the next several months for the initial 20 hospital sites selected. Moving oversea to Japan the interaction with the PMDA has slowed somewhat in their response time for the completion of this submission. Therefore an additional delay of three months may occur. We expect the controls commercial launch by December 2015 to March 2016. In summary we are financially sound and operationally prepared for the long term success while managing the details of our quarterly tactical plan. Our investment in clinical research and our extensive patent portfolio along with our disciplined execution provide ABIOMED a $2 billion opportunity to make Impella the new standard of care for percutaneous circulatory support. We want to thank the FDA and all our stakeholders and convey our incredible excitement for our future. Based on the growing population of high risk patients requiring hemodynamic support and pending catalysts of regulatory approvals and new geographies, ABIOMED anticipates many more years of double digit growth. I specifically want to thank all our employees for their hard work and dedication to our customers and patients. As a company we are motivated and committed to meaningfully impacting the lives of our patients and achieving our apex goal. I will now turn the call over to Bob Bowen, our CFO.

[Robert Bowen:]

Thank you, Mike. And good morning everyone. As noted in this morning’s earnings release, fiscal third quarter revenue increased 34% to a record $62 million from 46.2 million in the prior year. To summarize the most important parts of third quarter revenue, Impella patient news in the U.S. was up 46%, Impella reorder revenue in the U.S. was up 51%, Impella revenue outside the U.S. was up 28%, and up 39% on a constant currency basis and service revenue was up 30%. Worldwide Impella product revenue of 57.4 million grew 37% from 42 million in the prior year. In the U.S., Impella revenue of 51.9 million grew 38% from 37.7 million. The largest piece of U.S. Impella revenue was from Impella catheter reorders, totaling $46.4 million, up 51% from 30.8 million. Outside the U.S., Impella revenue grew 28% to 5.5 million or up 39% on a constant currency basis. Average Impella 2.5 and Impella CP combined unit inventory levels at hospital sites was 2.65 units compared to 2.60 in the prior sequential quarter and 2.52 units in the prior year. With regard to the breakdown of patient utilization, 46% of patient use was in a prophylactic setting and this segment grew 38% from last year. 45% was in an emergent setting and this segment grew 58% from last year and 9% was all other this segment grew 35%. Gross margin for the quarter expanded to 84.1% compared to 79.5% a year ago, Due to few replacements of AIC consoles which totaled 93 this year compared to 178 in the prior year as well as the benefit from higher unit catheter revenue production volume. The lower number of console placement contributed a 160 basis points of margin increased as of the end of the quarter 9% of U.S Impella sites have the AIC console. Although the console upgrade cycle is nearly complete. We expect to be placing consoles as sites increase volume levels and this part of the RPU rollout. In addition we do adjust the pricing of the Impella 2.5 downward when sites receive their first Impella CP order and we expect to incur somewhat level of manufacturing expense related the capacity expansion in this year. For the combination of these reasons we believe that the sustainable medium term gross margin rate will be in the 80% to 82% range. R&D expense of 8.4 million increased 0.6 million or 8% the increase from the prior year was attributable to the operating expenses of ACP which was acquired in July. SG&A expense of 30.1 million increased 5.7 million or 23% the increase was attributable of continuing investment in our field personal training and customer support higher stock compensation expense and higher medical device tax expense partially offset by lower legal fees. Operating profit of 13.7 million was 22% of revenue compared to 4.6 million of or 9.9% in the prior year. In fiscal Q3 operating profit nearly tripled on a 34% increase in revenue which reflects the substantial leverage of our business model. GAAP net income for the quarter increased to 12.7 million or $0.30 per diluted share from $4.4 million or $0.11 per diluted share a year ago. Our effective tax rate for the quarter was 7.4% and I would remind investors that we continue to have a large deferred tax asset which has a full valuation allowance. So our current tax rate does not reflect a normal statutory tax rate. As noted in our 10-K and 10-Qs we asses our ability to realized our differed tax assets on a quarterly basis. Should we determine that the deferred tax assets are more likely to not to be realizable we would release all or a portion of the valuation allowance. This would result in a significant one-time increase in earnings in the quarter in which the valuation allowance was released and subsequent tax rate would be closer to the statutory tax rate, which including both federal and state income taxes would approximately 40%. For future year modeling purposes this maybe the most appropriate way to use. This accounting adjustments would not affect our cash position or cash flows from operating activity but would merely reflect our determination that these deferred tax assets have significant value and will be utilized based on future estimates of profitability. Our balance sheet remains in excellent shape and we ended the quarter with cash and short-term and long-term marketable securities of 131 million. Turning to guidance, as noted in our earnings release we have increase the full year fiscal ’15 revenue guidance and the new range is now 223 million to 226 million an increase of 21% to 23% from the prior year. This new range compares to the previous range of 209 million to 212 million which represented an increase of 14% to 15% from the prior year. For the fourth fiscal quarter our revenue guidance is in the range of 60 million to 63 million. We are also increasing our full year fiscal ’15 GAAP operating margin guidance to be in the range of 9% to 11% compared to the previous range of 1% to 4%. We would also like to remind investors that historically our operating margin has been lumpy and at this stage of our growth opportunity we would expect it to continue to be lumpy. More explicitly we are not setting our forward going plans to maintain our fiscal third quarter operating margin of 22%. We continue to invest in a variety of product related initiatives as well as in the expansion of our field sales, clinical and training organization as we prepare for a post PMA marketing and clinical environment and will provide more detail on our fourth fiscal quarter earnings call. Please keep in mind that the company’s fiscal year period ends on March 31, 2015. However in view of the strong third quarter performance and the fact that many companies report on a calendar year basis we wanted to give investors an early look at our thinking for fiscal year ’16. Currently the company has estimated fiscal year 2016 revenue in the range of 260 million to 270 million and upon completion of our fiscal fourth quarter we will provide formal fiscal year 2016 guidance during our fourth quarter earnings call expected in early May 2015. Please keep in mind that although we expect to continue to experience strong growth, third quarter year-over-year growth rate up 34% is one data point and we are not extrapolating the growth curve from that one data point alone. Operator, would you please now open the line for questions?

[Operator:]

Thank you. [Operator Instructions]. Our first question comes from the line of Anthony Petrone from Jefferies Group. Your line is open.

[Anthony Petrone:]

Thanks gentlemen and good morning. And certainly congratulations on the quarter long road and you guys just well dissevered. So congratulations. Maybe on the obviously the jump in growth for Impella in the quarter, if we go back a few quarters ago you had mentioned that the marketing push on Impella was on autopilot as the 515 process was underway. So was that a factor in the quarter? Did that change? And then a couple of follow-ups.

[Michael Minogue:]

Anthony that’s a question we've been looking at all quarter. The success was driven by outstanding utilization across the board. So as I mentioned, the prophylactic setting was a 38% growth record high. The emergent setting was 58% record high and our other bucket was 35% another record high. As far as the breakdown it was about the same for prophylactic and emergent and then the other bucket was 9%. And the way we look at the quarter is it's like, a process of cutting down a tree that we have just had so many publications and these publications and the experienced customers have been translating into clinical guidelines. So we have hit our six reference in the clinical guideline which we marketed, in addition the balloon pump at least in Europe has been downgraded in its guideline for emergency patients. So I think that’s one of the elements is just the awareness of all the utilization. Two is that, there is a lot of use. We have done 25,000 patients now in the U.S. and this training and data has to do with getting used to something as compared to an older technology that’s been around for 40 years. So, there is a bit of this awareness little bit that could be the post TCT Impella awareness, but certainly there is just more awareness now that we have broken 900 hospitals. The last component of this is, there was a very significant paper that was put out in jack that we highlighted on our last call, which had to -- it was a healthcare, research and quality database, it was nearly 12,000 patients from 2004 to 2011 and it had both hospital outcome data relative to patient mortality as well as cost data analysis and in that paper it reported some very positive results on a percutaneous valve technology.

[Anthony Petrone:]

Maybe just a follow up there on the tailwind from guidelines it was a little bit of a delayed effect and of course the increase in publications. I mean is there any way to gauge, how long that tailwind could sort of push growth here into sort of this next higher level that we saw this quarter.

[Michael Minogue:]

So we’re pleasantly pleased to see the continued growth and again it’s in every region of the U.S it’s in every type of patient we support. So I think that that’s overall that’s a very positive trend. We’ve said that there is a couple steps to get to the standard of care, its clinical guidelines its quality of life and cost effectiveness publications, its having established reimbursement from the hospital and the position in the insures. But the remaining piece of the puzzle isn't in place yet, and that’s the PMA approval for high risk PCI and we have been on, basically haven’t really been engaged in the process of marketing or promoting for the appropriate patient selection and we look forward to doing those things and educating the clinical community on our outstanding results. But we also want to work through the hard team and use the platform that’s already in place for the percutaneous valve procedure which really does provide communication and more options per patients and this is a patient population that has pretty limited outcomes and pretty little options.

[Anthony Petrone:]

And then last one I’ll jump in. Just on RP can you give us a sense if that's factored in guidance here in the raise? And just a quick recap on the annual market opportunity for RP. Thanks again.

[Robert Bowen:]

Sure Anthony in terms of the guidance as Mike mentioned in his script that we’ve got 20 hospitals that we are going to get up and running here over the next couple of quarters. And so we don’t have substantial amounts of RP in the guidance numbers. But we’ll get more granular on our fourth quarter call. And in terms of the overall opportunities in HTE so the patient population is limited to 4000 patients in the U.S initially.

[Operator:]

Our next question comes from line of Danielle Antalffy from Leerink. Your line is open.

[Danielle Antalffy:]

Guys thanks so much for taking the question and congrats on an awesome quarter. I just wanted to touch on the fiscal 2016 guidance and obviously that came in ahead of consensus still projecting, several digit growth there I think high teens at the midpoint of the range. So just wanted to get a sense of sort of what’s driving the confidence in that guidance. I assume there is a little bit more RP. I assume Japan if you could just walk through the different pieces of that $260 million $270 million fiscal ’16 guidance and your confidence there.

[Michael Minogue:]

So Danielle the potential PMA approval for high risk PCI which we have projected for February and March, we believe will be a catalyst for growth for the high risk PCI patient population. And as we continue to roll out the RP will follow a model similar to the CP. So it will be a controlled roll out. And the confidence overall is just in our ability to execute based on the fundamentals of executing around patient support, clinical data and also making sure our product is easy to use and our customers are comfortable with it. So one of the things we’ve been doing is adding components for training so there is an app at the Apple store about quick set up and tips and tricks for use of Impella. We’ve got a call center that’s 24/7 we have a selected site remote diagnostics where we can go online and look at the console and what’s happening, we’ve also invested in simulator technology where we have set up some cath labs, there is four of those and we have an on a mobile truck that’s going around the country. So it’s really about just again creating more awareness and the basics of how an Impella works and the more folks are educated and are comfortable with the technology, the more they have the ability to treat different types of patients that need support and I think what this quarter showed is that there is a clinical need and it’s growing.

[Danielle Antalffy:]

Great that’s helpful. And just a follow up on that Mike we talked in the past about a TCT this year there was sort of new initiative about high risk PCI and raising awareness at medical meetings. I was wondering if you could highlight any major upcoming event potentially at ACC and our euro PCR where we should see some similar talk about high risk PCI and specific dedicated sessions to high risk PCI.

[Michael Minogue:]

Good Danielle. So the initiative you’re referring to is a CRF initiative that’s a group out of Columbia New York. The chip initiative stands for complex high risk interventional procedures; it has to do with complex lesions, CTOs patients that need hemodynamic support. There is course that's happening in Florida at the end of this week. There will be references and talks at PCR and there will continued initiatives throughout the year that will again through ACC and lead up to another TCT where they now have a criteria and a function or a group function called chip where you can find these type of talks.

[Operator:]

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

[Jayson Bedford:]

I guess just in explaining the acceleration this quarter. Do you think from a -- did anything change from a competitive standpoint? Meaning [indiscernible] to a fewer balloon pumps, fewer atmos in the quarter, was there something around the economics of either that you may have benefited from?

[Michael Minogue:]

I think it has to do with the overall publication and the history of the balloon pump itself and what’s happening in Europe as far as people looking for new options, I think that’s a high level on the micro-perspective I think there is a need or there is a growing opportunity here for patients that want to have intervention that might not have other options and might be turned down for surgery. And then the last is certainly again a lot of people brought the JAK paper on the use of percutaneous heart pumps from the 12,000 patient population from the health research and quality data base, that was an independent assessment and again a lot of physicians that we talked to we’re very interested in it, because it had both mortality data as well as cost data, and it was very supportive of our technology.

[Jayson Bedford:]

Just switching to the regulatory front here, when you file the supplements for the CP and the 5.0, is it your expectation that you’ll get an expanded labeling to include shock or will the CP label initially share that same high risk PCI label?

[Michael Minogue:]

Jayson, right now our only focus is completing the TMA for high risk PCI but what we’ve guided to is that both the CP and 5.0 will be supplements and all other indications will also be supplement off of the initial PMA. We will give more details to that as we move past the PMA.

[Jayson Bedford:]

And then when you look at your mix of volume next year with the PMA approval in hand, do you expect the mix to change, meaning do you expect to see I think what 2.5 was tracking to about third of Impella revenue. Do you expect it to be a bigger contributor next year given the FDA approval?

[Michael Minogue:]

We’re focused on the clinical data and not necessarily one product over the other, it’s really a family of products and I think that some physicians have a preference but certainly the Impella 2.5 has a roll in more the prophylactic setting. But we will let our physicians decide what their preference is for those different types of pumps for the application.

[Operator:]

Thank you. And our next question comes from the line of Ben Andrew from William Blair. Your line is open.

[Ben Andrew:]

If you could talk a little bit about fourth quarter guidance, I think you led us towards sort of a flat sequential performance and typically we’ll see a nice uptick in the quarter. What are the moving pieces there that could let you beat that or just come in line please?

[Robert Bowen:]

The primary piece is patient levels, that’s really the underlying driver of the business and I think we had a very substantial uptick in Q3 and we expect to see continued strong growth going forward but we just don’t want to get out over the front of our skis here.

[Ben Andrew:]

And then with the small delay in Japan, how significant can that be in fiscal -- I guess it would be 2017 by the time you get that. But how do we think about the ramp there when you do finally get into Japan given the nature of that market?

[Michael Minogue:]

So Ben we’ve said that we’re going to start off in Japan through a controlled rollout of the top 20 to 30 centers which we’ll be having a direct sales team and clinical team to support. We currently have a sales office in Japan with six people and where we have a Japanese advisory board and we’re prepared to go at the right rate of growth ensure we get the right outcomes and we can collect data in our registry. So if the delay is another three months, I don’t really see it as a significant change from what our current plans were.

[Ben Andrew:]

And then what’s the realistic sort of quarterly training rate for you guys after the initial roll out here of the new product. Is it still kind of 20 every couple of quarters? Can you accelerate that? Because obviously with the heart team approach, it’s quite an exhaustive effort.

[Michael Minogue:]

So Ben that’s a great question and there is a nice platform we build off, Edward has done a great job on the percutaneous valve. There is really a coordinated approach at these hospitals for screening patients and communication across the board between the different cardiology groups. So as we get started it will be at the 10 plus per quarter and then overtime as we have more training centers and more experience we'll be able to accelerate it. It will look a lot like the CP relative to the way we go to sites. Now that the CP is very similar to the 2.5, so the learning curve wasn’t nearly the same but we like the ability to train a group and then get their experience on site and then move onto the next group. And it’s really proved to be a model success as you saw the CP grew 106% in patient utilization last quarter.

[Ben Andrew:]

Right, I mean Edward has ran into some troubles in the ramp there when they were doing certain centers and other centers the adoption curves were very different. How long do you think it will take before you have a feel for how each of these is going to adopt, because that obviously would affect your patient add rates.

[Michael Minogue:]

That’s the key question. And some of these patients will be failed transplant some will be post [indiscernible] implantation, some will be biventricular or just right side failure, isolated right side failure. So as we look at the heart hospitals and we look at their volumes relative to that population, those are the sites we are going to start with and then we will work our way down and give more updates every quarter as we get closer and closer into the launch.

[Operator:]

And our next question comes from the line of Jan Wald from Benchmark. Your line is open.

[Jan Wald:]

Lot of my questions has been asked, but in terms of -- as you get the PMA approval for the 2.5 what should we expect the steps to be and how quickly will you be able to get up in training, get to training and get patients, get physicians actually using the system?

[Michael Minogue:]

Jan, this is a little bit different than some of the other PMAs or launches that you all have historically seen. For one piece of this is we are already on the market and been on the market for six years and have done over 25,000 patients. As you saw last quarter the prophylactic setting grew 38%. And I think at the macro senses there is a focus now in interventional cardiology to try to treat these patients. And as you treat some of the sickest patient is also a lot of clinical data that talks about the benefits of extensive revascularization. So there will be a population that the physician community has recognized, but what this will give us the ability to do is be involved, provide more education and training and make sure we get the appropriate patient selection and help them, similar to how Edwards has really involved themselves in the communication and education process with the heart team to find the patients that benefit the most from their product.

[Jan Wald:]

So maybe the proper way to ask the question would have been, we have been assuming something on an acceleration but how quickly would we see that acceleration start?

[Michael Minogue:]

Prior to this quarter we had said that we did expect the high-risk PMA approval to be a strong catalyst and reignite the prophylactic growth rate. Obviously we had a very quarter, its one data point, but we feel confident that in the coming quarters you will continue to see strong growth on that prophylactic setting, which has been lower than our emergent setting which has continued to grow strong and again it was 58% last quarter.

[Jan Wald:]

So would you say that the post PCT last year was with a lot of interest I think generated in the chip program and as you said that you are seeing the market continue. And do you have any evidence of that besides the fact that you have seen this pump this quarter?

[Michael Minogue:]

I think the evidence is in the numbers. And in the physician community on what they are talking about in the publications that are out there in regard to the benefits of treating this patient population.

[Operator:]

And our next question comes from the line of Chris [indiscernible] from Stevens. Your line is open.

[Unidentified Analyst:]

If I may, I just wanted to clarify a couple of quick things maybe Bob. When you were talking about the near-term changes to capacity would this level of the growth that you’ve seen in this most recent quarter are you now getting close to be in capacity constrained. Just trying to get a better feel for what you may or may not be undertaking there and how quickly that gets completed. And then I just have one additional follow-up. Thanks.

[Robert Bowen:]

Yes, Chris we are not capacity constrained. Exiting this fiscal year our capacity is about 400 million and it's higher. Already our plans are exceeding next fiscal year; we are just planning for the future and want to take that issue completely off the table on a go forward basis for us. So we are going to continue to build out our capacity. We did rent some additional -- leased some additional space here at our Danvers facility. And so that’s just going to be a continuing focus on the organization.

[Unidentified Analyst:]

And then maybe just if I could, one other additional question and kind of, there have been couple of [indiscernible] published actually this week on the advance line talking about LVADs and their ability to help the heart muscle remodel overtime. I know this is something that you have guys have discussed in for ages. Does that help from just a broader discussion of remodeling and clearly you already have a wealth of clinical evidence. But I am just curious kind of how you see that in the overall clinical body of evidence that scheme of things, does that help. Is it a nonevent at this point just your thoughts there Mike.

[Michael Minogue:]

So Chris the remodeling of patients that have worn out hearts is something that’s been talked about for a long time. The challenge with the option of an LVAD is that you have to core the left ventricle. You change the geometry, you remove muscle and it’s a very invasive procedure. So even if there is some benefits you have pretty much reduced a lot of your coronary blood flow and you have had atrophy to the muscle which is why the European studies use [indiscernible] which is a muscle stimulant that's actually outlawed in the United States and is used in horses and things outside the U.S. So what we’re talking about is looking at the patient population that may have bad heart function. But it’s not necessarily due to the muscle and what the LVADs do very well is they keep people alive to give them quality of life and they help many of them to go on to a transplant. So that’s great technology for that patient population. The population we’re talking about that we’d like to help focus on is patients that have heart value but it's due to a ischemic disease. So it means that they’ve got coronary blockage they’ve got, there vessel getting enough blood flows into the heart, into the coronaries and by doing extensive revascularization as a lot of this PCI studies have shown with or without hemodynamic support, that is a benefit to these patients. And then all of our FDA studies and all our registry data, the patients that were treated and protect one protect two euro and U.S paella all saw a sustainable increase in their injection traction at 90 days and more than half moved out of class three and class four. And this has been published and in FDA studies. So this is a quality of life benefit and it’s not something that invasive and it’s pretty cost effective, most of the patients are in and out of the procedure within a day or two, they are out of the hospital. The other side of this patient population is the acute population and everyone’s is talking about a growing epidemic of heart failure. The growing epidemic is because we’ve got very good at keeping patients alive with the plumbing and the electricity with stens and pace makers and some drugs and that has improved survival. However there is also recent papers that are out that show that still around 10% or 7% to 10% will die. But those that live approximately 70% will lose muscle, they will have an issue and of that 40% to 50% of those patients will be dead in five years from heart failure. So what we’re trying to do is treat a different population to either help avoid having heart muscle die or help the heart function improve by allowing for a minimally invasive procedure. And that’s really our focus but it’s in conjunction with what the LVAD companies do and in many ways we’re working together with them and with the heart surgeons now whether it’s supporting a patient to get them to a level or now in the future use the Impella RP to help improve their outcomes.

[Operator:]

And now this time I am showing no further questions and I will like to turn the call back to Mrs. Michael Minogue for any closing remarks.

[Michael Minogue:]

I just want to thank everyone for their time and their support and if there is any question, feel free to follow up. Have a great day.

[Operator:]

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