Abiomed, Inc.
Q4 2015 Earnings Call Transcript

Published: 5 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Abiomed Q4 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. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Ingrid Goldberg, Director of Investor Relations. Please go ahead.

[Ingrid Goldberg:]

Good morning, and welcome to Abiomed's fourth 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 from the fourth fiscal quarter and full fiscal year, and then turn it to our key operational and strategic objectives. Next, Bob will provide details on financial results outlined in today's press release. We'll then open the call for your questions. Before turning the call over to Mike, I would like to remind everyone on the call that this presentation includes forward-looking statements about the 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. 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 factors appears under the heading Forward-Looking Statements in the press release we issued this morning and in Part 1, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended March 31, 2014; and Part 2, Item 1A, Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2014, which are filed with the SEC and available at www.sec.gov and also on our website at www.abiomed.com. The forward-looking statements in this presentation speak 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. I'm now pleased to introduce Abiomed's Chairman, President and Chief Executive Officer, Mike Minogue.

[Michael R. Minogue:]

Thank you, Ingrid. Good morning, everyone. Abiomed had another breakout quarter, signifying the acceleration of Impella into the adoption curve. I am proud of our employees and grateful to our dedicated customers that allowed our company to achieve our best ever quarterly results with $67.6 million in revenue and 34% in growth. U.S. patient utilization set new highs, with a robust 42% growth rate, driven by record number of patients in prophylactic and emergent support. It is worth noting that high-risk PCI with Impella support, what Abiomed now refers to as protected PCI, grew 53%. These outstanding results prior to our PMA approval validate the FDA recognition of the growing clinical need and new patient population. This first of its kind FDA approval makes Impella the only safe and effective percutaneous circulatory support device for the high-risk PCI indication. Abiomed has now grown top line revenue double digits year-over-year for 22 straight quarters, and our results demonstrate the incredible potential of Impella becoming the standard of care in the United States. We are committed to this ultimate goal and we'll continue to prioritize and invest in our field and headquarters' capabilities, while maintaining rigor and discipline in our training and product launches. For today's call, we will first provide an update on the size of the market opportunity for protected PCI in the elective and urgent population and, second, expand upon some of our post-market approval, marketing, and educational programs. The elective and urgent high-risk PCI market is a growing population for the cath lab, which we estimate at over 50,000 patients in the United States. These patients may benefit from PCI but have poor heart function, complex coronary artery disease and comorbidities that likely require hemodynamic support for complete revascularization in high-risk intervention. Most of this patient population has likely been turned down or not considered for surgery by a heart team because of their age or prior surgical risk factors. The Impella approval allows for more focus on these patients that may not have other options and/or may be unaware of the benefits of protected PCI. We have amassed a library of clinical data with over 225 publications, referencing three FDA studies, our Impella registry and real world usage. In addition, Impella has supported over 25,000 U.S. patients and was referenced in our sixth AHA/ACC Guideline. However, prior to the FDA approval, we were limited in educating the broader physician community and patients. This has changed effective immediately. For the first time, Abiomed will now be able to assist our users in the patient identification process and highlight the clinical benefits of protected PCI with a 29% reduction in MACE, a 58% reduction in heart failure classification, and a 52% reduction in repeat procedures. With the PMA for high-risk PCI, the FDA has acknowledged this elective and urgent patient population. In an effort to demonstrate the significance of the approval, the following outlines some of our new programs. We are now able to provide direct education and training to interventional and referring cardiologists on how to identify and treat patients that may benefit from protected PCI. We are also providing educational slides, Impella clinical dossiers and marketing tools to hospitals, physicians, and administrators on how to expand their practice and improve outcomes as well as highlight patient case studies. In addition, Abiomed has launched a mobile learning lab circling the United States. This 18-wheel double-wide trailer brings the TCT booth experience to the hospital door, drawing 50 customers to 100 customers each day, staffed by our clinical experts, teaching with our most advanced Impella simulators. And last, we have newly introduced Protected PCI website. It has both direct to patient and direct to physician portals, and can be found at www.protectedpci.com. On other initiatives, our emergent business is also experiencing strong growth and was up 42% in Q4. With regards to our pending FDA supplements, Impella RP rollout and the Japan regulatory process, all are proceeding as previously stated in prior earnings calls and company communications. In summary, this quarter and fiscal year, Abiomed executed and achieved high growth, regulatory approvals, and sustainable profitability, and is positioned to address a substantial clinical need as Impella becomes the standard of care. We are financially sound and operationally prepared for many years of double-digit profitable growth in a $2 billion market opportunity. Abiomed would like to thank the FDA for their extensive review, and all our stakeholders for their support. I specifically want to thank all of our employees for their hard work and dedication to our customers and patients. After 11 years as the Abiomed Chairman and CEO, there has never been another time with more excitement and confidence in our future. We know our success comes from our patients first culture, and our commitment to meaningfully impacting the lives of our patients and helping our physicians improve outcomes. I will now turn the call over to my CFO, Bob Bowen.

[Robert L. Bowen:]

Thanks, Mike. Good morning, everyone. As noted in this morning's earnings release, fiscal fourth quarter revenue increased 34% to a record $67.6 million, from $50.4 million in the prior year. On a constant currency basis, revenues increased 36%. This is the second consecutive quarter, where revenue growth exceeded 30%. And for the fourth fiscal quarter, this is particularly notable, given a more difficult comparison to the prior year, worldwide total Impella product revenue of $63.4 million grew 38% from $46.1 million in the prior year. In the U.S., Impella revenue of $57.7 million grew 38% from $41.8 million. This growth was due to Impella patient use, which was up 42%. The resulting Impella catheter reorder revenue, which totaled $51.7 million was up 46% and represented approximately 90% of total U.S. Impella revenue. Outside the U.S., Impella revenue grew 30% to $5.7 million and was up 56% on a constant currency basis. Average Impella 2.5 and Impella CP combined unit inventory at hospital sites was 2.71 units, compared to 2.65 units in the prior sequential quarter and 2.60 units in the prior year. We believe average site inventory levels of the Impella 2.5 and Impella CP combined will trend towards 3 units per site, as sites increase utilization. Nonetheless, we expect sites will continue to carry the lowest reasonable Impella unit inventory level and rely on Abiomed for restocking based on patient usage, which is our preferred model. With regard to the breakdown of patient utilization, 47% of patient use was in an elective or urgent setting and this segment grew 53% from last year; 44% was in an emergent setting and this segment grew 42% from last year; and 9% was all other, which was essentially equal to the prior year. Gross margin for the quarter expanded to 84% compared to 79.9% a year ago, up 4.1 points, due mostly to the benefit from higher unit catheter revenue, higher production volume and a weaker euro. AIC console placements during the quarter was essentially unchanged at 130 this year, compared to 133 in the prior year. For the full year, gross margin rates of 82.7% were up 3 points from the prior year. For fiscal 2016, we are increasing our expected gross margin rate guidance to be in the range of 83% to 85% from our previous expectation of 80% to 82%. R&D expense for the fourth fiscal quarter and full year totaled $9.9 million and $36 million respectively, and was approximately 15% of revenue. We expect R&D expense to remain at approximately 15% of revenue for fiscal 2016. R&D expense includes research on next-generation products, product enhancements to the current product portfolio such as the Opsens sensor, clinical studies including the U.S. Impella registry, regulatory filing expenses, and a full year of expense for ECP. Not unlike fiscal 2015, we expect R&D expense as a percent of revenue to be higher in the early part of the year and trend downward toward the end of the year. SG&A expense for the fourth fiscal quarter and full year totaled $34.5 million and $125.7 million respectively and for the year, was approximately 55% of revenue. We are continuing to invest in our field personnel, training, customer support, and marketing initiatives, particularly those that are incorporated into our launch of protected PCI. For fiscal 2016, we expect SG&A expense as a percent of revenue to tick down a couple of points from fiscal 2015, and also to be higher as a percent of revenue in the first half of the year than in the second half. Operating profit for the fourth fiscal quarter of $12.4 million or 18.3% of revenue, more than tripled from the prior year, reflecting the substantial leverage of our business model. GAAP net income for the quarter of $98.9 million and for the year of $113.7 million included an income tax benefit of the $86.5 million, primarily due to the release of our valuation allowance on most of our deferred tax assets. This is a one-time accounting adjustment with the offset recorded on the balance sheet as short and long-term deferred tax assets, based on our determination that these deferred tax assets are realizable from sustained future profitability. The deferred tax assets are primarily net operating loss carryforwards in the U.S. and Germany that we expect to utilize to offset future tax liabilities. Remember, these net operating losses were incurred over a period of many years due to the high levels of investment needed to bring new medical device technologies to market. For future year modeling purposes, our estimated combined federal and state income tax rate for accounting purposes will approximate 40%. Our balance sheet remains in excellent shape and we ended the quarter with cash and short and long-term marketable securities of $146 million. Notably in the fourth fiscal quarter, cash provided by operating activities less expenditures for plant, property and equipment totaled $15.2 million and for the year totaled $38.1 million. We expect to continue to generate strong cash flows in fiscal 2016 and expect to use approximately $15 million to $20 million to expand our facilities in both our Danvers, Mass and Aachen, Germany locations to support additional manufacturing capacity and growth in our operational support infrastructure. Our philosophy is to eliminate any risk of limitation in our supply chain in support of our journey to become standard of care. Turning to guidance, as noted in our earnings release, we have increased the full year fiscal 2016 revenue guidance and the new range is now $285 million to $295 million, representing growth of 24% to 28% from the prior year. This new range compares to the range noted on our last conference call of $260 million to $270 million, which at the time represented an estimated increase of 15% to 21% from the prior year estimate. Our guidance includes approximately $4 million to $6 million of revenue from the launch of Impella RP, as we plan to continue to govern the pace of the launch, maintain rigor in training and focus on optimal patient outcomes as the best route to becoming standard of care. In addition, we have not yet incorporated Impella revenue from Japan and will provide updates later in the year, as we get closer to approval. Consistent with historical patterns, we expect to see higher revenue levels in the second half of the year than in the first half. We have high levels of confidence in our guidance, and we have a history of performance. I would also like to note that we expect top tier medical device industry revenue growth for several years and will provide additional color at our investor meeting planned for later this year. Also as noted in our earnings release, the company is giving its fiscal year guidance of GAAP operating margin to be in the range of 12% to 16%. In summary, this past year was a record year for Abiomed in terms of patients treated, financial performance and shareholder returns. It was also a validation of a new high-risk patient population and inflection point along our journey to become a new standard of care. Operator, would you please now open the line for questions.

[Operator:]

Thank you. . And our first question comes from Danielle Antalffy of Leerink. Your line is now open.

[Danielle J. Antalffy:]

Thanks so much. Good morning, guys. Thanks for taking the question, and congrats on another – yet another awesome quarter. Mike, I was hoping you could give a little bit of color, obviously, RP has now launched. How much did that contribute in the quarter? Any sort of level of clarity around the contribution of RP would be excellent.

[Michael R. Minogue:]

Sure. The contribution was very small. Because of the snow storms we had in the beginning of the calendar year, we had to cancel the first three courses. We currently have nine sites that are ordering from a commercial perspective, and we have 20 sites that have received RP approval.

[Danielle J. Antalffy:]

Okay, that's really helpful. Just a follow-up on that. Will you guys break out RP in the future or not?

[Robert L. Bowen:]

Yeah. I mean we normally, Danielle, give the percent of revenues and patients for each product, and I would expect that we would continue to do that. As Mike mentioned, we're just really getting started with the RP, there was some delays because of the weather. But we're very positive on how the launch is going to proceed. We're just – as we've indicated before, it'll be a controlled launch focused on patient outcomes.

[Danielle J. Antalffy:]

Okay. That's...

[Michael R. Minogue:]

As a reminder, Danielle – as a reminder, in order to receive the RP, the sites have to come in-house for training and that's the entire heart team. So it's interventional cardiologists, it's the cardiac surgeon, heart failure cardiologist and lead nurse. So the snow storms affected the ability to do the in-house training. But we're ramping it back up and we're still on schedule to what we had anticipated, which was to have 20 sites for the first half of the fiscal year.

[Danielle J. Antalffy:]

Got it. Understood. And then just wanted to follow up on the commentary on that the way we're looking at the market opportunity now. Mike, does this change at all the cadence of you bringing new centers online for the Impella 2.5, i.e., does that accelerate that or should we still be thinking about this as sort of 25-ish sites per quarter? Thanks so much.

[Michael R. Minogue:]

Thanks, Danielle. We currently have 968 sites with the Impella 2.5. It will not change the pace that we will open new sites, is still going to be in the 20 to 25 range per quarter. And we continue to remain focused on going deeper and training more physicians at our existing sites.

[Danielle J. Antalffy:]

Perfect. Thank you so much for taking the questions.

[Michael R. Minogue:]

Thanks, Danielle.

[Operator:]

Thank you. And our next question comes from Chris Cooley of Stephens. Your line is now open.

[Chris Cooley:]

Good morning and thank you for taking the questions and congratulations again on a record quarter. I wanted to see if we could maybe just go back, I know you mentioned that Japan was not in the guide for the upcoming year, but could you walk us through just in terms of your expectations there. I believe it was mid-calendar year this year, Ministry of Health and Welfare [Ministry of Health, Labour and Welfare] approval with reimbursement around calendar year end. But could you just update us on your thoughts there as well as Symphony, which is something we haven't heard about in some time? Thanks so much.

[Michael R. Minogue:]

Thank you for the question, Chris. Our timeline for Japan is the same as previously stated, which means in the January to March timeframe, or our Q4, we'll have a limited commercial release at selected sites. We expect the approval obviously in the third quarter of our fiscal year and the reimbursement to happen in that time or at the beginning of our fourth quarter. In regards to your question on Symphony, we have made some product enhancements and we've been doing certain research work on some of the changes. And we'll give further updates on our product development at the upcoming investor meeting, which will happen this summer.

[Chris Cooley:]

Thank you.

[Michael R. Minogue:]

Thanks, Chris.

[Operator:]

Thank you. And our next question comes from Raj Denhoy of Jefferies. Your line is now open.

[Raj S. Denhoy:]

Hi. Good morning. Wonder if I could ask a bit about the evolving view of this inoperable population that you're finding out there that simply weren't being offered PCI or surgery. Do you have a sense of how big that is and are certain centers discovering it quicker than others? And maybe just a sense of how that's kind of developing, because it does seem from your comments that that's really what's supporting this, really, reacceleration or this new gear of growth you've found here. So maybe some just comments around that would be helpful.

[Michael R. Minogue:]

The market for high-risk PCI has been defined in the past on the number of patients that were receiving PCI with an intra-aortic balloon pump. Our historical research suggests that that number was around 25,000 to 30,000 patients per year in the U.S. Now that Impella has entered the market and has the ability to really provide stronger hemodynamic support and the population of heart failure patients continues to grow, what we're finding is patients that have Class III and Class IV with ischemic disease or severe coronary artery disease have the ability to have a treatment that can improve their ejection fraction and improve their heart classification by reducing it 58%. The numbers that we look at, Raj, are based on populations around Class III and Class IV, which are approximately 1.6 million Class III and 300,000 Class IV, and then the other references that we see relative to coronary artery disease, which is pretty significant. We've also followed a little bit of the model that the percutaneous valve companies have launched. And what that looks like is patients that are now out in hospice care or in clinics that have limited options, and what they're doing now is screening them to see if there's any ability to improve their quality of life. When you look at the percutaneous valve studies, it was definitely heart team focus, and the average age was around 80 years old. And when you look at the PROTECT II study, the average age is 67. They're young, but they just have poor heart function and they can benefit from this PCI. So, as we have moved forward, what we're really focused on is getting the appropriate use, the appropriate patient population, and working as a heart team to identify that group, which is currently a Class I recommendation for the AHA and SCAI guidelines. And that's why this population continues to grow because there is somewhat of a very large heart failure population in general and in some cases, people refer to it as an epic population because we're improving the outcomes of these patients to live longer. However, many of them are suffering from congestive heart failure and getting classified as Class III and Class IV.

[Raj S. Denhoy:]

Okay, that's helpful. But maybe I could ask it a slightly different way. I mean, you certainly – I mean, one thing that's just been staggering in the last couple of quarters is this new level of growth in this mid-30% range, right. And as you noted, this is even in the absence of really having the PMA in hand and the ability to market Impella aggressively. And if you think about what's been behind this new level of growth, is it simply, as you described it, finding this new patient population, is it an increase in sales force, is it – just something that we can kind of tangibly get our hands around that really suggest that this is kind of sustainable at this rate. I know your guidance is slightly below this, but still, this new level of performance from the company.

[Michael R. Minogue:]

We stated in Q3 that we believe the growth was the tipping point, where we've achieved a critical mass in Impella relative to six guidelines, over 200 publications and all the product awareness. In Q4, momentum did continue and certainly, high-risk PCI accelerated at 53% growth, and we believe, it does demonstrate that there is a large population. And I think that the population has been there, but part of the process has been through education, through the guidelines, and now through the regulatory acknowledgment from the FDA that this is a feasible option for these patients.

[Raj S. Denhoy:]

Great. That's helpful. Thank you.

[Operator:]

Thank you. And our next question comes from David Lewis of Morgan Stanley. Your line is now open.

[James Francescone:]

Hey, guys. Thanks for taking the question. This is actually James in for David.

[Robert L. Bowen:]

Good morning, James.

[James Francescone:]

I was wondering with a little bit of PMA experience under your belt, I was hoping you could comment a bit on the heart team language required in the label and how that process of approving patients with the heart team is playing out in the real world. How does the level of detail in those reviews compare to, say, the processes, the more familiar procedures like TAVR? And over time, do you see that as being a gating factor at all for utilization?

[Michael R. Minogue:]

We received the PMA the last week of the quarter. So I'll basically comment on the end of the quarter and then we don't comment on current quarters. But James, the involvement of the heart team, which includes the cardiac surgeon, is not new. Our indication is consistent with the Appropriate Use Criteria that was established by the medical community and that was documented in the 2011 ACC/AHA guidelines, and that's for revascularization. We do not anticipate any change based on our label and each hospital follows an Appropriate Use Criteria and/or has an algorithm to decide the treatment options. What the FDA approval does is it further strengthens our ability to engage and educate the referring physicians and patients on the benefits of protected PCI. And as we've been out surveying, getting ready for the PMA launch, it was very obvious that the heart failure community in general really did not have any awareness to the clinical data and the studies that that we provided to the FDA.

[James Francescone:]

Okay, thanks. That's helpful. And then second for Bob, just with respect to the margin guidance, obviously in the prior two quarters, you've been right at around 20% operating margin and your gross margin continues to get higher. So there is some spending on SG&A, anything aside from supporting the launch in the U.S. that we need to be thinking about, from a margin perspective, into 2016 in terms of why you can't continue to achieve margin levels that you saw in the back half of 2015?

[Robert L. Bowen:]

Well, James, I think it's – I mean the – it's sort of maintaining where we are with the R&D for the areas that I called out in my script. And in the SG&A area, it is basically just to continue an investment in the field organizations, and we do have some funds set aside also for the Japan launch.

[James Francescone:]

Okay. Perfect. Thank you.

[Operator:]

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

[Benjamin Andrew:]

Hey, good morning. Thanks for taking the question. Mike, maybe talk through how your conversations with hospitals are going when it comes to the discussing the reimbursement process and how they're coding specifically for this. Because, obviously, as the volumes go up, maybe you get a little bit more sensitivity to the cost of the device. And how hospitals are dealing with that, how it's fitting within the existing codes; what codes they're using to bill under, please?

[Michael R. Minogue:]

Thanks for the question, Ben. The codes we use is primarily DRG 216 and that's been in place since 2008 when the device got 510(k) clearance. Relative to the way the discussions are going is it's notable to look at what happens to our patients in our studies. And when you track the outcomes from the procedure to 90 days, that matches the way hospitals are being rated today from CMS on their quality metrics. So specifically, all hospitals are being rated from discharge to 90 days on three criteria. One is heart failure, which is a subset – protected PCI is a subset. One is AMI, which is emergency patients; and one is pneumonia, which we have no impact. So two of the three key parameters for their metrics, Impella has the ability to impact. And specifically, what we do is we reduce – with the Impella protected PCI – we reduce those out of hospital adverse events. On a hard basis overall, something called MACE, it's a 29% reduction. For the patients, you're looking at really a drastic improvement in the way they feel, that's the 58% reduction in heart failure. And that's something that's very important to CMS, because they're looking at the quality of life and the benefit of these patients. And then last is, there's a huge focus on hospitals for readmissions, and the Impella data shows a 52% reduction in repeat procedures. So the 52% reduction for that patient – that 70-year-old from coming back to the hospital to have a repeat procedure. And it was also important to note that in the FDA press release on the approval, they also noted that the Impella had the ability to have fewer, later adverse events and gave an example as the need for repeat high-risk PCI procedures. So what we're looking at is showing the benefits of better care and what those benefits mean in reducing a length of stay at the hospital, but most important how, the patient can improve their quality of life and improve their heart function.

[Benjamin Andrew:]

Okay. No, that's great and obviously the co-pays at an attractive rates for the hospitals, is there – have you had any pushback from any of the regional payers or others about the rate or trying to use different codes, as opposed to obviously the hospitals would rather use a higher paying code?

[Michael R. Minogue:]

Sure. The CMS process is very thorough and they have a very experienced bull pen of physicians and we have communication with them on an ongoing basis. Now, that we have an FDA approval that says we're the only safe and effective device for high-risk PCI, that should only strengthen and help us in our discussions with the regional payers, but we have not had any changes to reimbursement from CMS since 2008. And we have an FDA approval now for prophylactic use and we have Class I recommendations for emergent use. So we continue to work with them, but I believe this is why Impella is one of the most cost-effective devices in med tech and it's because we have hard information, hard data that shows these kind of improvements in quality of life and also a reduction of these adverse events that are out to 90 days post discharge.

[Benjamin Andrew:]

Sure. That's great. That's very helpful. Two more topics from me. If you think about the trajectory of balloon pump usage at some of your higher utilizing sites, even in the few months since you've had the new guidelines and obviously the approval, what are you seeing? Does it go to zero, does it get cut in half, is it supplemental? What's kind of the range of the behaviors you're seeing from customers?

[Michael R. Minogue:]

Ben, at our most active sites that are doing advanced work in hemodynamics, they no longer use a balloon pump for most of the patients with two exceptions. One is if there's a physician, who has not gone through the learning curve, and they're not comfortable with the new technology, and they might rely on the balloon pump because that's what they've been using for 20 years, 30 years. The other is patients that are looking for somewhat of a tune-up before an open heart surgery, the balloon pump can provide coronary enhancement, but it's not a hemodynamic device for that patient population. So that's the trend we see at our busiest sites.

[Benjamin Andrew:]

Great. And then finally on the manufacturing expansion that Bob mentioned before, the gross margin guidance was exceptional, is there a window at some point over the next year or two when we could see that dip based upon those – that capacity coming online or can we think of this as more of a smooth ramp and not big chunks of capacity coming online, that would be underutilized? Thank you.

[Robert L. Bowen:]

Yeah. Ben, I think it's generally going to be a relatively smooth ramp, and we will add capacity – or I mean we're building out the capacity. The operators actually will be hired over a period of time and so I expect the ramp itself to be relatively smooth. We just want to be prepared for the upside that we see in the business.

[Benjamin Andrew:]

Okay. Thank you very much.

[Operator:]

Thank you. And your next question comes from Brooks West of Piper Jaffray. Your line is now open.

[Brooks E. West:]

Hi. Thanks for taking the questions. Bob, was hoping you can help us with cadence a little bit. Obviously, you just got the high-risk PCI label at the end of March. You've got some easier comps in the first half. Can you just kind of help us – do you expect a bigger growth year-over-year in the first half of the year or kind of a nice ramp of growth? How should we think about just the cadence throughout the year?

[Robert L. Bowen:]

Hey, Brooks. So I think our expectation is that the cadence will be not unlike it's been in prior years. So we will see more growth in the second half than in the first half. As you know, the first and second quarters for us have always been more challenging than the third and the fourth quarters. We have this new label and this new protected PCI launch, but this is also new territory for us. So we are going to learn as we go. And I think that's kind of pretty much what our guidance incorporates.

[Brooks E. West:]

Okay. So typical split of revenue quarterly. That's the way to look at it.

[Robert L. Bowen:]

I would use a typical split, yeah.

[Brooks E. West:]

Okay. And then going back to the operating margin question earlier. I think looking out a couple of years, investors see the ramp in revenue. They see the market opportunity, your ability to hold even R&D at 15% maybe three years, four years out is going to be challenging. Can you just help us think a little bit about what is the potential for operating margins at the multiyear of double-digit growth rate, Mike, that you're talking about maybe three years, four years out from now?

[Robert L. Bowen:]

Yeah. So I think, Brooks, right now, we think the right thing to do is to be investing in what we see as an extraordinary growth opportunity that comes along very few times in a lifetime. We have a first approval – PMA approval for the Impella 2.5. We've got supplements to submit, and when those come along, those will be additional catalysts for the business. So, our focus is really on driving the top line and that's how we're basically operating the business right now. On a longer term basis, there's certainly no doubt in my mind – and I think we've demonstrated this by virtue of the fact that, from time-to-time, our investment levels haven't kept pace with the growth of the business. That could happen again in fiscal 2016. But there's no doubt in my mind that in the long term, we will have top tier industry level operating margin rates.

[Brooks E. West:]

And just as a couple follow-ups there. So you mentioned the PMA supplements, is there any update on timing on submission there, when you expect those to come through?

[Michael R. Minogue:]

Brooks, this is Mike. Now that we have the PMA approved, we're working through all the specifics with the FDA for the remaining supplements for the products and the indications. Our current plan is to be prepared to submit the additional supplements by the end of September.

[Brooks E. West:]

Okay. Perfect. And then I guess two more for me, if I could. Mike, there was a question earlier about new center adds but it – I felt like you've been guiding us towards less of a focus on new center adds at least in the U.S. and more of a focus on penetration. Can you talk about what is the market that you're focusing on from a optimal number of centers? Question one. And then, as a follow-up to that, shouldn't your incremental SG&A spend or at least S spend come down as you're not really supporting as many centers to fund growth?

[Michael R. Minogue:]

Brooks, our main focus is, as you have stated, it's really to go deeper at existing centers. Now that we have the PMA approval, we can really engage with the heart failure community, the referring physicians and also direct to patients. And we believe that our existing sites are trained and ready and will provide the best quality and rigor in the procedural success rate. So that's really what we're focused on. And then relative to the SG&A spend, Bob's already outlined that this year and we're really focused on getting the type of growth that maintains quality and rigor in the outcomes and the training, because that's how you become the standard of care. So we're not going to try to run too fast, and we're not going to try to have any physicians starting to ramp procedure if we don't feel that they have the experience or expertise level. So we're going to do extensive training and we're going to be involved in opening up and supporting the physicians to have better patient outcomes.

[Brooks E. West:]

Right. Thanks, guys.

[Operator:]

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

[Jayson T. Bedford:]

Good morning and congratulations on the progress. Just a few questions. On the supplements for Impella CP and Impella 5.0, will the initial indication be the same as the one you received for the Impella 2.5 or will be it different?

[Michael R. Minogue:]

Jayson, we will be submitting for the Impella CP and the Impella 5.0, we will be submitting for additional indications. Some are larger, some are smaller. Things that have to do with myocarditis and postpartum cardiomyopathy. And we do have several publications and an FDA study on the Impella 5.0, which tends to be more of a heart failure patient and more of a patient that has low cardiac output or shock. And then just to remind all our investors, our U.S. registry on Impella is – has been a significant investment and we're going to continue to build that out. We've established a separate data collection, we have our own Executive Committee, and we're – in the end, we will create what is the largest database of high-risk patients that exists in the world.

[Jayson T. Bedford:]

All right. Thanks. On the post approval study, how long do you think it'll take to finish enrollment and when could we see data from the trial?

[Michael R. Minogue:]

It's probably too soon to tell. We're still working through all the specifics and we'll give updates as we go, Jayson. It's just a matter of how fast the enrollment and the sites that are willing to go through and create that type of rigor on something that they're supporting commercially.

[Jayson T. Bedford:]

Okay. And then finally maybe for Bob, can you break out the revenue contribution from Impella CP, Impella 2.5 and Impella 5.0?

[Robert L. Bowen:]

Sure. So the Impella 2.5 this quarter was 26%. The Impella CP was 65%, the Impella 5.0 was 7%, and there's 1% left over some console sales, and a little bit of RP.

[Jayson T. Bedford:]

Got you. Thanks.

[Operator:]

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

[Jan D. Wald:]

Good morning, everybody. Congratulations on the quarter. As you might imagine, most of my questions have been asked. But I guess one question I have is, on the training and education program, I'm sure there is a lot of activity there, but can you talk about maybe the pace of the program and what you expect out of the program in terms of the number of docs educated, let's say, over the next fiscal year or something like that, just to get a better understanding of what – who and how many docs are going to be trained on the device.

[Michael R. Minogue:]

Jan, thank you for the question. I think there's two pieces to the education for physicians. The first is ensuring that our users that have the most experience have all the tools that they need and all the support that they need to continue to treat the patient population that is growing. And we also want to provide them tools that they can use with their hospitals, their administrators, and their referring physicians to create more awareness of the benefits of protected PCI. The second piece of our education is really directly to the heart failure community. And this is a community that we haven't been able to engage in in the past, because we did not have the regulatory approvals, and to ensure that they understand that you can have a high-risk PCI patient that is Class III or Class IV, and if they have ischemic disease and you do an extensive revascularization on this patient, you have real benefits in improvements in their quality of life and improving their heart failure status. And so that's been documented in all of our European studies and in the two FDA studies PROTECT I and PROTECT II. We are not looking to go out and create all new sites with all new physicians. The product has been out under the 510(k) clearance since 2008. So really it's about making sure our best users have all the tools they need to ensure their success, and then to bring on the next level of adopters that have used Impella but have not created a protected PCI practice, or who have not used it as extensively as some of their best users, and that's really the focus right now at our existing sites.

[Jan D. Wald:]

Okay. And I guess my last question is, you talked about Symphony, but it's – in terms of new product opportunities and where you're going to be going and how you're going to be investing in R&D over the next few years, could you talk a little bit about that strategy?

[Michael R. Minogue:]

Jan, the amazing thing about our portfolio right now is that the Impella portfolio from the left side to the right side can potentially treat multiple types of patients, and we're very focused on being the standard of care for percutaneous hemodynamic support, which is a large population of patients as well as now this protected PCI population. And if we do a good job here, and provide a clinical solution for these patients, we're looking at a $2 billion opportunity in the U.S., Germany, and Japan alone. So we're very focused on our existing product. However, we do have the world's smallest heart pump. We do have extensive IP. So you're going to see us continue to improve the existing products to make them easier to put in, better quality as we expand the regulatory approvals on them. And then later this summer at our investor day, we'll show a little bit more of things we're working on, but again, we want to remain focused on this core opportunity to become the standard of care.

[Jan D. Wald:]

Okay. Thank you very much and congratulations.

[Michael R. Minogue:]

Thank you, Jan.

[Operator:]

Thank you. And I'm showing no further questions at this time. I'd like to turn the conference back to Mr. Mike Minogue for any further remarks.

[Michael R. Minogue:]

We just want to thank all supporters and if you have any follow-up questions, please feel free to call in direct. Have a great day.

[Operator:]

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