Abiomed Inc (NASDAQ: ABMD) Q3 2020 Earnings Call Transcript

Abiomed Inc (NASDAQ: ABMD) Q3 2020 Earnings Conference Call

February 06, 2020

Corporate Participants:

Todd A. Trapp — Vice President and Chief Financial Officer

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Analysts:

Raj Denhoy — Jefferies — Analyst

Matt O’Brien — Piper Sandler — Analyst

Danielle Antalffy — SVB Leerink — Analyst

Chris Pasquale — Guggenheim — Analyst

Jayson Bedford — Raymond James — Analyst

Marie Thibault — BTIG — Analyst

Chris Cooley — Stephens Inc. — Analyst

Margaret Kaczor — William Blair — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 Abiomed Earnings Conference Call. At this time all participants lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Mr. Todd Trapp. Sir, you may begin.

Todd A. Trapp — Vice President and Chief Financial Officer

Thank you, Crystal. Good morning and welcome to Abiomed’s third quarter fiscal 2020 Earnings Conference Call. This is Todd Trapp, Vice President and Chief Financial Officer, and I’m here with Mike Minogue, Abiomed’s Chairman, President and Chief Executive Officer.

The format for today’s call will be as follows; first Mike will discuss third quarter business and operational highlights and then I’ll review our financial results, which were outlined in today’s press release and webcast presentation. These documents can be found on our website under the Investors section. After that, we will open the call to your questions.

Before we begin, I’d like to remind everyone that today’s call includes forward-looking statements. The company cautions investors that any forward-looking statements that involve risks and uncertainties and are not a guarantee of future performance. Actual results may differ materially due to a variety of factors identified in our earnings press release and in our most recent 10-K and 10-Q filed with the SEC. We do not undertake any obligation to update forward-looking statements.

With that, let me turn the call over to Abiomed’s Chairman, President and Chief Executive Officer, Mike Minogue.

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Thanks Don. Good morning everyone. In the third quarter, Abiomed delivered $222 million of revenue, up 10% year-over-year, with an operating margin of 31.7%. As previously disclosed, we had a strong start to the quarter, highlighted by 24% global revenue growth in October. However, within the quarter, the company was negatively impacted by two misleading presentations at the American Heart Association American Heart Conference in mid-November.

And we remain steadfast on our goal of creating the new field of heart recovery and becoming the standard of care for circulatory support, which requires Class 1 clinical guideline recommendations for high-risk PCI and cardiogenic shock. Today, we are announcing the start of the next wave of clinical studies, designed by the true experts in the field, with best practice protocols, derived from 15 years of clinical experience and studies. In the history of the company, I feel most confident now about the strength of our innovation, clinical outcomes with protocols and field team.

We also have the infrastructure and expertise to execute multiple clinical trials. Our customers are energized and motivated to attempt again to randomize high-risk patients and further validate the clinical benefits of Impella’s support. Our formula for success has been training, data and time, while we continue to innovate and improve patient outcomes.

On today’s call, I will provide updates on physician education, current and expanding clinical data and studies, and I will also highlight our breakthrough innovation. Before I get into these initiatives, I would like to comment on the AHA presentation published in its journal called Circulation. To be clear, Abiomed believes that the medical field is enriched and advanced by free debate about the merits of technology and its clinical benefits. We vigorously support fair platforms for this important process. We have been the leader in this space for clinical research, and building real world evidence for circulatory support.

The circulation publication is misleading, because the authors manipulated a subset of 4% of our patients over a 10 year observational database, and did not disclose the analytical methods to other researchers, and waived the Institutional Review Board because the study was determined to not be human subjects’ research. Both the publication and the other presentation from nearly the same authors, contain factual inaccuracies that demonstrate a lack of knowledge of the totality of the Impella data and FDA regulatory process. The circulation paper and NCDR presentation, both excluded the sickest IAB patients, who were escalated to other therapies and all ECMO patients, which is the treatment most utilized at the authors hospitals. Abiomed requested that circulation have the authors validate the data with another third party research organization or the FDA directly to audit and scientifically validate what the authors state in the abstract and apply consistent standards to other observational studies. This request was denied.

Based on the reputation of this journal, this paper is currently impacting Impella utilization, Impella physician referrals, and ultimately and most frustrating, patient care in favor of inotropes, IABP and ECMO with virtually no positive data on effectiveness and no independent FDA studies. We have consistent response to all of these positive and negative billing database papers mixing elective high-risk PCI patients with cardiogenic shock patients with mortalities ranging up to 95%. Abiomed has collected and studied patient data on the vast majority of Impella U.S. patients since 2006 and has better visibility to clinical outcomes and adverse events than any third party billing observational database.

Over the last 10 years Abiomed’s training, education and technology have shortened the learning curve, lowered adverse event rates, and improved patient outcomes, and this is published. The company has taken actions to clarify the misinformation and educate the medical community on FDA audited datas and physician-initiated clinical studies. To respond to the safety concerns, we have posted safety data for vascular complications, major bleeding, and stroke, as well as a summary of our regulatory history and real-world evidence from 2004 to 2020.

Abiomed has initiated a series of conference calls with more than 60 key opinion leaders and embarked on a multicity road show with leading physicians to review the robust set of clinical data and best practices that support Impella’s exclusive indications for high-risk PCI, cardiogenic shock and right heart failure. Abiomed has produced seven FDA studies, five post-market studies, has tracked over 6,000 patients in our cVAD registry study and has more than 115,000 patients in our IQ Database. We’ve invested over $100 million in this endeavor.

Impella is the most studied heart pump in the history of the FDA with exclusive approval as safe and effective. Abiomed has supported or attempted seven randomized controlled trials and we are currently enrolling our ninth Impella RCT. Abiomed recognizes that these patients are hard to randomize, because they present ethical and logistical challenges for the physicians.

Now turning back to our key initiatives; Abiomed is pursuing additional RCTs in high-risk PCI and cardiogenic shock to complement our clinical evidence and best practices to optimize patient outcomes. We have a successful formula for building clinical data, illustrated through a series of studies as shown in the posted earnings slides. First, we pilot our data for safety and feasibility like PROTECT I, RECOVER I and RECOVER RIGHT for high-risk PCI, cardiogenic shock and right heart shock respectively.

Next, we conduct FDA RCTs like PROTECT II and RECOVER II, which shall form the foundation of our FDA approvals and indications along with our real-world data collection and FDA post-approval studies like PROTECT III, RECOVER III and RECOVER RIGHT RP study. Based on our clinical data and validation of our best practices, we are conducting another RCT for high risk PCI called PROTECT IV to support a Class 1 guideline recommendation.

The new trial will compare high risk PCI procedures with Impella support versus high-risk PCI procedures with no plan hemodynamic support, with the goal of safely achieving complete revascularization. This trial is designed to address the challenges that exist today in the yearly PCI quality metrics released at TCT, which includes 101,000 patients receiving incomplete revascularization, 134,000 patients undergoing staged revascularization, meaning two to three procedures. Roughly 67,000 patients suffering from acute kidney injury, and approximately 115,000 patients readmitted to the hospital within 30 days of PCI. Another older high-risk population exists, that includes over 300,000 heart failure patients with advanced coronary artery disease, that today are not offered surgery or PCI. Complete revascularization, protection of the kidneys and improvement in ejection fraction, preferably in a single setting, should be the goal of every high-risk PCI procedure.

PROTECT IV has been underdevelopment for eight months, and the Impella arm is currently being tested into our single arm RESTORE EF high risk PCI study. The primary endpoint is similar to PROTECT III MACCE at 90 days and will attract EF improvements and the patient for up to one year. The steering committee includes the true experts in the field for both PCI and hemodynamic support. We will provide more details on our clinical trials at ACC in March and at our Investor Day in May. We are confident in our clinical data, innovation and energized by our physicians to take the next steps that will advance PCI treatment and help accelerate Impella adoption similar to other breakthrough innovation.

My last update on our clinical studies, is that we are enrolling patients in the STEMI DTU FCA RCT with 10 sites already approved out of the 60 hospitals. We are pleased to announce that we have enrolled 12 patients to date. For this study the sites are randomizing standard of care reperfusion for heart attack patients against Impella unloading therapy combined with reperfusion to measure infarct size reduction. If successful, this trial is designed with clinical follow-up to allow for a Class I guideline recommendation and it could open up a new 4 million patient population worldwide.

The successful FDA pilot study of 50 patients was presented at AHA and published in Circulation in 2018. A subset of this STEMI network and principal investigators when ready will initiate RECOVER IV, a randomized study to test our best practices for cardiogenic shock comparing Impella support to other treatment therapies, such as inotropes, IABP and ECMO. The STEMI DTU study is currently our priority at these sites, but more details will be provided in the future on RECOVER IV.

In coordination with training best practices for PCI, Abiomed will be investing in education as we launch the largest educational development effort in the company’s history. This program is called CAMP-PCI, which stands for Coronary Artery Myocardial Protected PCI and will be launched later this month. The mission of CAMP is to enhance physician skills to optimize PCI utilizing innovation that enabled safer procedures and complete revascularization for improved patient outcomes. We are partnering with physician experts in the field to create a dedicated faculty for education and training on PCI overall, that will include hemodynamic support. These programs will include password-protected community, password-protected online training, on-site and in-house educational programs, a national user meeting and physician proctoring.

As an example, I would like to share a patient’s story on protected PCI. Michael Shaw, a 68-year-old from California began experiencing heart issues which left him feeling fatigued and unable to perform daily tasks. Cardiologists discovered that Michael had severe blockages causing poor heart function with an EF at 15%. It was determined that Michael was too high-risk for surgery and was an ideal candidate for protected PCI. Dr. Ali of St. Agnes Medical Center in Fresno implanted the Impella CP heart pump to provide hemodynamic support as he placed multiple stents and did a thorough job. Following the procedure, Michael felt an immediate improvement and he was discharged to home. He is back working on vintage cars and traveling with family. Michael’s latest ejection fraction was three times higher and nearly normal and he now feels better than he has in years.

Turning to innovation, we continue to rollout the Impella CP with SmartAssist which is now in 635 of our U.S. sites. In the quarter we also launched the Impella 5.5 with SmartAssist at leading heart hospitals in the U.S. The Impella 5.5 is the first and only forward flow, fully wean-able heart pump designed for axillary implant, so no sternotomy or cracking open the chest required with a smaller profile making insertion easier and giving patients the ability to get up and ambulate, which has been shown to improve outcomes. Early feedback from the heart surgeons on their first 100 patients has been very positive and a publication is in process.

In conclusion, we believe that Impella adoption is now a function of time. A recent JAMA publication revealed the growing epidemic of heart failure and reported that this high risk population is increasing as is mortality, especially in the 45 to 65-year-old segment. Like any new breakthrough technology, we have to endure some challenges and adapt to all criticism with clinical data and innovation.

We welcome every customer to analyze and critique our data and appropriately utilize our technology to help improve patient outcomes. I would like to thank our shareholders for their continued support and recognize our employees and our customers, who put patients first every day. We will remember this time and recognize the opportunity to propel us forward on our path for Class I guidelines for percutaneous unloading heart pumps called Impella.

I will now turn the call over to Todd.

Todd A. Trapp — Vice President and Chief Financial Officer

Thanks Mike and good morning everyone. As Mike mentioned, we delivered revenue of $222 million in the quarter, an increase of 10% on a reported basis versus a tough comparison of 30% growth in Q3 of last year. By region, U.S. revenue grew 8% to $186 million driven by 5% increase in patient utilization. For modeling purposes, U.S. product revenue was $177 million in the quarter.

In October we had a record month with 24% global revenue growth and 16% U.S. patient utilization, which we believe was the result of the progress on our key initiatives. Unfortunately, the presentations in November impacted our growth. Our elective business saw more of an impact with high-risk PCI declining 4% in the quarter, while cardiogenic shock grew 13%. Outside the U.S., revenue totaled $36 million, up 30% on constant currency, driven by strength in Europe and Japan. In the U.S. at the end of our fiscal Q3, the Impella 2.5 and CP have reached 1,425 sites. The Impella 5.0 has been placed in 640 sites and the RP is currently in 521 sites. We also launched our new Impella 5.5 with SmartAssist in 25 sites in the quarter with positive feedback from the heart surgeons.

Q3 reorder performance was solid with a rate slightly above 100%, in line with the reorder rate from Q3 of ’19. Average combined inventory at the hospitals for the Impella 2.5 and CP was approximately 4.6 units per site, consistent with the inventory levels we saw last quarter. Outside the U.S., we continue to see strong growth in Impella adoption. In Q3, our European revenue increased 23% in local currency, due to higher patient utilization in cardiogenic shock in Germany and further Impella adoption in other countries like Austria and Italy.

Additionally, Japan performed in line with expectations, as we generated $8.7 million of sales in the quarter. We opened 10 sites in Q3 and are now in 109 hospitals, with 151 hospitals currently approved by the government. We do expect to open less sites in the fourth quarter as the team closes out the post-approval study and prioritizes a broader CP launch at existing sites. We are executing our controlled rollout and we are focused on improving patient outcomes with native heart RECOVERY which we believe will allow us to become the standard of care in Japan for the next 10 plus years.

Moving to key financial metrics; gross margin was 82% in the quarter compared to 83% in the prior year. The year-over-year variance was driven by the SmartAssist launch and geographical sales mix. We introduced Impella CP with SmartAssist at approximately 300 new sites in the quarter. We believe this new technology will help improve ease of use, patient management, and drive productivity, both in the hospital and in the field.

In the quarter, R&D expense totaled $26 million, an increase of 7% from the prior year, driven by our ongoing investments in clinical research, including STEMI, and our post approval studies in the U.S. and in Japan. We also continue to fund our pipeline of products. Our new 10 French sheath will expand and collapse around the 9 French catheter for a small bore closure device. We have treated 16 patients outside of the U.S. so far, and plan to bring this device to the U.S. through a 510(k) clearance at the end of our fiscal ’21. We also have had our first-in-man pending this March and April for the Impella ECP, a true 9 French catheter and pump, which is ideal for protected PCI. We believe both these new products will help simplify training with ease-of-use and drive further Impella adoption with customers concerned with vascular complications.

SG&A expense for the third quarter totaled $86 million, 7% higher versus prior year. The lift was driven by investment in our commercial team and incremental physician training. We expect more investment in SG&A in the fourth quarter as the commercial team continues to grow and we provide additional training in the field.

In Q3, operating income grew 13% to $71 million, translating to an operating margin of 31.7%. Margins expanded 60 basis points, due to higher volume and lower stock-based compensation, which more than offset our ongoing growth investments. GAAP net income for the quarter was $69 million or $1.51 per diluted share versus $0.97 in Q3 of 2019. The 56% year-over-year growth was primarily driven by mark-to-market adjustment on our Shockwave investment, which equated to an after-tax non-cash benefit of $17.8 million or $0.39 per diluted share. Excluding the impact from Shockwave, earnings per share grew 16% year-over-year.

Our reported tax rate for Q3 was 28.7% versus 30.5% in the prior year. We also had another strong quarter on cash as we generated $89 million of operating cash flow, an increase of 20% versus prior year. The balance sheet remains debt-free and we ended the quarter with $596 million of cash and marketable securities. In Q3, we bought back roughly $25 million of stock in the open market under our share repurchase program. Our top priority for capital deployment continues to be organic growth initiatives, which we believe is the best return for shareholders over time.

Turning to guidance; as previously announced, our full year revenue guidance is 10% to 14% growth. Based on January’s performance, which was similar to December, we expect to be at the low end of this range. For operating margin there is no change to our guidance.

So in summary, we are confident in our overall strategy and both the technical and clinical advantages of Impella. With our best-in-class profitability, strong balance sheet and IP portfolio of over 759 patents and 649 pending, we believe Abiomed is well positioned to become the standard of care through our formula of training, data, and time.

Operator, please now open the line for questions.

Questions and Answers:

Operator

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

Raj Denhoy — Jefferies — Analyst

Good morning. I wonder maybe I could start, Todd, you updated the guidance towards the very end. You know, I guess I’m curious to know how things are trending in the field, right? You noted January continues to be somewhat weak similar to December. How has your response to the AHA publications been received in the marketplace? Are you still hearing some pushback? And really question is, when do you expect that the pressure will start to ease, such that growth might start to accelerate again?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Well, I’ll cover the response in the field, Raj. The physicians that are the published experts are the ones that are currently enrolling. They are frustrated, because the paper itself got more media attention and more press than some of the publications that show improvements in survival, with nearly 95% native heart recovery. So publications on best practices in shock like Inova or the Detroit Cardiogenic Shock Initiative, or the National Cardiogenic Shock Initiative, or the Hannover publication or even the Shock Working Group. So they are frustrated.

The second component of the Circulation paper declared that the sites that did the most or had the most experience had the worst outcomes, implying that they have the worst outcomes, not that they’re treating a sicker population, and the challenge with the Circulation is, that they’re mixing high-risk PCI patients with shock patients and we had sicker patients. We also know that they eliminated patients that are escalated on the balloon pumps, so they biased the data and took out the sickest balloon pump patients.

So they are frustrated and they are shocked it got published in Circulation, they are also shocked that their conclusions were allowed to be so strong on an observational database. They have asked us to buy the data and get access to it, so that we can evaluate and counter with the specific details which we’re doing, for both the NCDR and this Premier Database, and they are galvanized. So they are — the positive of this is, they are totally engaged. We know that there has been more than five letters written to Circulation, none of which have been published, that are very strong in favor of the clinical science. And again, the slides that we’ve posted, many of them and a couple more are being utilized and shared with our key opinion leaders to show that no other company has the totality of the data. And in fact what some of these centers that are authors, or their standard of care and their usage is really inotropes, balloon pump, and ECMO.

So I think the positive of this, is it’s going to allow us to get to that next level to push forward on the new studies, and I’ll let Todd comment on the guidance question.

Todd A. Trapp — Vice President and Chief Financial Officer

Yes. So Jason [Phonetic] as you remember back at JP Morgan we talked about the lower end of the range, really assumed that December run rate for most of the quarter, kind of continued and the higher end assumed that what we saw in October, we recovered earlier in the quarter and unfortunately, January has played out more like December from a U.S. patient utilization perspective.

So Raj, when I look at the patient utilization in January, it was up 3% sequentially from December, but from a year-over-year perspective, still relatively flat. So again, it’s something that we watch every day. We did kick off. We just launched our multi-city tour. We’re in the Southwest this week, and so we should see how that progresses. And then again in the fourth quarter, we’re still launching some of our new products like CP with SmartAssist, as well as the 5.5. And then some of the investments we’ve made in the U.S. distribution structure around field leadership should start yielding some benefit.

So it’s something that we’re watching pretty closely, but unfortunately we haven’t seen that rebound yet in January.

Raj Denhoy — Jefferies — Analyst

Right, and I guess, the math suggests that then the fourth quarter was going to come in something in the 2% range. And I guess the question is, really as you start thinking about fiscal 2021, right, and what kind of revenue growth one should expect out of the business, what we’re all trying to figure out is kind of the pace of that recovery and when we might start to get back to more positive growth. And so I don’t know if there’s anything you can offer in terms of when that might start to lift off of, at very low single-digit growth rate?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

So Raj, we can’t comment on next year’s forecast yet, but we know that our data is better, our clinical outcomes are better. The new innovation that’s rolling out for SmartAssist also helps improve outcomes and ease of use. This is a bump, and we stand by the data we have, and we are working with the leaders in this space to correct for this misinformation. In the end, it’s up to the clinical community to digest the data, but we feel very confident that we will in the end, become the standard of care and we will utilize this time to leverage more studies.

Raj Denhoy — Jefferies — Analyst

Okay, fair. Maybe just one clarification, you mentioned the expandable sheath, you are saying the end of next fiscal year. So you’re giving yourself the better part of 12 or 14 months, given that’s a 510(k), is there still some design work or something that has to happen on that product before you begin the regulatory process in the United States? It just seems like it’s — 12 or 14 months seems like a long time to get through a 510(k)?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Well, we want to be conservative to make sure that we’re comfortable with the timeline. We’ve already done 16 patients, and in April, we’re going to do another eight to 10. We want to make sure, as we enter this space, that we don’t create any new complications, and our process is always to get the best outcomes, and sometimes we go a little slower for that. But we think that’s most prudent.

Raj Denhoy — Jefferies — Analyst

Okay. Thank you. Thank you. Our next question comes from Matthew O’Brien from Piper Sandler.

Matt O’Brien — Piper Sandler — Analyst

Good morning, thanks for taking my questions. Just, I guess, Todd for starters on a finer point on guidance for Q4 here? I mean it assumes U.S. Impella revenue is down year-over-year, is that right?

Todd A. Trapp — Vice President and Chief Financial Officer

I don’t think it assumes U.S. Impella revenue is down, but it’s probably more in the flattish range, flat to up low-single digits.

Matt O’Brien — Piper Sandler — Analyst

Okay, so then maybe O-U.S. slows a little bit more?

Todd A. Trapp — Vice President and Chief Financial Officer

Yes.

Matt O’Brien — Piper Sandler — Analyst

Okay, got it. And then as you guys — and I think Raj kind of touched on it a little bit. But as you think about the high-risk PCI group in the U.S., as you are — there is clearly a contraction going on right now at that group, not using the product at all. Have you been able to isolate or identify a bigger chunk of that group has decided to start to reduce the number of Impellas that they’re using and how do you reach out to those guys directly, and then how do you get them to come around to the totality of the data that you have to get them back using more aggressively and how long does that take, is it six, nine, 12 months?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

So, Matt as we stated, we’re seeing more of an impact on high-risk PCI patients, because they are elective and they’re more dependent on the referring physicians in the community. Unfortunately, the referring physicians in the community saw some negative headlines, severe headlines on safety, that were unjustified and they sometimes only read the abstract. So we’re working with them. The other impact we’ve had is for high-risk PCI with the dabblers, the people who are starting to use it. They may decide to put off treatment or get in and out or stage the patient. So we’re working through that.

We also saw some of these headlines have impacted a little bit of what the hospitals are doing from a media perspective. So we’re going to try to transition that phase from people that are being aggressively marketing against us to the sites that are now going to start marketing these examples where they can do high-risk PCI patients, and they can see improvements in EF. And to remind all the investors, PCI in general, historically does not show an improvement in ejection fraction or heart function. It usually relieves symptoms, chest pain, CABG or open heart surgery has increased through EF, because you have complete revascularization with the vein, and every publication on PCI shows that complete revascularization reduces major adverse events and that’s the ultimate goal.

So getting in and out, and not getting complete revascularization limits the performance of PCI and that’s the bigger goal and that’s what people are focused on and that’s what PROTECT IV will highlight.

Matt O’Brien — Piper Sandler — Analyst

Okay. And then last one for me Mike, you kind of touched on it there with PROTECT IV, but I think with PROTECT II it took you, I think that study was about — took about four years to be completed. How do we think about how long this one will take? And then PROTECT II, I’m pretty sure was randomized versus balloon pumps, and in this case it’s not, is that going to be an issue with the clinical community given that you’re not randomizing versus some other type of hemodynamic support?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

That’s a great question. So the PROTECT II does give us the data against the balloon pump. What we see now as far as the critics or the skeptics, is they are not necessarily promoting the balloon pump, because the balloon pump has complications, it does have an increase of stroke, it does have vascular complications and has major bleeding as published in the literature. However, the folks talked about getting in and out. So they will do a radial, they will get in and out, they won’t inflate the balloon for the mandated time by the manufacturer for the stent. They don’t necessarily do atherectomy. They limit how much contrast they have for visualization, and that’s really the broader bigger market, that also gives us the ability to look at reducing readmissions or improving complete revasc or reducing acute kidney injury or even reducing readmission.

So that’s the bigger, broader market. That’s when you’re in and out to hundreds of thousands of patients every year with PCI and that’s the focus. I think from a speed perspective, we’ll give that data out, as we get closer, but we’re also doing more patients, a factor of 10 times more patients per week from when we were starting with PROTECT II and when we started with PROTECT II, we didn’t have 510(k) and then we had 510(k). So we have the infrastructure, the bandwidth. We have the field team, but we’re going to do it right, because we want to have a Class 1 recommendation. So patients that are termed high-risk PCI are turned down for surgery, can get the benefit of Impella support, so the physician can do complete revascularization.

Matt O’Brien — Piper Sandler — Analyst

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Danielle Antalffy from SVB Leerink. Your line is open.

Danielle Antalffy — SVB Leerink — Analyst

Hey, good morning everyone. Thanks so much for taking the question. Just wanted to ask about Japan here for a second. I know you said in your prepared remarks it was in line with expectations. It was down sequentially, though, and this is the first time it was down since sequentially since you’ve launched. So just wanted to get more color on why, what the drivers there were? And then I have one follow-up?

Todd A. Trapp — Vice President and Chief Financial Officer

Sure. Thanks for the question Danielle. So, as we mentioned in the last quarter, we opened up far fewer sites in the second half of the year, as we did in the first half. So just to remind you, we opened up about 49 sites in Japan in the first half of this year and in the second half we opened up 10 in this quarter and we’re going to open up a little bit less next quarter. And it’s really as we close out the post-approval study, and really the team is focused on rolling out CP in Japan, and so really that’s the difference between the $9.5 million that we had in Q2 to the $8.6 million, so it’s literally lower site openings in console shipments.

Danielle Antalffy — SVB Leerink — Analyst

Okay, so nothing about the AHA data, that’s not having an impact ex-U.S., Japan or Germany?

Todd A. Trapp — Vice President and Chief Financial Officer

No, I would say, it’s, we haven’t seen an impact in Japan. In Germany, I would say, we did see a little of that AHA noise start to spill over in the month of January. So we’re seeing a little bit of softness in Germany as a result of AHA.

Danielle Antalffy — SVB Leerink — Analyst

Got it, and then my one follow-up is — maybe this is for you, Mike. One of the questions we’re getting is how we should think about the government agencies looking at these AHA data presentations and Circulation publication. I mean, obviously this data set is flawed, but CMS over the last two years has proposed rate cuts and every year, they’ve reversed those. But how does this — this was — the one AHA data presentation was a cost-effective analysis? I mean does this give them leverage to potentially cut reimbursement? I don’t know what you can say about that, but would love your views?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Sure, two things. So one, as I said in my comments, we want the FDA involved. The FDA has, we’ve provided the data that they — in the publication. We are getting access to that data and we also are getting access to the NCDR data. But remember, from 2015 to 2017, we have all those patients in the IQ database, and we have some of those patients in multiple databases, so we can break it out, the high-risk PCI, shock, right heart failure, 5.0, by name, by hospital, by indication. So we have more data than exists in those databases.

The NCDR database did not actually have the ability to track some of the hemodynamic information until the end of 2017. And so, we have access to the data and we’ll continue to push that. For CMS, its a great question and we are in with CMS on a routine basis showing them our new data, talking about heart recovery, talking about our ability to enable improvement in EF and reduce readmissions, and acute kidney injury. And we want CMS to look at all this information. We want them to look at these other alternative therapies, inotropes, intra-aortic balloon pumps, ECMO. We want the FDA now to look at all those adverse events that they have for vascular complications and bleeding and stroke. But again, the reason that both presentations are interesting and somewhat flawed, is they eliminated all the patients that didn’t do well on the balloon pump. I don’t think any paper that we would submit or any study we would try would ever get completed if we said we’re going to published a paper on patients that got Impella only in the cath lab. The intent to treat, if it’s balloon pumps, then the intent to treat is the balloon pump and if they have to go onto other technology, then — that should be counted, especially from a cost effectiveness perspective. If a patient gets ECMO and as a result has to go on to and LVAD then do a transplant, that’s $1 million patient, that’s $1 million patient. That’s a $1 million patient to CMS and hospital charges, that’s a $1 million patient to an insurance company and all those things should be looked at.

So in the end CMS looks at the data. It’s a hospital charge equation and remember we have high-risk PCI and shock patients and what you’re expected to do is try to find ways to improve productivity, which is what we do at Abiomed. We expect that to come down every year. But what CMS has instituted, is a network of ways to get paid for Impella, whether it’s hub-and-spoke where you put it in and transfer, or if it’s biventricular or if it’s just left side or right side. So we’ll work with both agencies. We stand by our data and our data is more comprehensive and extensive and we have more cost effectiveness data than any database out there, and we have the largest database with high-risk PCI and shock patients that exist in the world and will continue to utilize that.

Danielle Antalffy — SVB Leerink — Analyst

Thank you so much.

Operator

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

Chris Pasquale — Guggenheim — Analyst

Thanks, and Mike I have to say first kudos to you and the team for being willing to do the kind of clinical studies necessary to generate some of this level one evidence. I wanted to touch on one point with each of the studies. So on RECOVER IV, just want to make sure I understand your comments there, do you plan to hold off on initiating that study until STEMI DTU is enrolled?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

So the answer is, not till its enrolled. We want to get the RV sites up and running, feel comfortable that we can now add it because we have the infrastructure, we’ve made the investment, these are some of the top users. And remember they are putting the device in at all hours. The device can be in for six plus hours, the patients will be in the ICU in some cases — in most cases, and they are already doing something that has some ethical logistical issues by waiting 30 minutes before they open up the blocked artery.

The flipside of that is, since we are screening now for all STEMI, non-STEMI patients, we’re going to get a 10% of that population, that’s going to be in shock. And therefore at many of these centers, we can just go to the next protocol, which would be shock, and then we’re going to utilize the protocol of NCSI or Inova for best practices, compare it to the other arm, which is going to be inotropes, balloon pump, ECMO, all the things that they do today at sites that don’t have Impella. And to point out and I appreciate the comments to continue to do studies, we’ve continued to do studies since 2006. It tells you something about the technology that it’s such an ethical challenge and logistical challenge to withhold hemodynamic support.

LVADs for acute shock have never been randomized in the history of the FDA. Impella, this is the first time we’ve done it. For DT and bridge transplant, the only randomization to optical medical management was in HeartMate I, and it wasn’t necessarily an ethical challenge because you were actually giving a pump to a patient that was dying of heart failure. So these are very difficult and challenging studies to do for ethical reasons, but we’re going to push through that and have certain ways to crossover, but there are going to be really hard endpoints to crossovers, so there is no confusion over how sick these patients are.

Chris Pasquale — Guggenheim — Analyst

Thanks and then on PROTECT IV, I appreciate the importance of comparing supported PCI to unsupported PCI and the idea that perhaps it’s that unsupported group that’s the bigger opportunity. But the recent papers do muddy the water in terms of the incremental benefit of Impella versus balloon pumps? So why not have a third arm in this study, where patients get balloon pumps and where you just count escalation of therapy perhaps as a failure on a composite endpoint to show the difference between that sort of support and the support that Impella provides?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

That’s a good point. And as I said, we’ve spent eight months working on this study with the experts. The balloon pump itself has adverse events and so going against nothing is actually a tougher comparator. Most people that do high-risk PCI, again the people on these publications are not published and are not high-risk PCI practitioners. They don’t use a balloon pump, because the hemodynamic support proven and measured is about 0.2 to 0.4 liters per minute, if it’s timed perfectly, which it’s not in most cases. So it’s a harder bar, and if they’re going to do and get in and out, that’s really what they want to compare to, that’s the bulk of the patients that are out there. We don’t necessarily see high-risk PCI. We don’t see the balloon pump as a competitor anymore. And even from PROTECT II and PROTECT III we are now going to have 1,500 patients to compare to PROTECT II and in PROTECT II remember, if you had atherectomy with the balloon pump, you had a 30% repeat revasc rate in 90 days. So, one out of three of all those patients had to come back, because the balloon pump didn’t provide hemodynamic support. So we’re going to go for the larger opportunity. That’s what our advisors believe and most of these patients in the future, it’s really going to be almost similar to on pump surgery versus off pump surgery, which about 85% of the patients in the U.S. have surgery on pump. And so to some extent, we’re looking at on pump PCI versus off pump and that will clarify and speed up the study.

Chris Pasquale — Guggenheim — Analyst

Thanks.

Operator

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

Jayson Bedford — Raymond James — Analyst

Good morning and thanks for taking the questions. Just a couple, Todd, you mentioned trends in January earlier and I think you said 3%, up 3% month-over-month, flat year-over-year in the month of January. Just curious, was that in reference to worldwide or U.S. growth?

Todd A. Trapp — Vice President and Chief Financial Officer

That was U.S. patient utilization.

Jayson Bedford — Raymond James — Analyst

Okay, perfect. Mike, you’ve mentioned a couple of times that a Class I guideline recommendation for percutaneous unloading is a goal. Just in terms of timing, when do you expect to get a Class I recommendation?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

So the PROTECT IV is our priority study right now and it’s already in the works. We already have a committee, and we are now going through the process of starting to screen the centers that will accept and we hope to be enrolling patients within the next year.

Jayson Bedford — Raymond James — Analyst

Okay. And I apologize if I missed this, if you talked about the size and the follow-up of that trial?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

What we said is we’re going to give details, more details at ACC and we will give a lot of details at the Investor Day in May. Just for the record, currently today for our guideline high-risk PCI is Class II B. The intra-aortic balloon for shock in Europe and Japan is Class III, which means it’s harmful for cardiogenic shock, which is why the paper that’s currently out is so questionable because some of the physicians have questioned, what is the purpose of that paper, is it to try to encourage a Class III recommended device or is it too softly encourage ECMO for shock patients.

Jayson Bedford — Raymond James — Analyst

Okay, thanks, that’s it from me.

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Thanks Jason.

Operator

Thank you. Our next question comes from Marie Thibault from BTIG. Your line is open.

Marie Thibault — BTIG — Analyst

Hi, good morning. Thanks for taking the questions. I wanted to ask one on the date here and then one away from it. With the early efforts we’ve been making to make calls of KOLs you’re starting the road show to get the data out to centers. Just on an early feedback basis, and kind of a one-on-one basis, are you seeing a positive impact person by person at this point?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Yes.

Marie Thibault — BTIG — Analyst

Great, that’s what I wanted to hear. One asking this on away from all the confusion here, I would love to hear more about how the Impella 5.5 launch is going. Is it on track with your expectations and what can we look for over the coming quarters?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

So Marie the Impella 5.5 is what I believe heart surgeons have wanted for the last 15 years. When I started at Abiomed we were a surgical company and people are always talking about a minimally invasive, longer term, wean-able pump, where you didn’t have to core out the ventricle or you didn’t have to crack open the chest. And so the Impella 5.5 is our first step into that equation, the Impella BTR pump will follow it. That will be a longer-term VAD implanted a similar way, but it will run for more than a year and allow for patient discharge. On both the Impella 5.5 and the BTR pump, they will have SmartAssist. So we’re able to actually monitor and see how the patient is doing. We’re able to look for signs and predict recovery. And of course with Impella Connect we track that patient in the cloud.

And so — it’s an absolute breakthrough. Fortunately the surgeons are not as susceptible to the noise from AHA. We have huge demand. The feedback has been incredibly positive, especially since we’ve been able to duplicate that cardiomyopathy shock patients can actually return to baseline come off their inotropes and have their kidneys either recover or protected, which allows them to be explanted and go home without any further technology. Such a big win, especially for a large population out there that’s 72 that’s acutely decompensating and when they come in, you don’t have a lot of options to get them back to baseline unless it’s more invasive or an escalation to inotropic therapy, which has been proven to increase mortality.

So we’re super excited. The top centers, the top heart surgeons in the country have embraced it. We’ve done over 100 patients and the publication is pending. We also believe it’s the most blood compatible pump and VAD ever created and we will be measuring and publishing that data as well. And there’s just a huge opportunity here as a forward flow pump because it does rest and recover the device with the heart, but as you wean it down, we can measure via the pressure volume loops, we can look at pressures in the LV and really get a good or have good timing on weaning somebody back almost the way you’d wean a hamstring.

Marie Thibault — BTIG — Analyst

Great, thank you so much.

Operator

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

Chris Cooley — Stephens Inc. — Analyst

Good morning and thanks for taking my questions. Just two quick ones from me at this point. Todd, maybe this is something we have to wait for the upcoming fiscal year guide, but could you maybe help us think a little bit about the related clinical trial expense that would still fall into fiscal 4Q? Just want to make sure we can triangulate to more correctly there. I think it’s great effort to be undertaking, but just – from a modeling perspective want to see if how we should maybe contemplate that?

And then maybe just as my follow-up Mike, I think I know the answer here too, but I’ve got to ask and one of the prior questions, you mentioned that you were in contact with the FDA on the data. I guess, I just – can you give us some color regarding the characterization of those discussions and what we should interpret from that or is this just the acknowledge that the agency is aware of the discrepancies in the Circulation paper? Thanks so much.

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Chris, let me answer the second question first. I don’t think we heard the first question. There was a little bit of static. So we worked all the time with the FDA. We collaborate with them. We have an ongoing FDA study now, we’re doing a review of some of the future studies. We have the five post-market approvals. So we’re always talking with them. We’re always communicating our database. And the reason that we want to communicate with them is we have an obligation as a company for patient safety. We track nearly all our patients in the U.S. I don’t believe there is another med tech company that does that. And certainly, no one in this space does that. And so, if things progress and we were not able to get access to the data, we have Circulation to have the authors validated and provided at least to the FDA, if they want so we can fulfill our — regulatory obligation. That request was denied and so the FDA is its own separate agency. They have seen the publication, but they also have seen all our data.

And if they were concerned, I think you’d know that because we currently have a STEMI DTU study going on for patients that aren’t in shock where we’re moving now for patients that just for heart attack. So they see the real-time data. The frustrating part is, this — I mean paper, it basically omitted every single FDA study. It even omitted the STEMI DTU publication that was in Circulation and presented at AHA as well as the PROTECT II study that was published in Circulation. So the data for vascular complications, major bleeding and stroke, the information for high-risk PCI comes from an FDA randomized study PROTECT II. The STEMI numbers we have come from our pilot randomized study and now in process. And for shock it comes from our registry data and other studies as well, so we stand by our data. We continue to work with the FDA to improve outcomes and innovate. Now what was the first question?

Chris Cooley — Stephens Inc. — Analyst

Just, I appreciate the additional color there. I just wanted to clarify from Todd, the PROTECT IV and the additional clinical trial ramp up here. How should we think about that expense? I realize it’s probably more of the fiscal 2021, but just helping us kind of dial into through remainder of this fiscal year, just in terms of the 4Q if there is a material spend here in 4Q?

Todd A. Trapp — Vice President and Chief Financial Officer

Yes, I would say the PROTECT IV is more of a fiscal probably towards the end of the fiscal 2021 cost element. As you think about this year in Q4, obviously from a margin standpoint, it’s going to — I imagine will be down year-over-year and mostly driven by just the investments we’re making in the business. And so, if you think about from an investment standpoint, we have the higher heads that are hitting us in Q4 for what we hired this year. We had the Japan post-approval study that’s more back-end loaded, that will impact Q4. STEMI is ramping up over the course of the year and again more back-end loaded this year. And then it’s also that we have the start of the next calendar year, we typically see higher payroll taxes and fringe benefits in Q4. So from a year-over-year perspective, margins in Q4 I do expect them to be down versus what we saw in Q3 as well as year-over-year.

Chris Cooley — Stephens Inc. — Analyst

Thank you for clarifying that.

Operator

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

Margaret Kaczor — William Blair — Analyst

Hey, good morning guys. Thanks for taking the questions.

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Hi Margaret.

Margaret Kaczor — William Blair — Analyst

So what I wanted to follow-up on was the referral channel, and this is maybe something you guys don’t have quite as much control over is going out and talking to your top accounts and administrators. So whether it’s a 60 site road show, have you been able to reach out to that referral channel? How have the top users or the top accounts for you guys thought about how to effectively address that kind of decrease in referral network adds and just kind of general thoughts on that over the next 12 to 18 months?

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Thanks Marge for the question. So it’s — the road shows is kind of a three-pronged approach to clarify this data. Number one is, we’ve already done calls with the key opinion leaders, where we’re providing the slides you see on the Internet and more in detail to make sure that they have the information summarized on what are the — what’s the safety data available for balloon pump, Impella and ECMO and how does that stack up for vascular — master complications, major bleeding and stroke and Impella does very well there.

The second; with that information is asking them now, either with or without us to work with their referring physicians. So one physician told me his strategy, is when he has gotten these calls from referring physicians saying they are concerned about the safety of Impella and they don’t want to have a Protected PCI, his standard line is, have you read the paper in whole, and usually the answer is no. And he comments too, well, why don’t you read the paper, look at the limitations of it and then call me back if you really are still concerned. And so, those local meetings are important, but what we’re also doing is we’re going out with some of them and having them present to their community and then as part of that roadshow, we’re talking about the clinical data, but we’re also talking about the innovation, some of the new things coming, whether it’s expandable sheath or single access or SmartAssist.

And then last is, we’re creating this CAMP user base network so that our users can communicate with each other, can share information, can post slides, can post case studies, and we can share the videos with them, both internally and then externally as appropriate. So we are very fortunate to have such a dedicated group of physicians. They are the experts in this space. They are the published leaders and they’re the ones treating these patients. So I would say in summary, that’s the most important thing, and investors should take notice of, is that the people in this space that are leading the field are using Impella, are publishing their actual data, not taking a billing database and pulling it to take other people’s data. So we’ll continue to lead on that front, and we feel like our physicians have never been so supportive and energized as they are today.

Margaret Kaczor — William Blair — Analyst

Okay, that’s great. And then just to follow-up and you kind of referenced this a little bit, but I think earlier, you said you’ve been asked and you did may be purchase some of the data from [Indecipherable] or some of the other networks. So are you going to take that data, review it, and then potentially publish your response? Or leave it in the clinicians hands and just wait for kind of the single site and RCT data to be published? Thanks.

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

I’m going to do all of the above. So the first thing is, we have data that’s already like that. So we have the NIH database that was published in JACC in 2015, the author was stretched. That article showed that when the advent of PVADs hit the market and that’s 99% Impella in 2008, it lowered mortality. The paper also showed that when you utilize the balloon pump costs went up 25% absolute costs because many of these patients get escalated and when patients were escalated or used before the PVAD, it was a statistical predictor of death.

This is why this paper by eliminating those escalated on a balloon pump took out the sickest and most costly patients and also eliminated all ECMO patients, which many of those survivors because the heart has been loaded require more invasive and more expensive procedures like LVADs and then transplant. So that’s a very important component, but then with the premier database itself we will go through it. We will put everything back into it with the NCDR data, we’re going to run the numbers from 2015 and 2019. Some of those patients will be in IQ. Some of them will be in IQ and in our post-approval studies.

We also are pulling the data from these six centers that have very limited use of Impella. So in 2018 the authors, the hospitals, they did 1,400 ECMO patients. They did 1000 plus balloon pump patients and they did 221 Impella patients. In those patients at those centers, about half of the time they do not follow the protocol. So Impella patients that get Impella come usually with a balloon pump before or many of our patients transferred in on Impella to their hospitals, Impella is immediately removed and switched to ECMO. So we’ll be continuing to publish data from our real world evidence and will complement it with the other publications that are out there.

Margaret Kaczor — William Blair — Analyst

Great, thank you, guys.

Todd A. Trapp — Vice President and Chief Financial Officer

Thanks Margaret.

Operator

Thank you. And that does conclude our question-and-answer session for today’s conference and I’d like to turn the conference back over to Mike Minogue for any closing remarks.

Michael R. Minogue — Chairman of the Board, President and Chief Executive Officer

Well, I want to end with thanking our investors for their support. This is part of our journey to become the standard of care, and it’s probably the best opportunity we’ve had in a long time to push through to get the guidelines required so that Impella can be worldwide a Class 1 guideline. If you have any follow-up questions, please reach out to us, and we thank you for your time today.

Operator

[Operator Closing Remarks].