Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ABMD > SEC Filings for ABMD > Form 10-Q on 5-Nov-2012All Recent SEC Filings

Show all filings for ABIOMED INC

Form 10-Q for ABIOMED INC


5-Nov-2012

Quarterly Report


ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

Abiomed's discussion of financial condition and results of operations may contain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our actual results may differ materially from those anticipated in these forward-looking statements based upon a number of factors, including uncertainties associated with development, testing and related regulatory approvals, anticipated future losses, complex manufacturing, high quality requirements, dependence on limited sources of supply, competition, market acceptance of our new products, technological change, government regulation, future capital needs and uncertainty of additional financing and other risks detailed in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Report. In particular, we encourage you to review the risks and uncertainties discussed under Item 1A of Part I of our Annual Report on Form 10-K, for the year ended March 31, 2012. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this Report or to reflect the occurrence of unanticipated events.

OVERVIEW

We are a leading provider of mechanical circulatory support devices and we offer a continuum of care to heart failure patients. We develop, manufacture and market proprietary products that are designed to enable the heart to rest, heal and recover by improving blood flow and/or performing the pumping function of the heart. Our products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by heart surgeons for patients who are in need of hemodynamic support prophylactically or emergently before, during or after angioplasty or heart surgery procedures. We believe heart recovery is the optimal clinical outcome for patients experiencing heart failure because it restores their quality of life. In addition, we believe that for the care of such patients, heart recovery is the most cost-effective solution for the healthcare system.

Our strategic focus and the driver of the most recent revenue growth in our business is the market penetration of our Impella 2.5 product, which received 510(k) clearance in June 2008 for partial circulatory support for up to six hours. We received 510(k) clearance in April 2009 for our Impella 5.0 and Impella LD devices for circulatory support for up to six hours. These devices are larger and provide more blood flow to patients than the Impella 2.5.

In September 2012, we announced that the Impella CP received 510(k) clearance from the U.S. Food and Drug Administration, or FDA. The Impella CP (previously marketed outside of the U.S. as Impella cVAD) received CE Marking approval to market the device in the European Union in April 2012 and Health Canada approval to market the device in Canada in June 2012. We initiated a controlled launch with top heart hospitals in the U.S. during the second quarter of fiscal 2013 and expect the Impella CP to be fully commercially available in the U.S. in the fourth quarter of fiscal 2013.

In addition, we are currently conducting initial patient use trials outside of the U.S. of the Impella RP. The Impella RP is a percutaneous catheter-based axial flow pump that is designed to allow greater than four liters of flow and is intended to provide the flow and pressure needed to compensate for right heart failure. This product is not currently available for sale.

Revenues from our other products, largely focused on the heart surgery suite, have been lower recently as we have strategically shifted our sales and marketing efforts towards our Impella products and the cath lab. We expect revenues from our non-Impella business, including BVS and AB5000, will continue to decrease as we continue to focus on our Impella products.

In November 2011, we announced Symphony, a synchronized minimally invasive implantable cardiac assist device designed to treat chronic patients with moderate heart failure by improving patient hemodynamics and potentially improving quality of life. The device is designed with the primary goal of stabilizing the progression of heart failure and/or recovering or remodeling the heart. We recently conducted the initial first in man implant of Symphony outside the U.S. and we continue to focus on development initiatives associated with the Symphony product. This product is not currently available for sale.

For the three and six months ended September 30, 2012, we recognized net income of $5.5 million and $8.6 million, respectively. With the exception of fiscal 2012, we have incurred annual net losses since our inception. Even though we were profitable in fiscal 2012, we may incur additional losses in the future as we continue to invest in research and development related to our products, conduct clinical studies and registries on our products, expand our commercial infrastructure and invest in new markets such as Japan.

Impella 2.5

The Impella 2.5 catheter is a percutaneous micro heart pump with an integrated motor and sensors. The device is designed primarily for use by interventional cardiologists to support patients in the cath lab who may require assistance to maintain their circulation. The Impella 2.5 device received 510(k) clearance from the FDA in June 2008 for partial circulatory support for up to six hours, has CE mark approval in Europe for up to five days of use and is approved for use in over 40 countries.


Table of Contents

The Impella 2.5 catheter can be quickly inserted via the femoral artery to reach the left ventricle of the heart where it is directly deployed to draw blood out of the ventricle and deliver it to the circulatory system. This function is intended to reduce ventricular work and provide flow to vital organs. The Impella 2.5 is introduced with normal interventional cardiology procedures and can pump up to 2.5 liters of blood per minute.

In August 2007, we received approval from the FDA to begin a high-risk percutaneous coronary intervention, or PCI, pivotal clinical trial, known as the Protect II study, for the Impella 2.5. This pivotal study was to determine the safety and effectiveness of the Impella 2.5 as compared to medical management with an intra-aortic balloon, or IAB, during "high-risk" angioplasty procedures. In December 2010, we announced the termination of the Protect II study based on a futility determination at the planned interim analysis regarding the primary end-point, which we view as likely to have resulted from how rotational atherectomy was performed by investigators in the study.

A November 2011 update to the American College of Cardiology Foundation /American Heart Association Task Force on Practice Guidelines and the Society for Cardiovascular Angiography and Interventions Guidelines for Percutaneous Coronary Intervention, for the first time, included Impella in both the emergent and prophylactic hemodynamic support settings.

We are currently conducting USpella, the first U.S. multicenter observational registry collecting clinical data and outcomes for patients supported with Impella 2.5 and 5.0 during elective, urgent and emergent procedures. Currently, there are 41 hospitals in the U.S. and Canada contributing data to the USpella registry.

Impella CP

In September 2012, we announced that the Impella CP received 510(k) clearance from the FDA. The Impella CP provides over one liter per minute more than the Impella 2.5 and peak flows of approximately four liters of blood per minute and is indicated for up to six hours of partial circulatory support using an extracorporeal bypass control unit. It is also intended to be used to provide partial circulatory support, for up to six hours, during procedures not requiring cardiopulmonary bypass. The Impella CP (previously marketed outside of the U.S. as Impella cVAD) received CE Marking approval to market the device in the European Union in April 2012 and Health Canada approval to market the device in Canada in June 2012. We initiated a controlled launch with top heart hospitals in the U.S. during the second quarter of fiscal 2013 and expect the Impella CP to be fully commercially available in the U.S. in the fourth quarter of fiscal 2013.

Impella 5.0 and Impella LD

The Impella 5.0 catheter and Impella LD are percutaneous micro heart pumps with integrated motors and sensors for use primarily in the heart surgery suite. These devices are designed to support patients who require higher levels of circulatory support as compared to the Impella 2.5. The Impella 5.0 and Impella LD devices received 510(k) clearance in April 2009, for circulatory support for up to six hours and have CE mark approval in Europe for up to ten days duration and are approved for use in over 40 countries.

The Impella 5.0 can be quickly implanted via a small incision in the femoral artery in the groin using a guide wire to reach the left ventricle of the heart where it can then be directly deployed to draw blood out of the ventricle, deliver it to the arterial system and perfuse the heart muscle. This function is intended to reduce ventricular work. The Impella LD is similar to the Impella 5.0 but is implanted directly through an aortic graft. The Impella 5.0 and Impella LD can pump up to five liters of blood per minute, providing full circulatory support.

AB5000 and BVS 5000

We manufacture and sell the AB5000 Circulatory Support System and the BVS 5000 Biventricular Support System for the temporary support of acute heart failure patients in profound shock, including patients suffering from cardiogenic shock after a heart attack, post-cardiotomy cardiogenic shock, or myocarditis. We believe the AB5000 and BVS 5000 systems are the only commercially available cardiac assist devices that are approved by the FDA for all indications where heart recovery is the desired outcome, including patients who have undergone successful cardiac surgery and subsequently develop low cardiac output, or patients who suffer from acute cardiac disorders leading to hemodynamic instability. We are in the process of transitioning our sales force from the BVS 5000 to the AB5000, the Impella 5.0, and the Impella LD.

We have developed a Portable Circulatory Support Driver for both in-hospital and out-of-hospital patients. The Portable Driver is designed to support our AB5000 VAD. We received CE mark approval for our Portable Driver in March 2008. In May 2008, we received conditional approval for the Portable Driver under an investigational device exemption, or IDE.

AbioCor

Our AbioCor implantable replacement heart is the first completely self-contained artificial heart. Designed to sustain the body's circulation, the AbioCor is intended for end-stage biventricular heart failure patients whose other treatment options have been exhausted. Patients with advanced age, impaired organ function or cancer are generally ineligible for a heart transplant and are potential candidates to receive the AbioCor implantable heart. Once implanted, the AbioCor system does not penetrate the skin, reducing the chance of patient infection. This technology provides patients with mobility and remote diagnostics. AbioCor devices have a life expectancy of 18 to 24 months and can only be implanted in normal to larger sized male patients.


Table of Contents

We received a humanitarian device exemption, or HDE, supplement approval from the FDA for product enhancement of the AbioCor in January 2008. HDE approval signifies that no comparable alternative therapy exists for patients facing imminent death due to end-stage biventricular heart failure and allows the AbioCor to be made available to a limited patient population. We have no current plans to market AbioCor in the forseeable future or seek a broader regulatory approval of the AbioCor. In September 2012, the FDA agreed to our request to suspend post-approval study on the AbioCor. We have not had any AbioCor sales since fiscal 2009, and we do not expect revenues from sales of the AbioCor for the foreseeable future as our primary strategic focus is centered on heart recovery for acute heart failure patients.

Critical Accounting Policies

There have been no significant changes in our critical accounting policies during the three and six months ended September 30, 2012, as compared to the critical accounting policies disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

Recently Adopted Accounting Standards

During the first quarter of fiscal 2013, we adopted Accounting Standards Update, or ASU, No ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate, but consecutive, statements of net income and other comprehensive income. In December 2011, the Financial Accounting Standards Board, or FASB, issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 amended ASU 2011-05 by indefinitely deferring the requirement to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. We adopted ASU 2011-05 with retrospective application as required and have included in these condensed consolidated financial statements separate unaudited statements of comprehensive income. The adoption of this standard did not impact our condensed consolidated financial statements other than this change in presentation.

In September 2011, the FASB issued ASU No. 2011-08, Testing for Goodwill Impairment. ASU 2011-08 amended current goodwill impairment testing guidance by providing entities with an option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. We adopted ASU 2011-08 during the first quarter of fiscal 2013 and will apply the provisions to our annual impairment assessment to be conducted during the third quarter of fiscal 2013.


Table of Contents

Results of Operations

The following table sets forth certain consolidated statements of operations
data for the periods indicated as a percentage of total revenues (which includes
revenues from products and funded research and development):



                                                   Three Months Ended           Six Months Ended
                                                      September 30,               September 30,
                                                   2012           2011          2012         2011
Revenues:
Product                                               99.7 %        98.9 %        99.7 %       99.1 %
Funded research and development                        0.3           1.1           0.3          0.9

Total revenues                                       100.0         100.0         100.0        100.0


Costs and expenses:
Cost of product revenue                               19.2          18.8          19.2         20.1
Research and development                              15.6          21.9          16.5         24.3
Selling, general and administrative                   49.3          55.4          51.7         60.7
Amortization of intangible assets                       -            1.3           0.1          1.3

Total costs and expenses                              84.1          97.4          87.5        106.4

Income (loss) from operations                         15.9           2.6          12.5         (6.4 )

Other (expense) income:
Other (expense) income, net                             -            0.2            -          (0.1 )

                                                        -            0.2            -          (0.1 )

Income (loss) before income tax provision             15.9           2.8          12.5         (6.5 )
Income tax provision                                   1.3           0.8           1.2          0.5

Net income (loss)                                     14.6 %         2.0 %        11.3 %       (7.0 )%

Three and six months ended September 30, 2012 compared with the three and six months ended September 30, 2011

Revenues

Our revenues are comprised of the following (in thousands):



                                           Three Months Ended          Six Months Ended
                                              September 30,              September 30,
                                            2012          2011         2012         2011

    Impella product revenue              $   32,843     $ 24,802     $ 67,519     $ 46,994
    Other products                            2,164        2,511        4,282        5,935
    Service and other revenue                 2,312        1,838        4,165        3,388

    Total product and service revenues       37,319       29,151       75,966       56,317
    Funded research and development              98          327          234          516

    Total revenues                       $   37,417     $ 29,478     $ 76,200     $ 56,833

Impella product revenue encompasses Impella 2.5, Impella CP, Impella 5.0, and Impella LD product sales. Other product revenue includes AB5000, BVS5000 and cannulae product sales. Service and other revenue represents revenue earned on service contracts and maintenance calls.

Total revenues for the three months ended September 30, 2012 increased by $7.9 million, or 27%, to $37.4 million from $29.5 million for the three months ended September 30, 2011. Total revenues for the six months ended September 30, 2012 increased by $19.4 million, or 34%, to $76.2 million from $56.8 million for the six months ended September 30, 2011. The increase in total revenue was primarily due to higher Impella revenue due to greater utilization in the U.S. and the initial launch of Impella CP in fiscal 2013. Following four quarters of sequential growth, Impella revenues were sequentially lower in the second quarter of fiscal 2013, which we believe was primarily due to a general slowdown in cath lab activity during the summer months.


Table of Contents

Impella product revenues for the three months ended September 30, 2012 increased by $8.0 million, or 32% to $32.8 million from $24.8 million for the three months ended September 30, 2011. Impella revenues for the six months ended September 30, 2012 increased by $20.5 million, or 44% to $67.5 million from $47.0 million for the six months ended September 30, 2011. Most of our Impella revenue was from disposable product sales of Impella 2.5 in the U.S., as we focus on controlled rollouts for new sites and increasing utilization of these products through continued investment in our sales force and physician training.

Other product revenues for the three months ended September 30, 2012 decreased by $0.3 million, or 12%, to $2.2 million from $2.5 million for the three months ended September 30, 2011. Other product revenues for the six months ended September 30, 2012 decreased by $1.6 million, or 27%, to $4.3 million from $5.9 million for the six months ended September 30, 2011. The decrease in other revenue was due to a decline in BVS and AB5000 disposable sales. We expect that BVS and AB5000 revenue will continue to decline in fiscal 2013 as we focus our sales efforts in the surgical suite on Impella 5.0 and LD.

Service and other revenue for the three months ended September 30, 2012 increased by $0.5 million, or 28%, to $2.3 million from $1.8 million for the three months ended September 30, 2011. Service revenue for the six months ended September 30, 2012 increased by $0.8 million, or 24%, to $4.2 million from $3.4 million for the six months ended September 30, 2011. The increase in service revenue was primarily due to an increase in service contracts, primarily for our new Impella consoles.

Cost of Product Revenues

Cost of product revenues for the three months ended September 30, 2012 and 2011, respectively, was $7.2 million and $5.6 million. Gross margin was 81% for each of the three months ended September 30, 2012 and September 30, 2011. The increase in cost of product revenues was related to higher material purchases and increased headcount to support the higher demand for Impella products.

Cost of product revenues for the six months ended September 30, 2012 and 2011, respectively, was $14.6 million and $11.4 million. Gross margin was 81% for the six months ended September 30, 2012 compared to 80% for the six months ended September 30, 2011. The increase in gross margin was primarily due to higher reorders of Impella product disposable pumps and improved manufacturing efficiency with higher production volume.

Research and Development Expenses

Research and development expenses for the three months ended September 30, 2012 decreased by $0.6 million, or 9%, to $5.9 million from $6.5 million for the three months ended September 30, 2011. Research and development expenses for the six months ended September 30, 2012 decreased by $1.2 million, or 9%, to $12.6 million from $13.8 million for the six months ended September 30, 2011.

The decrease in research and development expenses was due to a decrease in clinical trial expenditures as we completed our work associated with the Protect II trial for the Impella 2.5, partially offset by an increase in spending on product development initiatives associated with Impella RP and Symphony. We expect research and development expenses to increase slightly in fiscal 2013 as we continue to focus on new product development initiatives associated with Impella RP and Symphony products.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2012 increased by $2.1 million, or 13%, to $18.4 million from $16.3 million for the three months ended September 30, 2011. Selling, general and administrative expenses for the six months ended September 30, 2012 increased by $4.9 million, or 14%, to $39.4 million from $34.5 million for the six months ended September 30, 2011.

The increase in selling, general and administrative expenses was primarily due to an increased field headcount as we continue to build out our commercial efforts in the U.S. and increased spending on marketing initiatives as we continue to educate physicians on the benefits of hemodynamic support. We expect to increase our expenditures on sales and marketing activities in fiscal 2013, with particular investments in clinical personnel with cath lab expertise. We also plan to increase our marketing, service, and training investments to support the efforts of the sales and field clinical teams to drive recovery awareness for acute heart failure patients.

Amortization of Intangibles

Amortization of intangible assets was $0 and $0.4 million for the three months ended September 30, 2012 and 2011, respectively. Amortization of intangible assets was $0.1 million and $0.8 million for the six months ended September 30, 2012 and 2011, respectively. Amortization primarily relates to specifically identified assets from the Impella acquisition in May 2005. We fully amortized the remaining net book value of our intangible assets during the six months ended September 30, 2012.


Table of Contents

Provision for Income Taxes

During three months ended September 30, 2012 and 2011, we recorded a provision for income taxes of $0.5 million and $0.2 million, respectively. During the six months ended September 30, 2012 and 2011, we recorded an income tax provision of $0.9 million and $0.3 million, respectively. The income tax provision for the three and six months ended September 30, 2012 is primarily due to income taxes in Germany that we do not expect will be offset by our net operating loss carryforwards in Germany and therefore we expect to pay in cash. We have also recorded income taxes related to our deferred tax liability on our goodwill and alternative minimum tax in the U.S.

Net Income (Loss)

During the three months ended September 30, 2012, we recorded net income of $5.5 million, or $0.14 per basic and $0.13 per diluted share, compared to a net income of $0.6 million, or $0.02 per basic and diluted share, for the three months ended September 30, 2011. During the six months ended September 30, 2012, we generated net income of $8.6 million, or $0.22 per basic and $0.21 per diluted share, compared to a net loss of $4.0 million, or $0.10 per basic and diluted share, for the six months ended September 30, 2011.

The increase in profitability was due to increased Impella sales from greater demand for our products in the U.S.

Liquidity and Capital Resources

At September 30, 2012, our cash, cash equivalents and short-term marketable securities totaled $89.0 million, which represents an increase of $11.8 million compared to $77.2 million in cash, cash equivalents and short-term marketable securities at March 31, 2012. We believe that our revenue from product sales together with existing resources will be sufficient to fund our operations for at least the next twelve months, exclusive of activities involving any future acquisitions of products or companies that complement or augment our existing line of products.

Our primary liquidity needs are to fund the expansion of our commercial infrastructure in the U.S., increase our Impella manufacturing capacity, increase our inventory levels in order to meet increasing customer demand for Impella in the U.S., fund new product development and provide for general working capital needs. Through September 30, 2012, we have funded our operations principally from product sales and through the sale of equity securities. Marketable securities at September 30, 2012 consist of $84.5 million held in funds that invest solely in U.S. Treasury securities. We are not a party to any interest rate swaps, currency hedges or derivative contracts of any type and have no exposure to commercial paper or auction rate securities markets. We continue to monitor our cash position closely and currently only invest excess cash in short term U.S. treasury securities.

Cash and cash equivalents held by our foreign subsidiaries totaled $2.4 million and $3.0 million at September 30, 2012 and March 31, 2012, respectively. Our operating income outside the U.S. is deemed to be permanently reinvested in foreign jurisdictions. We do not intend or currently foresee a need to repatriate cash and cash equivalents held by our foreign subsidiaries. If these funds are needed in the U.S., we may be required to accrue and pay U.S. taxes to repatriate these funds.

During the six months ended September 30, 2012, net cash provided by operating activities was $11.1 million, compared to net cash used of $6.3 million during the same period in the prior year. The increase in cash provided by operations was primarily attributable to the net improvement in net income of $12.6 million reflected in our net income of $8.6 million for the six months ended . . .

  Add ABMD to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ABMD - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.