ABIOMED, Inc. (ABMD) Q3 2019 Earnings Conference Call Transcript

ABIOMED, Inc. (ABMD)
Q3 2019 Earnings Conference Call
Jan. 31, 2019, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants
  
  See all our earnings call transcripts.

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q3 2019 ABIOMED, Inc. 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. If anyone should require assistance during the conference, please press "*0" on your touchtone telephone. As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Mr. Todd Trap, Vice President, Chief Financial Officer. Sir, you may begin.

Todd Trapp -- Vice President and Chief Financial Officer

Thank you, Crystal, and good morning, everyone, and welcome to ABIOMED's Third Quarter Fiscal 2019 Earnings Conference Call. This is Todd Trapp, Vice President and Chief Financial Officer for ABIOMED and here with me is 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. After that, we'll open the call to your questions.

Before we begin, I'd like to remind you that our presentation today includes forward-looking statements as it relates to our discussion of our outlook. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under "Forward-Looking Statements" in our earnings press release and our most recent 10-Q and 10-K 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 Minogue -- Chairman, President, and Chief Executive Officer

Thank you, Todd, and good morning, everyone. This quarter, ABIOMED celebrated an historic milestone, as we treated more than 100,000 patients in the U.S., Europe, and Japan. We have invested well over $500 million in research and compiled 20 years of Impella development to create the technology for the field of heart recovery with 597 patents and 442 patents pending. We are impacting more patients than ever before due to our commitment to sustainable growth while improving clinical outcomes.

In Q3, our disciplined approach delivered our best ever quarterly results, with $201 million in revenue, up 30% year-over-year, and a record 31.1% operating margin. We have strong growth and execution in our three key countries: U.S., Germany, and Japan. ABIOMED remains one of the fastest growing, GAAP profitable, med tech companies and maintains a stellar balance sheet with $458 million in cash and no debt. This allows us to remain focused on our mission of recovering hearts and saving lives while we continue to invest in innovation.

On this call, I will highlight our successful launch in Japan and our expanding 24x7 capabilities in the United States to improve patient outcomes for today's clinical crises. So, first on Impella adoption in Japan.

Japan had another strong quarter, delivering $5.4 million in revenue and we continued to maintain the rigor around training and education. In Q3, we opened 13 sites, bringing our total to 48 Impella hospitals out of the 103 already approved by the government physician committee. We now have 1% penetration of the 50,000 potential patients. Japan is an ideal match with our mission of recovering hearts and saving lives because there's a cultural aversion to heart transplants and open chest procedures with a strong desire for native heart recovery.

The Impella launch is going well in both clinical outcomes and revenue. I returned from Japan on Monday night, where I enjoyed my time with the physicians and our field team. It was rewarding to see first-hand the impact Impella can have on patients in cariogenic shock and hear the interest from physicians on the science of unloading the heart.

On January 15, we hosted a press conference in Tokyo with Dr. June Nakata and Dr. Yoshiki Sawa. They discussed the benefits of heart recovery with Impella and highlighted the recovery story of a Mr. Ridel Tomawanke, a professional fisherman, who at 28 years old, survived cardiogenic shock from myocarditis and went home with his own heart. He is a perfect example of the quality of life benefits and cost savings of heart recovery in Japan.

As previously stated, ABIOMED is focused on launching our Japanese business in a controlled manner with comprehensive field training to ensure we achieve the best patient outcomes. We are excited about the progress to date but have a lot more to do in order to become the standard of care in Japan. Additionally, we are investing in the commercial distribution to prepare for the expansion of products in the short- and mid-term, such as Impella CP, Impella Connect, Impella 5.5, and Impella RP.

Our second highlight for today's call is our expanding 24x7 capabilities to improve patient outcomes for a clinical crisis. Today, heart failure is a clinical crisis in the United States, with 47% and 36% of men over 45 years old dying within five years of their first heart attack. In addition, cardiogenic shock carries one of the highest mortality rates in healthcare. The mortality rate for cardiogenic shock has been 50% for the last 20 years without Impella.

ABIOMED is investing to improve clinical outcomes around both survival and native heart recovery, with on-site and on-call support 24x7 and tracking outcomes on nearly all commercial patients. No other company in this space provides this level of support to help improve patient outcomes.

Our new technology, call Impella Connect, launched at 36 U.S. hospitals, provides real-time, in the cloud, live monitoring to patients on Impella support. This allows ABIOMED to provide a new level of exclusive support and offers our customers another tool to deliver better outcomes for patients. And today we are proud to announce that Impella Connect has received CE mark approval in Europe.

On the clinical research side, we are utilizing both Impella quality database and the cVAD study to complement our six FDA studies and conduct extensive post-market surveillance to identify and validate best practices. In total, we now have IQ clinical data in the U.S. from over 90,000 patients at more than 1,300 sites. Best practices identified within the IQ database are further validated in our cVAD study. The cVAD study is an IRB-approved, prospective, and audited study utilizing FDA definitions on more than 5,000 patients. For your reference, we included two summary slides on the IQ, cVAD, and Impella Connect in our quarterly update.

ABIOMED's clinical experience and research has stimulated a collaboration on education and led to physician-driven initiatives such as the National Cardiogenic Shock Initiative, or NCSI. NCSI continues to improve awareness of the benefits of a shock protocol of best practices, which includes inserting Impella before PCI to unload the heart, stabilizing the patient and minimizing inotropic therapy. NCSI has now expanded to 63 hospitals and is having an impact on patient survival with native heart recovery.

A recent patient story shows the life-changing power of best practice protocols. Todd Vesser, a 41-year-old man from Rockwall, Texas, suddenly collapsed at home. His girlfriend, a nurse, immediately began CPR. While in cardiac arrest, Todd received multiple defibrillator shocks by paramedics en route to local hospital and was Life Flighted to Presbyterian Hospital in Dallas. Todd was in cardiogenic shock with organ failure due to 90% blockage of his major coronary arteries and had an injection fraction of only 10%.

In the cath lab, Dr. James Park and his team followed the NCSI protocol, as a new participating hospital, and immediately implanted the Impella CP pump to support his heart before they placed multiple stents. After two full days on Impella support, Todd's heart recovered enough to explant the Impella CP and he was discharged home six days later to spend Christmas with his family. Todd's story highlights how protocols with Impella support before PCI can optimize and achieve the ultimate goal of survival and native heart recovery.

Before concluding, I would like to remind those who missed our recent investor presentation at J.P. Morgan that we have posted our presentation with automatic slide advance and animations on the investor section of our website and included a link in our quarter's press release. The presentation includes further details into our pipeline of new products and the science around our pending pivotal FDA STEMI DTU study.

In summary, we are proud of our 100,000 patient milestone and we will continue to grow the field of heart recovery and improve patient outcomes by partnering with our customers to use real-world studies to identify and validate best practice protocols. ABIOMED remains focused on our disciplined execution and sustainable growth so that even more patients around the world can benefit from heart recovery.

I want to thank our employees and customers who put patients first every day. Or as we say in Japan, "[Speaking Japanese]." I would like to thank our shareholders for their continued support as well. I will now turn the call back over to Todd Trapp.

Todd Trapp -- Vice President and Chief Financial Officer

Thank you, Mike. As Mike mentioned, we delivered another record quarter, with 30% top-line growth and a 31% operating margin. Revenue in the third quarter was $201 million, an increase of $47 million, or 30%, versus last year, with solid performance across all geographies. This represents the 17th consecutive quarter of greater than 25% revenue growth for ABIOMED.

In the U.S., revenue rose 27% to $173 million, driven by a 24% increase in overall patient utilization. Outside the U.S., revenue was $28 million, up 59% versus prior year, due to strength in both Germany and Japan. On a constant currency basis, Germany saw revenues increase 41% due to patient utilization. And we continue to be very pleased with our controlled rollout in Japan, as we opened 13 sites and delivered $5.4 million of revenue in the quarter.

In the U.S., at the end of our fiscal Q3, the Impella 2.5 and CP have been placed at approximately 1,300 sites. The Impella 5.0 has been placed at 578 sites, while the RP is now at roughly 400 sites in total.

Re-order performance in Q3 was also strong, with a rate slightly above 100%, consistent with the prior quarter. Average combined inventory at the hospitals for the Impella 2.5 and CP rose slightly from 4.2 to 4.3 units per site during the quarter, as higher volume hospitals carried more inventory to support their cases.

In the third quarter, gross margin was 83%, down 80 basis points versus last year due to sales mix and manufacturing investments, primarily more operators to support our sales growth in both Danvers and Aachen.

R&D expense for the quarter totaled $4 million, up 36% versus Q3 of last year. The variance was driven by new product development for the Impella 5.5 and Impella ECP, as well as for data collection related to our ongoing, prospective cVAD study. These investments will lay the groundwork for improving clinical outcomes and sustaining long-term growth.

SG&A expense was $80 million in the quarter, up 20% versus prior year. The increase was due to expansion of our commercial team, additional marketing programs, higher incentive compensation, and support of our Japanese launch.

In the third quarter, we delivered $62 million of operating income, an increase of 39% versus prior year. This translated into an operating margin of 31.1%, a new record for the company. Our margin expanded 200 basis points over prior year due to higher volume, which more than offset our growth investments.

GAAP net income for the quarter increased 235% to $45 million, or $0.97 per diluted share. The year-over-year increase was due to strong operating performance and a lower effective tax rate. As a reminder, third quarter fiscal 2018 net income included a tax charge of $22 million, or $0.48 per share, as a result of the U.S. tax reform. Normalizing for this adjustment, EPS increased 26% in the quarter.

Our balance sheet remains debt free and we ended the quarter with $458 million of cash and marketable securities. Our top priority for cash is to support organic growth initiatives and to continue to build on our intellectual property advantage.

Now, turning to guidance, we have increased our fiscal year 2019 revenue guidance to $780 million, an increase of approximately 31% from the prior year. This compares to our prior fiscal 2019 guidance range of $765 million to $770 million, an increase of 29% to 30%. This guidance projects Q4 revenue to be approximately $218 million, up 25% off a tough comparison, where in the prior year we reported 40% growth. We also expect 2019 full-year operating margin to be in the 29% to 29.5% range compared to our prior guide of 28% to 30%.

In summary, ABIOMED had another record quarter. Our razor-blade business model enables us to recover hearts and save people's lives as we deliver top-tier revenue growth, greater than 80% gross margins, and an operating margin now approaching 30%. Keep in mind that the 30% was our five-year operating margin target that we communicated three and a half years ago. So, we're ahead of that projection and we will continue to drive for best-in-class performance.

What makes ABIOMED really unique is that we've been able to deliver consistent top-tier financial results while, at the same time, making significant strategic investments in the business. We're investing in new products and enhancements, like Smart Assist, Impella Connect, Impella 5.5, and Impella ECP. We're focused on clinical research and potential new indications, like STEMI. We've expanded our manufacturing capacity in both Danvers and Aachen to support future demand. And we also continue to add to our industry-leading commercial team and provide education and 24x7 hospital support, all with a focus on improving patient outcomes.

It is a great time to be at ABIOMED and we are very proud of what we're able to accomplish for our patients. Operator, please now open the line for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press "*1" on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press "#". Once again, to ask a question, please press "*1".

And our first question comes from Chris Pasquale from Guggenheim. Your line is open.

Christopher Pasquale -- Guggenheim Partners -- Analyst

Thanks and congrats on another strong quarter, guys. Mike, I wanted to start with some of the new technology you guys are rolling out. Can you talk about the early experience with Impella Connect in the U.S., how that changes how hospitals use Impella when they have access to that 24/7 support? And maybe what the plans are to expand that limited launch to more of a full rollout?

Michael Minogue -- Chairman, President, and Chief Executive Officer

Sure, Chris. Thanks for the question. The Impella Connect is a new tool, and for everyone's benefit, it allows us to use a one-way video transmission out of the hospital, utilizing their Wi-Fi system. So, it's HIPAA compliant and it's secure. And it replicates on whatever tool that you're visualizing, whether it's an iPad or your phone, the console of the patient on support. So, it's real-time, as if you were standing in the ICU room looking at the console. The second thing is that you're not able to make any changes and it is secure. So, it does allow for the productivity but also the security of the patient.

Now, the way we've used it is to ensure that the device is being used correctly, that we can see alarms, we can use it for training. If at any moment, there's an alarm that goes off, you can have it set up that you can get a text or an email that the critical alarm has gone off. If anything has changed bedside, the flow rates, it records it so you can go back and look at when and how the flow rates were changed. And in combination with the new software that's on the consoles, the Smart Assist, it gives us the ability to start looking at algorithms to see how the patient is doing with the intent to wean people off.

So, if you combined the Smart Assist capability to look at pressures in the ventricle and cardiac output and cardiac power, you now have really a navigation set of tools that you didn't have before. And I equate it to flying a plane and landing the plane. And what you want to do is you want to maintain the proper hemodynamics, the optimal unloading, but then if you have the ability to reload a patient, and you can only do that with an Impella forward-flow pump because you're not bypassing the heart, that's where we believe we can increase recovery, whether it's for an acute patient or acute on chronic.

And I draw the investors' attention to a paper that came out last quarter in ASAIO, in the journal, by Richard Chang, the first author. And it talks about how at Cedars Hospital in L.A., they're utilizing the 5.0 to take severely decompensating shock patients and basically salvage them back either to baseline recovery or on to a bridge of either durable LVAD or cardiac transplantations. So, there's a lot of information that's going to be coming out of the console itself but then Impella Connect gives a real-time ability for everyone to see it.

Now, to give one last practical example, there are times where, on weekends or late nights, some of the nurses on call are not necessarily certified experts in managing these patients and, as a routine procedure, they'll sometimes change seats or shift the patients. And when that happens, you have the ability to shift and move the Impella pump. So, a couple of months ago, on a Friday night at 10:45 p.m., a nurse was changing sheets on the bed and turned our patient, which caused the device to move, and the nurse silenced the alarm. And within a few minutes, the nurse received a call from our on-call site people that were watching and monitoring to let them know that she just silenced an alarm that we did not want silenced, to get the physician on call, which she did. They made the adjustment using the console and the pressures from the device to reposition the Impella properly, which they did, and the device ran flawlessly through the weekend. And on Monday night, the patient was weaned off with a successful outcome.

So, the fact that we have all this information on the console and we can track it 24x7 makes the physicians more productive, makes us more productive, and it really allows us, again, to focus on the proper care in the ICU. And with the algorithms that we have currently and that are coming, we're going to be able to measure things like contractility, weanability, cardiac power output, to really provide a new service that doesn't exist and has never existed in hemodynamic support.

Christopher Pasquale -- Guggenheim Partners -- Analyst

And can you just remind us about the economics for you guys. There's an investment on service and support on your end. Are customers paying for this as a subscription? Is this something that you're providing to them for free to drive utilization of pumps?

Michael Minogue -- Chairman, President, and Chief Executive Officer

So, the specific part of Smart Assist which gives you all the information and the algorithms on the console, that's provided at no cost. That's part of our service contract. For the Impella Connect 24x7, we have a pilot phase of sites that are receiving it and giving us input. Once we hit a certain number, around 100 sites in the U.S., we will be looking at some type of service model, software model, where we'll tier the pricing based on the outcomes and productivity of their team versus the amount of requirement that we're utilizing. So, we'll have some type of shared expense. But, again, the main intent is to improve outcomes for these patients in the ICU.

And just to remind all of our investors, these are the sickest patients in the hospital and when you can recover someone, they'll likely leave the hospital earlier with better outcomes. They'll have less readmissions. And these are also some of the most costly patients in the system. So, improving outcomes has a financial benefit for the hospital. And just having the ability to see and monitor patients real-time essentially improves the hospital employee productivity and it certainly improves our productivity as well.

Christopher Pasquale -- Guggenheim Partners -- Analyst

Thanks, Mike.

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 on Japan. It seems like Japan is tracking ahead of your initial expectations. Just wondering if you have an updated number as to what you think revenue can be from Japan in '19?

Todd Trapp -- Vice President and Chief Financial Officer

Sure, Jason. Appreciate the question. So, our initial guidance in Japan was about $10 million of revenue. So, year to date, right now, after the $5.4 million in Q3, they're just shy of about $12 million. And so we're forecasting right now for fiscal year 2019 for Japan to be somewhere in that $17 million to $18 million range for the year.

Jayson Bedford -- Raymond James -- Analyst

Okay. And just as a follow-up to that, Mike, are you accelerating your efforts there? I realize that it's a controlled launch but from a headcount perspective, are you adding more resources given the momentum?

Michael Minogue -- Chairman, President, and Chief Executive Officer

We are and we're also preparing for some of the new products that I've talked about. So, Impella CP, Impella Connect, Impella RP, and then after that, Impella 5.5. So, we plan to be the standard of care in Japan for the next 10-plus years. To remind our investors, last April, the intra-aortic balloon pump was deemed Class III for cardiogenic shock, which means it's harmful and not to be used. And we have a lot of growing momentum because, in Japan, recovery is the ideal alternative and option and it also has a significant cost savings for the system.

Jayson Bedford -- Raymond James -- Analyst

And just I'll ask one more and then drop. Do you expect any new countries to come on in fiscal '20?

Michael Minogue -- Chairman, President, and Chief Executive Officer

We've currently been seeding new countries. So, we have patients being done in Australia and India, other parts of Europe. Italy is a dedicated distributor. That's been going well. But we also are very disciplined that we need to see a commitment from the government, along with the physicians' societies, that they recognize Impella is a new unloading therapy to focus on heart recovery. And what that means is it's identified as its own DRG and that's what's happened in the U.S., in Germany, and Japan. And we want to maintain that so all our patients in the future can get the care required, we can build out the infrastructure, and our recovery can become the standard of care.

Jayson Bedford -- Raymond James -- Analyst

All right. Thank you.

Michael Minogue -- Chairman, President, and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Bruce Nudell from SunTrust. Your line is open.

Bruce Nudell -- SunTrust Robinson Humphrey -- Analyst

Good morning. Thanks so much for taking the question. Great quarter. I had a couple of trial design questions. With regards to the GTU trial, could you comment briefly about the enrollment criteria to ensure that the heart attack size or the infarct size will be big enough? And also any point estimates for expected infarct sizes in treatment and control arms.

And then, secondly, with regards to evidence development in AKI prevention in high-risk PCI, any initial thoughts about how you might use the cVAD registry to get a proof statement that Impella is, in fact, protective of the kidneys during high-risk PCI?

Michael Minogue -- Chairman, President, and Chief Executive Officer

Sure. So, Bruce, thanks for the question. I'll try to summarize it. Obviously, we can have follow-up as well. First, on the trial design, we spent a lot of time at J.P. Morgan talking about the results from this STEMI study. We're very pleased that we've shown that it's safe and feasible to delay for 30 minutes the reperfusion while you unload and we have met the endpoints and we're moving on to the pivotal.

As of this moment, we do not have confirmation on the primary endpoint and details of the sample size, purely because not the government shutdown but because of the storms in DC. We're meeting again with the FDA next week. So, we're happy to give kind of our overall concept of what we believe but we can't commit to anything yet because we don't have formal confirmation.

So, as we stated at J.P. Morgan, we're happy that the pilot revealed that it's feasible but also showed signal that the Impella unloading has the potential to reduce your infarct size as compared to area at risk. We used a greater than four ST sum in the study and you see that same trend in that but you only had a handful of patients that were at four. The majority were either five or six. But to remind everyone, we actually had a P value when the ST sum was six or greater. So, that's pretty impressive for only 50 patients.

We still believe that infarct size measurement at 3-5 days with an MRI is the gold standard and this reduction of infarct size or an infarct there likely leads to heart failure in the long term. So, our intent for this study will be to have a shorter term endpoint around the infarct size and a longer term endpoint with follow-up on a clinical heart failure measurement.

This study will answer important questions. Go ahead if you have a follow-up to that.

Bruce Nudell -- SunTrust Robinson Humphrey -- Analyst

Yeah. The only other question then was just about the AKI prevention. Any idea for evidence at all there?

Michael Minogue -- Chairman, President, and Chief Executive Officer

Sure. So, on the AKI, we actually have data from Protect 2, the RCT that we conducted back in 2012. And Protect 2 showed for the first time that you could decouple the amount of contrast to renal failure. So, the Impella arm had statistically more contrast and had numerically lower renal failure. And women actually had more AKI than men, so we're doing analysis on that as well. We do currently have multiple studies that have been done in Europe and the U.S. and we presented data that will be published using the cVAD registry demonstrating the continued reduction of AKI and showing a little bit of a benefit to the higher flow CP in reducing AKI compared to the Impella 2.5.

So, there'll be more science coming on that this year. There will be more publications. There will also be some more studies as well. It does appear that there is a connection between unloading the heart. There appears to be a hormonal connection between the kidneys and the production of urine. And for a long period of time, many physicians used to refer to Impella as a urine pump and we'll continue to publish that. But we believe that AKI, acute kidney injury, is an Achilles' heel, is a problem for all PCI, for CABG as well as for CABR, and there will be a tremendous amount of science on this rolling out in the future.

Bruce Nudell -- SunTrust Robinson Humphrey -- Analyst

Thanks so much.

Operator

Thank you. Our next question comes from Isaac Ro from Goldman Sachs. Your line is open.

Isaac Ro -- Goldman Sachs -- Analyst

Good morning, guys. Thanks for taking the question. So, I wanted to start with the expense side, actually. The operating leverage came in a little better than we expected. I'm just trying to think through some of the things that might have gone right there. And if you could kind of help us frame out what you're assuming for the rest of the year, sequentially, on any kind of unusual expense items, that would help us kind of think through operating leverage.

Todd Trapp -- Vice President and Chief Financial Officer

Sure. Thanks, Isaac, for the question. So, I think what drove margins in the quarter -- I mean, 31%, which were a record for the company and it's the first time we broke the 30% barrier. The 200 basis points of margin improvement was really driven by the higher volume which offset some of our growth investments in the quarter. So, we continued to invest. A good portion of our heads that we added were on the manufacturing side, operators in both Danvers and Aachen, really to support our top-line growth. We also continued to add to our commercial team in the quarter as well. In Q3, we spent a little bit more on R&D to support some of the new product pipelines, like the 5.5 and the expandable sheath. And as I mentioned, these investments will continue to lay the groundwork for this longer term growth of the business.

As I look at Q4, and as you know, we don't give formal quarterly guidance, but I guess some of the puts and takes I'll say is we will have higher revenue in Q4 versus Q3, as we typically do in our business. In Q4, we do have higher payroll taxes, primarily Social Security, as the calendar year begins and the clock on those taxes reset. We are going to continue to rollout Impella Connect and CP Optical and that will put a little bit of pressure on our gross margins but, obviously, something we're really excited about, to roll out that technology. I think in Q4, we're also forecast to spend a little bit more on R&D, primarily around third-party spend, again, to support some of our projects like the 5.5 and ECP and our expandable sheath. And I think in Q4, we're also continuing to add to our commercial team at a similar level in Q3.

So, I expect to see some nice margin expansion year-over-year. If you think about how we progressed during the course of the year, in Q1, we started off with 26% operating margins. Q2, we moved up to 27.7%, 31% at Q3, and we'll be a little bit north of that in Q4. So, exiting the year at the right rate.

Isaac Ro -- Goldman Sachs -- Analyst

Great. If I could just ask for a quick follow-up on key pipeline events. Just 5.5, when that comes to the U.S? ECP, first in-man? And then what comes next in STEMI? That'd be great. Thank you.

Michael Minogue -- Chairman, President, and Chief Executive Officer

Sure, Isaac. This is Mike. The 5.5 is approved in Europe. We're doing patients now under a limited launch. As we said, we expect to have the 5.5 as a supplement to the 5.0 by the end of this coming calendar year. For ECP, we expect to do our first in-man this year as well. And for the STEMI study, we expect to start this year. We just need to make sure that we get everything organized, we get the final confirmation from the FDA, and then roll it out with the proper site selection. But we're really excited and we have some additional products and other indications we're working on top of all of that.

Isaac Ro -- Goldman Sachs -- Analyst

Great. Thank you, guys.

Todd Trapp -- Vice President and Chief Financial Officer

Thanks, Isaac.

Operator

Thank you. Our next question comes from Raj Denhoy from Jefferies. Your line is open.

Raj Denhoy -- Jefferies -- Analyst

Hi. Good morning. I was wondering if I could just follow up on a couple of things. So, on the STEMI trial, have you confirmed that it's going to be a two-arm study as opposed to a three-arm study at this point? That there won't just be an Impella and immediate arm in the trial?

Michael Minogue -- Chairman, President, and Chief Executive Officer

Yeah. As far as 100% confirmation, we feel very strong that that's probably -- that's what we're recommending, that's what the discussion is. To remind everyone, we did the pilot so that we could confirm and measure out the specific differences of the 30-minute delay. Because the Impella was in both arms, was in the patients during the PCI and after the PCI, and really what we were trying to show is that this 30-minute preconditioning has the ability to activate a cardioprotective program that the hypothesis was from animals would reduce the reperfusion injury. We believe that we've confirmed that. We've shown that not only is there not harm done to the patient, there appears to be a benefit when the ST sum is six or greater and that was the intent. So, now, moving forward, we're going to do standard of care, which is door-to-balloon, which is today's standard of the angioplasty balloon to opening up. And so we're going to be comparing plumbing only to a heart pump with plumbing. And that's what we're excited about.

Raj Denhoy -- Jefferies -- Analyst

Great. Great. And then just, as I'm sure you saw over the quarter, the PHP trial restarted. The Abbott trial. Any thoughts on that trial? Any of the updates that were provided, have you heard anything from the field yet in terms of physician interest in that trial? Any thoughts would be helpful.

Michael Minogue -- Chairman, President, and Chief Executive Officer

Sure. I mean, we'll let Abbott give you all the details of their own study but we like the added support and focus on recruiting high-risk PCI patients that have advanced coronary disease. As I said, they're a good company and they've got a large platform for education and they create a lot of clinical awareness. We all agree there's an unmet need for patients that are high-risk that are turned down for surgery. We've referenced to publications that show the majority of these patients never make it to the cath lab or get referred in. And there's one paper estimating it's over 300,000 patients per year in the U.S. alone. That being said, it's still a 13.8 French catheter. They did have to stop the study. We're very confident in our innovation and our IP and we have a 20-year head start. So, we look forward to having them join along and the CMO of Abbott is a great guy and he used to be a customer. So, we wish him the best of luck.

Raj Denhoy -- Jefferies -- Analyst

Great. And then just maybe one last one. I think you had alluded earlier that you might be doing an analyst meeting later this year, sort of give us some updates in terms of your assumptions for market size and the like. Is that still the plan for later this year?

Michael Minogue -- Chairman, President, and Chief Executive Officer

That is, Raj. And, essentially, we work on behalf of our investors and our analysts and so there's a lot of new information coming on the STEMI, on the 5.5., on some of the other capabilities we have, and then also updating the total addressable market versus our current addressable market. So, we do plan to do that this calendar year. We want to get a couple of these other milestones behind us so we can give more detail and have an Investor Day of substance, which means it's probably later this calendar year.

Raj Denhoy -- Jefferies -- Analyst

Great. Thank you.

Operator

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

Margaret Kaczor -- William Blair & Co. -- Analyst

Hey, good morning, guys. Thanks for taking the questions. First off, I wanted to follow up on the Impella Connect in the U.S. You kind of referenced 100 sites that you're trying to get to initially. Is there a backlog of demand, where the hospitals or clinicians are asking for this in the hospital right now that you guys can continue to launch into? And then are the hospitals used to that shared expense model that you described? Kind of what's been the feedback so far from those you have described it to?

Michael Minogue -- Chairman, President, and Chief Executive Officer

So, Margaret, that's a good question. So, the first component of it is there's definitely an amazing cool factor that the physicians, when they have their phone in their hand and they can see this and they can look at the way the patient was tracked or monitored or any change in an item, that element of technology, it doesn't exist anywhere else. The second thing is, on top of the fact that they can see the console, we've put new tools on the console itself. Things around cardiac power output, cardiac output, looking at pressures in the left ventricle, things that they also haven't had the ability to monitor and understand. And so we're giving them the ability to see how the heart is doing, the contractility and what's happening, with the goal of weaning the patient off. So, that part is in conjunction.

And then from a demand, I think that the people that are focused on the outcomes and people that are putting the best practice protocols in place, this is where the evolution is going to go. Because if you can manage these patients properly, it's not necessarily just one less day in the ICU. It's life or death and it means the patient may go home alive with their own heart. So, these are massive changes in the outcomes for the patients. These are huge benefits to the patients and their families. And I think that doesn't sink in at times, the fact that we're managing people that have the highest mortality risk in the hospital and we're giving them 24x7 information to save the patient's life and transform the standard of care. These physicians and nurses have watched these patients die for 20 years or watch them go on to more invasive, more expensive procedures. So, the demand out there is a sincere expectation and a quest to improve the standard of care and so we're giving them in these tools.

As far as the shared revenue, the model, I think that you have to prove that out, which is why we're going to pilot it at the certain sites. But, certainly, having this information is going to have a difference and what we're looking at doing is rewarding the sites that have the protocols, that have the expertise, and we understand other sites may require a little bit more handholding and more intense support from us 24x7, which includes coming to the ICU. But because of that, that we'll be, over time, to wean them back and get their hospital up and get their hospital to where these other best practice hospitals are that are achieving these 70% and 80% survival rates with 95%-plus native heart recovery. So, that's the model and we're super excited about it.

Margaret Kaczor -- William Blair & Co. -- Analyst

Okay. That's great. And in terms of the P&L, just to kind of hit on two things, you mentioned hitting the prior long-term guidance. I assume we'll get an update on that at the analyst day. But, Todd or Mike, as you guys look at your P&L and your go-to-market strategy, who do you view as your top peers for operating margin longer term?

Todd Trapp -- Vice President and Chief Financial Officer

The company that we typically benchmark ourselves would be Intuitive. It's one of the companies that has best-in-class revenue, as well as margins. So, that's a company that we kind of model ourselves at here as well. So, based on what we're seeing right now, for us, it's always trying to find that focus between, really, that short-term margins and that longer-term growth initiatives. And I think that's one of the great things about our business model is that we can do both. Right? We can grow top line faster than most and we can drive further margin expansion while continuing to invest back in the business. And that's what we're going to do. I mean, if you think about where we were just a few years back in 2015, we were a 12.5% margin business. And over that time period, we spent close to $300 million of R&D and now we're approaching 30% and we're not done yet. And so we're going to strive to be best in class on both the top line as well as on the bottom line, Margaret.

Margaret Kaczor -- William Blair & Co. -- Analyst

Great. Thank you much.

Operator

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

David Lewis -- Morgan Stanley -- Analyst

Good morning. Hey, Mike. Just a couple quick nips for Todd and then one strategic for Mike. Just on the financial side, Todd, I just want to confirm this number in the deck. The two and a half placements this quarter, that seems like a very big number. I want to make sure I have that right. What drove that particular number? And just the R&D spend, there was a real disconnect in our margin math this quarter. That R&D number continues to scale. Where is that incremental investment going? And then I have one strategic for Mike.

Todd Trapp -- Vice President and Chief Financial Officer

David, can you just repeat your first question on the sites?

David Lewis -- Morgan Stanley -- Analyst

Sure. I think in the deck, on the two and a half site number, that looked like a very big number. I just wanted to understand what the drivers of that incremental two and a half site add was in the quarter.

Todd Trapp -- Vice President and Chief Financial Officer

So, if you're doing new sites, David, we did 104 new sites, 40 of which were CP, and that compares to 101 total sites prior year. So, the breakdown of new sites for 2.5, CP, 5.0, and RP went from 101 to 104. Is that the number you were referring to?

David Lewis -- Morgan Stanley -- Analyst

Pretty consistent. We had a different number. So, we'll come take that offline. That's helpful. And then, Todd, just R&D. R&D investment continues to scale the last three quarters. That's $7 million, I think, up year-on-year. Where's that incremental investment going?

Todd Trapp -- Vice President and Chief Financial Officer

It's going in the pipeline of our new products, like the Impella 5.5, Impella ECP, and expandable sheath, as well as we continue to build out our cVAD study and our IQ database. And as you know, that data has been a great foundation for us to attain expanded indications for our products. So, I would say between the products as well as our ability to build out our cVAD study and our IQ database.

David Lewis -- Morgan Stanley -- Analyst

Okay. And then on just the outlook for 2020, Mike, if you think about the growth, can you just give us a sense of where you're thinking about geographic growth? Obviously, the U.S. coming off harder comps, international could scale at new countries, and Japan is ramping. Just give us a flavor for sort of drivers of geographic growth next year, as well as new product growth. Thank you.

Michael Minogue -- Chairman, President, and Chief Executive Officer

So, David, relative to your question on geographic, I think what you'll see is we continue to maintain focus in the U.S. and Germany. Potentially, based on some additional reimbursement in countries and Germany, we could expand, potentially, a little bit more resources in France or the UK or other parts of Europe.

We also expect to now move a little bit faster in what I would consider in Japan to be the full launch. We've had kind of this limited launch to ensure we get the infrastructure. So, you'll see us try to ramp it a little bit faster in Japan. We always give, each quarter, the number of sites that are already approved. So, we're only at 48 but 103 sites are ready and approved by the government so we could pick that up. We could be twice the rate now there. That's going to go to 350 hospitals. But there's certainly more hospitals than the 350 and the balloon pumps are at more than 350 hospitals in Japan. So, we'll really see a push in Japan.

And we'll continue to build out and plant seeds around the rest of Asia for areas that are focused on heart recovery and just more execution, more discipline. The new tool of the Impella Connect really gives us the ability to audit and check as we open new countries, to be able to ensure that they're managing the patients the way we want them managed and that they're utilizing the best practices. And I think the Impella Connect gives us a little bit more flexibility to experiment and audit in some of these countries that before we might have been hesitant to launch in.

Operator

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

Danielle Antalffy -- Leerink Partners -- Analyst

Hey, good morning, everyone. Thanks so much for taking the question. Todd, first question for you on the Q4 guidance. I appreciate that it's a tough year-over-year comparable but it feels like momentum is actually accelerating or, at the very least, stable. Can you remind us what drove strength in the Q4 last year and the puts and takes of guidance this year, given that you're clearly doing better in Japan? Can you talk a little bit about why you're expecting the stepdown in growth, beyond the fact that it's a tough comp?

Todd Trapp -- Vice President and Chief Financial Officer

Yeah. Well, I mean, listen. Consistent with past practices, in Q3, we took up the range for the third time year. It was $15 million off the low end and $10 million off the high end. And so, again, we're focusing on $780 million for the year, up 31%. But, Danielle, it does come down to, really, bigger numbers and tough comps. I mean, as you mentioned, last year in Q4, we grew 40% from a top line perspective. And so we are lapping some really difficult quarters. And so we're going to continue to grow at a pace that we think is sustainable with a focus on patient outcomes. And, again, as Mike mentioned, our goal remains to be one of the fastest growing, most profitable med tech companies in the market. And so I think it's more comps than anything else at this point in time.

Danielle Antalffy -- Leerink Partners -- Analyst

Okay. That's helpful. And just from a cash perspective, Mike, I appreciate you said the focus is investing organically into the business but you continue to generate strong cash flow. You're now at over $450 million in cash, no debt. At what point do you start to deploy capital elsewhere because it feels like you're generating cash faster than you can spend it? So, just curious how to think about your view over the next few years on deploying that capital. Thanks so much.

Michael Minogue -- Chairman, President, and Chief Executive Officer

Danielle, we're very focused on our organic growth and our execution. We like having a very big cash position that allows us to continue to invest in innovation, as well as create a stronger IP position, and we plan to continue to enforce our IP position. We are placing investments, though, on things that are adjacent. So, we placed $15 million in Shockwave. We think it's clever technology that helps people with vascular disease and allows us to potentially place more Impellas through the femoral arteries. We've also made upwards of $30 million to $40 million in other investments in new technologies that might be 5-7 years out that have a fit into what we're doing or our patient path and we'll continue to be selective and invest in areas where we see a benefit, where we can leverage our core competency of recovering hearts and saving lives.

Danielle Antalffy -- Leerink Partners -- Analyst

Thank you so much.

Michael Minogue -- Chairman, President, and Chief Executive Officer

Thanks, Danielle.

Operator

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Mike Minogue for any closing remarks.

Michael Minogue -- Chairman, President, and Chief Executive Officer

Great. We want to thank everyone for their time today and if you have any follow-up questions, please feel free to reach out. Have a great day.

Operator

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

Duration: 54 minutes

Call participants:

Todd Trapp -- Vice President and Chief Financial Officer

Michael Minogue -- Chairman, President, and Chief Executive Officer

Christopher Pasquale -- Guggenheim Partners -- Analyst

Jayson Bedford -- Raymond James -- Analyst

Bruce Nudell -- SunTrust Robinson Humphrey -- Analyst

Isaac Ro -- Goldman Sachs -- Analyst

Raj Denhoy -- Jefferies -- Analyst

Margaret Kaczor -- William Blair & Co. -- Analyst

David Lewis -- Morgan Stanley -- Analyst

Danielle Antalffy -- Leerink Partners -- Analyst

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