UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 29, 2022,
TABLE OF CONTENTS
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Item 1. |
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Condensed Consolidated Balance Sheets as of June 30, 2022 and March 31, 2022 |
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Condensed Consolidated Statements of Operations for the three months ended June 30, 2022 and 2021 |
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Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2022 and 2021 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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EXPLANATORY NOTES
Pending Trademarks and Registered Marks
Throughout this quarterly report on Form 10-Q (“this Report”), we refer to various trademarks, service marks and trade names that we use in our business. Abiomed, Impella, Impella 2.5, Impella 5.0, Impella LD, Impella CP, Impella RP, Impella 5.5, Impella Connect, and SmartAssist are registered trademarks of Abiomed, Inc., and are registered in the U.S. and certain foreign countries. Impella ECP, Impella BTR, CVAD STUDY, STEMI DTU, Automated Impella Controller, Abiomed Breethe OXY-1 System and preCARDIA are pending trademarks of ABIOMED, Inc. Other trademarks and service marks appearing in this Report are the property of their respective holders.
Company References
Throughout this Report, unless the context otherwise requires, “ABIOMED, Inc.,” the “Company,” “we,” “us” and “our” refer to ABIOMED, Inc. and its consolidated subsidiaries.
Where You Can Find More Information
We make available, free of charge on our website located at www.abiomed.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after filing such reports with or furnishing such reports to the U.S. Securities and Exchange Commission (“SEC”). We also use our website for the distribution of Company information. The information we post on our website may be deemed to be material information. Accordingly, investors should monitor our website, in addition to following our press releases, SEC reports and other filings and public conference calls and webcasts. The contents of our website are not incorporated by reference into this Report.
2
PART I. FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
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June 30, 2022 |
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March 31, 2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term marketable securities |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term marketable securities |
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Property and equipment, net |
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Goodwill |
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Other intangibles, net |
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Deferred tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue |
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Other current liabilities |
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Total current liabilities |
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Other long-term liabilities |
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Contingent consideration |
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Deferred tax liabilities |
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Total liabilities |
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and contingencies (Note 15) |
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Stockholders' equity: |
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Class B Preferred Stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Retained earnings |
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Treasury stock at cost - |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
3
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
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For the Three Months Ended June 30, |
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2022 |
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2021 |
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Revenue |
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$ |
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$ |
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Cost of revenue and operating expenses: |
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Cost of revenue |
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Research and development |
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Selling, general and administrative |
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Acquired in-process research and development |
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Income (loss) from operations |
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Interest and other income, net |
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Income (loss) before income taxes |
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Income tax provision |
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Net income (loss) |
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$ |
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$ |
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Net income (loss) per share - basic |
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$ |
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$ |
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Weighted average shares outstanding - basic |
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Net income (loss) per share - diluted |
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$ |
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$ |
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Weighted average shares outstanding - diluted |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
4
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)
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For the Three Months Ended June 30, |
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2022 |
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2021 |
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Net income (loss) |
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$ |
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$ |
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Other comprehensive loss: |
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Foreign currency translation (losses) gains |
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Unrealized losses on derivative instrument |
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Net unrealized losses on marketable securities, net of tax |
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Other comprehensive loss |
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Comprehensive income (loss) |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
5
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(in thousands, except share data)
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Common Stock |
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Treasury Stock |
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Additional Paid |
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Retained |
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Accumulated Other |
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Total Stockholders' |
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Shares |
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Par value |
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Shares |
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Amount |
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in Capital |
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Earnings |
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Comprehensive Loss |
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Equity |
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Balance, March 31, 2022 |
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Restricted stock units issued |
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Stock options exercised |
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Return of common stock to pay withholding taxes on restricted stock units |
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( |
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( |
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( |
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( |
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Stock-based compensation expense |
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Stock repurchase program |
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( |
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( |
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( |
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( |
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Other comprehensive loss |
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Net income |
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Balance, June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Common Stock |
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Treasury Stock |
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Additional Paid |
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Retained |
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Accumulated Other |
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Total Stockholders' |
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Shares |
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Par value |
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Shares |
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Amount |
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in Capital |
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Earnings |
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Comprehensive Loss |
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Equity |
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Balance, March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Restricted stock units issued |
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— |
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Stock options exercised |
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Return of common stock to pay withholding taxes on restricted stock units |
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( |
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( |
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Stock-based compensation expense |
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Other comprehensive loss |
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Net loss |
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Balance, June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
6
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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For the Three Months Ended June 30, |
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2022 |
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2021 |
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Operating activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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Acquired in-process research & development |
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Bad debt expense (recoveries) |
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Stock-based compensation |
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Write-down of inventory and other |
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Accretion on marketable securities |
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Change in fair value of other investments |
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Gain on previously held interest in preCARDIA |
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Deferred tax provision |
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Change in fair value of contingent consideration |
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Other non-cash operating activities |
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Changes in assets and liabilities: |
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Accounts receivable |
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Inventories |
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( |
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( |
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Prepaid expenses and other assets |
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Accounts payable |
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( |
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Accrued expenses and other liabilities |
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Deferred revenue |
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Net cash provided by operating activities |
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Investing activities: |
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Purchases of marketable securities |
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Proceeds from the sale and maturity of marketable securities and other |
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Purchases of other investments |
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Acquisition of preCARDIA, net of cash acquired |
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( |
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Purchases of property and equipment |
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( |
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Net cash provided by (used for) investing activities |
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Financing activities: |
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Proceeds from the exercise of stock options |
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Taxes paid related to net share settlement upon vesting of stock awards |
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( |
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( |
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Repurchase of common stock |
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( |
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Net cash used for financing activities |
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( |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for income taxes, net of refunds |
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$ |
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$ |
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Supplemental disclosure of non-cash activities: |
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Property and equipment in accounts payable and accrued expenses |
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Right-of-use assets obtained in exchange for lease liabilities |
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The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
7
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data)
Note 1. Nature of Operations
ABIOMED, Inc. (the “Company” or “ABIOMED”) is a leading provider of medical technology that provides circulatory support and oxygenation. The Company's products are designed to enable the heart to rest by improving blood flow and/or performing the pumping of the heart. The Company’s products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by cardiac surgeons for patients who are in need of hemodynamic support prophylactically or emergently before, during or after angioplasty or heart surgery procedures.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial reporting as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and in accordance with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 that has been filed with the SEC.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments that are necessary for a fair presentation of results for the interim periods presented. The results of operations for any interim period may not be indicative of results for the full fiscal year or any other subsequent period. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from these estimates.
There have been no changes in the Company’s significant accounting policies for the three months ended June 30, 2022 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 that has been filed with the SEC.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from these estimates.
COVID-19 Pandemic
The Company is subject to additional risks and uncertainties as a result of the ongoing novel coronavirus (“COVID-19”) pandemic. Since March 2020, the ongoing COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company’s business and markets, including the Company’s workforce and the operations of its customers, suppliers, and business partners. While the COVID-19 (including new variants of COVID-19) pandemic remains fluid and continues to evolve differently across various geographies, the Company believes it is likely to continue to experience variable impacts on its business.
To ensure the health and safety of its global employees, the Company continues to offer onsite COVID-19 testing and vaccinations in order to maintain a safe working environment. The Company’s proactive testing and vaccination programs have reduced exposure with early detection and enabled its manufacturing facilities to operate at full capacity.
The depth and extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, results of operations, financial condition and individual markets is dependent upon various factors, including the spread of additional variants; the availability of vaccinations, personal protective equipment, intensive care unit (“ICU”) and operating room capacity, and medical staff; and government interventions to reduce the spread of the virus. When COVID-19 infection rates spike in a particular region, the Company’s patient utilization volumes have generally been negatively impacted as hospitals face capacity limitations, staffing shortages and some in-patient treatments have been deferred.
While patient utilization increased in the first quarter of fiscal year 2023, sales were impacted by slower than expected improvements in hospital staffing shortages. The Company continues to closely monitor the impact of COVID-19 on all aspects of its business and geographies, including any impact on the Company’s customers, including the ongoing hospital labor shortages, employees, suppliers, vendors, business partners and distribution channels, as well as on procedures and the demand for its products by keeping apprised of local, regional, and global COVID-19 surges (including new variants of the virus).
While the Company cannot reliably estimate the extent to which the COVID-19 pandemic may impact patient utilization and revenues of its products, the Company's focus is to increase patient utilization of its Impella devices. As of the date of issuance of
these financial statements, the extent to which the COVID-19 pandemic may materially adversely affect the Company’s financial condition, liquidity or results of operations is uncertain.
8
Recently Adopted Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” an amendment focused on increasing transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The Company adopted ASU 2021-10 as of April 1, 2022, on a prospective basis, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Effective
No new accounting pronouncements issued or effective during the period had, or are expected to have, a material impact on the consolidated financial statements.
Note 3. Acquisitions
Acquisition of preCARDIA, Inc.
The Company acquired
The Company acquired preCARDIA for a purchase price of $
In connection with the acquisition, the Company acquired net assets of $
Note 4. Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the treasury stock method by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted average shares outstanding any potential dilutive securities outstanding for the period. Potential dilutive securities include stock options, restricted stock units, performance-based stock awards and shares to be purchased under the Company’s employee stock purchase plan.
For purposes of the diluted net income (loss) per share calculation, potential dilutive securities are excluded from the calculation if their effect would be anti-dilutive. As such, basic and diluted net loss per share are the same for periods with a net loss.
The Company’s basic and diluted net income (loss) per share were as follows:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net income (loss) per share – basic |
|
(in thousands, except per share data) |
|
|||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
||
Weighted average shares – basic |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net income (loss) per share – basic |
|
$ |
|
|
$ |
( |
) |
|
9
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net income (loss) per share – diluted |
|
(in thousands, except per share data) |
|
|||||
Net income (loss) |
|
$ |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Weighted average shares – basic |
|
|
|
|
|
|
||
Effect of dilutive securities |
|
|
|
|
|
— |
|
|
Weighted average shares – diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net income (loss) per share – diluted |
|
$ |
|
|
$ |
( |
) |
|
For the three months ended June 30, 2022 and 2021, approximately
Note 5. Revenue Recognition
Revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer.
Product revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract.
Service revenue is generally recognized over time as the services are rendered to the customer based on the extent of progress towards completion of the performance obligation. The Company recognizes service revenue over the term of the service contract. Services are expected to be transferred to the customer throughout the term of the contract and the Company believes recognizing revenue ratably over the term of the contract best depicts the transfer of value to the customer. Revenue generated from preventative maintenance calls is recognized at a point in time when the services are provided to the customer.
Revenue from the sale of products and services are evidenced by either a contract with the customer or a valid purchase order and an invoice which includes all relevant terms of sale and shipment of product or service provided has been incurred. The Company performs a review of each specific customer's credit worthiness and ability to pay prior to acceptance as a customer. Further, the Company performs periodic reviews of its customers' creditworthiness prospectively.
Disaggregation of Revenue
Revenue is disaggregated from contracts between product revenue and service and other revenue and by geography, which the Company believes best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors. The Company generally sells its products and services through a direct sales force in the U.S. and Germany and through direct sales and distribution agreements in other international markets outside the U.S. (e.g., Japan, Europe, Canada, Latin America, Asia-Pacific, Middle East).
The following table disaggregates the Company’s revenue by products and services:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Product revenue |
|
$ |
|
|
$ |
|
||
Service and other revenue |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
10
The following table disaggregates the Company’s revenue by geographic location:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
United States |
|
$ |
|
|
$ |
|
||
Europe |
|
|
|
|
|
|
||
Japan |
|
|
|
|
|
|
||
Rest of world |
|
|
|
|
|
|
||
Outside the U.S. |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
Variable Consideration
Returns Reserve
The Company estimates an allowance for future sales returns based on historical return experience, which requires judgment. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company estimates product return liabilities using the expected value method based on its historical sales information and other factors that it believes could significantly impact its expected returns. The Company’s returns reserve was not material as of June 30, 2022 and March 31, 2022.
Rebates and Discounts
The Company provides certain customers with rebates and discounts that are defined in the Company’s contractual arrangements with customers and are recorded as a reduction of revenue in the period the related revenue is recognized with a corresponding liability recorded and included in accrued expenses in the accompanying condensed consolidated balance sheets. Rebates normally result from performance-based offers that are primarily based on attaining contractually specified sales volumes as well as product usage. Discounts are normally from early payment incentives. The Company estimates the amount of rebates and discounts based on an estimate of the third-party’s sales and the respective rebate or discount defined in the customer contractual arrangement.
Contract Balances
Contract balances represent amounts presented in the condensed consolidated balance sheets when either the Company has transferred goods or services to the customer, or the customer has paid consideration to the Company under the contract. These contract balances include trade accounts receivable and deferred revenue.
Deferred Revenue
The Company’s deferred revenue balance was $
Costs to Obtain or Fulfill a Customer Contract
The Company has certain costs to obtain and fulfill a customer contract, such as commissions and shipping costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. These costs are included in selling, general, and administrative expenses.
11
Note 6. Financial Instruments
Cash Equivalents and Marketable Securities
The Company’s cash equivalents and marketable securities at June 30, 2022 and March 31, 2022 are invested in the following:
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Market |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
June 30, 2022 |
|
(in thousands) |
|
|||||||||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total cash equivalents |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term U.S. Treasury mutual fund securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term government-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total short-term marketable securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term U.S. Treasury mutual fund securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term government-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total long-term marketable securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total cash equivalents and marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Market |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
March 31, 2022: |
|
(in thousands) |
|
|||||||||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total cash equivalents |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term U.S. Treasury mutual fund securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term government-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Short-term commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total short-term marketable securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term U.S. Treasury mutual fund securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term government-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Long-term corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total long-term marketable securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total cash equivalents and marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Gross realized gains and losses on sales of marketable securities were not material for the three months ended June 30, 2022 and 2021.
The securities that the Company invests in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. Unrealized losses as of June 30, 2022 are primarily due to changes in interest rates and credit spreads. Accordingly, the Company has not recorded an allowance for credit losses. No marketable securities have been in a continuous material unrealized loss position for greater than twelve months as of June 30, 2022.
12
Derivative Instruments
In October 2019, the Company entered into an intercompany agreement in which it loaned
The following table summarizes the terms of the cross-currency swap agreement as of June 30, 2022 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
Effective Date |
|
Maturity |
|
Fixed Rate |
|
Aggregate Notional Amount |
|
|
Pay EUR |
|
|
|
|
EUR |
|
|||
Receive U.S.$ |
|
|
|
|
|
|
USD |
|
|
The following table presents the fair value of the cross-currency swap (amounts in thousands):
Derivatives designated as hedging instruments under ASC 815 |
|
Balance Sheet classification |
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
Cross-currency swap |
|
Other assets (other long-term liabilities) |
|
$ |
|
|
$ |
( |
) |
|
The Company has structured its cross-currency swap agreement to be 100% effective and, as a result, there was no net impact to earnings resulting from hedge ineffectiveness. The change in fair value of the cross-currency swap during the three months ended June 30, 2022 was mainly due to fluctuations in the Euro to the U.S. dollar exchange rates.
For the three months ended June 30, 2022 and 2021, the Company recorded income related to the interest rate differential of the cross-currency swap of $
Fair Value Hierarchy
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three categories:
Level 1 primarily consists of financial instruments whose values are based on quoted market prices such as exchange-traded instruments and listed equities.
Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3 is comprised of unobservable inputs that are supported by little or no market activity. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
13
The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
June 30, 2022: |
|
(in thousands) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term U.S. Treasury mutual fund securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term government-backed securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Long-term U.S. Treasury mutual fund securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Long-term government-backed securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Long-term corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Investment in Shockwave Medical |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Cross-currency swap agreement |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
March 31, 2022: |
|
(in thousands) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term U.S. Treasury mutual fund securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term government-backed securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Short-term commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Long-term U.S. Treasury mutual fund securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Long-term government-backed securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Long-term corporate debt securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Investment in Shockwave Medical |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cross-currency swap agreement |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
The Company has determined that the estimated fair value of its money market funds and its investment in Shockwave Medical, a publicly traded medical device company, are reported as Level 1 financial assets as they are valued at quoted market prices in active markets. The investment in Shockwave Medical is classified within other assets in the condensed consolidated balance sheets.
The Company has determined that the estimated fair value of its commercial paper, U.S. Treasury mutual fund securities, government-backed securities, corporate debt securities and cross-currency swap agreement are reported as Level 2 financial assets and liabilities as they are based on model-driven valuations in which all significant inputs are observable, or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability.
The Company evaluates transfers between fair value levels at the end of each reporting period. There were no transfers of assets or liabilities between fair value levels during the three months ended June 30, 2022.
Level 3 Assets and Liabilities
Other Investments
The Company periodically makes investments in medical device companies that focus on heart failure and heart pumps and other medical device technologies. The Company measures these equity investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment. The Company monitors any events or changes in circumstances that may have a significant effect on the fair value of investments, either due to impairment or based on observable price changes and records adjustments as needed.
14
The Company’s other investments are classified as a Level 3 assets and are not included in the fair value table above.
|
|
|
|
|
|
|
(in thousands) |
|
|
Balance, March 31, 2022 |
|
$ |
|
|
Additions |
|
|
|
|
Change in fair value, net |
|
|
|
|
Balance, June 30, 2022 |
|
$ |
|
|
Change in fair value, net represents upward and downward adjustments due to observable price changes and related foreign currency fluctuations, which are reflected within interest and other income, net in the Company's condensed consolidated statements of operations.
Contingent Consideration
Contingent consideration represents potential milestones that the Company may pay as additional consideration related to the acquisition of ECP Entwicklungsgesellschaft mbH (“ECP”) in July 2014 and the acquisition of Breethe in April 2020. Changes in fair value of contingent consideration are reflected within research and development expenses in the Company’s condensed consolidated statements of operations. There is no assurance that any of the conditions for the milestone payments will be met.
The components of contingent consideration are as follows:
|
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
|
|
(in thousands) |
|
|||||
ECP |
|
$ |
|
|
$ |
|
||
Breethe |
|
|
|
|
|
|
||
Total contingent consideration |
|
$ |
|
|
$ |
|
||
ECP
In July 2014, the Company acquired ECP and AIS GmbH Aachen Innovative Solutions (“AIS”) for $
The Company uses a combination of an income approach, based on various revenue and cost assumptions and the application of a probability to each outcome, and a Monte-Carlo valuation model, both of which consider significant unobservable inputs. As it relates to the CE Mark approval milestone, probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn out itself, the related projections, and the overall business. The revenue-based milestone is valued using a Monte-Carlo valuation model, which simulates estimated future revenues during the earn out-period using management’s best estimates.
Key unobservable inputs include the discount rate used to present value the projected revenues and cash flows (ranging from
Breethe
In April 2020, the Company acquired Breethe for $
The Company uses a combination of an income approach, based on various revenue and cost assumptions and the application of a probability to each outcome, and a Monte-Carlo valuation model, both of which consider significant unobservable inputs. As it relates to the regulatory milestones, probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn out itself, the related projections, and the overall business. The commercial milestones are valued using a Monte-Carlo valuation model, which simulates estimated future revenues during the earn out-period using management’s best estimates.
15
Key unobservable inputs include the discount rates used to present value the projected revenues and cash flows (ranging from
Contingent consideration is classified as a Level 3 liability as the estimated fair value of the contingent consideration related to the acquisitions of ECP and Breethe require significant management judgment or estimation.
The following table summarizes the change in fair value, as determined by Level 3 inputs of the contingent consideration for the three months ended June 30, 2022:
|
|
|
|
|
|
|
(in thousands) |
|
|
Balance, March 31, 2022 |
$ |
|
||
Change in fair value |
|
( |
) |
|
Balance, June 30, 2022 |
$ |
|
||
The change in fair value of the contingent consideration was primarily due to estimates related to development timelines and the passage of time on the fair value measurement of milestones.
The significant unobservable inputs used in the fair value of the Company’s contingent consideration are the discount rate and forecasted financial information, including the probability of achievement. Significant increases (decreases) in the discount rate would have resulted in a significantly lower (higher) fair value measurement. Significant increases (decreases) in the forecasted financial information would have resulted in a significantly higher (lower) fair value measurement. As of June 30, 2022 and March 31, 2022, the present value of expected payments related to the Company’s contingent consideration was $
Note 7. Inventories, net
The components of inventories, net are as follows:
|
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
|
|
(in thousands) |
|
|||||
Raw materials and supplies |
|
$ |
|
|
$ |
|
||
Work-in-progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories, net |
|
$ |
|
|
$ |
|
||
The Company’s inventories relate to its Impella® and Abiomed Breethe OXY-1 System™ (“Breethe OXY-1”) product platforms. Finished goods and work-in-process inventories consist of direct material, labor and overhead.
Note 8. Property and Equipment, net
The components of property and equipment, net are as follows:
|
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
|
|
(in thousands) |
|
|||||
Land |
|
$ |
|
|
$ |
|
||
Building and building improvements |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
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|
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|
||
Machinery, equipment and computer software |
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|
||
Furniture and fixtures |
|
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|
|
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|
||
Construction in progress |
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|
|
|
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|
||
Total cost |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense related to property and equipment was $
16
Note 9. Goodwill and Other Intangible Assets, net
Goodwill
The carrying amount of goodwill as of June 30, 2022 and March 31, 2022 was $
|
|
(in thousands) |
|
|
Balance, March 31, 2022 |
|
$ |
|
|
Foreign currency translation |
|
|
( |
) |
Balance, June 30, 2022 |
|
$ |
|
|
The Company evaluates goodwill at least annually on October 31, as well as whenever events or changes in circumstances suggest that the carrying amount may not be recoverable. The Company has
Other Intangible Assets, net
Other intangible assets, net consists of the following:
|
|
June 30, 2022 |
|
|||||||||||
|
|
Weighted Average Amortization Period |
|
Cost |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|||
|
|
|
|
(in thousands) |
|
|||||||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|||
Developed technology |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|||
In-process research and development |
|
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
March 31, 2022 |
|
|||||||||||
|
|
Weighted Average Amortization Period |
|
Cost |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|||
|
|
|
|
(in thousands) |
|
|||||||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|||
Developed technology |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|||
In-process research and development |
|
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The Company’s finite-lived intangible asset represents developed technology associated with the estimated fair value of the Breethe OXY-1 System. During the year ended March 31, 2021, the Company reclassified the in-process research and development (“IPR&D”) asset to developed technology upon receiving U.S. Food and Drug Administration or FDA 510(k) clearance of the Breethe OXY-1 System and began amortizing the intangible asset on a straight-line basis over an estimated useful life of
The Company’s IPR&D asset represents the estimated fair value of the Impella ECPTM related to the acquisition of ECP and AIS, in July 2014. The estimated fair value of the IPR&D asset at the acquisition date was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flow estimates for the future Impella ECPTM expandable catheter pump were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the acquisition date and the time and resources needed to complete development.
The Company evaluates the other intangible assets at least annually on October 31, as well as whenever events or changes in circumstances suggest that the carrying amount may not be recoverable. The Company has
17
Note 10. Other Assets
The components of other assets are as follows:
|
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
|
|
(in thousands) |
|
|||||
Investment in Shockwave Medical |
|
$ |
|
|
$ |
|
||
Other investments (Note 6) |
|
|
|
|
|
|
||
Operating lease right of use assets |
|
|
|
|
|
|
||
Other intangible assets and other assets |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
Investment in Shockwave Medical
The fair value of the Company’s investment in Shockwave Medical, a publicly-traded medical device company, was $
Operating Lease Right of Use Assets
The Company has lease agreements for real estate including corporate offices and warehouse space, vehicles and certain equipment. The balance of operating lease right-of-use assets included in other assets was $
Other Long-Term Assets
The Company’s other long-term assets is comprised primarily of license manufacturing rights to certain technology from third parties and prepayments related to the Company’s clinical trial activities.
Note 11. Accrued Expenses
Accrued expenses consist of the following:
|
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
|
|
(in thousands) |
|
|||||
Employee compensation |
|
$ |
|
|
$ |
|
||
Sales and income taxes |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
||
Marketing |
|
|
|
|
|
|
||
Warranty |
|
|
|
|
|
|
||
Professional, legal and accounting fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Employee compensation consists primarily of accrued bonuses, accrued commissions and accrued employee benefits. Other includes returns reserve, allowance for rebates and discounts and other miscellaneous accrued expenses.
Note 12. Stockholders’ Equity
Class B Preferred Stock
The Company has authorized
Stock Repurchase Program
In August 2019, the Company’s Board of Directors authorized a stock repurchase program for up to $
18
trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The stock repurchase program has no time limit and may be suspended for periods or discontinued at any time. The Company is funding the stock repurchase program with its available cash and marketable securities. The remaining authorization under the stock repurchase program was $
The following table provides stock repurchase activities during the quarter:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Shares repurchased |
|
|
|
|
|
|
||
Average price per share |
|
$ |
|
|
|
|
||
Value of shares repurchased (in millions) |
|
$ |
|
|
|
|
||
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows (in thousands):
|
|
Three Months Ended June 30, 2022 |
|
|||||||||||||
|
|
Foreign Currency Translation Losses |
|
|
Unrealized Gains (Losses) on Derivative Instrument |
|
|
Net Unrealized Losses on Marketable Securities, net of tax |
|
|
Total |
|
||||
Balance, March 31, 2022 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2022 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
Three Months Ended June 30, 2021 |
|
|||||||||||||
|
|
Foreign Currency Translation (Losses) Gains |
|
|
Unrealized Gains (Losses) on Derivative Instrument |
|
|
Net Unrealized Gains (Losses) on Marketable Securities, net of tax |
|
|
Total |
|
||||
Balance, March 31, 2021 |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance, June 30, 2021 |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Note 13. Stock-Based Compensation
The following table summarizes stock-based compensation expense by financial statement line item in the Company’s condensed consolidated statements of operations for each of the three months ended June 30, 2022 and 2021:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Cost of revenue |
|
$ |
|
|
$ |
|
||
Research and development |
|
|
|
|
|
|
||
Selling, general and administrative |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
19
Stock Options
The following table summarizes the stock option activity for the three months ended June 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
||||
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Aggregate |
|
||||
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
||||
|
|
Options |
|
|
Exercise |
|
|
Contractual |
|
|
Value |
|
||||
|
|
(in thousands) |
|
|
Price |
|
|
Term (years) |
|
|
(in thousands) |
|
||||
Outstanding at beginning of period |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Cancelled and expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and expected to vest at end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock options generally vest and become exercisable annually over
The aggregate intrinsic value of stock options exercised was $
The Company estimates the fair value of each stock option granted at the grant date using the Black-Scholes option valuation model.
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Weighted average grant-date fair value |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Valuation assumptions: |
|
|
|
|
|
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected option life (years) |
|
|
|
|
|
|
||
Expected volatility |
|
|
% |
|
|
% |
||
Restricted Stock Units
The following table summarizes activity of restricted stock units for the three months ended June 30, 2022:
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
|
|
(in thousands) |
|
|
(per share) |
|
||
Restricted stock units at beginning of period |
|
|
|
|
$ |
|
||
Granted (1) |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Restricted stock units at end of period |
|
|
|
|
$ |
|
||
(1)
The weighted average grant-date fair value for restricted stock units granted during the three months ended June 30, 2022 was $
Restricted stock units generally vest annually, over
20
As of June 30, 2022, the Company recognized compensation expense based on the probable outcomes related to the prescribed performance targets on the outstanding awards. The remaining unrecognized compensation expense for outstanding performance-based and market-based restricted stock units as of June 30, 2022 was $
Performance-Based Awards
The Company grants performance-based restricted stock units to certain executive officers and employees, which vest upon achievement of prescribed service-based milestones by the award recipients and the achievement of prescribed performance milestones by the Company, as defined in the respective agreements.
Market-Based Awards
The Company grants market-based restricted stock units to certain executive officers and employees. These restricted stock units vest upon achievement of prescribed service-based milestones, relative total shareholder return (“TSR”) goals by the Company and the achievement of prescribed performance milestones by the Company, as defined in the respective agreements.
The Company used a Monte-Carlo simulation model to estimate the grant-date fair value of the TSR restricted stock units.
The table below sets forth the assumptions used to value the outstanding market-based restricted stock units and the estimated grant-date fair value:
|
|
May 2021 |
|
|
May 2020 |
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
— |
|
|
|
— |
|
Remaining performance period (years) |
|
|
|
|
|
|||
Estimated fair value per share |
|
$ |
|
|
$ |
|
||
Target performance (number of shares) |
|
|
|
|
|
|
||
Note 14. Income Taxes
The Company’s income tax provision was $
The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company’s most recent completed income tax audits were in the U.S., relating to fiscal year 2016 and in Germany, which covered fiscal years 2016 through 2019. These tax audits did not materially impact the Company’s financial statements. All other tax years remain subject to examination by the IRS, state and foreign tax authorities.
Note 15. Commitments and Contingencies
From time to time, the Company is involved in legal and administrative proceedings and claims of various types. In some actions, the claimants seek damages, as well as other relief, which, if granted, would require significant expenditures. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in liability to the Company and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.
21
Maquet Matters
The Company has been litigating certain patents owned by Maquet Cardiovascular LLC (“Maquet”) in two separate cases pending in the U.S. District Court for the District of Massachusetts (“D. Mass” or “the Court”) since 2016.
In May 2016, the Company filed a declaratory judgment action (the “2016 Action”) alleging that it does not infringe Maquet’s patent. Following the claim construction (“Markman”) order issued in November 2018, and prior to the close of discovery, both parties filed series of motions. On September 30, 2021, the Court granted the Company’s Motion for Summary Judgement (“MSJ”) for non-infringement of the two claims remaining in this case. Maquet moved for reconsideration of the MSJ order, which the Court denied on November 30, 2021. The Court has not entered a final judgement; therefore, the case is not yet appealable to the Federal Circuit.
In November 2017, Maquet filed a new action in D. Mass alleging that the Company’s Impella 2.5®, Impella CP®, and Impella 5.0® heart pumps infringe certain claims of another patent in the same family (the seventh patent overall between both cases). The Parties submitted Markman briefs and argued their respective positions in November 2019. A Markman order has not yet issued, and discovery remains ongoing.
The asserted patents in both cases expired on September 1, 2020.
The Company is unable to estimate the potential liability with respect to the legal matters noted above. There are numerous factors that make it difficult to meaningfully estimate possible loss or range of loss at this stage of the legal proceedings, including the significant number of legal and factual issues still to be resolved in the Maquet patent disputes.
Note 16. Segment and Geographic Information
Segment Information
Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM (determined to be the Chief Executive Officer) reviews the business, makes investment and resource allocation decisions, and assesses operating performance based on the Company’s consolidated operating results. The Company operates as
Geographic Information
Sales outside the U.S. accounted for
Geographic information about long-lived assets, net excluding goodwill and other intangible assets is as follows:
|
|
June 30, 2022 |
|
|
March 31, 2022 |
|
||
|
|
(in thousands) |
|
|||||
United States |
|
$ |
|
|
$ |
|
||
Europe |
|
|
|
|
|
|
||
Japan |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Note 17. Employee Benefit Plans
The Company sponsors voluntary 401(k) retirement savings plans for eligible employees in the U.S. and Japan. The Company matches the contributions of participating employees on the basis of percentages specified in each plan. Total expense related to the Company's matching contributions to the plans was $
22
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This Report, including the documents incorporated by reference in this Report, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “should,” “likely,” “will” and other words and terms of similar meaning.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes included in this Report. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs, which are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those expressed or implied by such statements. The forward-looking statements in this Report are based on certain risks and uncertainties, including, but not limited to, the risk factors described in “Part I, Item 1A. Risk Factors” of our annual report on Form 10-K for the year ended March 31, 2022 and the following: the impact of public health threats and epidemics, including the COVID-19 pandemic; the impact of prolonged economic downturns on our operations and financial conditions; fluctuations in foreign currency exchange rates and inflation; climate change; corporate social responsibility and sustainability matters; our dependence on Impella® products for most of our revenues; our ability to successfully compete against our existing or potential competitors; the acceptance of our products by cardiac surgeons and interventional cardiologists, especially those with significant influence over medical device selection and purchasing decisions; the effect of long sales and training cycles associated with expansion into new hospital cardiac centers; the potential for reduced market acceptance of our products and reduced revenue due to lengthy clinician training process; our ability to effectively manage our growth; our ability to anticipate demand for, and successfully commercialize, our products; the impact of unsuccessful clinical trials or procedures relating to products under development; our ability to develop new circulatory assist products and our development efforts; our ability to develop additional and high-quality manufacturing capacity to support continued demand for our products; our dependence on third-party payers to provide reimbursement to our customers of our products; our suppliers’ failure to provide the components we require; our reliance on distributors to sell our products in international markets; our success in expanding our direct sales activities into international markets; our ability to sustain profitability at levels achieved in recent years; the unpredictability of fluctuations in our operating results; our ability to develop and commercialize new products or acquire desirable companies, products or technologies; inventory write-downs and other costs due to product quality issues; risks and liabilities associated with acquisitions of other companies or businesses, including our ability to integrate acquired businesses into our operations; the impact of consolidation in the healthcare industry on our prices; our ability to attract and retain key personnel; our ability to obtain and maintain governmental and other regulatory approvals and market and sell our products in certain jurisdictions; regulatory or enforcement actions and product liability suits relating to off-label uses of our products; the increased risk of material product liability claims and impact on our reputation and financial results; our ability to maintain compliance with regulatory requirements and continuing regulatory review; the impact of mandatory or voluntary product recalls; changes in healthcare policy and reimbursement systems in the U.S. and abroad; our ability to comply with healthcare “fraud and abuse” laws and any related penalties for non-compliance; our failure to comply with the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations; our or our vendors’ ability to achieve and maintain high manufacturing standards; the economic effects of “Brexit” and related impacts to relationships with our existing and future customers; our potential “ownership change” for U.S. federal income tax purposes and our limited utilization of net operating losses and income tax credit carryforwards from prior tax years; our ability to maintain compliance with, and the impact on us of changes in, tax laws; our ability to comply with, and the impact of any related costs or regulatory actions with respect to, environmental, health and safety requirements; our failure to protect our intellectual property, both domestically and internationally, or develop or acquire additional intellectual property; claims that our current or future products infringe or misappropriate the proprietary rights of others; compliance with laws protecting the confidentiality of patient health information; disruptions of critical information systems or material breaches in the security of our systems; risks relating to our shares of common stock, including market price volatility and the potential for dilution to our stockholders’ ownership interests through the sale of additional securities.
23
Overview
We are a provider of medical devices that provide circulatory support and oxygenation. We develop, manufacture and market proprietary products that are designed to enable the heart to rest and recover by improving blood flow and/or performing the pumping function of the heart and provide sufficient oxygenation to those in respiratory failure. Our products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by cardiac surgeons for patients who are in need of hemodynamic support prophylactically or emergently before, during or after angioplasty or heart surgery procedures. We believe that heart recovery is the optimal clinical outcome for a patient experiencing heart failure because it enhances the potential for the patient to go home with their own heart, facilitating the restoration of quality of life. In addition, we believe that, for the care of such patients, heart recovery is often the most cost-effective solution for the healthcare system.
COVID-19 Pandemic
We are subject to additional risks and uncertainties as a result of the ongoing novel coronavirus (“COVID-19”) pandemic. Since March 2020, the ongoing COVID-19 pandemic has adversely impacted and is likely to further adversely impact our business and markets, including our workforce and the operations of our customers, suppliers, and business partners. While the COVID-19 (including new variants of COVID-19) pandemic remains fluid and continues to evolve differently across various geographies, we believe we are likely to continue to experience variable impacts on our business. To ensure the health and safety of our global employees, we continue to offer onsite COVID-19 testing and vaccinations in order to maintain a safe working environment. Our proactive testing and vaccination programs have reduced exposure with early detection and enabled our manufacturing facilities to operate at full capacity.
The depth and extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations, financial condition and individual markets is dependent upon various factors, including the spread of additional variants; the availability of vaccinations, personal protective equipment, intensive care unit (“ICU”) and operating room capacity, and medical staff; and government interventions to reduce the spread of the virus. When COVID-19 infection rates spike in a particular region, our patient utilization volumes have generally been negatively impacted as hospitals face capacity limitations, staffing shortages and some in-patient treatments have been deferred.
While patient utilization increased in the first quarter of fiscal year 2023, sales were impacted by slower than expected improvements in hospital staffing shortages. We continue to closely monitor the impact of COVID-19 on all aspects of our business and geographies, including any impact on our customers, including the ongoing hospital labor shortages, employees, suppliers, vendors, business partners and distribution channels, as well as on procedures and the demand for our products by keeping apprised of local, regional, and global COVID-19 surges (including new variants of the virus).
While we cannot reliably estimate the extent to which the COVID-19 pandemic may impact patient utilization and revenues of our products, our focus is to continue increasing patient utilization of our Impella devices in the U.S. and growing our business internationally, with a continued focus on Europe and Japan. As of the date of issuance of these financial statements, the extent to which the COVID-19 pandemic may materially adversely affect our financial condition, liquidity or results of operations is uncertain.
Macroeconomic Conditions
Our revenues and results of operations may be susceptible to fluctuations in macroeconomic conditions, including inflation and slowing economic growth and contractions, fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, changes in customer and consumer sentiment and demand, increasing prices for raw materials, transportation and labor costs, disruptions in the manufacturing, supply and distribution operations of us and our suppliers. The nature and extent of the impact of these factors among others varies by region and remains uncertain and unpredictable.
Acquisition of preCARDIA
We acquired 100% interest in preCARDIA on May 28, 2021. preCARDIA is a developer of a proprietary catheter and controller that will complement Abiomed’s product portfolio to expand options for patients with acute decompensated heart failure (“ADHF”). The preCARDIA system is uniquely designed to rapidly treat ADHF-related volume overload by effectively reducing cardiac filling pressures and promoting decongestion to improve overall cardiac and renal function. We acquired preCARDIA for a purchase price of $115.2 million. The acquisition was accounted for as an asset acquisition as substantially all of the fair value of the acquisition related to the acquired in-process research and development asset. Since the acquired technology platform is pre-commercial and has not reached technical feasibility, the cost of the in-process research and development asset was expensed, resulting in a charge of $115.5 million to the condensed consolidated statements of operations for the three months ended June 30, 2021. In addition, we recognized a gain of $21.0 million related to our previously owned minority interest within the condensed consolidated statements of operations for the three months ended June 30, 2021. In connection with the acquisition, we acquired a license agreement, under which there is a potential payout of $5 million based on the achievement of a commercial milestone.
24
Our Existing Products
Our strategic focus and the primary driver of our revenue growth is the market penetration of our family of Impella® heart pumps. The Impella device portfolio, which includes the Impella 2.5®, Impella CP®, Impella 5.0®, Impella LD®, Impella 5.5® and Impella RP® devices, has supported thousands of patients worldwide.
As we continue to innovate our product portfolio, we expect to continue to transition our sales focus to newer generations of Impella devices over time. In the catheterization lab, we expect to continue shifting sales focus from the Impella 2.5 device to the Impella CP device and in the surgical suite, from the Impella 5.0 device to the Impella 5.5 device. Accordingly, we expect that a greater concentration of our product revenues will be from Impella CP and Impella 5.5 devices in the future.
Below is a summary of our existing products and the countries where they have received regulatory approval. We expect to continue to make additional regulatory submissions for our products for additional indications and in additional countries.
Impella 2.5®
The Impella 2.5 device is a percutaneous heart pump with an integrated motor and sensors. The technology is designed primarily for use by interventional cardiologists to support patients in the cath lab who may require assistance to maintain circulation. The Impella 2.5 heart pump 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 blood flow to vital organs. The Impella 2.5 heart pump is introduced with normal interventional cardiology procedures and can pump up to 2.5 liters of blood per minute.
Our Impella 2.5 device has received FDA and PMDA approvals which allows us to market it in the U.S. and Japan, respectively. The technology is also approved for use in multiple other countries.
Impella CP®
The Impella CP device provides blood flow of up to 4.3 liters of blood per minute and is primarily used by either interventional cardiologists to support patients in the cath lab or by cardiac surgeons in the heart surgery suite.
Our Impella CP device has received FDA, CE Mark, PMDA approvals which allows us to market it in the U.S., European Union and Japan, respectively. The technology is also approved for use in multiple other countries.
Impella 5.0® and Impella LD®
The Impella 5.0 and Impella LD devices are percutaneous 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 and Impella CP devices.
Our Impella 5.0 and Impella LD devices have received FDA, CE Mark, PMDA approvals which allow us to market them in the U.S., European Union and Japan, respectively. The technology is also approved for use in multiple other countries.
Impella 5.5®
The Impella 5.5 device is designed to be a percutaneous heart pump with integrated motors and sensors. The Impella 5.5 device delivers peak flows of greater than six liters per minute. The Impella 5.5 device has a motor housing that is thinner and 45% shorter than the Impella 5.0 device and it improves ease of pump insertion through the vasculature.
In September 2019, the Impella 5.5 device received PMA approval from the FDA for safety and efficacy in the therapy of cardiogenic shock for up to 14 days in the U.S. The Impella 5.5 device was introduced in the U.S. through a controlled rollout at hospitals with established heart recovery protocols beginning in fiscal year 2020. In April 2018, the Impella 5.5 device received CE Mark approval in Europe and was introduced in Europe through a controlled rollout, similar to the U.S. In November 2021, the Impella 5.5 device received PMDA approval and we began a controlled rollout in Japan in fiscal year 2022, similar to the U.S. and Europe.
Impella RP®
The Impella RP device is a percutaneous catheter-based axial flow pump that is designed to allow for greater than four liters of blood flow per minute and is intended to provide the flow and pressure needed to compensate for right side heart failure. Our Impella RP device has received FDA and CE Mark approval which allows us to market this technology in the U.S. and European Union. The Impella RP device is the first percutaneous heart pump designed for right heart support to receive FDA approval. The Impella RP device is approved to provide support of the right heart during times of acute failure for certain patients who have received a left ventricle assist device or have suffered heart failure due to AMI, a failed heart transplant, or following open heart surgery. Additionally, we have adapted the design of the Impella RP device to be implanted through the internal jugular vein in the neck; we believe this approach is the preferred method for heart surgeons as it allows for patient ambulation. We anticipate making a regulatory submission for this technology in fiscal year 2023.
25
Impella SmartAssist®
The Impella SmartAssist platform includes optical sensor technology for improved pump positioning and the use of algorithms that enable improved native heart assessment during the weaning process. The Impella SmartAssist platform is currently available for our Impella CP, Impella 5.5 and Impella RP heart pumps. The Impella SmartAssist platform received FDA, CE Mark and PMDA approvals which allows us to market it in the U.S., European Union and Japan, respectively. The technology is also approved for use in multiple other countries.
Impella Connect®
Impella Connect is a cloud-based technology that enables secure, remote viewing of the Automated Impella Controller, or AIC, for physicians and hospital staff. We began a controlled rollout of Impella Connect at certain hospital sites during fiscal year 2020 and have transitioned most of our customers to this technology. We continue to introduce this technology to hospitals outside the U.S.
Abiomed Breethe OXY-1 System™
The Breethe OXY-1 System is a portable external respiratory assistance device that we acquired as part of our acquisition of Breethe, in April 2020 in connections with our efforts to expand our product portfolio to support the needs of patients, such as those suffering from cardiogenic shock or respiratory failure, whose lungs can no longer provide sufficient oxygenation. The Breethe OXY-1 System takes venous blood from the patient, removes carbon dioxide and adds oxygen much like a human lung, and returns the oxygenated blood safely back to the patient. In October 2020, the Breethe OXY-1 System received 510(k) clearance from the FDA for an all-in-one, compact cardiopulmonary bypass system. We have conducted a controlled launch of the Breethe OXY-1 System at a limited number of hospitals in the U.S. and have seen positive results regarding survival, blood compatibility, durability of the Pump Lung Unit (“PLU”), hemodynamic flow rates and ease of patient ambulation. Based on our early patient study, we identified areas of improvement around the electronics of the console and implemented a voluntary recall at the seven hospitals where the Breethe OXY-1 Systems were placed in fiscal year 2022. Until the corrective action is completed, we are not expanding the number of patients or centers under the controlled launch. The console upgrades require 510(k) clearance from the FDA. We expect to resume commercialization of the Breethe OXY-1 System under a controlled rollout in the second half of fiscal year 2023.
Our Product Pipeline
Impella ECP™
The Impella ECP device is designed for blood flow of greater than three and a half liters per minute. It is intended to be delivered on a standard sized (9 French) catheter and will include an expandable inflow in the left ventricle. The Impella ECP device has achieved initial FDA safety milestones, including completion of the first stage in its FDA early feasibility study (“EFS”). The prospective, multi-center, single arm EFS is designed to allow us, study investigators, and the FDA to make qualitative assessments about the safety and feasibility of the use of the Impella ECP device in high-risk percutaneous coronary intervention (“PCI”) patients. In fiscal year 2021, we received approval from the FDA to expand the EFS for the Impella ECP device and we continue to enroll patients in this study. In August 2021, we received Breakthrough Device designation by the FDA for the Impella ECP device, which is provided pursuant to the FDA’s Breakthrough Device Program, a program intended to help patients receive more timely access to certain medical technologies by providing a speedier development, assessment and review process for such technologies. The protocol of a single arm pivotal high-risk PCI study for the Impella ECP device, as part of an investigational device exemption (“IDE”), has been approved by the FDA. We have supported over 25 patients in our early feasibility study and began patient enrollment under a pivotal-like protocol in March 2022. We expect to transition to a pivotal trial in fiscal year 2023. The Impella ECP device is still in development and has not been approved for commercial use or sale.
Impella BTR™
The Impella BTR device is designed to be a percutaneous, weanable, smart heart pump with integrated motors and sensors. The Impella BTR device is designed to allow for greater than six liters of blood flow per minute, provide up to one year of hemodynamic support and include a wearable driver designed for hospital discharge. The Impella BTR device is expected to and intended to allow for heart recovery with adjunctive therapies for advanced heart-failure patients. In December 2021, we received conditional approval for an IDE early feasibility study for the Impella BTR device and began enrollment in early fiscal year 2023. The Impella BTR device is still in development and has not been approved for commercial use or sale.
preCARDIA™
The preCARDIA system is a minimally invasive, catheter-mounted superior vena cava therapy system designed to rapidly treat acutely decompensated heart failure (“ADHF”) related volume overload by effectively reducing cardiac filling pressures and promoting decongestion to improve overall cardiac and renal function. The preCARDIA system allows for straightforward placement in the ICU by physicians and hemodynamic monitoring by medical staff. Prior to the acquisition of preCARDIA, the preCARDIA system received Breakthrough Device Designation by the FDA. In January 2022, we announced results of the first-in-human early feasibility study of the preCARDIA system. The multicenter, prospective, single-arm VENUS-HF early feasibility study examined 30 patients with ADHF
26
who were assigned preCARDIA therapy for 12 or 24 hours. The primary endpoint was a composite of major adverse events through 30 days. The results support additional study of the preCARDIA system. In the third quarter of fiscal year 2022, the FDA authorized the preCARDIA early feasibility study to be expanded by 30 additional patients. The preCARDIA system is still in development and has not been approved for commercial use or sale.
Critical Accounting Policies and Estimates
Other than the accounting policy changes discussed in “Note 2. Basis of Presentation and Summary of Significant Accounting Policies” to our condensed consolidated financial statements, which is incorporated herein by reference, there have been no significant changes in our critical accounting policies during the three months ended June 30, 2022, 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, 2022.
Results of Operations for the Three Months Ended June 30, 2022 compared with the Three Months Ended June 30, 2021
Revenue
The following table disaggregates our revenue by products and services:
|
For the Three Months Ended June 30, |
|
||||||||||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||||||||||||||
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% |
|
|||||||||
Product revenue |
$ |
|
264,472 |
|
|
|
95 |
% |
|
$ |
|
241,474 |
|
|
|
96 |
% |
|
$ |
|
22,998 |
|
|
|
10 |
% |
Service and other revenue |
|
|
12,677 |
|
|
|
5 |
% |
|
|
|
11,111 |
|
|
|
4 |
% |
|
|
|
1,566 |
|
|
|
14 |
% |
Total revenue |
$ |
|
277,149 |
|
|
|
100 |
% |
|
$ |
|
252,585 |
|
|
|
100 |
% |
|
$ |
|
24,564 |
|
|
|
10 |
% |
The following table disaggregates our revenue by geographic location:
|
For the Three Months Ended June 30, |
|
||||||||||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||||||||||||||
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% |
|
|||||||||
United States |
$ |
|
226,520 |
|
|
|
82 |
% |
|
$ |
|
207,143 |
|
|
|
82 |
% |
|
$ |
|
19,377 |
|
|
|
9 |
% |
Europe |
|
|
33,836 |
|
|
|
12 |
% |
|
|
|
32,237 |
|
|
|
13 |
% |
|
|
|
1,599 |
|
|
|
5 |
% |
Japan |
|
|
13,235 |
|
|
|
5 |
% |
|
|
|
11,284 |
|
|
|
4 |
% |
|
|
|
1,951 |
|
|
|
17 |
% |
Rest of world |
|
|
3,558 |
|
|
|
1 |
% |
|
|
|
1,921 |
|
|
|
1 |
% |
|
|
|
1,637 |
|
|
|
85 |
% |
Outside the U.S. |
|
|
50,629 |
|
|
|
18 |
% |
|
|
|
45,442 |
|
|
|
18 |
% |
|
|
|
5,187 |
|
|
|
11 |
% |
Total revenue |
$ |
|
277,149 |
|
|
|
100 |
% |
|
$ |
|
252,585 |
|
|
|
100 |
% |
|
$ |
|
24,564 |
|
|
|
10 |
% |
The following table disaggregates our product revenue by geographic location:
|
For the Three Months Ended June 30, |
|
||||||||||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||||||||||||||
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% |
|
|||||||||
United States |
$ |
|
215,567 |
|
|
|
78 |
% |
|
$ |
|
197,459 |
|
|
|
78 |
% |
|
$ |
|
18,108 |
|
|
|
9 |
% |
Europe |
|
|
32,569 |
|
|
|
12 |
% |
|
|
|
31,229 |
|
|
|
12 |
% |
|
|
|
1,340 |
|
|
|
4 |
% |
Japan |
|
|
12,778 |
|
|
|
5 |
% |
|
|
|
10,865 |
|
|
|
4 |
% |
|
|
|
1,913 |
|
|
|
18 |
% |
Rest of world |
|
|
3,558 |
|
|
|
1 |
% |
|
|
|
1,921 |
|
|
|
1 |
% |
|
|
|
1,637 |
|
|
|
85 |
% |
Outside the U.S. |
|
|
48,905 |
|
|
|
18 |
% |
|
|
|
44,015 |
|
|
|
17 |
% |
|
|
|
4,890 |
|
|
|
11 |
% |
Total product revenue |
$ |
|
264,472 |
|
|
|
95 |
% |
|
$ |
|
241,474 |
|
|
|
96 |
% |
|
$ |
|
22,998 |
|
|
|
10 |
% |
Product revenue encompasses Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella 5.5, Impella RP and Impella AIC product sales and related accessories. Service and other revenue represents revenue earned on service maintenance contracts and preventative maintenance calls. The following is a discussion of our revenues for the three months ended June 30, 2022.
27
Total Revenue
Total revenue increased by $24.6 million, or 10%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. The increase in total revenue from the three months ended June 30, 2021 to the three months ended June 30, 2022 was driven by an increase in both product revenue and service and other revenue, as further described below, despite the unfavorable impact of foreign exchange fluctuations due to the strengthening of the U.S. dollar.
Product Revenue
Product revenue increased by $23.0 million, or 10%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. U.S. product revenue increased by $18.1 million, or 9%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. Outside the U.S., product revenue increased by $1.6 million, or 85%, from the three months ended June 30, 2021 to the three months ended June 30, 2022.
Product revenue increased in the three months ended June 30, 2022, primarily due to sales mix and higher patient utilization in the U.S., Germany and Japan as compared to the three months ended June 30, 2021 as we experienced varying levels of recovery across our product lines and geographic locations from the challenges caused by the COVID-19 pandemic, partially offset by the unfavorable impact of foreign exchange fluctuations due to the strengthening of the U.S. dollar.
Service and other revenue
Service and other revenue increased by $1.6 million, or 14%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. The increase in service revenue was primarily due to an increase in service contracts sold. We have expanded the number of Impella AIC consoles at many of our existing higher volume customer sites and continue to sell additional consoles to new customer sites. We expect revenue growth for service revenue to be consistent with recent history as most customer sites in the U.S. have service contracts which typically have three-year terms.
Cost of Revenue
|
For the Three Months Ended June 30, |
|
||||||||||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||||||||||||||
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% |
|
|||||||||
Cost of revenue |
$ |
|
52,626 |
|
|
|
19 |
% |
|
$ |
|
45,188 |
|
|
|
18 |
% |
|
$ |
|
7,438 |
|
|
|
16 |
% |
Cost of revenue increased by $7.4 million, or 16%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. Gross margin was 81.0% for the three months ended June 30, 2022 and 82.1% for the three months ended June 30, 2021.
Cost of product revenue increased due to our investment in direct labor and overhead as we continue to expand the manufacturing capacity of our facilities in the U.S. and Germany, resulting in a corresponding decrease to gross margin.
Operating Expenses
|
For the Three Months Ended June 30, |
|
||||||||||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||||||||||||||
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% of Total revenue |
|
|
Amount |
|
|
% |
|
|||||||||
Research and development |
$ |
|
40,477 |
|
|
|
15 |
% |
|
$ |
|
37,708 |
|
|
|
15 |
% |
|
$ |
|
2,769 |
|
|
|
7 |
% |
Selling, general and administrative |
|
|
117,996 |
|
|
|
43 |
% |
|
|
|
103,484 |
|
|
|
41 |
% |
|
|
|
14,512 |
|
|
|
14 |
% |
Acquired in-process research and development |
|
|
- |
|
|
|
0 |
% |
|
|
|
115,490 |
|
|
|
46 |
% |
|
|
|
(115,490 |
) |
|
|
(100 |
)% |
Total operating expenses |
$ |
|
158,473 |
|
|
|
57 |
% |
|
$ |
|
256,682 |
|
|
|
102 |
% |
|
$ |
|
(98,209 |
) |
|
|
(38 |
)% |
Research and Development Expenses
Research and development expenses increased by $2.8 million, or 7%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. The increase in research and development expenses was primarily due to increases in regulatory and quality hiring, ongoing product development initiatives relating to our existing and pipeline products, including the development of the Impella ECP™, preCARDIA, Impella BTR™ and Breethe OXY-1 System™ devices, the expansion of our engineering organization, continued investment in our clinical trials, most notably the STEMI DTU and PROTECT IV studies, and our focus on clinical,
28
technological and quality initiatives for our products. The increase in research and development expenses was partially offset by a $3.4 million gain related to the change in fair value of our contingent consideration for the three months ended June 30, 2022.
We expect research and development expenses to continue to increase as we continue to increase engineering, product development and clinical spending related to our initiatives to improve our existing products, develop new technologies and conduct clinical studies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $14.5 million, or 14%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. The increase in selling, general and administrative expenses was primarily due to increases in commercial hiring, marketing, travel and clinical training and education initiatives.
We aim to continue to invest strategically in hiring and sales and marketing activities, with a particular focus on training and education to drive utilization of our Impella devices and recovery awareness for acute heart failure patients.
Acquired In-Process Research and Development Expenses
We acquired 100% interest in preCARDIA on May 28, 2021, for a purchase price of $115.2 million. In connection with the acquisition, we acquired net assets of $115.2 million, which included $115.5 million related to the fair value of the in-process research and development asset and $0.3 million for net liabilities assumed. The acquisition was accounted for as an asset acquisition as substantially all of the fair value of the acquisition related to the acquired in-process research and development asset. Since the acquired technology platform is pre-commercial and has not reached technical feasibility, the cost of the in-process research and development asset was expensed, resulting in a charge of $115.5 million to the condensed consolidated statements of operations for the three months ended June 30, 2021.
Interest and other income, net
|
Three Months Ended June 30, |
|||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|||||||||||
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
% |
||||||||
Interest and other income, net |
$ |
|
3,772 |
|
|
$ |
|
39,935 |
|
|
|
(36,163 |
) |
|
|
(91 |
) |
% |
Interest and other income, net decreased by $36.2 million, or 91%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. This decrease was primarily due to the recognition of a $4.8 million loss from our investment in Shockwave Medical for the three months ended June 30, 2022 compared to a $17.6 million gain for the three months ended June 30, 2021 and the recognition of a $21.0 million gain related to the Company's previously owned minority interest in preCARDIA for the three months ended June 30, 2021. These amounts were partially offset by a $4.7 million gain related to changes in fair value of our investments in medical technology companies, a $2.1 million gain related to foreign currency fluctuations and a $0.5 million increase in interest income related to marketable securities for the three months ended June 30, 2022.
Income tax provision
|
Three Months Ended June 30, |
|||||||||||||||||
|
2022 |
|
|
2021 |
|
|
Change |
|||||||||||
|
Amount |
|
|
Amount |
|
|
Amount |
|
|
% |
||||||||
Income tax provision |
$ |
|
15,268 |
|
|
$ |
|
17,175 |
|
|
|
(1,907 |
) |
|
|
(11 |
) |
% |
The income tax provision decreased by $1.9 million, or 11%, from the three months ended June 30, 2021 to the three months ended June 30, 2022. Our effective income tax rate was 21.9% and 183.7% for the three months ended June 30, 2022 and 2021, respectively. The decrease in the effective income tax rate for the three months ended June 30, 2022 is primarily due to a non-deductible charge for in-process research and development related to the preCARDIA acquisition that occurred during the three months ended June 30, 2021.
Liquidity and Capital Resources
As of June 30, 2022, our total cash, cash equivalents and short and long-term marketable securities totaled $1.0 billion, an increase of $25.5 million compared to $978.7 million at March 31, 2022. The change in our total cash, cash equivalents and short and long-term marketable securities was primarily due to positive cash flows from operations, cash provided by investing activities, net of cash used for purchases of property, equipment and other investments, and net cash used for financing activities related to equity activity.
29
A summary of our cash flow activities is as follows:
|
|
For the Three Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net cash provided by operating activities |
|
$ |
68,103 |
|
|
$ |
55,359 |
|
Net cash provided by (used for) investing activities |
|
|
8,114 |
|
|
|
(109,055 |
) |
Net cash used for financing activities |
|
|
(23,936 |
) |
|
|
(7,470 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(4,607 |
) |
|
|
3,910 |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
47,674 |
|
|
$ |
(57,256 |
) |
Cash Provided by Operating Activities
For the three months ended June 30, 2022, net cash provided by operating activities consisted of net income of $54.6 million, plus non-cash items of $14.2 million less cash used for working capital of $0.7 million. As discussed above, the change in net income was primarily due to an increase in operating expenses partially offset by an increase in revenue for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Adjustments for non-cash items consisted primarily of $13.4 million of stock-based compensation expense, $6.6 million of depreciation and amortization expense, $6.4 million in deferred tax provision, $2.6 million in inventory and other write-downs, $0.6 million in accretion on marketable securities and a $0.3 million net change in fair value of our investments in Shockwave Medical and other private medical technology companies. The decrease in cash from changes in working capital is primarily due to a $6.5 million increase in inventory to support growing sales volume, a $2.4 million decrease in deferred revenue and a $1.9 million increase in accounts receivable due to timing of collections partially offset by a $7.0 million increase in accounts payable, accrued expenses and other liabilities and a $3.1 million decrease in prepaid expenses and other assets.
For the three months ended June 30, 2021, cash provided by operating activities consisted of net loss of $26.5 million, plus non-cash items of $108.7 million offset by cash used in working capital of $26.8 million. Adjustments for non-cash items consisted primarily of $115.5 million for acquired preCARDIA in-process research and development, a $21.0 million gain related to our previously owned minority interest in preCARDIA recognized upon the acquisition of preCARDIA in May 2021, a $17.6 million net change in fair value of our investments in Shockwave Medical and other private medical technology companies, $12.6 million of stock-based compensation expense, $6.9 million of depreciation and amortization expense, $6.3 million in deferred tax provision, $3.5 million in inventory and other write-downs, and $0.9 million in accretion on marketable securities. The decrease in cash from changes in working capital included a $20.8 million decrease in accounts payable, accrued expenses and other liabilities and a $8.8 million decrease in accounts receivable due to timing of collections offset by a $8.7 million increase in prepaid expenses and other assets and a $5.8 million increase in inventory due to the mix of customer demand and production.
Cash Provided by (Used for) Investing Activities
For the three months ended June 30, 2022, net cash provided by investing activities included $19.5 million in sales and maturities (net of purchases) of marketable securities, offset by $6.8 million used for the purchase of property and equipment primarily related to continued expansion of manufacturing capacity, office space and research development facilities in Danvers and Aachen, Germany and $4.6 million for our investment in private medical technology companies.
For the three months ended June 30, 2021, net cash used for investing activities included $15.2 million in purchases (net of maturities) from the sale of marketable securities and $7.2 million for the purchase of property and equipment primarily related to continued expansion of manufacturing capacity, office space and research development facilities in Danvers and Aachen, Germany. We also made a $3.9 million investment in private medical technology companies during the first quarter of fiscal 2022.
Capital expenditures for fiscal year 2023 are estimated to range from $40 million to $50 million, including, as part of the long-term development of our business, additional capital expenditures for manufacturing capacity and building expansions in our Danvers and Aachen facilities and information systems development projects.
Cash Used for Financing Activities
For the three months ended June 30, 2022, net cash used for financing activities included $14.5 million for repurchases of our common stock and $11.0 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards. These amounts were offset by $1.5 million in proceeds from the exercise of stock options.
For the three months ended June 30, 2021, net cash used for financing activities included $9.6 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards offset by $2.1 million in proceeds from the exercise of stock options.
30
Operating Capital and Liquidity Requirements
Our sources of cash liquidity are primarily from existing cash and cash equivalents, marketable securities and cash flows from operations. As of June 30, 2022, our cash, cash equivalents, and short and long-term marketable securities totaled $1.0 billion, an increase of $25.5 million compared to $978.7 million as of March 31, 2022. Marketable securities as of June 30, 2022 consisted of $823.7 million held in funds that invest in U.S. Treasury securities, government-backed securities, corporate debt securities and commercial paper. We generated operating cash flows of $68.1 million and $55.4 million for the three months ended June 30, 2022 and 2021, respectively. At June 30, 2022, we had no debt outstanding. We believe that our sources of liquidity are sufficient to fund the current requirements of working capital, capital expenditures, and other financial commitments for at least the next twelve months.
We primarily fund our operations from product sales. Our primary liquidity requirements are to fund the following: expansion of our commercial and operational infrastructures; expansion of our manufacturing capacity and office space; the procurement and production of inventory to meet customer demand for our Impella devices; funding of new product and business development initiatives, such as the recent acquisitions of preCARDIA and Breethe; ongoing commercial launch in Japan and expansion into potential new markets; increased clinical spending; legal expenses related to ongoing patent litigation and other legal matters; purchases of our common stock through our share repurchase programs; payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards and provide for general working capital needs.
We believe that our sources of liquidity are sufficient to fund the current requirements of working capital, capital expenditures, and other financial commitments for at least the next twelve months. Our liquidity is influenced by our ability to sell our products in a competitive industry and our customers’ ability to pay for our products. Factors that may affect liquidity primarily include our ability to penetrate the market for our products, our ability to maintain or reduce the length of the selling cycle for our products, our capital expenditures, and our ability to collect cash from customers after our products are sold. We continue to review our short-term and long-term cash needs on a regular basis.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, as of June 30, 2022. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2022, these disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us, including our consolidated subsidiaries, in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the first quarter of our fiscal year ending March 31, 2023, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are from time to time involved in various legal actions, the outcomes of which are not within our complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief, which, if granted, would require significant expenditures and could impair our business and results of operations. Material legal proceedings are discussed in “Note 15. Commitments and Contingencies” to our condensed consolidated financial statements and such information is incorporated herein by reference.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. In addition to the other information set forth in this Report, you should carefully consider the factors discussed in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2022, which could materially affect our business, financial condition or future results. As of the date of this Report there has been no material change in any of the risk factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Period |
|
Total Number of Shares Repurchased (1) |
|
|
Average Price Paid per Share (1) |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
|
|
Approximate Dollar Value Maximum of Shares that May Yet Be Purchased Under the Plans or Programs (in $000's) (2) |
|
||||
April 1-30, 2022 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
103,811 |
|
May 1-31, 2022 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
103,811 |
|
June 1-30, 2022 |
|
|
60,282 |
|
|
|
240.79 |
|
|
|
60,282 |
|
|
|
89,295 |
|
Total |
|
|
60,282 |
|
|
$ |
240.79 |
|
|
|
60,282 |
|
|
$ |
89,295 |
|
(1) The Company’s policy is to consider shares to have been repurchased upon the settlement date of the transaction, which is typically three days subsequent to the trading date.
(2) In August 2019, the Company’s Board of Directors authorized a stock repurchase program for up to $200.0 million of shares of its common stock. The remaining authorization under this program was $89.3 million as of June 30, 2022. The amount reflected under the column captioned “Approximate Dollar Value Maximum of Shares that May Yet Be Purchased Under the Plans or Programs (in $000's)” reflects the approximate dollar value maximum at the end of the applicable month for the 2019 Share Repurchase Program. On August 3, 2022, the Company’s Board of Directors authorized an additional stock repurchase program for up to $200 million of shares of its common stock (the “2022 Share Repurchase Program”). The 2019 Share Repurchase Program and 2022 Share Repurchase Program have no time limit and may be suspended for periods or discontinued at any time.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
32
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
|
Filed with This Form 10-Q |
|
Incorporated by Reference |
||||
|
|
|
Form |
|
Filing Date |
|
Exhibit No. |
|||
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
|
|
S-3 |
|
September 29, 1997 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
Amended & Restated By-Laws, as Amended and Restated May 26, 2022 |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
|
|
|
8-K |
|
March 21, 2007 |
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
10.1* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
Rule 13a—14(a)/15d—14(a) certification of principal executive officer |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
Rule 13a—14(a)/15d—14(a) certification of principal accounting officer |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
The following financial information from the ABIOMED, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in inline Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2022 and March 31, 2022; (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three months ended June 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three months ended June 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended June 30, 2022 and 2021 (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended June 30, 2022 and 2021; and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited). |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Cover page from the ABIOMED, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in iXBRL and contained in Exhibit 101 |
|
X |
|
|
|
|
|
|
* Management contract or compensatory plan, contract or arrangement.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ABIOMED, Inc. |
|
|
|
Date: August 4, 2022 |
|
/s/ TODD A. TRAPP |
|
|
Todd A. Trapp |
|
|
Executive Vice President and Chief Financial Officer |
|
|
(Authorized Signatory) |
34