UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 20172021
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 numbernumber: 001-09585
ABIOMED, INC.
(Exact name of registrant as specified in its charter)
|
| 04-2743260 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
22 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTSDanvers, Massachusetts 01923
(Address of principal executive offices, including zip code)
(978) 646-1400
(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 |
Common Stock, $0.01 par value | ABMD | The NASDAQ Stock Market LLC |
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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
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.:
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
|
|
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 ☐ No ☒
As of January 31, 2018, 44,277,82527, 2022, 45,516,200 shares of the registrant’s common stock, $.01 par value, were outstanding.
ABIOMED, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Item 1. | 3 | ||||
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| Condensed Consolidated Balance Sheets as of December 31, | 3 | |||
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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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NOTE REGARDING COMPANY REFERENCESEXPLANATORY NOTES
Pending Trademarks and Registered Marks
Throughout this quarterly report on Form 10-Q (the “Report”(“this Report”), “Abiomed,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 XR Sheath, 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
NOTE REGARDING TRADEMARKS
ABIOMED, IMPELLA, IMPELLA 2.5, IMPELLA 5.0, IMPELLA LD, IMPELLA CPWe 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 IMPELLA RP are trademarks of ABIOMED, Inc., and are registered inany amendments to those reports, as soon as reasonably practicable after filing such reports with or furnishing such reports to the U.S. Securities and certain foreign countries. AB5000Exchange 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 cVAD REGISTRYother filings and public conference calls and webcasts. The contents of our website are trademarks of ABIOMED, Inc.not incorporated by reference into this Report.
PART 1. FINANCIALI. FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
|
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 144,255 |
|
| $ | 232,710 |
|
Short-term marketable securities |
|
| 524,966 |
|
|
| 350,985 |
|
Accounts receivable, net |
|
| 88,952 |
|
|
| 97,179 |
|
Inventories, net |
|
| 90,199 |
|
|
| 81,059 |
|
Prepaid expenses and other current assets |
|
| 36,634 |
|
|
| 26,032 |
|
Total current assets |
|
| 885,006 |
|
|
| 787,965 |
|
Long-term marketable securities |
|
| 262,635 |
|
|
| 264,085 |
|
Property and equipment, net |
|
| 196,880 |
|
|
| 197,129 |
|
Goodwill |
|
| 77,449 |
|
|
| 78,568 |
|
Other intangibles, net |
|
| 40,278 |
|
|
| 42,150 |
|
Deferred tax assets |
|
| 3,680 |
|
|
| 11,380 |
|
Other assets |
|
| 126,949 |
|
|
| 113,082 |
|
Total assets |
| $ | 1,592,877 |
|
| $ | 1,494,359 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 32,066 |
|
| $ | 34,842 |
|
Accrued expenses |
|
| 66,668 |
|
|
| 66,046 |
|
Deferred revenue |
|
| 24,867 |
|
|
| 24,322 |
|
Other current liabilities |
|
| 3,195 |
|
|
| 3,759 |
|
Total current liabilities |
|
| 126,796 |
|
|
| 128,969 |
|
Other long-term liabilities |
|
| 10,805 |
|
|
| 10,162 |
|
Contingent consideration |
|
| 21,539 |
|
|
| 24,706 |
|
Deferred tax liabilities |
|
| 799 |
|
|
| 847 |
|
Total liabilities |
|
| 159,939 |
|
|
| 164,684 |
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Class B Preferred Stock, $.01 par value |
|
| — |
|
|
| — |
|
1,000 shares authorized; issued and outstanding - 0ne |
|
|
|
|
|
|
|
|
Common stock, $.01 par value |
|
| 455 |
|
|
| 453 |
|
100,000 shares authorized; 48,229 and 47,929 shares issued as of December 31, 2021 and March 31, 2021, respectively |
|
|
|
|
|
|
|
|
45,516 and 45,271 shares outstanding as of December 31, 2021 and March 31, 2021, respectively |
|
|
|
|
|
|
|
|
Additional paid in capital |
|
| 853,210 |
|
|
| 800,690 |
|
Retained earnings |
|
| 904,187 |
|
|
| 828,007 |
|
Treasury stock at cost - 2,713 and 2,658 shares as of December 31, 2021 and March 31, 2021, respectively |
|
| (304,425 | ) |
|
| (288,030 | ) |
Accumulated other comprehensive loss |
|
| (20,489 | ) |
|
| (11,445 | ) |
Total stockholders' equity |
|
| 1,432,938 |
|
|
| 1,329,675 |
|
Total liabilities and stockholders' equity |
| $ | 1,592,877 |
|
| $ | 1,494,359 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
ABIOMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Condensed Consolidated Statements of Operations(Unaudited)
(in thousands, except per share data)
|
| December 31, 2017 |
|
| March 31, 2017 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 50,502 |
|
| $ | 39,040 |
|
Short-term marketable securities |
|
| 250,751 |
|
|
| 190,908 |
|
Accounts receivable, net |
|
| 64,862 |
|
|
| 54,055 |
|
Inventories |
|
| 46,891 |
|
|
| 34,931 |
|
Prepaid expenses and other current assets |
|
| 9,192 |
|
|
| 8,024 |
|
Total current assets |
|
| 422,198 |
|
|
| 326,958 |
|
Long-term marketable securities |
|
| 49,485 |
|
|
| 47,143 |
|
Property and equipment, net |
|
| 107,977 |
|
|
| 87,777 |
|
Goodwill |
|
| 34,814 |
|
|
| 31,045 |
|
In-process research and development |
|
| 16,241 |
|
|
| 14,482 |
|
Long-term deferred tax assets, net |
|
| 75,201 |
|
|
| 34,723 |
|
Other assets |
|
| 13,686 |
|
|
| 8,286 |
|
Total assets |
| $ | 719,602 |
|
| $ | 550,414 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 21,991 |
|
| $ | 20,620 |
|
Accrued expenses |
|
| 41,565 |
|
|
| 37,703 |
|
Deferred revenue |
|
| 11,797 |
|
|
| 10,495 |
|
Current portion of capital lease obligation |
|
| — |
|
|
| 799 |
|
Total current liabilities |
|
| 75,353 |
|
|
| 69,617 |
|
Other long-term liabilities |
|
| 466 |
|
|
| 3,251 |
|
Contingent consideration |
|
| 10,423 |
|
|
| 9,153 |
|
Long-term deferred tax liabilities |
|
| 878 |
|
|
| 783 |
|
Capital lease obligation, net of current portion |
|
| — |
|
|
| 15,539 |
|
Total liabilities |
|
| 87,120 |
|
|
| 98,343 |
|
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Class B Preferred Stock, $.01 par value |
|
| — |
|
|
| — |
|
Authorized - 1,000,000 shares; Issued and outstanding - none |
|
|
|
|
|
|
|
|
Common stock, $.01 par value |
|
| 443 |
|
|
| 437 |
|
Authorized - 100,000,000 shares; Issued - 45,995,445 shares at December 31, 2017 and 45,249,281 shares at March 31, 2017 |
|
|
|
|
|
|
|
|
Outstanding - 44,271,905 shares at December 31, 2017 and 43,673,286 shares at March 31, 2017 |
|
|
|
|
|
|
|
|
Additional paid in capital |
|
| 605,697 |
|
|
| 565,962 |
|
Retained earnings (accumulated deficit) |
|
| 103,610 |
|
|
| (46,959 | ) |
Treasury stock at cost - 1,723,540 shares at December 31, 2017 and 1,575,995 shares at March 31, 2017 |
|
| (66,622 | ) |
|
| (46,763 | ) |
Accumulated other comprehensive loss |
|
| (10,646 | ) |
|
| (20,606 | ) |
Total stockholders' equity |
|
| 632,482 |
|
|
| 452,071 |
|
Total liabilities and stockholders' equity |
| $ | 719,602 |
|
| $ | 550,414 |
|
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
|
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| ||||
Revenue |
| $ | 261,176 |
|
| $ | 231,663 |
|
| $ | 761,903 |
|
| $ | 606,277 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 47,627 |
|
|
| 41,110 |
|
|
| 136,701 |
|
|
| 115,829 |
|
|
Research and development |
|
| 40,869 |
|
|
| 33,004 |
|
|
| 119,618 |
|
|
| 89,886 |
|
|
Selling, general and administrative |
|
| 107,618 |
|
|
| 86,198 |
|
|
| 313,881 |
|
|
| 233,809 |
|
|
Acquired in-process research and development |
|
| 496 |
|
|
| — |
|
|
| 115,986 |
|
|
| — |
|
|
|
|
| 196,610 |
|
|
| 160,312 |
|
|
| 686,186 |
|
|
| 439,524 |
|
|
Operating income |
|
| 64,566 |
|
|
| 71,351 |
|
|
| 75,717 |
|
|
| 166,753 |
|
|
Other (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net |
|
| 891 |
|
|
| 1,449 |
|
|
| 2,918 |
|
|
| 5,668 |
|
|
Other (loss) income, net |
|
| (7,580 | ) |
|
| 7,935 |
|
|
| 37,163 |
|
|
| 42,305 |
|
|
|
|
| (6,689 | ) |
|
| 9,384 |
|
|
| 40,081 |
|
|
| 47,973 |
|
|
Income before income taxes |
|
| 57,877 |
|
|
| 80,735 |
|
|
| 115,798 |
|
|
| 214,726 |
|
|
Income tax provision |
|
| 12,125 |
|
|
| 18,867 |
|
|
| 39,618 |
|
|
| 46,057 |
|
|
Net income |
| $ | 45,752 |
|
| $ | 61,868 |
|
| $ | 76,180 |
|
| $ | 168,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share - basic |
| $ | 1.01 |
|
| $ | 1.37 |
|
| $ | 1.68 |
|
| $ | 3.74 |
|
|
Weighted average shares outstanding - basic |
|
| 45,508 |
|
|
| 45,201 |
|
|
| 45,419 |
|
|
| 45,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share - diluted |
| $ | 1.00 |
|
| $ | 1.35 |
|
| $ | 1.66 |
|
| $ | 3.69 |
|
|
Weighted average shares outstanding - diluted |
|
| 45,921 |
|
|
| 45,706 |
|
|
| 45,851 |
|
|
| 45,653 |
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
ABIOMED, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income |
| $ | 45,752 |
|
| $ | 61,868 |
|
| $ | 76,180 |
|
| $ | 168,669 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (losses) gains |
|
| (3,083 | ) |
|
| 4,823 |
|
|
| (5,693 | ) |
|
| 8,599 |
|
Unrealized losses on derivative instrument |
|
| (1,094 | ) |
|
| (1,268 | ) |
|
| (766 | ) |
|
| (1,994 | ) |
Net unrealized (losses) gains on marketable securities |
|
| (1,756 | ) |
|
| (525 | ) |
|
| (2,585 | ) |
|
| 415 |
|
Other comprehensive (loss) income |
|
| (5,933 | ) |
|
| 3,030 |
|
|
| (9,044 | ) |
|
| 7,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
| $ | 39,819 |
|
| $ | 64,898 |
|
| $ | 67,136 |
|
| $ | 175,689 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
ABIOMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(in thousands, except per share data)
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
| $ |
| 153,989 |
|
| $ |
| 114,624 |
|
| $ |
| 419,202 |
|
| $ |
| 320,541 |
|
Funded research and development |
|
|
| 33 |
|
|
|
| 50 |
|
|
|
| 111 |
|
|
|
| 83 |
|
|
|
|
| 154,022 |
|
|
|
| 114,674 |
|
|
|
| 419,313 |
|
|
|
| 320,624 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue |
|
|
| 24,994 |
|
|
|
| 18,987 |
|
|
|
| 68,483 |
|
|
|
| 51,366 |
|
Research and development |
|
|
| 17,706 |
|
|
|
| 16,349 |
|
|
|
| 54,027 |
|
|
|
| 50,061 |
|
Selling, general and administrative |
|
|
| 66,556 |
|
|
|
| 53,935 |
|
|
|
| 187,233 |
|
|
|
| 158,053 |
|
|
|
|
| 109,256 |
|
|
|
| 89,271 |
|
|
|
| 309,743 |
|
|
|
| 259,480 |
|
Income from operations |
|
|
| 44,766 |
|
|
|
| 25,403 |
|
|
|
| 109,570 |
|
|
|
| 61,144 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net |
|
|
| 969 |
|
|
|
| 457 |
|
|
|
| 2,385 |
|
|
|
| 1,068 |
|
Other expense, net |
|
|
| (81 | ) |
|
|
| (34 | ) |
|
|
| (25 | ) |
|
|
| (225 | ) |
|
|
|
| 888 |
|
|
|
| 423 |
|
|
|
| 2,360 |
|
|
|
| 843 |
|
Income before income taxes |
|
|
| 45,654 |
|
|
|
| 25,826 |
|
|
|
| 111,930 |
|
|
|
| 61,987 |
|
Income tax provision |
|
|
| 32,208 |
|
|
|
| 10,394 |
|
|
|
| 36,607 |
|
|
|
| 24,770 |
|
Net income |
| $ |
| 13,446 |
|
| $ |
| 15,432 |
|
| $ |
| 75,323 |
|
| $ |
| 37,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
| $ |
| 0.30 |
|
| $ |
| 0.36 |
|
| $ |
| 1.71 |
|
| $ |
| 0.86 |
|
Basic weighted average shares outstanding |
|
|
| 44,247 |
|
|
|
| 43,431 |
|
|
|
| 44,095 |
|
|
|
| 43,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
| $ |
| 0.29 |
|
| $ |
| 0.34 |
|
| $ |
| 1.65 |
|
| $ |
| 0.83 |
|
Diluted weighted average shares outstanding |
|
|
| 45,869 |
|
|
|
| 44,770 |
|
|
|
| 45,731 |
|
|
|
| 44,597 |
|
|
| Common Stock |
|
| Treasury Stock |
|
| Additional Paid |
|
| Retained |
|
| Accumulated Other |
|
| Total Stockholders' |
| ||||||||||||||
|
| Shares |
|
| Par value |
|
| Shares |
|
| Amount |
|
| in Capital |
|
| Earnings |
|
| Comprehensive Loss |
|
| Equity |
| ||||||||
Balance, March 31, 2021 |
|
| 45,270,948 |
|
| $ | 453 |
|
|
| 2,658,454 |
|
| $ | (288,030 | ) |
| $ | 800,690 |
|
| $ | 828,007 |
|
| $ | (11,445 | ) |
| $ | 1,329,675 |
|
Restricted stock units issued |
|
| 85,284 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Stock options exercised |
|
| 55,757 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 2,119 |
|
|
| — |
|
|
| — |
|
|
| 2,120 |
|
Return of common stock to pay withholding taxes on restricted stock |
|
| (34,274 | ) |
|
| (1 | ) |
|
| 34,274 |
|
|
| (9,589 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,590 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,608 |
|
|
| — |
|
|
| — |
|
|
| 12,608 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (766 | ) |
|
| (766 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,525 | ) |
|
| — |
|
|
| (26,525 | ) |
Balance, June 30, 2021 |
|
| 45,377,715 |
|
| $ | 454 |
|
|
| 2,692,728 |
|
| $ | (297,619 | ) |
| $ | 815,416 |
|
| $ | 801,482 |
|
| $ | (12,211 | ) |
| $ | 1,307,522 |
|
Restricted stock units issued |
|
| 19,638 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock options exercised |
|
| 95,916 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 6,261 |
|
|
| — |
|
|
| — |
|
|
| 6,262 |
|
Return of common stock to pay withholding taxes on restricted stock |
|
| (7,753 | ) |
|
| — |
|
|
| 7,753 |
|
|
| (2,539 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,539 | ) |
Stock issued under employee stock purchase plan |
|
| 11,047 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,961 |
|
|
| — |
|
|
| — |
|
|
| 2,961 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,749 |
|
|
| — |
|
|
| — |
|
|
| 15,749 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,345 | ) |
|
| (2,345 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 56,953 |
|
|
| — |
|
|
| 56,953 |
|
Balance, September 30, 2021 |
|
| 45,496,563 |
|
| $ | 455 |
|
|
| 2,700,481 |
|
| $ | (300,158 | ) |
| $ | 840,387 |
|
| $ | 858,435 |
|
| $ | (14,556 | ) |
| $ | 1,384,563 |
|
Restricted stock units issued |
|
| 28,303 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock options exercised |
|
| 3,134 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 440 |
|
|
| — |
|
|
| — |
|
|
| 440 |
|
Return of common stock to pay withholding taxes on restricted stock |
|
| (12,221 | ) |
|
| — |
|
|
| 12,221 |
|
|
| (4,267 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,267 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,383 |
|
|
| — |
|
|
| — |
|
|
| 12,383 |
|
Stock repurchase program |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,933 | ) |
|
| (5,933 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,752 |
|
|
| — |
|
|
| 45,752 |
|
Balance, December 31, 2021 |
|
| 45,515,779 |
|
| $ | 455 |
|
|
| 2,712,702 |
|
| $ | (304,425 | ) |
| $ | 853,210 |
|
| $ | 904,187 |
|
| $ | (20,489 | ) |
| $ | 1,432,938 |
|
|
| Common Stock |
|
| Treasury Stock |
|
| Additional Paid |
|
| Retained |
|
| Accumulated Other |
|
| Total Stockholders' |
| ||||||||||||||
|
| Shares |
|
| Par value |
|
| Shares |
|
| Amount |
|
| in Capital |
|
| Earnings |
|
| Comprehensive Loss |
|
| Equity |
| ||||||||
Balance, March 31, 2020 |
|
| 45,008,687 |
|
| $ | 450 |
|
|
| 2,533,374 |
|
| $ | (265,411 | ) |
| $ | 739,133 |
|
| $ | 602,482 |
|
| $ | (11,189 | ) |
| $ | 1,065,466 |
|
Restricted stock units issued |
|
| 124,749 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Stock options exercised |
|
| 31,488 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,010 |
|
|
| — |
|
|
| — |
|
|
| 1,010 |
|
Return of common stock to pay withholding taxes on restricted stock |
|
| (52,515 | ) |
|
| — |
|
|
| 52,515 |
|
|
| (9,857 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,857 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,298 |
|
|
| — |
|
|
| — |
|
|
| 9,298 |
|
Stock repurchase program |
|
| (67,649 | ) |
|
| (1 | ) |
|
| 67,649 |
|
|
| (11,309 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11,310 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,654 |
|
|
| 2,654 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,588 |
|
|
| — |
|
|
| 44,588 |
|
Balance, June 30, 2020 |
|
| 45,044,760 |
|
| $ | 450 |
|
|
| 2,653,538 |
|
| $ | (286,577 | ) |
| $ | 749,440 |
|
| $ | 647,070 |
|
| $ | (8,535 | ) |
| $ | 1,101,848 |
|
Restricted stock units issued |
|
| 11,554 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock options exercised |
|
| 121,066 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 4,544 |
|
|
| — |
|
|
| — |
|
|
| 4,545 |
|
Return of common stock to pay withholding taxes on restricted stock |
|
| (3,602 | ) |
|
| — |
|
|
| 3,602 |
|
|
| (1,077 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,077 | ) |
Stock issued under employee stock purchase plan |
|
| 16,105 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 1,978 |
|
|
| — |
|
|
| — |
|
|
| 1,979 |
|
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,565 |
|
|
| — |
|
|
| — |
|
|
| 11,565 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,336 |
|
|
| 1,336 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 62,213 |
|
|
| — |
|
|
| 62,213 |
|
Balance, September 30, 2020 |
|
| 45,189,883 |
|
| $ | 452 |
|
|
| 2,657,140 |
|
| $ | (287,654 | ) |
| $ | 767,527 |
|
| $ | 709,283 |
|
| $ | (7,199 | ) |
| $ | 1,182,409 |
|
Restricted stock units issued |
|
| 2,717 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock options exercised |
|
| 32,875 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 1,520 |
|
|
| — |
|
|
| — |
|
|
| 1,521 |
|
Return of common stock to pay withholding taxes on restricted stock |
|
| (879 | ) |
|
| (1 | ) |
|
| 879 |
|
|
| (242 | ) |
|
|
|
|
|
| — |
|
|
| — |
|
|
| (243 | ) |
Stock compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,856 |
|
|
| — |
|
|
| — |
|
|
| 12,856 |
|
Stock repurchase program |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,030 |
|
|
| 3,030 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61,868 |
|
|
| — |
|
|
| 61,868 |
|
Balance, December 31, 2020 |
|
| 45,224,596 |
|
| $ | 452 |
|
|
| 2,658,019 |
|
| $ | (287,896 | ) |
| $ | 781,903 |
|
| $ | 771,151 |
|
| $ | (4,169 | ) |
| $ | 1,261,441 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
ABIOMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income |
| $ | 13,446 |
|
| $ | 15,432 |
|
| $ | 75,323 |
|
| $ | 37,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gains (losses) |
|
| 1,557 |
|
|
| (5,873 | ) |
|
| 10,406 |
|
|
| (6,760 | ) |
Net unrealized losses on marketable securities |
|
| (401 | ) |
|
| (269 | ) |
|
| (446 | ) |
|
| (137 | ) |
Other comprehensive gain (loss) |
|
| 1,156 |
|
|
| (6,142 | ) |
|
| 9,960 |
|
|
| (6,897 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
| $ | 14,602 |
|
| $ | 9,290 |
|
| $ | 85,283 |
|
| $ | 30,320 |
|
|
| For the Nine Months Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 76,180 |
|
| $ | 168,669 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 20,799 |
|
|
| 17,271 |
|
Acquired in-process research & development |
|
| 115,986 |
|
|
| — |
|
Bad debt recoveries |
|
| (19 | ) |
|
| (192 | ) |
Stock-based compensation |
|
| 40,740 |
|
|
| 33,719 |
|
Write-down of inventory and other |
|
| 8,899 |
|
|
| 5,078 |
|
Accretion on marketable securities |
|
| 2,701 |
|
|
| 1,183 |
|
Change in fair value of other investments |
|
| (14,265 | ) |
|
| (43,107 | ) |
Gain on previously held interest in preCARDIA |
|
| (20,980 | ) |
|
| — |
|
Deferred tax provision |
|
| 7,049 |
|
|
| 22,920 |
|
Change in fair value of contingent consideration |
|
| (833 | ) |
|
| 3,016 |
|
Other non-cash operating activities |
|
| 2,331 |
|
|
| 3,194 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 7,662 |
|
|
| (6,925 | ) |
Inventories |
|
| (19,569 | ) |
|
| 6,596 |
|
Prepaid expenses and other assets |
|
| (11,874 | ) |
|
| (7,061 | ) |
Accounts payable |
|
| (2,481 | ) |
|
| (8,147 | ) |
Accrued expenses and other liabilities |
|
| (6,589 | ) |
|
| (10,000 | ) |
Deferred revenue |
|
| 681 |
|
|
| 1,889 |
|
Net cash provided by operating activities |
|
| 206,418 |
|
|
| 188,103 |
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchases of marketable securities |
|
| (581,849 | ) |
|
| (487,753 | ) |
Proceeds from the sale and maturity of marketable securities |
|
| 404,193 |
|
|
| 338,331 |
|
Purchases of other investments and intangible assets |
|
| (7,067 | ) |
|
| (26,104 | ) |
Acquisition of preCARDIA, net of cash acquired |
|
| (82,821 | ) |
|
| — |
|
Acquisition of Breethe, net of cash acquired |
|
| — |
|
|
| (52,183 | ) |
Proceeds from sales of Shockwave Medical securities |
|
| — |
|
|
| 67,882 |
|
Purchases of property and equipment |
|
| (20,872 | ) |
|
| (27,274 | ) |
Net cash used for investing activities |
|
| (288,416 | ) |
|
| (187,101 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
| 8,822 |
|
|
| 7,076 |
|
Taxes paid related to net share settlement upon vesting of stock awards |
|
| (16,396 | ) |
|
| (11,176 | ) |
Payment of Breethe contingent consideration at acquisition date fair value |
|
| (2,334 | ) |
|
| — |
|
Repurchase of common stock |
|
| — |
|
|
| (11,310 | ) |
Proceeds from the issuance of stock under employee stock purchase plan |
|
| 2,961 |
|
|
| 1,978 |
|
Net cash used for financing activities |
|
| (6,947 | ) |
|
| (13,432 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| 490 |
|
|
| 1,107 |
|
Net decrease in cash and cash equivalents |
|
| (88,455 | ) |
|
| (11,323 | ) |
Cash and cash equivalents at beginning of period |
|
| 232,710 |
|
|
| 192,341 |
|
Cash and cash equivalents at end of period |
| $ | 144,255 |
|
| $ | 181,018 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | 50,378 |
|
| $ | 34,024 |
|
Supplemental disclosure of non-cash activities: |
|
|
|
|
|
|
|
|
Contingent consideration related to the acquisition of Breethe |
|
| — |
|
|
| 13,300 |
|
Property and equipment in accounts payable and accrued expenses |
|
| 1,433 |
|
|
| 640 |
|
Right-of-use assets obtained in exchange for lease liabilities |
|
| 5,397 |
|
|
| 1,378 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
ABIOMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
|
| For the Nine Months Ended December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 75,323 |
|
| $ | 37,217 |
|
Adjustments required to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
| 8,100 |
|
|
| 4,488 |
|
Bad debt expense |
|
| (8 | ) |
|
| (12 | ) |
Stock-based compensation |
|
| 29,170 |
|
|
| 24,521 |
|
Write-down of inventory and other assets |
|
| 3,212 |
|
|
| 2,059 |
|
Excess tax benefit from stock-based awards |
|
| — |
|
|
| (4,595 | ) |
Deferred tax provision |
|
| 34,740 |
|
|
| 18,817 |
|
Change in fair value of contingent consideration |
|
| 1,270 |
|
|
| 612 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (10,342 | ) |
|
| (7,555 | ) |
Inventories |
|
| (11,974 | ) |
|
| (8,615 | ) |
Prepaid expenses and other assets |
|
| (1,033 | ) |
|
| (3,923 | ) |
Accounts payable |
|
| 2,595 |
|
|
| 3,542 |
|
Accrued expenses and other liabilities |
|
| 3,874 |
|
|
| 11,040 |
|
Deferred revenue |
|
| 1,220 |
|
|
| 265 |
|
Net cash provided by operating activities |
|
| 136,147 |
|
|
| 77,861 |
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchases of marketable securities |
|
| (209,834 | ) |
|
| (177,591 | ) |
Proceeds from the sale and maturity of marketable securities |
|
| 148,095 |
|
|
| 144,670 |
|
Purchase of other investment |
|
| (6,400 | ) |
|
| (149 | ) |
Purchases of property and equipment |
|
| (44,168 | ) |
|
| (24,039 | ) |
Net cash used for investing activities |
|
| (112,307 | ) |
|
| (57,109 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
| 7,626 |
|
|
| 8,265 |
|
Excess tax benefit from stock-based awards |
|
| — |
|
|
| 4,595 |
|
Taxes paid related to net share settlement of vesting of stock awards |
|
| (19,860 | ) |
|
| (19,898 | ) |
Proceeds from the issuance of stock under employee stock purchase plan |
|
| 1,063 |
|
|
| 769 |
|
Principal payments on capital lease obligation |
|
| (517 | ) |
|
| (264 | ) |
Net cash used for financing activities |
|
| (11,688 | ) |
|
| (6,533 | ) |
Effect of exchange rate changes on cash |
|
| (690 | ) |
|
| (1,381 | ) |
Net increase in cash and cash equivalents |
|
| 11,462 |
|
|
| 12,838 |
|
Cash and cash equivalents at beginning of period |
|
| 39,040 |
|
|
| 48,231 |
|
Cash and cash equivalents at end of period |
| $ | 50,502 |
|
| $ | 61,069 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | 845 |
|
| $ | 735 |
|
Cash paid for interest on capital lease obligation |
|
| 302 |
|
|
| 223 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Property and equipment under capital lease obligation |
|
| — |
|
|
| 16,784 |
|
Property and equipment in accounts payable and accrued expenses |
|
| 3,836 |
|
|
| 3,717 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share data)
Note 1. Nature of Business
Abiomed,ABIOMED, Inc. (the “Company” or “Abiomed”“ABIOMED”) is a provider of mechanicalmedical devices that provide circulatory support devices and offers a continuum of care to heart failure patients.oxygenation. The Company develops, manufactures and markets proprietary products that are designed to enable the heart to rest heal and recover by improving blood flow and/or performing the pumping function of the heart.heart and provide sufficient oxygenation to those in respiratory failure. The Company’s products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by heartcardiac 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 Preparation 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, 20172021 that has been filed with the Securities and Exchange Commission (the “SEC”).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 and nine months ended December 31, 20172021 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, 20172021 that has been filed with the SEC.
NewThe 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.
Certain prior period amounts within the notes to the condensed consolidated financial statements have been reclassified to conform to the current period presentation.
COVID-19 Pandemic
The Company is subject to additional risks and uncertainties as a result of the ongoing novel coronavirus (“COVID-19”) pandemic. 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, including, for example: supply shortages, particularly of its product components; and supply chain disruptions, which may limit its ability to manufacture or distribute its products.
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.
As the Company started the third quarter of fiscal year 2022, patient utilization of Impella heart pump devices continued to be negatively impacted by an increase in COVID-19 hospitalizations in certain geographies due to the Delta variant and ongoing shortage of hospital workers, that limited ICU capacity and contributed to some deferral of elective procedures. However, as Delta cases
moderated, patient utilization of Impella heart pump devices increased during the last two months of the third quarter, despite on-going hospital labor shortages and the emergence of the Omicron variant. While the Company experienced improvements in overall patient utilization in the third quarter, the Company continues to monitor the impact of the Omicron variant and ongoing hospital labor 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, 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). 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.
Recently Adopted Accounting Pronouncements Adopted
Effective April 1, 2017, the Company adoptedIn December 2019, the Financial Accounting Standards Board (“FASB”) standard updateissued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment2019-12, “Simplifying the Accounting for Income Taxes (ASC 740).” (“The ASU 2016-09”) whichenhances and simplifies severalvarious aspects of the income tax accounting guidance in ASC 740, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intra-period tax allocation exception to the incremental approach, ownership changes in investments, changes from a subsidiary to an equity method investment, interim-period accounting for share-based payment transactions, including incomeenacted changes in tax consequences, recognitionlaw, and the year-to-date loss limitation in interim-period tax accounting. This guidance is effective for the Company for annual and interim periods beginning after December 31, 2020; however, early adoption is permitted. The Company adopted this standard as of stock compensation award forfeitures, classification of awards as either equity or liabilities, the calculation of diluted shares outstanding and classificationApril 1, 2021 on a prospective basis. The adoption did not have a material impact on the statement of cash flows.
The following table summarizes the most significant impacts of ASU 2016-09 for the three and nine months ended December 31, 2017:
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
|
See table below for the changes in beginning stockholders' equity as a result of this implementation.
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Number of shares |
|
| Par value |
|
| Number of shares |
|
| Amount |
|
| Additional Paid in Capital |
|
| Accumulated Deficit |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total Stockholders' Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2017 |
|
| 43,673,286 |
| $ |
| 437 |
|
|
| 1,575,995 |
| $ |
| (46,763 | ) | $ |
| 565,962 |
| $ |
| (46,959 | ) | $ |
| (20,606 | ) | $ |
| 452,071 |
|
Cumulative effect of adoption of new accounting standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,835 |
|
|
| 75,246 |
|
|
|
|
|
|
| 77,081 |
|
Balance, April 1, 2017 |
|
| 43,673,286 |
| $ |
| 437 |
|
|
| 1,575,995 |
| $ |
| (46,763 | ) | $ |
| 567,797 |
| $ |
| 28,287 |
| $ |
| (20,606 | ) | $ |
| 529,152 |
|
Recent Accounting Pronouncements
Company’s condensed consolidated financial statements.
In May 2014,January 2020, the FASB issued ASU 2014-09, Revenue from Contracts with Customers2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to provide updated guidance on revenue recognition. This new standard will replace most of the existing revenue recognition guidance in U.S. GAAP when it becomes effectiveequity securities, equity method investments, and permits the use of either the retrospective or cumulative effect transition method. ASU 2014-09 requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under the current accounting guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.certain derivative instruments. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.
is effective for fiscal years beginning after December 15, 2020. The Company is assessing all of the potential impacts of the revenue recognition guidance. Although the Company has not yet completed its assessment of the new revenue recognition guidance, the Company believes that the new revenue recognition guidance generally supports the recognition of revenue at a point-in-time for product sales and over an extended period of time for preventative maintenance service agreements, which is consistent with its current revenue recognition model. The Company does anticipate that the new revenueadopted this standard will result in expanded financial statement disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company is reviewing and updating its internal controls and processes over revenue recognition in order to prepare for the adoption of and ongoing accounting under the new standard. As the Company completes its evaluation of this new accounting standard, new information may arise that could change the Company’s current understanding of the impact to revenue and expense recognized and financial statement disclosures. Additionally, the Company will continue to monitor industry activities and any additional guidance provided by regulators, standards setters, or the accounting profession and adjust the Company’s assessment and implementation plans accordingly, if required. ASU 2014-09 can be applied retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company will apply the new guidance effective April 1, 2018 using the modified retrospective method to contracts that are not completed as of April 1, 2018.2021 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Effective
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. ASU 2021-10 will become effective for the Company in fiscal year 2023. The Company has the option to apply the amendments retrospectively, to all transactions within the scope of the amendment, or prospectively. The Company does not expect the adoption of this standard including the cumulative effect of any adjustment to the opening balance of retained earnings, to have a material impact on its consolidated financial statements. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
No other new accounting pronouncements issued or effective during the period had, or are expected to have, a material impact on the condensed consolidated financial statements.
In January 2016,
Note 3. Acquisitions
Acquisition of preCARDIA, Inc.
The Company acquired 100% interest in preCARDIA , Inc. (“preCARDIA”) on May 28, 2021. preCARDIA is a developer of a proprietary catheter and controller that is expected to complement the FASB issued ASU 2016-01, RecognitionCompany’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 Measurementpromoting decongestion to improve overall cardiac and renal function. The Company determined that substantially all of Financial Assets and Financial Liabilities. This guidance changes accounting for financial assets and financial liabilities under the fair value option and includes additional presentation and disclosure requirements for financial instruments. ASU 2016-01 requires certain financial assets to be measured at fair value with changes in fair value recognizedwas concentrated in the statementacquired in-process research and development asset in accordance with ASC 805 Business Combinations. As such, the acquisition was accounted for as an asset acquisition.
The Company acquired preCARDIA for a purchase price of operations. ASU 2016-01 eliminates$115.2 million, with a potential payout of $5 million payable based on achievement of a commercial milestone. The purchase price included cash consideration of $82.8 million for the available-for-sale classificationremaining interest in preCARDIA, paid to the selling shareholders and for marketable securitiestransaction costs associated with the acquisition and $32.4 million representing the Company’s previously owned minority interest in which changespreCARDIA. The Company recognized a gain of $21.0 million related to its previously owned minority interest in fair value are currently recorded as a component of other comprehensive income. ASU 2016-01 also impactspreCARDIA within the recognition and measurement of equity investments, which are currently carried at cost, but will be measured at fair value in the Company’scondensed consolidated statement of operations. ASU 2016-01 is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted with specific application guidance. ASU 2016-01 will become effectiveoperations for the nine months ended December 31, 2021.
In connection with the acquisition, the Company beginningacquired 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. During the three months ended December 31, 2021, the Company made a holdback payment of $0.5 million to former shareholders of preCARDIA. 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 fiscal 2019. The Company is evaluatinga charge of $116.0 million to the impact to itscondensed consolidated financial statements but ASU 2016-01 could have a significant impact, including additional volatility in other income (expense) within its statement of operations for the nine months ended December 31, 2021.
Acquisition of Breethe, Inc.
The Company acquired Breethe, Inc. (“Breethe”), a Maryland corporation, on April 24, 2020. Breethe is engaged in future periods if there are measurable changesresearch and development of a novel extracorporeal membrane oxygenation (“ECMO”) system that will complement and expand its product portfolio to more comprehensively serve the needs of patients whose lungs can no longer provide sufficient oxygenation, including patients suffering from cardiogenic shock, or respiratory failure, such as ARDS, H1N1, or COVID-19. The Company acquired Breethe for $55.0 million in cash, with additional potential payouts up to a maximum of $55.0 million payable based on the achievement of certain technical, regulatory and commercial milestones.
Purchase Price Allocation
The acquisition was accounted for as a business combination. The purchase price for the acquisition has been allocated to the assets acquired and liabilities assumed based on their estimated fair values and was finalized in the year ended March 31, 2021.
The acquisition-date fair value of equity investments.the consideration transferred is as follows:
In February 2016,
| Total Acquisition Date Fair Value (in thousands) |
| |
Cash and other considerations | $ | 57,850 |
|
Contingent consideration |
| 13,300 |
|
Total consideration transferred | $ | 71,150 |
|
The following table summarizes the FASB issued ASU 2016-02, Leases. The new guidance significantly impacts lessee accountingestimated fair values of the assets acquired and financial statement disclosures. Specifically, this guidance requires lessees to identify arrangements that should be accounted for as leases. Under this guidance, for lease arrangements exceeding a one year term, a right-of-use asset and lease obligation is recorded by the lessee for all leasesliabilities assumed on the balance sheet, whether operating or financing, while the statement of operations includes lease expense for operating leases and amortization and interest expense for financing leases. The balance sheet amount recorded at the date of adoption of this guidance must beacquisition (in thousands):
Acquired assets: |
|
|
|
Cash and cash equivalents | $ | 3,404 |
|
Property and equipment |
| 744 |
|
Goodwill |
| 44,485 |
|
In-process research and development |
| 27,000 |
|
Other assets acquired |
| 895 |
|
Total assets acquired |
| 76,528 |
|
Liabilities assumed: |
|
|
|
Accounts payable and other liabilities |
| 1,562 |
|
Deferred tax liabilities |
| 3,816 |
|
Net assets acquired | $ | 71,150 |
|
Goodwill is calculated usingas the applicable incremental borrowing rate atdifference between the date of adoption. Leases with a term of one year or less will be accounted for similar to existing guidance for operating leases. The Company is currently in the process of evaluating its lessee arrangements to determine the impact of ASU 2016-02 on its consolidated financial statements. This evaluation includes a reviewacquisition-date fair value of the Company’s existing leasing arrangements on its facilities. ASU 2016-02 must be adopted using a modified retrospective approachconsideration transferred and the fair values of the assets acquired and liabilities assumed. The goodwill is not deductible for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. ASU 2016-02 will become effective for the Company beginning in fiscal 2020.income tax purposes.
Note 3.4. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding are 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 per share calculation, potential dilutive securities are excluded from the calculation if their effect would be anti-dilutive.
The Company’sfollowing tables illustrate the determination of basic and diluted net income per share for each period presented (in thousands, except per share data):
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
Net income |
| $ | 45,752 |
|
| $ | 61,868 |
|
| $ | 76,180 |
|
| $ | 168,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares – basic |
|
| 45,508 |
|
|
| 45,201 |
|
|
| 45,419 |
|
|
| 45,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share – basic |
| $ | 1.01 |
|
| $ | 1.37 |
|
| $ | 1.68 |
|
| $ | 3.74 |
|
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
Net income |
| $ | 45,752 |
|
|
| 61,868 |
|
|
| 76,180 |
|
|
| 168,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares – basic |
|
| 45,508 |
|
|
| 45,201 |
|
|
| 45,419 |
|
|
| 45,105 |
|
Effect of dilutive securities |
|
| 413 |
|
|
| 505 |
|
|
| 432 |
|
|
| 548 |
|
Weighted average shares – diluted |
|
| 45,921 |
|
|
| 45,706 |
|
|
| 45,851 |
|
|
| 45,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share – diluted |
| $ | 1.00 |
|
| $ | 1.35 |
|
| $ | 1.66 |
|
| $ | 3.69 |
|
Share-based compensation awards of approximately 0.2 million and 0.2 million shares for the three months ended December 31, 2021 and 2020, respectively, and approximately 0.1 million and 0.3 million shares for the nine months ended December 31, 2021 and 2020, respectively, were outstanding but were not included in the computation of diluted net income per share because the effect of including such shares would have been anti-dilutive or such shares are contingently issuable upon meeting performance criteria in the periods presented.
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 is 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.
If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately.
Disaggregation of Revenue
Revenue is disaggregated 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 (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 December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Product revenue |
| $ | 249,065 |
|
| $ | 220,883 |
|
| $ | 726,324 |
|
| $ | 575,977 |
|
Service and other revenue |
|
| 12,111 |
|
|
| 10,780 |
|
|
| 35,579 |
|
|
| 30,300 |
|
Total revenue |
| $ | 261,176 |
|
| $ | 231,663 |
|
| $ | 761,903 |
|
| $ | 606,277 |
|
The following table disaggregates the Company’s revenue by geographical location:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
U.S. |
| $ | 211,957 |
|
| $ | 189,116 |
|
| $ | 619,585 |
|
| $ | 495,988 |
|
Europe |
|
| 32,379 |
|
|
| 28,630 |
|
|
| 97,143 |
|
|
| 73,638 |
|
Japan |
|
| 14,021 |
|
|
| 12,012 |
|
|
| 37,572 |
|
|
| 31,308 |
|
Rest of world |
|
| 2,819 |
|
|
| 1,905 |
|
|
| 7,603 |
|
|
| 5,343 |
|
Total revenue |
| $ | 261,176 |
|
| $ | 231,663 |
|
| $ | 761,903 |
|
| $ | 606,277 |
|
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, including product discontinuations, product recalls and expirations, of which it becomes aware. The Company’s cost of replacing defective products has not been material and is accounted for at the time of replacement. The Company’s returns reserve as of December 31, 2021 and March 31, 2021, was 0t material.
Rebates and Discounts
The Company provides certain customers with rebates and discounts that are defined in the Company’s contract arrangements with customers and are recorded as a reduction of revenue in the period the related revenue is recognized, resulting in a reduction to revenue and the establishment of a liability, which are all included in accrued expenses in the accompanying consolidated balance sheet. 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. Revenue adjustments that relate to performance obligations satisfied in prior periods during the three and nine months ended December 31, 2021 and 2020, were not material.
Contract Balances
Deferred Revenue
The Company’s deferred revenue balance was $24.9 million and $24.3 million as of December 31, 2021 and March 31, 2021, respectively. The deferred revenue balance is due to the timing of product shipment and completion of recognizing revenue when the customer obtains control of the product, and additional preventative maintenance service contracts and the subsequent recognition of
the contract ratably over the term of the service contract. The Company recognized $3.6 million and $21.6 million of revenue during the three and nine months ended December 31, 2021, respectively, that was included in the deferred revenue balance as of March 31, 2021. The Company recognized $3.0 million and $17.6 million of revenue during the three and nine months ended December 31, 2020, that was included in the deferred revenue balance as of March 31, 2020.
Note 6. Financial Instruments
Cash Equivalents and Marketable Securities
The Company’s cash equivalents and marketable securities at December 31, 2021 and March 31, 2021 are invested in the following:
|
| Amortized |
|
| Gross Unrealized |
|
| Gross Unrealized |
|
| Fair Market |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
December 31, 2021 |
| (in thousands) |
| |||||||||||||
Money market funds |
| $ | 61,245 |
|
| $ | — |
|
| $ | (2 | ) |
| $ | 61,243 |
|
Repurchase agreements |
|
| 10,000 |
|
|
| — |
|
|
| — |
|
|
| 10,000 |
|
Total cash equivalents |
|
| 71,245 |
|
|
| — |
|
|
| (2 | ) |
|
| 71,243 |
|
Short-term U.S. Treasury mutual fund securities |
|
| 143,488 |
|
|
| 1 |
|
|
| (101 | ) |
|
| 143,388 |
|
Short-term government-backed securities |
|
| 126,586 |
|
|
| 1 |
|
|
| (88 | ) |
|
| 126,499 |
|
Short-term corporate debt securities |
|
| 63,549 |
|
|
| 233 |
|
|
| (21 | ) |
|
| 63,761 |
|
Short-term commercial paper |
|
| 191,373 |
|
|
| 4 |
|
|
| (59 | ) |
|
| 191,318 |
|
Total short-term marketable securities |
|
| 524,996 |
|
|
| 239 |
|
|
| (269 | ) |
|
| 524,966 |
|
Long-term U.S. Treasury mutual fund securities |
|
| 128,705 |
|
|
| — |
|
|
| (357 | ) |
|
| 128,348 |
|
Long-term government-backed securities |
|
| 114,681 |
|
|
| 1 |
|
|
| (725 | ) |
|
| 113,957 |
|
Long-term corporate debt securities |
|
| 20,435 |
|
|
| — |
|
|
| (105 | ) |
|
| 20,330 |
|
Total long-term marketable securities |
|
| 263,821 |
|
|
| 1 |
|
|
| (1,187 | ) |
|
| 262,635 |
|
Total cash equivalents and marketable securities |
| $ | 860,062 |
|
| $ | 240 |
|
| $ | (1,458 | ) |
| $ | 858,844 |
|
|
| Amortized |
|
| Gross Unrealized |
|
| Gross Unrealized |
|
| Fair Market |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
March 31, 2021: |
| (in thousands) |
| |||||||||||||
Money market funds |
| $ | 124,297 |
|
| $ | — |
|
| $ | — |
|
| $ | 124,297 |
|
Repurchase agreements |
|
| 33,000 |
|
|
| — |
|
|
| — |
|
|
| 33,000 |
|
Total cash equivalents |
|
| 157,297 |
|
|
| — |
|
|
| — |
|
|
| 157,297 |
|
Short-term U.S. Treasury mutual fund securities |
|
| 72,221 |
|
|
| 28 |
|
|
| — |
|
|
| 72,249 |
|
Short-term government-backed securities |
|
| 128,668 |
|
|
| 13 |
|
|
| (12 | ) |
|
| 128,669 |
|
Short-term corporate debt securities |
|
| 104,253 |
|
|
| 581 |
|
|
| (2 | ) |
|
| 104,832 |
|
Short-term commercial paper |
|
| 45,237 |
|
|
| 1 |
|
|
| (3 | ) |
|
| 45,235 |
|
Total short-term marketable securities |
|
| 350,379 |
|
|
| 623 |
|
|
| (17 | ) |
|
| 350,985 |
|
Long-term government-backed securities |
|
| 225,231 |
|
|
| 190 |
|
|
| (37 | ) |
|
| 225,384 |
|
Long-term corporate debt securities |
|
| 38,091 |
|
|
| 630 |
|
|
| (20 | ) |
|
| 38,701 |
|
Total long-term marketable securities |
|
| 263,322 |
|
|
| 820 |
|
|
| (57 | ) |
|
| 264,085 |
|
Total cash equivalents and marketable securities |
|
| 770,998 |
|
|
| 1,443 |
|
|
| (74 | ) |
|
| 772,367 |
|
Gross realized gains and losses on sales of marketable securities were not material for the three and nine months ended December 31, 20172021 and 2016 were2020.
Derivative Instruments
In October 2019, the Company entered into an intercompany agreement in which it loaned 85.0 million Euro to Abiomed Europe GMBH, its German subsidiary. In conjunction with this intercompany loan agreement, the Company entered into a cross-currency swap agreement to convert a notional amount of 85.0 million Euro equivalent to $93.5 million denominated intercompany loan into U.S. dollars. The objective of this cross-currency swap is to hedge the variability of cash flows related to the forecasted interest and principal payments on the Euro denominated fixed rate loan against changes in the exchange rate between the U.S. dollar and the Euro. Under the terms of this cross-currency swap contract, which has been designated as follows (in thousands, except per share data)a cash flow hedge, the Company will make interest payments in Euro and receive interest in U.S. dollars. Upon the maturity of this contract, the Company will pay the principal amount of the loan in Euro and receive U.S. dollars from the counterparty. The cross-currency swap is carried on the consolidated balance sheet at fair value, and changes in the fair values are recorded as unrealized gains or losses in accumulated other comprehensive income.
The Company does not enter into derivative instruments for any purpose other than cash flow hedging.
The following table summarizes the terms of the cross-currency swap agreement as of December 31, 2021 (amounts in thousands):
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Basic Net Income Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | $ |
| 13,446 |
|
| $ |
| 15,432 |
|
| $ |
| 75,323 |
|
| $ |
| 37,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic net income per share |
|
| 44,247 |
|
|
|
| 43,431 |
|
|
|
| 44,095 |
|
|
|
| 43,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share - basic | $ |
| 0.30 |
|
| $ |
| 0.36 |
|
| $ |
| 1.71 |
|
| $ |
| 0.86 |
|
Effective Date | Maturity | Fixed Rate | Aggregate Notional Amount | ||||||||
Pay EUR | October 15, 2019 | October 15, 2024 | 2.75% | EUR 85,000 | |||||||
Receive U.S.$ | 4.64% | USD 93,457 |
The following table presents the fair value of the Company’s derivative instrument (in thousands):
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Diluted Net Income Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | $ |
| 13,446 |
|
| $ |
| 15,432 |
|
| $ |
| 75,323 |
|
| $ |
| 37,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic net income per share |
|
| 44,247 |
|
|
|
| 43,431 |
|
|
|
| 44,095 |
|
|
|
| 43,125 |
|
Effect of dilutive securities |
|
| 1,622 |
|
|
|
| 1,339 |
|
|
|
| 1,636 |
|
|
|
| 1,472 |
|
Weighted average shares used in computing diluted net income per share |
|
| 45,869 |
|
|
|
| 44,770 |
|
|
|
| 45,731 |
|
|
|
| 44,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share - diluted | $ |
| 0.29 |
|
| $ |
| 0.34 |
|
| $ |
| 1.65 |
|
| $ |
| 0.83 |
|
Derivatives designated as hedging instruments under ASC 815 |
| Balance Sheet classification |
| December 31, 2021 |
|
| March 31, 2021 |
| ||
Cross-currency swap |
| Other long-term liabilities |
| $ | 2,131 |
|
| $ | 4,298 |
|
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. Changes in the fair value of the cross-currency swap are designated as a hedging instrument that effectively offsets the variability of cash flows and are reported in accumulated other comprehensive income. These amounts subsequently are reclassified into the consolidated statements of operations in the same period in which the related hedged item affects earnings. The change in fair value of the cross-currency swap during the three and nine months ended December 31, 2021 was mainly due to fluctuations in the Euro to the U.S. dollar exchange rates.
For the three and nine months ended December 31, 2017, approximately 2,600 and 4,800 shares underlying out-of-the-money stock options, respectively, were excluded in2021, the computation of diluted earnings per share because their effect would have been anti-dilutive. Also, approximately 128,000 restricted shares in eachCompany recorded income related to the interest rate differential of the threecross-currency swap of $0.4 million and nine months ended December 31, 2017,$1.2 million, respectively related to performance-based and market-based awards for which milestones have not been met, were not included in other (loss) income, net, within the computationcondensed consolidated statements of diluted earnings per share.
operations. For the three and nine months ended December 31, 2016, approximately 28,000 and 17,000 shares underlying out-of-the-money stock options, respectively, were excluded in2020, the computation of diluted earnings per share because their effect would have been anti-dilutive. Also, approximately 185,000 restricted shares in eachCompany recorded income related to the interest rate differential of the threecross-currency swap of $0.5 million and nine months ended December 31, 2016,$1.2 million, respectively related to performance-based and market-based awards for which milestones have not been met, were not included in other (loss) income, net, within the computationcondensed consolidated statements of diluted earnings per share.operations.
Note 4. Marketable Securities and Fair Value Measurements
Marketable Securities
The Company’s marketable securities are classified as available-for-sale securities and, accordingly, are recorded at fair value. The difference between amortized cost and fair value is included in stockholders’ equity. At December 31, 2017 and March 31, 2017, the Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and contingent consideration. The carrying amounts of accounts receivable and accounts payable are considered reasonable estimates of their fair value, due to the short maturity of these investments.
The Company’s marketable securities at December 31, 2017 and March 31, 2017 are invested in the following:
|
| Amortized |
|
| Gross Unrealized |
|
| Gross Unrealized |
|
| Fair Market |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
|
| (in $000's) |
| |||||||||||||
December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term U.S. Treasury mutual fund securities |
| $ | 21,068 |
|
| $ | — |
|
| $ | (25 | ) |
| $ | 21,043 |
|
Short-term government-backed securities |
|
| 152,586 |
|
|
| — |
|
|
| (343 | ) |
|
| 152,243 |
|
Short-term corporate debt securities |
|
| 77,592 |
|
|
| 3 |
|
|
| (130 | ) |
|
| 77,465 |
|
Long-term government-backed securities |
|
| 47,587 |
|
|
| — |
|
|
| (96 | ) |
|
| 47,491 |
|
Long-term corporate debt securities |
|
| 1,997 |
|
|
| — |
|
|
| (3 | ) |
|
| 1,994 |
|
|
| $ | 300,830 |
|
| $ | 3 |
|
| $ | (597 | ) |
| $ | 300,236 |
|
|
| Amortized |
|
| Gross Unrealized |
|
| Gross Unrealized |
|
| Fair Market |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
|
| (in $000's) |
| |||||||||||||
March 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term U.S. Treasury mutual fund securities |
| $ | 45,199 |
|
| $ | — |
|
| $ | (13 | ) |
| $ | 45,186 |
|
Short-term government-backed securities |
|
| 90,199 |
|
|
| 1 |
|
|
| (87 | ) |
|
| 90,113 |
|
Short-term corporate debt securities |
|
| 55,465 |
|
|
| — |
|
|
| (31 | ) |
|
| 55,434 |
|
Long-term U.S. Treasury mutual fund securities |
|
| 1,998 |
|
|
| — |
|
|
| (3 | ) |
|
| 1,995 |
|
Long-term government-backed securities |
|
| 43,484 |
|
|
| 5 |
|
|
| (18 | ) |
|
| 43,471 |
|
Long-term corporate debt securities |
|
| 1,853 |
|
|
| — |
|
|
| (1 | ) |
|
| 1,852 |
|
|
| $ | 238,198 |
|
| $ | 6 |
|
| $ | (153 | ) |
| $ | 238,051 |
|
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: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
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.
The following table presentstables present the Company’s financial instruments recordedassets and liabilities measured at fair value in the condensed consolidated balance sheets, classified according to the three categories described above:on a recurring basis:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
December 31, 2017: |
| (in $000's) |
| |||||||||||||||||||||||||||||
December 31, 2021 |
| (in thousands) |
| |||||||||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 61,243 |
|
| $ | — |
|
| $ | — |
|
| $ | 61,243 |
| ||||||||||||||||
Repurchase agreements |
|
| — |
|
|
| 10,000 |
|
|
| — |
|
|
| 10,000 |
| ||||||||||||||||
Short-term U.S. Treasury mutual fund securities |
| $ | — |
|
| $ | 21,043 |
|
| $ | — |
|
| $ | 21,043 |
|
|
| — |
|
|
| 143,388 |
|
|
| — |
|
|
| 143,388 |
|
Short-term government-backed securities |
|
| — |
|
|
| 152,243 |
|
|
| — |
|
|
| 152,243 |
|
|
| — |
|
|
| 126,499 |
|
|
| — |
|
|
| 126,499 |
|
Short-term corporate debt securities |
|
| — |
|
|
| 77,465 |
|
|
| — |
|
|
| 77,465 |
|
|
| — |
|
|
| 63,761 |
|
|
| — |
|
|
| 63,761 |
|
Short-term commercial paper |
|
| — |
|
|
| 191,318 |
|
|
| — |
|
|
| 191,318 |
| ||||||||||||||||
Long-term U.S. Treasury mutual fund securities |
|
| — |
|
|
| 128,348 |
|
|
| — |
|
|
| 128,348 |
| ||||||||||||||||
Long-term government-backed securities |
|
| — |
|
|
| 47,491 |
|
|
| — |
|
|
| 47,491 |
|
|
| — |
|
|
| 113,957 |
|
|
| — |
|
|
| 113,957 |
|
Long-term corporate debt securities |
|
| — |
|
|
| 1,994 |
|
|
| — |
|
|
| 1,994 |
|
|
| — |
|
|
| 20,330 |
|
|
| — |
|
|
| 20,330 |
|
Investment in Shockwave Medical |
|
| 52,920 |
|
|
| — |
|
|
| — |
|
|
| 52,920 |
| ||||||||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swap agreement |
|
| — |
|
|
| 2,131 |
|
|
| — |
|
|
| 2,131 |
| ||||||||||||||||
Contingent consideration |
|
| — |
|
|
| — |
|
|
| 10,423 |
|
|
| 10,423 |
|
|
| — |
|
|
| — |
|
|
| 21,539 |
|
|
| 21,539 |
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
March 31, 2017: |
| (in $000's) |
| |||||||||||||||||||||||||||||
March 31, 2021 |
| (in thousands) |
| |||||||||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 124,297 |
|
| $ | — |
|
| $ | — |
|
| $ | 124,297 |
| ||||||||||||||||
Repurchase agreements |
|
| — |
|
|
| 33,000 |
|
|
| — |
|
|
| 33,000 |
| ||||||||||||||||
Short-term U.S. Treasury mutual fund securities |
| $ | — |
|
| $ | 45,186 |
|
| $ | — |
|
| $ | 45,186 |
|
|
| — |
|
|
| 72,249 |
|
|
| — |
|
|
| 72,249 |
|
Short-term government-backed securities |
|
| — |
|
|
| 90,113 |
|
|
| — |
|
|
| 90,113 |
|
|
| — |
|
|
| 128,669 |
|
|
| — |
|
|
| 128,669 |
|
Short-term corporate debt securities |
|
| — |
|
|
| 55,434 |
|
|
| — |
|
|
| 55,434 |
|
|
| — |
|
|
| 104,832 |
|
|
| — |
|
|
| 104,832 |
|
Long-term U.S. Treasury mutual fund securities |
|
| — |
|
|
| 1,995 |
|
|
| — |
|
|
| 1,995 |
| ||||||||||||||||
Short-term commercial paper |
|
| — |
|
|
| 45,235 |
|
|
| — |
|
|
| 45,235 |
| ||||||||||||||||
Long-term government-backed securities |
|
| — |
|
|
| 43,471 |
|
|
| — |
|
|
| 43,471 |
|
|
| — |
|
|
| 225,384 |
|
|
| — |
|
|
| 225,384 |
|
Long-term corporate debt securities |
|
| — |
|
|
| 1,852 |
|
|
| — |
|
|
| 1,852 |
|
|
| — | �� |
|
| 38,701 |
|
|
| — |
|
|
| 38,701 |
|
Investment in Shockwave Medical |
|
| 38,655 |
|
|
| — |
|
|
| — |
|
|
| 38,655 |
| ||||||||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swap agreement |
|
| — |
|
|
| 4,298 |
|
|
| — |
|
|
| 4,298 |
| ||||||||||||||||
Contingent consideration |
|
| — |
|
|
| — |
|
|
| 9,153 |
|
|
| 9,153 |
|
|
| — |
|
|
| — |
|
|
| 24,706 |
|
|
| 24,706 |
|
The Company has determined that the estimated fair value of its investmentsmoney 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 repurchase agreements, U.S. Treasury mutual fund securities, government-backed securities, and corporate debt securities and commercial paper and cross-currency swap agreement are reported as Level 2 financial assets and liabilities as they are not exchange-traded instruments.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 nine months ended December 31, 2021.
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 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.
The Company’s financial liabilities consistedother investments are classified as a Level 3 assets and are not included in the fair value table above. The carrying value of contingentthe Company’s portfolio of other investments and the change in the balance for the nine months ended December 31, 2021 are as follows:
|
|
|
|
|
|
| (in thousands) |
| |
Balance, March 31, 2021 |
| $ | 62,995 |
|
Additions |
|
| 7,067 |
|
Change in investment upon acquisition (Note 3) |
|
| (11,443 | ) |
Balance, December 31, 2021 |
| $ | 58,619 |
|
Contingent Consideration
Contingent consideration potentially payablerepresents 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:
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||
|
| (in thousands) |
| |||||
ECP |
| $ | 11,239 |
|
| $ | 10,306 |
|
Breethe |
|
| 10,300 |
|
|
| 14,400 |
|
Total contingent consideration |
| $ | 21,539 |
|
| $ | 24,706 |
|
ECP
In July 2014, the Company acquired ECP and AIS GmbH Aachen Innovative Solutions (“AIS”), in July 2014. The Company acquired ECP for $13.0 million in cash, with additional potential payouts totaling $15.0 million based on the achievement of certain clinicalCE Mark approval in the European Union and regulatory anda revenue-based milestonesmilestone related to the development of the future Impella ECPTM expandable catheter pump technology. These potential milestone payments may be made, at the Company’s option, by a combination of cash or AbiomedABIOMED common stock.
The Company uses a combination of an income approach, based on various revenue and cost assumptions and applyingapplies a probability to each outcome and a Monte-Carlo valuation model. Formodel, both of which consider significant unobservable inputs. Probabilities are applied to the clinical and regulatory milestone, probabilities were applied tomilestones, for each potential scenario and the resulting values wereare 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-basedrevenue-based milestone is valued using a Monte-Carlo valuation model, which simulates estimated future revenues during the earn out-period using management'smanagement’s best estimates. Projected
Key unobservable inputs include the discount rate used to present value the projected revenues and cash flows (ranging from 1.8% to 2.2%), the probability of achieving the various technical, regulatory and commercial milestones (estimated to range from 15% to 80%) and projected revenues, which are based on ourthe Company’s most recent internal operational budgets and long-range strategic plans.
Breethe
In April 2020, the Company acquired Breethe for $55.0 million in cash, with additional potential payouts up to a maximum of $55.0 million payable based on the achievement of certain technical, regulatory and commercial milestones.
The Company uses a combination of an income approach, based on various revenue and cost assumptions and applies a probability to each outcome and a Monte-Carlo valuation model, both of which consider significant unobservable inputs. For the regulatory milestones, probabilities are applied to each potential scenario and the resulting values are 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.
Key unobservable inputs include the discount rates used to present value the projected revenues and cash flows (ranging from 1.7% to 2.3%), the probability of achieving the various technical, regulatory and commercial milestones (estimated to range from 15% to 75%) and projected revenues, which are based on the Company’s most recent internal operational budgets and long-range strategic plans.
This liabilityContingent consideration is reportedclassified as a Level 3 liability as the estimated fair value of the contingent consideration related to the acquisitionacquisitions of ECP requiresand Breethe require significant management judgment or estimation and is calculated using the following valuation methods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value at December 31, 2017 (in $000's) |
|
| Valuation Methodology |
| Significant Unobservable Input |
| Weighted Average (range, if applicable) |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical and regulatory milestone |
| $ | 5,654 |
|
| Probability weighted income approach |
| Projected fiscal year of milestone payments |
| 2019 to 2022 |
| |
|
|
|
|
|
|
|
| Discount rate |
| 2.8% to 3.3% |
| |
|
|
|
|
|
|
|
| Probability of occurrence |
| Probability adjusted level of 40% for the base case scenario and 12% to 30% for various upside and downside scenarios |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue-based milestone |
|
| 4,769 |
|
| Monte Carlo simulation model |
| Projected fiscal year of milestone payments |
| 2023 to 2035 |
| |
|
|
|
|
|
|
|
| Discount rate |
|
| 18% |
|
|
|
|
|
|
|
|
| Expected volatility for forecasted revenues |
|
| 50% |
|
|
| $ | 10,423 |
|
|
|
|
|
|
|
|
|
estimation.
The following table summarizes the change in fair value, as determined by Level 3 inputs of the contingent consideration for the three and nine months ended December 31, 2017 and 2016:2021:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
|
| (in $000's) |
|
| (in $000's) |
| ||||||||||
Level 3 liabilities, beginning balance |
| $ | 9,835 |
|
| $ | 7,749 |
|
| $ | 9,153 |
|
| $ | 7,563 |
|
Additions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Change in fair value |
|
| 588 |
|
|
| 426 |
|
|
| 1,270 |
|
|
| 612 |
|
Level 3 liabilities, ending balance |
| $ | 10,423 |
|
| $ | 8,175 |
|
| $ | 10,423 |
|
| $ | 8,175 |
|
|
| (in thousands) |
| |
Balance, March 31, 2021 | $ | 24,706 |
| |
Payment of Breethe contingent consideration at acquisition date fair value |
| (2,334 | ) | |
Change in fair value |
| (833 | ) | |
Balance, December 31, 2021 | $ | 21,539 |
|
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 related tomilestones.
The significant unobservable inputs used in the ECP acquisition. Adjustments associated with the change in fair value of the Company’s contingent consideration are included in researchthe discount rate and development expensesforecasted financial information. Significant increases (decreases) in the Company’s condensed consolidated statements of operations.discount rate would have resulted in a significantly lower (higher) fair value measurement. Significant increases or decreases(decreases) in any of the probabilities of success or changes in expected timelines for achievement of any of these milestones could resultforecasted financial information would have resulted in a significantly higher or lower(lower) fair value measurement. As of December 31, 2021 and March 31, 2021, the present value of expected payments related to the Company’s contingent consideration was $21.5 million and $24.7 million, respectively. The undiscounted value of the liability. The fair valuepayments, assuming that all contingencies are met, would be $67.5 million as of the contingent consideration at each reporting date is updated by reflecting the changes in fair value reflected in the Company’s statement of operations. There is no assurance that any of the conditions for the milestone payments will be met.
Other Investments
The Company periodically makes investments in private medical device companies that focus on heart failure, heart pump and other medical device technologies. The aggregate carrying amount of the Company’s other investments was $12.6 million and $7.2 million at December 31, 2017 and March 31, 2017, respectively, and is classified within other assets in the unaudited condensed consolidated balance sheets. During the nine months ended December 31, 2017, the Company made investments of $6.4 million in private medical device companies. These investments are accounted for using the cost method and are evaluated for impairment and measured at fair value only if there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of these investments.2021.
Note 5.7. Inventories, net
The components of inventories, net are as follows:
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||
|
| (in thousands) |
| |||||
Raw materials and supplies |
| $ | 28,917 |
|
| $ | 27,782 |
|
Work-in-progress |
|
| 36,424 |
|
|
| 35,187 |
|
Finished goods |
|
| 24,858 |
|
|
| 18,090 |
|
Inventories, net |
| $ | 90,199 |
|
| $ | 81,059 |
|
The Company’s inventories relate to its Impella®andAbiomed 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:
|
| December 31, 2017 |
|
| March 31, 2017 |
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||||
|
| (in $000's) |
|
| (in thousands) |
| ||||||||||
Land |
| $ | 7,550 |
|
| $ | 4,046 |
|
| $ | 10,729 |
|
| $ | 10,875 |
|
Building and building improvements |
|
| 61,086 |
|
|
| 10,900 |
|
|
| 152,117 |
|
|
| 148,870 |
|
Capital lease asset |
|
| — |
|
|
| 16,784 |
| ||||||||
Leasehold improvements |
|
| 2,173 |
|
|
| 34,854 |
|
|
| 1,387 |
|
|
| 439 |
|
Machinery and equipment |
|
| 38,336 |
|
|
| 27,989 |
| ||||||||
Machinery, equipment and computer software |
|
| 97,540 |
|
|
| 91,784 |
| ||||||||
Furniture and fixtures |
|
| 7,503 |
|
|
| 3,899 |
|
|
| 16,070 |
|
|
| 15,608 |
|
Construction in progress |
|
| 15,958 |
|
|
| 9,257 |
|
|
| 17,970 |
|
|
| 10,906 |
|
Total cost |
|
| 132,606 |
|
|
| 107,729 |
|
|
| 295,813 |
|
|
| 278,482 |
|
Less accumulated depreciation |
|
| (24,629 | ) |
|
| (19,952 | ) | ||||||||
|
| $ | 107,977 |
|
| $ | 87,777 |
| ||||||||
Accumulated depreciation |
|
| (98,933 | ) |
|
| (81,353 | ) | ||||||||
Property and equipment, net |
| $ | 196,880 |
|
| $ | 197,129 |
|
In October 2017, the Company entered into a purchase and sale agreement to acquire the Company’s headquarters that it had been leasing in Danvers, Massachusetts. The total acquisition cost for the land and building was approximately $16.5 million, with $3.0 million being recorded to land and $13.0 million being recorded to building and building improvements. In addition, the Company reclassified $32.6 million in leasehold improvements to building and building improvements due to the termination of the lease agreement upon the property acquisition.
In December 2016, the Company entered into a purchase and sale agreement to acquire its existing European headquarters in Aachen, Germany, consisting of 33,000 square feet of space. The Company acquired the property in February 2017. The original acquisition cost for the land and building was approximately $12.6 million, with $4.0 million being recorded to land and $8.6 million being recorded to the building and building improvements.
Note 6.9. Goodwill and In-Process Research and DevelopmentOther Intangible Assets, net
Goodwill
The carrying amount of goodwill atas of December 31, 20172021 and March 31, 20172021 was $34.8$77.4 million and $31.0$78.6 million, respectively, and has been recorded in connection with the Company’s acquisition of Impella Cardiosystems AG, in May 2005, and ECP and AIS in July 2014.2014 and Breethe in April 2020. The carrying value of goodwill activity isand the change in the balance for the nine months ended December 31, 2021 are as follows:
|
| (in $000's) |
| |
Balance at March 31, 2017 |
| $ | 31,045 |
|
Foreign currency translation impact |
|
| 3,769 |
|
Balance at December 31, 2017 |
| $ | 34,814 |
|
|
| (in thousands) |
| |
Balance, March 31, 2021 |
| $ | 78,568 |
|
Foreign currency translation |
|
| (1,119 | ) |
Balance, December 31, 2021 |
| $ | 77,449 |
|
The Company evaluates goodwill and in-process research and development (“IPR&D”) assets at least annually aton October 31, as well as whenever events or changes in circumstances suggest that the carrying amount may not be recoverable. The Company has no0 accumulated impairment losses on goodwill or IPR&D assets.goodwill.
Other Intangible Assets, net
Other intangible assets, net consists of the following:
|
|
|
|
|
|
|
|
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||||||||||
|
| Weighted Average Useful Life (in years) |
|
| Cost |
|
| Accumulated Amortization |
|
| Net Carrying Value |
|
| Accumulated Amortization |
|
| Net Carrying Value |
| ||||||
|
|
|
|
|
| (in thousands) |
| |||||||||||||||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology |
|
| 13.9 |
|
| $ | 27,000 |
|
| $ | (2,100 | ) |
| $ | 24,900 |
|
|
| (750 | ) |
| $ | 26,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process research and development |
|
|
|
|
|
| 15,378 |
|
|
| — |
|
|
| 15,378 |
|
|
| — |
|
|
| 15,900 |
|
Total |
|
|
|
|
| $ | 42,378 |
|
| $ | (2,100 | ) |
| $ | 40,278 |
|
|
| (750 | ) |
| $ | 42,150 |
|
The carrying amountCompany’s finite-lived intangible asset represents developed technology associated with the estimated fair value of IPR&D assetstheBreethe OXY-1 System. The estimated fair value of developed technology was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flow estimates for the Breethe OXY-1 System were based on certain key assumptions, including estimates of future revenue and expenses, the stage of development of the technology at December 31, 2017the acquisition date and the time and resources needed to complete development. During the year ended March 31, 2017 was $16.2 million2021, the Company reclassified the in-process research and $14.5 million, respectively,development (“IPR&D”) asset to developed technology upon receiving U.S. Food and was recorded in conjunction withDrug 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 15 years.
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 assetsasset 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 technology 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 used a discount rate of 21% and cash flowsevaluates the other intangible assets at least annually on October 31, as well as whenever events or changes in circumstances suggest that have been probability adjusted to reflect the risks of product commercialization, which thecarrying amount may not be recoverable. The Company believes are appropriate and representative of market participant assumptions.
has 0 accumulated impairment losses on other intangible assets. The carrying value of the Company’s IPR&D assets and the change in the indefinite-lived intangible assets balance for the nine months ended December 31, 20172021, related to the impact of foreign currency translation.
Note 10. Other Assets
The components of other assets are as follows:
|
| (in $000's) |
| |
Balance at March 31, 2017 |
| $ | 14,482 |
|
Foreign currency translation impact |
|
| 1,759 |
|
Balance at December 31, 2017 |
| $ | 16,241 |
|
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||
|
| (in thousands) |
| |||||
Investment in Shockwave Medical |
| $ | 52,920 |
|
| $ | 38,655 |
|
Other investments (Note 6) |
|
| 58,619 |
|
|
| 62,995 |
|
Operating lease right of use asset (Note 11) |
|
| 9,069 |
|
|
| 6,109 |
|
Other intangible assets and other assets |
|
| 6,341 |
|
|
| 5,323 |
|
Total other assets |
| $ | 126,949 |
|
| $ | 113,082 |
|
Investment in Shockwave Medical
During the three months ended December 31, 2021 and 2020, the Company recorded a loss of $8.2 million and a gain of $8.3 million, respectively in other (loss) income, net. During the nine months ended December 31, 2021 and 2020, the Company recorded gains of $14.3 million and $43.0 million, respectively, in other (loss) income, net. During the nine months ended December 31, 2020, the Company sold approximately 1.4 million of its shares in Shockwave Medical for cash proceeds of $67.9 million and recognized a gain of $47.3 million.
Other Intangible Assets and Other Assets
The Company’s other intangible assets and other assets is comprised primarily of license manufacturing rights to certain technology from third parties and other long-term assets such as from third parties and other long-term assets such as prepayments related to the Company’s clinical trial activities.
Note 11. Leases
Lessee
The following table presents supplemental balance sheet information related to the Company’s operating leases:
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||
|
| (in thousands) |
| |||||
Assets |
|
|
|
|
|
|
|
|
Operating lease right-of-use assets in other assets |
| $ | 9,069 |
|
| $ | 6,109 |
|
Liabilities |
|
|
|
|
|
|
|
|
Operating lease liabilities in other current liabilities |
|
| 2,587 |
|
|
| 2,459 |
|
Operating lease liabilities in other long-term liabilities |
|
| 6,447 |
|
|
| 3,657 |
|
Total operating lease liabilities |
| $ | 9,034 |
|
| $ | 6,116 |
|
Expense charged to operations under operating leases was $6.7 million and $12.4 million for the three and nine months ended December 31, 2021, respectively.Expense charged to operations under operating leases was $1.0 million and $2.9 million for the three and nine months ended December 31, 2020, respectively.
Future minimum lease payments under non-cancelable operating leases as of December 31, 2021 are as follows:
(in thousands, except lease term and discount rate) |
| |||
|
|
|
|
|
Fiscal Years Ending March 31, |
|
|
|
|
2022 (excluding the 9 months ended December 31, 2021) |
| $ | 731 |
|
2023 |
|
| 2,617 |
|
2024 |
|
| 2,375 |
|
2025 |
|
| 1,610 |
|
2026 |
|
| 1,020 |
|
Thereafter |
|
| 1,026 |
|
Total future minimum lease payments |
|
| 9,379 |
|
Less: present value adjustment |
|
| (345 | ) |
Total operating lease liabilities |
|
| 9,034 |
|
Less: operating lease liabilities in other current liabilities |
|
| (2,587 | ) |
Operating lease liabilities in other long-term liabilities |
| $ | 6,447 |
|
|
|
|
|
|
Weighted average remaining lease term |
|
| 4.61 |
|
|
|
|
|
|
Weighted average discount rate |
|
| 1.60 | % |
Lessor
In March 2021, as part of the $17.5 million purchase of a building located in Danvers, Massachusetts, we assumed existing leases with third parties for a portion of the building which are classified as operating leases. The leases have annual escalating payments and the latest expires in March 2025 in accordance with the terms and conditions of the existing agreement. For the nine months ended December 31, 2021, operating lease income was not material.
Note 7.12. Accrued Expenses
Accrued expenses consist of the following:
|
| December 31, 2017 |
|
| March 31, 2017 |
|
| December 31, 2021 |
|
| March 31, 2021 |
| ||||
|
| (in $000's) |
|
| (in thousands) |
| ||||||||||
Employee compensation |
| $ | 26,077 |
|
| $ | 23,290 |
|
| $ | 45,283 |
|
| $ | 40,954 |
|
Research and development |
|
| 8,301 |
|
|
| 6,983 |
| ||||||||
Professional, legal, and accounting fees |
|
| 1,673 |
|
|
| 1,957 |
| ||||||||
Warranty |
|
| 2,356 |
|
|
| 2,053 |
| ||||||||
Marketing |
|
| 2,738 |
|
|
| 3,674 |
| ||||||||
Sales and income taxes |
|
| 4,612 |
|
|
| 3,180 |
|
|
| 673 |
|
|
| 5,914 |
|
Professional, legal and accounting fees |
|
| 3,294 |
|
|
| 2,019 |
| ||||||||
Research and development |
|
| 2,271 |
|
|
| 2,349 |
| ||||||||
Marketing |
|
| 2,254 |
|
|
| 1,827 |
| ||||||||
Warranty |
|
| 1,010 |
|
|
| 717 |
| ||||||||
Accrued capital expenditures |
|
| — |
|
|
| 2,300 |
| ||||||||
Other |
|
| 2,047 |
|
|
| 2,021 |
|
|
| 5,644 |
|
|
| 4,511 |
|
|
| $ | 41,565 |
|
| $ | 37,703 |
|
| $ | 66,668 |
|
| $ | 66,046 |
|
EmployeeThe accrual for employee compensation consists primarily of accrued bonuses, accrued commissions, and accrued employee benefits and payroll taxes at December 31, 20172021 and March 31, 2017.2021.
Note 13. Stockholders’ Equity
Class B Preferred Stock
The Company has authorized 1,000,000 shares of Class B Preferred Stock, $.01 par value, of which the board of directors can set the designation, rights and privileges. NaN shares of Class B Preferred Stock have been issued or are outstanding.
Stock Repurchase Program
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. Under this stock repurchase program, the Company is authorized to repurchase shares through open market purchases, privately negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 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 $103.8 million as of December 31, 2021.
The Company did not buy shares through the stock repurchase program during either of the three or nine months ended December 31, 2021. The following table provides shares bought through the stock repurchase program during the three and nine months ended December 31, 2020:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||
|
| 2020 |
|
| 2020 |
| ||
Shares repurchased |
|
| — |
|
|
| 67,649 |
|
Average price per share |
|
| — |
|
| $ | 167.19 |
|
Value of shares repurchased (in millions) |
|
| — |
|
| $ | 11.3 |
|
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, are as follows (in thousands):
|
| Three and Nine Months Ended December 31, 2021 |
| |||||||||||||
|
| Foreign Currency Translation Adjustments |
|
| Unrealized Gains (Losses) on Marketable Securities |
|
| Gains (Losses) on Derivative Instruments |
|
| Total |
| ||||
Balance, March 31, 2021 |
| $ | (14,718 | ) |
| $ | 1,369 |
|
| $ | 1,904 |
|
| $ | (11,445 | ) |
Other comprehensive income (loss) |
|
| 83 |
|
|
| (632 | ) |
|
| (217 | ) |
|
| (766 | ) |
Balance, June 30, 2021 |
|
| (14,635 | ) |
|
| 737 |
|
|
| 1,687 |
|
|
| (12,211 | ) |
Other comprehensive (loss) income |
|
| (2,693 | ) |
|
| (197 | ) |
|
| 545 |
|
|
| (2,345 | ) |
Balance, September 30, 2021 |
|
| (17,328 | ) |
|
| 540 |
|
|
| 2,232 |
|
|
| (14,556 | ) |
Other comprehensive (loss) income |
|
| (3,083 | ) |
|
| (1,756 | ) |
|
| (1,094 | ) |
|
| (5,933 | ) |
Balance, December 31, 2021 |
| $ | (20,411 | ) |
| $ | (1,216 | ) |
| $ | 1,138 |
|
| $ | (20,489 | ) |
|
| Three and Nine Months Ended December 31, 2020 |
| |||||||||||||
|
| Foreign Currency Translation Adjustments |
|
| Unrealized Gains (Losses) on Marketable Securities |
|
| Gains (Losses) on Derivative Instruments |
|
| Total |
| ||||
Balance, March 31, 2020 |
| $ | (16,860 | ) |
| $ | 1,672 |
|
| $ | 3,999 |
|
| $ | (11,189 | ) |
Other comprehensive income (loss) |
|
| 1,360 |
|
|
| 1,755 |
|
|
| (461 | ) |
|
| 2,654 |
|
Balance, June 30, 2020 |
|
| (15,500 | ) |
|
| 3,427 |
|
|
| 3,538 |
|
|
| (8,535 | ) |
Other comprehensive income (loss) |
|
| 2,416 |
|
|
| (814 | ) |
|
| (266 | ) |
|
| 1,336 |
|
Balance, September 30, 2020 |
|
| (13,084 | ) |
|
| 2,613 |
|
|
| 3,272 |
|
|
| (7,199 | ) |
Other comprehensive income (loss) |
|
| 4,823 |
|
|
| (525 | ) |
|
| (1,268 | ) |
|
| 3,030 |
|
Balance, December 31, 2020 |
| $ | (8,261 | ) |
| $ | 2,088 |
|
| $ | 2,004 |
|
| $ | (4,169 | ) |
Note 8.14. Stock-Based Compensation
The following table summarizes stock-based compensation expense by financial statement line item in the Company’s condensed consolidated statements of operationsoperation for each of the three and nine months ended December 31, 20172021 and 2016:2020:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||||||||
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| (in $000's) |
|
| (in $000's) |
|
| (in thousands) |
| |||||||||||||||||||||||
Cost of product revenue |
| $ | 489 |
|
| $ | 234 |
|
| $ | 1,221 |
|
| $ | 754 |
| ||||||||||||||||
Cost of revenue |
| $ | 1,259 |
|
| $ | 1,061 |
|
| $ | 3,589 |
|
| $ | 2,689 |
| ||||||||||||||||
Research and development |
|
| 1,673 |
|
|
| 900 |
|
|
| 4,217 |
|
|
| 4,793 |
|
|
| 2,278 |
|
|
| 1,922 |
|
|
| 6,681 |
|
|
| 5,069 |
|
Selling, general and administrative |
|
| 9,070 |
|
|
| 5,340 |
|
|
| 23,732 |
|
|
| 18,974 |
|
|
| 8,846 |
|
|
| 9,873 |
|
|
| 30,470 |
|
|
| 25,961 |
|
|
| $ | 11,232 |
|
| $ | 6,474 |
|
| $ | 29,170 |
|
| $ | 24,521 |
|
| $ | 12,383 |
|
| $ | 12,856 |
|
| $ | 40,740 |
|
| $ | 33,719 |
|
The following table summarizes the stock option activity for the nine months ended December 31, 2017:2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| ||
|
|
|
|
|
| Weighted |
|
| Average |
|
| Aggregate |
|
|
|
|
|
| Weighted |
|
| Average |
|
| Aggregate |
| ||||||
|
|
|
|
|
| Average |
|
| Remaining |
|
| Intrinsic |
|
|
|
|
|
| Average |
|
| Remaining |
|
| Intrinsic |
| ||||||
|
| Options |
|
| Exercise |
|
| Contractual |
|
| Value |
|
| Options |
|
| Exercise |
|
| Contractual |
|
| Value |
| ||||||||
|
| (in thousands) |
|
| Price |
|
| Term (years) |
|
| (in thousands) |
|
| (in thousands) |
|
| Price |
|
| Term (years) |
|
| (in thousands) |
| ||||||||
Outstanding at beginning of period |
|
| 1,646 |
|
| $ | 32.09 |
|
|
| 5.46 |
|
|
|
|
|
|
| 711 |
|
| $ | 141.87 |
|
| 5.46 |
|
|
|
|
| |
Granted |
|
| 152 |
|
|
| 140.41 |
|
|
|
|
|
|
|
|
|
|
| 66 |
|
|
| 289.01 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (371 | ) |
|
| 20.54 |
|
|
|
|
|
|
|
|
|
|
| (155 | ) |
|
| 56.98 |
|
|
|
|
|
|
|
|
|
Cancelled and expired |
|
| (55 | ) |
|
| 100.57 |
|
|
|
|
|
|
|
|
|
|
| (14 | ) |
|
| 314.28 |
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
| 1,372 |
|
| $ | 44.49 |
|
|
| 5.42 |
|
| $ | 196,132 |
|
|
| 608 |
|
| $ | 175.36 |
|
|
| 5.72 |
|
|
| 113,080 |
|
Exercisable at end of period |
|
| 1,048 |
|
| $ | 24.03 |
|
|
| 4.42 |
|
| $ | 171,235 |
|
|
| 462 |
|
| $ | 147.90 |
|
| 4.81 |
|
|
| 99,031 |
| |
Options vested and expected to vest at end of period |
|
| 1,347 |
|
| $ | 43.85 |
|
|
| 5.37 |
|
| $ | 193,386 |
|
|
| 608 |
|
| $ | 175.36 |
|
|
| 5.72 |
|
|
| 113,080 |
|
The aggregate intrinsic value of
Stock options exercised was $46.1 million for the nine months ended December 31, 2017. The total fair value of options that vested during the nine months ended December 31, 2017 was $4.8 million.
generally vest and become exercisable annually, over three years. The remaining unrecognized stock-based compensation expense for unvested stock option awards atas of December 31, 20172021, was approximately $10.6$9.5 million and the estimated weighted-average period over which this cost willis expected to be recognized is 2.41.9 years.
The aggregate intrinsic value of stock options exercised was $43.4 million for the nine months ended December 31, 2021. The total cash received as a result of employee stock option exercises for the nine months ended December 31, 2021, was $8.8 million.
The Company estimates the fair value of each stock option granted at the grant date using the Black-Scholes option valuation model.
The weighted average grant-date fair values and weighted average assumptions used in the calculation of fair value of options granted during the three and nine months ended December 31, 2017 and 2016 was as follows:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||||||||||||
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
Weighted average grant-date fair value |
| $ | 70.14 |
|
| $ | 48.15 |
|
| $ | 51.20 |
|
| $ | 42.21 |
|
| $ | 127.20 |
|
| $ | 94.64 |
|
| $ | 104.93 |
|
| $ | 76.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
| 2.13 | % |
|
| 1.37 | % |
|
| 1.86 | % |
|
| 1.32 | % |
|
| 1.14 | % |
|
| 0.39 | % |
|
| 0.81 | % |
|
| 0.31 | % |
Expected option life (years) |
|
| 4.08 |
|
|
| 4.17 |
|
|
| 4.07 |
|
|
| 4.14 |
|
|
| 5.57 |
|
|
| 4.17 |
|
|
| 4.28 |
|
|
| 4.22 |
|
Expected volatility |
|
| 42.2 | % |
|
| 48.5 | % |
|
| 43.6 | % |
|
| 49.5 | % |
|
| 41.19 | % |
|
| 43.70 | % |
|
| 44.11 | % |
|
| 42.85 | % |
Restricted Stock Units
The following table summarizes activity of restricted stock units for the nine months ended December 31, 2017:2021:
|
|
|
|
|
| Weighted |
| |||||||||
|
|
|
|
|
| Average |
| |||||||||
|
| Number of |
|
| Grant Date |
| ||||||||||
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Shares |
|
| Fair Value |
| ||||
|
| (in thousands) |
|
| (per share) |
|
| (in thousands) |
|
| (per share) |
| ||||
Restricted stock units at beginning of period |
|
| 1,056 |
|
| $ | 80.50 |
|
|
| 301 |
|
| $ | 273.57 |
|
Granted |
|
| 295 |
|
| $ | 136.80 |
| ||||||||
Granted (1) |
|
| 171 |
|
|
| 289.73 |
| ||||||||
Vested |
|
| (363 | ) |
| $ | 53.16 |
|
|
| (132 | ) |
|
| 297.00 |
|
Forfeited |
|
| (94 | ) |
| $ | 98.08 |
|
|
| (30 | ) |
|
| 275.27 |
|
Restricted stock units at end of period |
|
| 894 |
|
| $ | 108.35 |
|
|
| 310 |
|
| $ | 274.15 |
|
(1) | Includes 10 thousand performance-based awards granted due to greater than 100% target vesting. |
Restricted stock units generally vest annually, over three years. The remaining unrecognized compensation expense for outstanding restricted stock units, including performance and market-based awards, as of December 31, 20172021 was $38.5$58.5 million and the estimated weighted-average period over which this cost willis expected to be recognized is 2.01.9 years.
In May 2017, performance-based awardsThe weighted average grant-date fair value for restricted stock units granted during the nine months ended December 31, 2021 was $289.73. The total fair value of restricted stock units forvested during the potential issuance of approximately 159,000 shares of commonnine months ended December 31, 2021 was $39.2 million.
Performance-Based Awards
The Company grants performance-based restricted stock were issuedunits to certain executive officers and employees, which vest upon achievement of prescribed service milestones by the award recipients and the achievement of prescribed performance milestones by the Company. As of December 31, 2017,2021, the Company is recognizingrecognized compensation expense based on the probable outcomeoutcomes related to the prescribed performance targets on the outstanding awards.
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 TSR goals by the Company and the achievement of prescribed performance milestones, as defined in the respective agreements.
The relative total shareholder return (“TSR”) is based on the Company’s common stock in relation to the TSR of 20 peer companies over a defined period, based on a comparison of average closing stock prices during the 20 trading days prior to the first day of the performance period, reinstated dividends during each performance period and the average closing stock prices during the final 20 trading days of each performance period. The actual number of market-based restricted stock units that may be earned can range from 0% to 200% of the target number of shares. The payout percentage may be further adjusted based on the Company’s performance relative to the constituents of the S&P 500 Index on the first day of the performance period that are still actively trading on the last day of each performance period, as defined in the respective agreements.
The Company used a Monte-Carlo simulation model to estimate the grant-date fair value of the market-based restricted stock units. The fair value related to these awards are recorded as compensation expense over the period from date of grant, based on the probable outcomes related to the prescribed performance targets on the outstanding awards, regardless of the actual TSR outcome reached.
The table below sets forth the assumptions used to value the awards and the estimated grant-date fair value:
|
| May 2021 |
|
| May 2020 |
| ||
Risk-free interest rate |
|
| 0.3 | % |
|
| 0.2 | % |
Expected volatility |
|
| 44.8 | % |
|
| 35.5 | % |
Dividend yield |
|
| — |
|
|
| — |
|
Remaining performance period (years) |
|
| 2.8 |
|
| 1.9 - 2.9 |
| |
Estimated fair value per share |
| $ | 292.40 |
|
| $347.05 - $349.28 |
| |
Target performance (number of shares) |
|
| 25,172 |
|
|
| 30,881 |
|
Note 9.15. Income Taxes
On December 22, 2017, the Tax Cut and Jobs Act, or the Tax Reform Act, was signed into law. The Tax Reform Act included significant changes to existing law, including among other items, a reduction to the U.S. federal statutory corporate tax rate from 35% to 21% effective January 1, 2018. ASC 740, Income Taxes (Topic 740), or ASC 740, requires that the effects of changes in tax laws or rates be recognized in the period in which the law is enacted. Those effects, both current and deferred, are reported as part of the tax provision, regardless of income in which the underlying pretax income (expense) or asset (liability) was or will be reported.
The Company’s estimated fiscal 2018 blended U.S. federal statutory corporate income tax rate of 31.5% was applied in the computation of the income tax provision for the three and nine months ended December 31, 2017. The blended U.S. federal statutory corporate tax rate of 31.5% represents the weighted average rate between the pre-enactment U.S. federal statutory corporate tax rate of 35% prior to the January 1, 2018 effective date and the post-enactment U.S. federal statutory corporate tax rate of 21% thereafter.
The Company’s income tax provision was $32.2$12.1 million and $36.6$18.9 million for the three months ended December 31, 2021 and 2020, respectively. The Company’s income tax provision was $39.6 million and $46.1 million for the nine months ended December 31, 2017, respectively,2021 and $10.4 million and $24.8 million for the three and nine months ended December 31, 2016,2020, respectively. The Company’s effective tax rate was 70.6%21% and 32.7%23.4% for the three months ended December 31, 2021 and 2020, respectively. The Company’s effective tax rate was 34.2% and 21.4% for the nine months ended December 31, 2017, respectively,2021 and 40.2% and 40.0%2020, respectively. The effective tax rate differs from the statutory federal income tax rate of 21% for the three and nine months ended December 31, 2016, respectively. Consistent with guidance issued by the SEC, which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the Tax Reform Act, the Company provisionally recorded an income tax expense of $22.0 million during the three2021 and nine months ended December 31, 2017, 2020 primarily due to the re-measurement of its net deferredstate and foreign income taxes and permanent differences offset by credits and excess tax assets due to the lower U.S. federal statutory corporate tax rate. This provisional estimate reflects estimable current year impacts of the Tax Reform Act on the Company’s estimated annual effective tax rate and discrete items resulting directly from the enactment of the Tax Reform Act based on the information available, prepared, or analyzed (including computations) in reasonable detail. Any adjustments to this provisional estimate will be recorded as adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized, if necessary.
As discussed in “Note 2. Basis of Presentation and Summary of Significant Accounting Policies,” thebenefits. The Company also recognized excess tax benefits associated with stock-based awards of $3.2$0.3 million and $24.5$1.9 million as anfor the three months ended December 31, 2021 and 2020, respectively. The effective tax rate differs from the statutory federal income tax benefitrate of 21% for three andthe nine months ended December 31, 2017, respectively. These recognized2021, primarily due to a non-deductible charge for in-process research and development related to the preCARDIA acquisition offset by excess tax benefits resultedrelated to stock-based compensation. The effective tax rate differs from restricted stock units that vested or stock options that were exercised during the three andstatutory federal income tax rate of 21% for the nine months ended December 31, 2017.
2020, primarily due state and foreign income taxes and permanent differences offset by credits and excess tax benefits. The significant differences between the statutory incomeCompany recognized excess tax ratebenefits associated with stock-based awards of $10.1 million and effective income tax rate$10.4 million for the three and nine months ended December 31, 20172021 and 2016 were as follows:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
|
| ||||||||||
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
|
Statutory income tax rate |
|
| 31.5 |
| % |
| 35.0 |
| % |
| 31.5 |
| % |
| 35.0 |
| % |
Increase resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefits from stock-based awards |
|
| (7.0 | ) |
|
| — |
|
|
| (21.9 | ) |
|
| — |
|
|
Credits |
|
| (2.1 | ) |
|
| (1.2 | ) |
|
| (2.1 | ) |
|
| (1.2 | ) |
|
State taxes, net |
|
| 3.7 |
|
|
| 3.3 |
|
|
| 3.7 |
|
|
| 3.3 |
|
|
Permanent differences |
|
| 1.7 |
|
|
| 2.7 |
|
|
| 1.7 |
|
|
| 2.7 |
|
|
Effect of the Tax Reform Act on net deferred tax assets |
|
| 42.1 |
|
|
| — |
|
|
| 19.6 |
|
|
| — |
|
|
Other |
|
| 0.7 |
|
|
| 0.4 |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
Effective tax rate |
|
| 70.6 |
| % |
| 40.2 |
| % |
| 32.7 |
| % |
| 40.0 |
| % |
The recently enacted Tax Reform Act allows for a 100% deduction for the repatriation of foreign subsidiary earnings with minimal U.S. income tax consequences other than the one-time deemed repatriation toll charge. Since most of the Company’s cash
and cash equivalents are held by foreign subsidiaries which are disregarded entities for domestic tax purposes, any repatriation of such funds to the U.S. would likely have a nominal tax impact, if any.
2020, respectively.
The Company and its subsidiaries areis subject to U.S. federalthe examination of its income tax as well as income tax of multiple state and foreign jurisdictions. Fiscal years 2012 through 2017 remain open to examination in Germany and Abiomed Europe GmbH, the Company’s main operating subsidiary in Germany, is currently being audited for fiscal years 2012 through 2015. In July 2017, the Company was notifiedreturns by the Internal Revenue Service or IRS, that it has selectedand other tax authorities. The outcome of these audits cannot be predicted with certainty. During the Company’s federal tax return for fiscal 2016 for examination. In September 2017, the Company was notified by German tax authorities that our ECP subsidiary in Germany will be audited for the yearnine months ended December 31, 2014 and2021, the three months ended March 31, 2015.Company closed an income tax audit in Germany which covered fiscal years 2016 through 2019 with 0 material adjustments. The Company’s most recent completed income tax audit in the U.S. related to fiscal year 2016. All other tax years remain subject to examination by the IRSfederal, state and stateforeign tax authorities, because the Company has net operating loss and tax credit carryforwards which may be utilized in future years to offset taxable income, those years may also be subject to review by relevant taxing authorities if the carryforwards are utilized.authorities.
Note 10.16. Commitments and Contingencies
Commitments
Leases
The Company’s corporate headquarters is located in Danvers, Massachusetts. This facility encompasses most of the Company’s U.S. operations, including research and development, manufacturing, sales and marketing and general and administrative departments. In October 2017, the Company entered into a purchase and sale agreement to purchase its corporate headquarters for approximately $16.5 million and terminated its existing lease arrangement (See Note 5).
In February 2017, the Company entered into a lease agreement for an additional 21,603 square feet of office space in Danvers, Massachusetts, which expires on July 31, 2022. In December 2017, the Company entered into an amendment to this lease to extend the lease term through August 31, 2025 and to add an additional 6,607 square feet of space in which rent would begin around June 1, 2018. The amendment also allows the Company a right of first offer to purchase the property from January 1, 2018 through August 31, 2035, if the lessor decides to sell the building or receives an offer to purchase the building from a third-party buyer. The annual rent expense for the lease is estimated to be $0.4 million.
In September 2016, the Company entered into a lease agreement in Berlin, Germany which commenced in May 2017 and expires in May 2024. The annual rent expense for the lease is estimated to be $0.3 million.
In October 2016, the Company entered into a lease agreement for an office in Tokyo, Japan and expires in September 2021. The office houses administrative, regulatory, and training personnel in connection with the Company’s commercial launch in Japan. The annual rent expense for the lease is estimated to be $0.9 million.
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 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.
In April 2014, the Company received an administrative subpoena from the Boston regional office of the United States Department of Health and Human Services, or HHS, Office of Inspector General requesting materials relating to the Company’s reimbursement of employee expenses and remuneration to healthcare providers from July 2012 through December 2012, in connection with a civil investigation under the False Claims Act (the “FCA Investigation”). Subsequently, the Company received Civil Investigative Demands from the U.S. Attorney’s Office for the District of Massachusetts that collectively sought additional information relating to this matter for the time period of January 1, 2011 through September 14, 2016. Maquet Matters
The Company continues to cooperate with the government in this investigation and is exploring ways to resolve this matter with the government. The Company is not able to predict what action, if any, might be taken in the future as a result of the investigation, or the potential impact on its financial position.
Thoratec Corporation, or Thoratec, a subsidiary of Abbott Laboratories, has challenged a number of Company ownedbeen litigating certain patents in Europe in connection with the launch of their HeartMate PHP medical device, or PHP, in Europe. These actions relate to Thoratec’s ability to manufacture and sell their PHP product in Europe. These actions do not relate to the Company’s ability to manufacture or sell its Impella line of devices.
In December 2014, Thoratec filed a nullity suit in the German Federal Patent Court against a German “pigtail” patent owned by the Company with a flexible extension feature, and auxiliary pigtail, basket and funnel features. The validity hearing was held in November 2016 and the Federal Patent Court found the patent invalid. The Company is appealing this decision.
In August 2015, Thoratec filed a nullity action in the German Federal Patent Court against two Company owned patents covering a “magnetic clutch” feature. These magnetic clutch patents were acquired by the Company in July 2014, in connection with its acquisition of ECP and AIS. The validity hearing for the magnetic clutch patents was held in June 2017. The Company’s patents were upheld in an amended form to focus on the structure and interaction of the magnets in the clutch. The Federal Patent Court found certain unamended claims to be invalid. The Company is appealing the decision with respect to the unamended claims.
In September 2015, the Company filed counterclaims in the magnetic clutch action in Germany asserting that the PHP product infringes the two magnetic clutch patents, a European pigtail patent, and the German pigtail patent. The infringement trial has been stayed, pending resolution of the German nullity actions.
In February 2017, Thoratec filed an opposition in the European Patent Office against a Company owned patent acquired in connection with the acquisition of ECP and AIS relating to a housing structure for an expandable pump. The Company filed an initial response to the opposition in July 2017. In December 2017, Thoratec filed an opposition in the European Patent Office against a Company owned patent acquired in connection with the acquisition of ECP and AIS relating to a pump having a shaft cap with an atraumatic ball. The Company’s due date for responding to the opposition is May 27, 2018.
In December 2015, the Company received a letter from Maquet Cardiovascular LLC or Maquet, a subsidiary of the Getinge Group, asserting that the Company’s Impella devices infringe certain claims having guidewire, lumen and sensor features, which were(“Maquet”) in two Maquet patents and oneseparate cases pending patent application in the U.S. and elsewhere, and attached a draft litigation complaint and encouraged the Company to take a license from Maquet. In January 2016, the Company responded to Maquet stating that it believed that the cited claims were invalid and that its Impella devices did not infringe the cited patents. In May 2016, Maquet notified the Company that its pending U.S. patent application had been issued as a U.S. patent, repeated their earlier assertion and encouraged the Company to discuss taking a license from Maquet. The three patents expire September 2020, December 2020 and October 2021. In May 2016, the Company filed suit in U.S. District Court for the District of Massachusetts (“D. Mass” or D. Mass., against Maquet seeking“the Court”) since 2016.
In May 2016, the Company filed a declaratory judgment action (the “2016 Action”) alleging that the Company’s Impella devices doit does not infringe Maquet’s cited patent rights.
In August 2016, Maquet sent a letterpatent. Following the claim construction (“Markman”) order issued in November 2018, and prior to the Company identifying four new U.S. continuation patent filings with claims that Maquet alleges are infringed byclose of discovery, both parties filed series of motions. On September 30, 2021, the Court granted the Company’s Impella devices. OfMotion for Summary Judgement (“MSJ”) for non-infringement of the four U.S. continuation applications, one issued astwo 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 patent on January 17, 2017, one issued as a patent on February 7, 2017, one issued as a patent on March 21, 2017, and one issued as a patent on October 17, 2017. These four issued patents will expire in September 2020.final judgement; therefore, the case is not yet appealable to the Federal Circuit.
In September 2016, Maquet filed a response to the Company’s suit in D. Mass., including various counterclaims alleging that the Company’s Impella 2.5, Impella CP, Impella 5.0, and Impella RP heart pumps infringe certain claims of the three original issued U.S. patents. On June 15,November 2017, Maquet filed a motion for leave to amend its infringement counterclaims to add the first three additional U.S. continuation patents mentioned above and to file various false advertising, unfair competition claims under state law and under the Lanham Act, and a trademark cancellation in the pending case. Maquet’s amended complaint and counterclaim, like those it originally filed, seek injunctive relief and monetary damages in the form of a reasonable royalty, with three times the amount for alleged willful infringement. The amended complaint admits that Maquet’s currently commercially available products do not embody the claims of the asserted patents. On July 21, 2017, the Court granted the motion in part, allowing the three additional continuation patents to be added to the case, and denied the motion to add the false advertising claims, Lanham Act claims, and the trademark cancellation claims. On October 26, 2017, Maquet filed an amended answer, adding a new counterclaim alleging infringement of an additional seventh patent. Maquet did not seek leave to amend the pleadings and did not first consult with the Company concerning this addition. On November 11, 2017, after Maquet refused to withdraw the patent, the Company filed a motion to strike the seventh patent of Maquet’s counterclaims on the grounds that Maquet did not seek leave to add the patent and had amended its pleadings after the deadline set by the Court. On November 15, 2017, Maquet informed the Court that it would agree to voluntarily withdraw the seventh patent. In response on November 22, 2017, Maquet filed a second lawsuitaction in D. Mass alleging that the Company’s Impella 2.5®, Impella CP®, and Impella 5.0® heart pumps infringe certain claims of the seventh patent. In the complaint Maquet seeks injunctive relief and monetary damagesanother patent in the form of a reasonable royalty, with three times the amount for alleged willful infringement. Discovery is ongoingsame family (the seventh patent overall between both cases). The Parties submitted Markman briefs and theargued their respective positions in November 2019. A Markman Hearing on claim interpretationorder has been rescheduled for March 13, 2018.
With regard to the first six Maquet patents mentioned above, in Marchnot yet issued, and April 2017 the Company filed requests for inter partes review, or IPR, at the U.S. Patent & Trademark Office’s Patent Trial and Appeals Board, or PTAB, asserting that the claims are invalid in view of prior art blood pump technology. In September and October 2017, the PTAB denied institution on these IPR requests filed by the Company. In September 2017, the Company filed additional IPRs and the institution decisions are expected in March 2018.discovery remains ongoing.
The Company cannot estimate what the potential outcome of these claims will be at this time. Discovery is ongoing and the hearingasserted patents in both cases expired on claim interpretation is scheduled for March 2018. 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 that the FCA Investigationsignificant number of legal and patent disputes with Thoratec and Maquet remain either in relatively early stages, or there are significant factual and legal issues still to be resolved and information obtained or rulings made during any lawsuits or investigations that could affectin the methodology for calculation.Maquet patent disputes.
Note 11. Segment and Enterprise Wide DisclosuresThoratec Matters
The Company operateshas been involved in two ongoing patent infringement actions against Thoratec Corporation (“Thoratec”), a subsidiary of Abbott Laboratories (“Abbott”) for the sales and marketing of Thoratec’s Heartmate PHP™ pump in 2016. In August 2021, the Appellate Court (the Court of 2nd Instance) in Düsseldorf affirmed that Thoratec infringes both patents. The Company can now enforce the judgment in one business segment—case by seeking a court ordered injunction if Thoratec sells Heartmate PHP™ in Germany. Thoratec
had appealed the research, developmentsecond case to the Federal Court of Justice (the Court of 3rd and saleLast Instance) and in January 2022, Thoratec withdrew its appeal.
These actions relate solely to Thoratec’s ability to manufacture and sell its PHP product in Europe and have no impact on the Company's ability to manufacture or sell its Impella® line of medical devicesdevices. The actions do not expose the Company to assist or replace the pumping functionliability risk, except under local German law, which requires a losing party in a proceeding to pay a portion of the failing heart. other party’s legal fees.
Securities Class Action Litigation
On or about August 6, 2019, the Company received a securities class action complaint filed on behalf of a single shareholder in the U.S. District Court for the Southern District of New York (“SDNY”), on behalf of himself and persons or entities that purchased or acquired the Company’s securities between January 31, 2019 through July 31, 2019. On October 7, 2019, a similar purported class action complaint was filed by a different shareholder on behalf of himself and persons or entities that purchased or acquired the Company’s securities between November 1, 2018 and July 31, 2019. Also, on October 7, 2019, four shareholders filed applications to be appointed lead plaintiff and for their counsel to be appointed lead counsel for the class. Two of those shareholders also filed motions to consolidate the two cases and two of the shareholders have withdrawn their applications to be lead plaintiff.
The complaints alleged that the Company violated Sections 10(b) and 20(a) of and Rule 10b-5 under the Exchange Act, in connection with allegedly misleading disclosures made by the Company regarding its financial condition and results of operations.
On June 29, 2020, SDNY issued an order consolidating the two cases and appointed Local 705 International Brotherhood of Teamsters Pension Fund as the lead plaintiff and Labaton Sucharow LLP as lead counsel. On September 17, 2020, the lead plaintiff filed an amended complaint in which it proposed a new class period of May 3, 2018 to July 31, 2019. As prescribed by a scheduling order, the Company filed a motion to dismiss on November 16, 2020. On September 21, 2021, SDNY granted the Company’s motion, dismissed the amended complaint, and gave the lead plaintiff leave to move to amend the complaint by October 12, 2021. On October 12, 2021, the Company and the lead plaintiff entered into a stipulation to voluntarily dismiss the securities class action and SDNY ordered dismissal of the case with prejudice on the same day. Under the terms of the stipulation, the lead plaintiff has agreed not to move for leave to amend the complaint and not to appeal the dismissal of the action.
Shareholder Derivative Litigation
On November 6 and 7, 2019, two shareholders filed derivative actions in SDNY that were subsequently consolidated. On November 8, 2019, another shareholder filed a derivative action in Massachusetts Suffolk County Superior Court. On January 7, 2020, another shareholder derivative action was filed in the U.S. District Court for the District of Delaware. The complaints in these actions relied on many of the same allegations as in the securities class actions, and asserted that, between November 1, 2018 and July 31, 2019, the directors of the Company made or allowed to be made misleading public statements regarding the Company’s growth, ultimately harming the Company.
The Company agreed with the plaintiffs in all three actions to stay the cases pending resolution of a motion to dismiss in the securities class actions. As a result of the stay, the Delaware action was administratively closed.
Following dismissal of the securities class action, the Company agreed with the plaintiffs in all three actions to voluntarily dismiss the derivative actions. In all three actions, the respective courts have entered judgment dismissing the action without prejudice.
Litigation Demand
On March 3, 2020, a shareholder sent a letter to the Board of Directors asserting that the directors of the Company made or allowed to be made misleading public statements regarding the Company’s growth. The letter relied on many of the same allegations as the securities class actions and derivative actions, and demanded that the Board (i) undertake an independent investigation of the directors, (ii) bring suit against the directors on behalf of the Company, and (iii) take a number of additional affirmative actions to redress the purported wrongs. On March 30, 2020, the Company, after discussions with the Board of Directors, sent a written response to the shareholder’s counsel which they responded to on June 1, 2020. The Company then sent a further response to the shareholder’s counsel on June 15, 2020, affirming the decision to defer consideration of the litigation demand pending further developments in the securities class action suit. Following the filing of the amended complaint in the securities class action, described above, the same shareholder renewed their demand on September 29, 2020. The Company responded on October 9, 2020 and once again affirmed that it would defer consideration of the demand pending further substantive developments in the securities class action suit.
On November 5, 2020, a second shareholder sent a letter to the Board of Directors that made essentially the same demands as the September 29, 2020 letter from the first shareholder. The Company responded on November 23, 2020, noting that it would defer consideration of the demand pending further substantive developments in the securities class action suit.
On November 22, 2021, the Company sent letters to each shareholder’s counsel noting the dismissal of the securities class action suit and derivative actions and communicating the Company’s expectation that the shareholders would withdraw their demands.
Note 17. 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 makerdecision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM (determined to be the Chief Executive Officer) does not manage any part ofreviews the Company separately,business, makes investment and theresource allocation of resourcesdecisions, and assessment ofassesses operating performance are based on the Company’s consolidated operating results. InternationalThe Company operates as 1 reportable segment.
Geographic Information
Rest of world sales (sales(meaning sales outside the U.S. and, primarily in Europe)Europe and Japan) accounted for 11%19% and 18% of total product revenue infor each of the three and nine months ended December 31, 2017, respectively,2021 and 9% of total product revenue in each of the three and nine months ended December 31, 2016,2020, respectively. Most of theThe Company’s long-lived assets are located in the U.S., except for $31.7$57.3 million and $23.2$56.4 million at December 31, 20172021 and March 31, 2017,2021, respectively, which are located primarily in Germany.
Forward Looking Statements
This Report, containsincluding the documents incorporated by reference in this Report, includes forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Any1995. All statements, other than one conveying solelystatements of historical facts, is amay be forward-looking statement.statements. These forward-looking statements may be accompanied by such words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “should,” “likely,” “will” and other words and terms of similar meaning. These forward-looking statements address various matters including, among others, future actions related to ongoing investigations and litigation and expenditures related thereto; the development and commercialization of new and existing products and anticipated costs, including research and development, sales and marketing and training costs associated with product development and commercialization; the anticipated launch dates of technological improvements in existing products and studies in pipeline products; expected capital expenditures for the fiscal year ending March 31, 2018; commercial plans for our products into new markets such as Japan; expected enrollment in our prospective feasibility study; demand and expected shipments of our products; anticipated shifts in the revenue mix associated with our products; our ability to increase revenue from our Impella® line of products and the sufficiency of revenue to fund future operations; the impact of market factors such as changes in interest rates, currency exchange rates on our securities and the fair value of our financial instruments; awards of performance and market-based restricted stock units; and the impact of ASU 2016-09 on our consolidated financial statements and disclosures. Each forward-looking statement in this Report is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement,statement. Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include: the impact of public health threats and epidemics, including among others:the COVID-19 pandemic and resulting or prolonged economic downturns on our inabilityoperations and financial conditions; effects on our profitability if we are unable to predict the outcomemanufacture our products as a result of investigations and litigation and associated expenses; possible delaysnatural or man-made disasters; fluctuations in foreign currency exchange rates; our research and development programs;dependence on Impella® products for most of our revenues; our ability to obtain regulatory approvalssuccessfully 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 uncertainties relatedreduced revenue due to regulatory processes; greater government scrutiny and regulation of the medical device industry andlengthy clinician training process; our ability to respondeffectively manage our growth; our ability to changing lawsanticipate demand for, and regulations affecting our industry, including any reforms to the regulatory approval process administered by the U.S Food and Drug Administration, or FDA, and changing enforcement practices related thereto; the inability to manufacture products in commercial quantities at an acceptable cost; the acceptance by physicians and hospitals ofsuccessfully commercialize, our products; the impact of competitiveunsuccessful clinical trials or procedures relating to products under development; our ability to develop additional and pricing; uncertaintieshigh-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 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; material impairments caused by shutdowns of the U.S. federal government; changes in healthcare 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 capital needscustomers; our potential “ownership change” for U.S. federal income tax purposes and our limited utilization of net operating losses from prior tax years; our ability to maintain compliance with, and the risks identified under Item 1Aimpact on us of Part Ichanges in, tax laws including U.S. Tax Reform legislation; 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 or develop or acquire additional intellectual property; compliance with laws protecting the confidentiality of patient health information; disruptions of critical information systems or material breaches in the security of our Annual Reportsystems; 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; changes in methods, estimates and judgments we use in applying our accounting policies; changes in accounting standards, tax laws and financial reporting requirements; and other factors discussed in “Part I, Item 1A. Risk Factors” of our annual report on Form 10-K for the year ended March 31, 2017, as well as2021 and the other information we filefiling subsequently filed with or furnished to the Securities and Exchange Commission.SEC. Readers are cautioned not to place considerableundue reliance on any forward-looking statements contained in this Report, which speak only as of the date of this Report. Any forward-looking statement made in this Report speaks only as of the date hereof. We undertake no obligation to update or revise these forward-looking statements whether as a result of new information, future events or otherwise, unless otherwise required by law. Our business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.
Overview
We are a leading provider of temporary mechanicalmedical devices that provide circulatory support devices, and we offer a continuum of care to heart failure patients.oxygenation. We develop, manufacture and market proprietary products that are designed to enable the heart to rest heal and recover by improving blood flow to the coronary arteries and end-organs and/or temporarily assistingperforming the pumping function of the heart.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 the electrophysiology lab, the hybrid lab and in the heart surgery suite by heart surgeons. A physician may use our devicescardiac surgeons for patients who are in need of hemodynamic support prophylactically urgently 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 the patient’stheir own native 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. 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, including, for example: supply shortages, particularly of our product components; and supply chain disruptions, which may limit our ability to manufacture or distribute our products. 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.
As we started the third quarter of fiscal year 2022, patient utilization of Impella heart pump devices continued to be negatively impacted by an increase in COVID-19 hospitalizations in certain geographies due to the Delta variant and ongoing shortage of hospital workers, that limited ICU capacity and contributed to some deferral of elective procedures. However, as Delta cases moderated, patient utilization of Impella heart pump devices increased during the last two months of the third quarter, despite on-going hospital labor shortages and the emergence of the Omicron variant. While we experienced improvements in overall patient utilization in the third quarter, we continue to monitor the impact of the Omicron variant and ongoing hospital labor 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, 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). 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.
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, with a potential payout of $5 million payable based on achievement of a commercial milestone. During the three months ended December 31, 2021, we made a holdback payment of $0.5 million to former shareholders of preCARDIA. 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 $116.0 million to the condensed consolidated statements of operations for the nine months ended December 31, 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 nine months ended December 31, 2021.
Our Existing Products
Our strategic focus and the primary driver of the majority of our revenue growth is the market penetration of our family of Impella®Impella® heart pumps. The Impella device portfolio, which includes the Impella 2.5® Impella CP®2.5®, Impella RP®CP®, Impella LD®5.0®, Impella LD®, Impella 5.5® and Impella 5.0®RP® devices, has supported numerousthousands of patients worldwide. We expect that allmost of our product and service revenue in the near future will be from our Impella devices. Revenues from
Below is a summary of our non-Impella devices, largely focused on the AB5000 device used in the heart surgery suite, have been decreasing over the past several years and we are no longer selling the AB5000 as we have strategically shifted our sales and marketing efforts towards our Impella devicesexisting products and the cath lab.
In March 2015, wecountries where they have received a Pre-Market Approval, or PMA,��from the FDA for use of the Impella 2.5 device during elective and urgent high-risk percutaneous coronary intervention, or PCI, procedures. In December 2016, the FDA expanded this PMA approval in the U.S. to include the Impella CP device. With these PMA indications, the Impella 2.5 and Impella CP devices provide the only minimally invasive treatment options indicated for use during high-risk PCI procedures in the U.S. In April 2016, the FDA approved a PMA supplement for our Impella 2.5, Impella CP, Impella 5.0 and Impella LD devices to provide treatment for ongoing cardiogenic shock that occurs following a heart attack or open heart surgery. The intent of our Impella system therapy is to reduce
ventricular work and to provide the circulatory support necessary to allow heart recovery and early assessment of residual myocardial function.
In September 2017, we received a PMA from the FDA for the Impella RP® heart pump. This latest approval follows the prior FDA Humanitarian Device Exemption (HDE) received in January 2015 and adds the Impella RP heart pump to our platform of PMA approved devices. The Impella RP heart pump is indicated for providing temporary right ventricular support for up to 14 days in patients with a body surface area ≥1.5 m², who develop acute right heart failure or decompensation following left ventricular assist device implantation, myocardial infarction, heart transplant, or open-heart surgery. With this approval, the Impella RP heart pump is the only percutaneous temporary ventricular support device that is FDA-approved as safe and effective for right heart failure as stated in the indication.
Our Impella 2.5, Impella 5.0, Impella LD, Impella CP and Impella RP devices also have CE Mark approval and Health Canada approval, which allows us to market these devices in the European Union and Canada.
In September 2016, we received Pharmaceuticals and Medical Devices Agency, or PMDA, approval from the Japanese Ministry of Health, Labour & Welfare, or MHLW, for our Impella 2.5 and Impella 5.0 heart pumps to provide treatment of drug-resistant acute heart failure in Japan. In July 2017, we received approval from the MHLW for reimbursement for the Impella 2.5 and 5.0 heart pumps. Reimbursement in Japan for the Impella 2.5 and 5.0 is equivalent to our average Impella sales price in the U.S. and we commenced commercialization in Japan during the three months ended September 30, 2017. The first Japanese patient was treated with the Impella device in October 2017 and we are conducting a controlled Impella device launch at a limited number of hospitals. We do not expect to have any material revenue in Japan during fiscal 2018.
In May 2017, we announced the enrollment of the first patient in the FDA approved prospective multi-center feasibility study, STEMI Door to Unloading with Impella CP system in acute myocardial infarction. The trial focuses on the feasibility and safety of unloading the left ventricle using the Impella CP heart pump prior to primary PCI in patients presenting with ST segment elevation myocardial infarction, or STEMI, without cardiogenic shock with the hypothesis that this will potentially reduce infarct size. The study, which received FDA approval in October 2016, will enroll up to 50 patients at 10 sites. We expect to complete enrollment in fiscal 2019.
regulatory approval. We expect to continue to make additional PMA supplementregulatory submissions for our Impella portfolio of devicesproducts for additional indications.indications and in additional countries.
Our Existing Products
Impella 2.5®
The Impella 2.5 device is a percutaneous micro heart pump with an integrated motor and sensors. The devicetechnology 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.
The Impella 2.5 device received 510(k) clearance from the FDA in June 2008 for partial circulatory support for up to six hours. In March 2015, we received a PMA from the FDA for the use of the Impella 2.5 device during elective and urgent high-risk PCI procedures. With this PMA indication, the Impella 2.5 device became the first FDA approved hemodynamic support device for use during high-risk PCI procedures. Under this first PMA, the Impella 2.5 is a temporary (up to six hours) ventricular support device indicated for use during high-risk PCI performed in elective or urgent hemodynamically stable patients with severe coronary artery disease and depressed left ventricular ejection fraction, when a heart team, including a cardiac surgeon, that has determined high-risk PCI is the appropriate therapeutic option. Use of the Impella 2.5 device in these patients may prevent hemodynamic instability that may occur during planned temporary coronary occlusions and may reduce periprocedural and post-procedural adverse events. The product labeling allows for the clinical decision by physicians to leave the Impella 2.5 device in place beyond the intended duration of up to six hours should unforeseen circumstances arise.
In April 2016, the FDA approved a supplement to our March 2015 PMA approval for the use of our Impella 2.5, Impella CP, Impella 5.0 and Impella LD devices to provide treatment for ongoing cardiogenic shock. This PMA supplement covers a set of indications related to the use of the Impella devices in patients suffering cardiogenic shock following acute myocardial infarction or cardiac surgery and allows for a longer duration of support.
Pursuant to the April 2016 PMA approval, the Impella 2.5, Impella CP, Impella 5.0 and Impella LD catheters, in conjunction with the Automated Impella Controller, or AIC, were approved as temporary ventricular support devices intended for short term use (≤ 4 days for the Impella 2.5 and Impella CP, and ≤ 6 days for the Impella 5.0 and LD) and indicated for the treatment of ongoing cardiogenic shock that occurs immediately (< 48 hours) following acute myocardial infarction or open heart surgery as a result of isolated left ventricular failure that is not responsive to optimal medical management and conventional treatment measures. The intent of the Impella system therapy is to reduce ventricular work and to provide the circulatory support necessary to allow heart recovery and early assessment of residual myocardial function. Optimal medical management and convention treatment measures include volume loading and use of pressors and inotropes, with or without an intraortic balloon pump, or IABP.
TheOur Impella 2.5 device has received FDA, CE Mark approval in Europe for up to five days of use and is approved for use in up to 40 countries. The Impella 2.5 device also has Health Canada approvalPMDA approvals which allows us to market the device in Canada.
In September 2016, we received PMDA approval from the Japanese MHLW for our Impella 2.5 and Impella 5.0 heart pumps to provide treatment of drug-resistant acute heart failure in Japan. In July 2017, we received approval from the MHLW for reimbursement for the Impella 2.5 and 5.0 heart pumps. Reimbursement in Japan for the Impella 2.5 and 5.0 is equivalent to our average Impella sales priceit in the U.S., European Union and we commenced commercializationJapan, respectively. The technology is also approved for use in Japan during the three months ended September 30, 2017. The first Japanese patient was treated with the Impella device in October 2017 and we are conducting a controlled Impella device launch at a limited number of hospitals. We do not expect to have any significant revenue in Japan during fiscal 2018.multiple other countries.
Impella CP®
In September 2012, we announced that the Impella CP device received 510(k) clearance from the FDA. The Impella CP device provides blood flow of approximately one liter moreup to 4.3 liters of blood per minute than the Impella 2.5 device and is primarily used by either interventional cardiologists to support patients in the cath lab or by cardiac surgeons in the heart surgery suite.
In April 2016, the FDA approved the PMA supplement for certain of our devices, including our Impella CP device to provide treatment for ongoing cardiogenic shock.
In December 2016, we received PMA approval from the FDA for the use of the Impella CP device during elective and urgent high-risk PCI procedures, identical to the indication for use for the Impella 2.5 device. This approval allows the Impella CP to be used as a temporary (≤ 6 hours) ventricular support system indicated for use during high risk PCI procedures performed in elective or urgent hemodynamically stable patients with severe coronary artery disease and depressed left ventricular ejection fraction, when a heart team, including a cardiac surgeon, has determined that high risk PCI is the appropriate therapeutic option. The product labeling allows for the clinical decision by physicians to leave the Impella CP device in place beyond the intended duration of up to six hours should unforeseen circumstances arise.
In May 2017, we announced the enrollment of the first patient in the FDA approved prospective multi-center feasibility study, STEMI Door to Unloading with Impella CP system in acute myocardial infarction. The trial focuses on the feasibility and safety of unloading the left ventricle using the Impella CP heart pump prior to primary PCI in patients presenting with ST segment elevation myocardial infarction, or STEMI, without cardiogenic shock with the hypothesis that this will potentially reduce infarct size. The study, which received FDA approval in October 2016, will enroll up to 50 patients at 10 sites. We expect to complete enrollment in fiscal 2019.
The primary endpoints of the feasibility study will focus on safety, including Adverse Cardiovascular and Cerebrovascular Events, or MACCE, at 30 days. All patients will undergo cardiac magnetic resonance imaging to assess infarct size as a percent of left ventricular mass at 30 days post-PCI. Patients will be randomized to Impella CP placement with immediate primary PCI, or to Impella CP placement with 30 minutes of unloading prior to primary PCI. The hypothesis of this novel approach to treating STEMI patients, based on extensive mechanistic research, is that unloading the left ventricle prior to PCI reduces myocardial work load, oxygen demand and also initiates a cardio-protective effect at the myocardial cell level, which may alleviate myocardial damage caused by reperfusion injury at the time of revascularization. This feasibility study will help refine the protocol and lay the groundwork for a future pivotal study with more sites and patients and will be designed for statistical significance.
We are currently developing optical sensor technology which is intended to provide enhanced monitoring capability, reduce setup time and improve ease of use for physicians. The optical sensor technology is approved under CE Mark in Europe and we anticipate beginning to incorporate the technology into our Impella CP devices in fiscal 2019.
TheOur Impella CP device has received FDA, CE Mark, approvalPMDA approvals which allows us to market it in Europe for up to five days of usethe U.S., European Union and Japan, respectively. The technology is also approved for use in up to 40multiple other countries.
The Impella 5.0 and Impella LD devices are percutaneous micro heart pumps with integrated motors and sensors for use primarily in the heart surgery suite. These devices are designed to support patients who require higher levels of circulatory support as compared to the Impella 2.5.
The Impella 5.0 device can be inserted into the left ventricle via femoral cut down or through the axillary artery. The Impella 5.0 device is passed into the ascending aorta, across the valve and into the left ventricle. The Impella LD device is similar to the Impella 5.0 device, but it is implanted directly into the ascending aorta through an aortic graft. Both of these procedures are normally performed with the assistance of heart surgeons in the surgery suite. The Impella 5.02.5 and Impella LD devices can pump up to five liters of blood per minute, potentially providing full circulatory support.CP devices.
The Impella 5.0 and Impella LD devices originally received 510(k) clearance in April 2009, for circulatory support for up to six hours. In April 2016, the FDA approved the PMA supplement for certain of our devices, including the Impella 5.0 and Impella LD devices to provide treatment for ongoing cardiogenic shock following a heart attack or open heart surgery.
TheOur 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 for upand was introduced in Europe through a controlled rollout, similar to ten days’ duration and are approved for use in over 40 countries.
the U.S. In July 2017, we received approval from the MHLW for reimbursement forNovember 2021, the Impella 2.5 and 5.0 heart pumps. Reimbursement5.5 device received PMDA approval in Japan for the Impella 2.5 and 5.0 is equivalent to our average Impella sales price in the U.S. and we commenced commercialization in Japan during the three months ended September 30, 2017. The first Japanese patient was treated with the Impella device in October 2017 and we are conducting a controlled Impella launch at a limited number of hospitals. We do not expect to have any material revenue in Japan during fiscal 2018.Japan.
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 single access 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 acute myocardial infarction, or AMI, a failed heart transplant, or following open heart surgery.
In November 2012, Additionally, we have adapted the Impella RP device received U.S. investigational device exemption, or IDE, approval from the FDA for use in RECOVER RIGHT, a pivotal clinical study in the U.S. This was a study of 30 patients who presented signs of right side heart failure, required hemodynamic support, and were capable of being treated in the catheterization lab or cardiac surgery suite. The study was completed in March 2014 and collected safety and effectiveness data on the percutaneous usedesign of the Impella RP device to be implanted through the internal jugular vein in the neck; this approach is the preferred method for heart surgeons as it allows for patient ambulation. We anticipate making a regulatory submission for this technology by early fiscal 2023.
Impella SmartAssist®
The Impella SmartAssist platform includes optical sensor technology for improved pump positioning and was submittedthe 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 in supportfor an all-in-one, compact cardiopulmonary bypass system. We have conducted a controlled launch of an HDE submission. An HDE is similar tothe Breethe OXY-1 System at a PMA application but is intended for patient populationslimited number of 8,000 or less per yearhospitals 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 have identified areas of improvement around the electronics of the console and have implemented a voluntary recall at the seven hospitals where the Breethe OXY-1 Systems have been placed. The console upgrades may require a 510(k) clearance from the FDA. Therefore, until the corrective action is subjectcompleted, we are not expanding the number of patients or centers under the controlled launch.
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 certain profitbe 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, non-randomized EFS is designed to allow us, study investigators, and the FDA to make qualitative assessments about the safety and feasibility of the use restrictions.of the Impella ECP device in high-risk percutaneous coronary intervention (“PCI”) patients. In January 2015,fiscal year 2021, we received HDE approval from the FDA to expand the EFS for the Impella RPECP device from the FDA.
and we continue to enroll patients in this study. In September 2017,August 2021, we received a PMA fromBreakthrough Device designation by the FDA for the Impella RP heart pump. This latest approval followsECP device, which is provided pursuant to the prior FDA HDE received in January 2015FDA’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 addsreview process for such technologies. Concurrently, we are finalizing the protocol of a single arm pivotal high-risk PCI study for the Impella RP heart pumpECP device as part of an investigational device exemption (“IDE”) submission with the FDA. To date, we have supported over 25 patients in our early feasibility study and expect to our platform of PMA approved devices.begin patient enrollment under a pivotal-like protocol by early fiscal year 2023. The Impella RP heart pump is indicated for providing temporary right ventricular support for up to 14 days in patients with a body surface area ≥1.5 m², who develop acute right heart failure or decompensation following left ventricular assistECP device implantation, myocardial infarction, heart transplant, or open-heart surgery. With this approval, the Impella RP heart pump is the only percutaneous temporary ventricular support device that is FDA-approved as safe and effective for right heart failure as stated in the indication.
In April 2014, the Impella RP device received CE Mark approval which allows for commercial sales of the Impella RP device in the European Union and other countries that require a CE Mark approval for commercial sales.
Impella 5.5™
The Impella 5.5TM device is designed to be a percutaneous micro heart pump with integrated motors and sensors. The Impella 5.5TM device is designed to be smaller, provide months of hemodynamic support and is expected to allow for greater than five liters of blood flow per minute. We anticipate conducting a first-in-man trial outside of the U.S. in calendar year 2018. The Impella 5.5TM pump is still in development and has not been approved for commercial use or sale.
Impella ECP™XR Sheath™
The Impella ECPTM pumpXR Sheath is designeda low-profile sheath that expands and recoils, allowing for blood flow of greater than three liters per minute.small bore access and closure with certain Impella heart pumps. It inserts at 10 French and the flexible, nitinol braids momentarily expand during insertion, then recoil, simplifying access for complex interventions. The Impella XR Sheath is intended to be delivered on a standard sized catheter and will include an expandable inflow inproduce less trauma at the left ventricle. We anticipate conducting a first-in-man trial outside ofarterial access site compared to large bore sheaths. In December 2020, we received 510(k) clearance from the U.S. in calendar year 2018.FDA for the Impella XR Sheath for the Impella 2.5 device. The Impella ECPTM pumpXR Sheath for our Impella CP device is still in development and has not been approvedcleared for commercial use or sale.
In July 2014, we acquired all of the issued shares of ECP Entwicklungsgesellschaft mbH, or ECP, a German limited liability company based in Berlin, Germany, for $13.0 million in cash, with additional potential payments up to a maximum of $15.0 million based on the achievement of certain technical, regulatory and commercial milestones. In connection with our acquisition of ECP, ECP acquired all of the issued shares of AIS GmbH Aachen Innovative Solutions, or AIS, a German limited liability company, for $2.8 million in cash which was provided by us. AIS, based in Aachen, Germany, holds certain intellectual property useful to ECP’s business, and, prior to being acquired by ECP, had licensed such intellectual property to ECP.
Impella BTR™
The Impella BTRTM device is designed to be a percutaneous, microweanable, smart heart pump with integrated motors and sensors. The Impella BTRTM device is designed to be smaller,allow for greater than six liters of blood flow per minute, provide up to one year of hemodynamic support and is expected to allow for greater than five liters of blood flow per minute. The Impella BTRTM device also includesinclude a wearable driver designed for hospital discharge. The Impella BTRTM pump device is expected to and intended to allow for heart recovery or heart remodeling with adjunctive therapies for class III and class IV heart-failure patients. In December 2021, we received conditional approval for an IDE early feasibility study for the Impella BTR device and we expect to begin patient enrollment by 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 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
ThereOther than the accounting policy changes discussed in “Note 2. Basis of Preparation 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 and nine months ended December 31, 2017,2021, 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, 2017.2021.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is included in “Note 2. Basis of Preparation and Summary of Significant Accounting Policies” to our condensed consolidated financial statements and is incorporated herein by reference.
Results of Operations for the Three and Nine Months Ended December 31, 2021 compared with the Three and Nine Months Ended December 31, 2020
The following table sets forth certain condensed consolidated statements of operations data for the periods indicated as a percentage of total revenue:
| For the Three Months Ended December 31, |
|
|
| For the Nine Months Ended December 31, |
|
| ||||||||||||
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
| 100.0 |
| % |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses as a percentage of total revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue |
| 16.2 |
|
|
|
| 16.6 |
|
|
|
| 16.3 |
|
|
|
| 16.0 |
|
|
Research and development |
| 11.5 |
|
|
|
| 14.3 |
|
|
|
| 12.9 |
|
|
|
| 15.6 |
|
|
Selling, general and administrative |
| 43.2 |
|
|
|
| 46.9 |
|
|
|
| 44.7 |
|
|
|
| 49.3 |
|
|
Total costs and expenses |
| 70.9 |
|
|
|
| 77.8 |
|
|
|
| 73.9 |
|
|
|
| 80.9 |
|
|
Income from operations |
| 29.1 |
|
|
|
| 22.2 |
|
|
|
| 26.1 |
|
|
|
| 19.1 |
|
|
Income tax provision and other |
| 20.4 |
|
|
|
| 8.7 |
|
|
|
| 8.1 |
|
|
|
| 7.5 |
|
|
Net income as a percentage of total revenue |
| 8.7 |
| % |
|
| 13.5 |
| % |
|
| 18.0 |
| % |
|
| 11.6 |
| % |
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
|
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| ||||
Revenue |
|
| 100.0 |
| % |
| 100.0 |
| % |
| 100.0 |
| % |
| 100.0 |
| % |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 18.2 |
|
|
| 17.7 |
|
|
| 17.9 |
|
|
| 19.1 |
|
|
Research and development |
|
| 15.6 |
|
|
| 14.2 |
|
|
| 15.7 |
|
|
| 14.8 |
|
|
Selling, general and administrative |
|
| 41.2 |
|
|
| 37.2 |
|
|
| 41.2 |
|
|
| 38.6 |
|
|
Acquired in-process research and development |
|
| 0.2 |
|
|
| — |
|
|
| 15.2 |
|
|
| — |
|
|
Total costs and expenses |
|
| 75.3 |
|
|
| 69.2 |
|
|
| 90.1 |
|
|
| 72.5 |
|
|
Operating income |
|
| 24.7 |
|
|
| 30.8 |
|
|
| 9.9 |
|
|
| 27.5 |
|
|
Other (loss) income and income tax provision, net |
|
| (7.2 | ) |
|
| (4.0 | ) |
|
| 0.1 |
|
|
| 0.3 |
|
|
Net income |
|
| 17.5 |
| % |
| 26.7 |
| % |
| 10.0 |
| % |
| 27.8 |
| % |
ThreeRevenue
The following table disaggregates revenue by products and nine months ended December 31, 2017 compared with the three and nine months ended December 31, 2016
Revenue
Our revenues are comprised of the following:services:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
|
| (in $000's) |
|
| (in $000's) |
| ||||||||||
Impella product revenue |
| $ | 147,989 |
|
| $ | 109,235 |
|
| $ | 402,583 |
|
| $ | 304,759 |
|
Service and other revenue |
|
| 6,000 |
|
|
| 4,791 |
|
|
| 16,619 |
|
|
| 13,945 |
|
Other products |
|
| - |
|
|
| 598 |
|
|
| - |
|
|
| 1,837 |
|
Total product revenue |
|
| 153,989 |
|
|
| 114,624 |
|
|
| 419,202 |
|
|
| 320,541 |
|
Funded research and development |
|
| 33 |
|
|
| 50 |
|
|
| 111 |
|
|
| 83 |
|
Total revenue |
| $ | 154,022 |
|
| $ | 114,674 |
|
| $ | 419,313 |
|
| $ | 320,624 |
|
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Product revenue |
| $ | 249,065 |
|
| $ | 220,883 |
|
| $ | 726,324 |
|
| $ | 575,977 |
|
Service and other revenue |
|
| 12,111 |
|
|
| 10,780 |
|
|
| 35,579 |
|
|
| 30,300 |
|
Total revenue |
| $ | 261,176 |
|
| $ | 231,663 |
|
| $ | 761,903 |
|
| $ | 606,277 |
|
Impella productThe following table disaggregates revenue by geographical location:
|
| For the Three Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
U.S. |
| $ | 211,957 |
|
| $ | 189,116 |
|
| $ | 619,585 |
|
| $ | 495,988 |
|
Europe |
|
| 32,379 |
|
|
| 28,630 |
|
|
| 97,143 |
|
|
| 73,638 |
|
Japan |
|
| 14,021 |
|
|
| 12,012 |
|
|
| 37,572 |
|
|
| 31,308 |
|
Rest of world |
|
| 2,819 |
|
|
| 1,905 |
|
|
| 7,603 |
|
|
| 5,343 |
|
Total revenue |
| $ | 261,176 |
|
| $ | 231,663 |
|
| $ | 761,903 |
|
| $ | 606,277 |
|
Product revenue encompasses Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella 5.5, Impella RP and Impella RP device sales.AIC product sales and related accessories. Service and other revenue represents revenue earned on service maintenance contracts and preventivepreventative maintenance calls. Other product revenue primarily includes sales of the AB5000 that we no longer actively market.
Total Revenue
Total revenue for the three months ended December 31, 20172021 increased $39.3by $29.5 million, or 34%13%, to $154.0$261.2 million from $114.7$231.7 million for the three months ended December 31, 2016.2020. Total revenue for the nine months ended December 31, 20172021 increased $98.7$155.6 million, or 31%26%, to $419.3$761.9 million from $320.6$606.3 million for the nine months ended December 31, 2016.2020. The increase in total revenue from the three and nine months ended December 31, 2020 to the three and nine months ended December 31, 2021 was primarily due to higherdriven by both Impella product revenue from increased utilization in the U.S and Europe.service and other revenue, as further described below.
Impella productProduct Revenue
Product revenue for the three months ended December 31, 20172021 increased by $38.8$28.2 million, or 36%13%, to $148.0$249.1 million from $109.2$220.9 million for the three months ended December 31, 2016. Impella product2020. Product revenue for the nine months ended December 31, 20172021 increased by $97.8$150.3 million, or 32%26%, to $402.6$726.3 million from $304.8$576.0 million for the nine months ended December 31, 2016. Most of2020. Product revenue increased in the increase in Impella product revenue was from increased devicethree and nine months ended December 31, 2021, primarily due to sales mix and higher patient utilization in the U.S., Germany and Japan as compared to the three and nine months ended December 31, 2020 as we focusexperienced varying levels of recovery across our product lines and geographic locations from the challenges caused by the COVID-19 pandemic. Despite these improvements, the timing and impact of COVID-19 on increasingpatient utilization volume continues to vary widely by country, region, and type. As we started the third quarter of fiscal year 2022, patient utilization of our disposable catheter products throughImpella heart pump devices continued investmentto be negatively impacted by an increase in our field organizationCOVID-19 hospitalizations in certain geographies due to the Delta variant and physician training programs.ongoing shortage of hospital workers, that limited ICU capacity and contributed to some deferral of elective procedures. However, as Delta cases moderated, patient utilization of Impella product revenue outsideheart pump devices increased during the last two months of the U.S. also increased primarily due to increased utilization in Germany. We expect product revenue from our Impella devices to continue to increase due to our recent PMAs inthird quarter, despite on-going hospital labor shortages and the U.S. for our Impella devices, including the PMA approval on the Impella RP device received in September 2017, continued utilization for high risk PCI procedures and ongoing cardiogenic shock, our continued controlled launch of Impella devices outsideemergence of the U.S. with a focus on GermanyOmicron variant.
Service and Japan.Other Revenue
Service and other revenue for the three months ended December 31, 20172021 increased by $1.2$1.3 million, or 25%12%, to $6.0$12.1 million from $4.8$10.8 million for the three months ended December 31, 2016.2020. Service and other revenue for the nine months ended December 31,
2017 2021 increased by $2.7$5.3 million, or 19%17%, to $16.6$35.6 million from $13.9$30.3 million for the nine months ended December 31, 2016. 2020.
The increase in total service and other revenue from the three and nine months ended December 31, 2020 to the three and nine months ended December 31, 2021 was primarily due to an increase in preventative maintenance service contracts.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 slower than our product revenue growth in the near futureconsistent with recent history as most of these usingcustomer sites in the U.S. have service contracts that normallywhich typically have three yearthree-year terms.
The decrease in other revenue was due to a decline in AB5000 disposable sales. We are no longer actively marketing the AB5000 revenue device and we do not expect to have any other product revenue in the near future. We have transitioned our sales focus in the surgical suite from the AB5000 to Impella 5.0, Impella LD and Impella RP devices.
Costs and Expenses
Cost of Product Revenue
Cost of product revenue for the three months ended December 31, 20172021 increased by $6.0$6.5 million, or 32%16%, to $25.0$47.6 million from $19.0$41.1 million for the three months ended December 31, 2016.2020. Gross margin was 84%81.8% for the three months ended December 31, 20172021 and 83%82.3% for the three months ended December 31, 2016.2020.
Cost of product revenue for the nine months ended December 31, 20172021 increased by $17.1$20.9 million, or 33%18%, to $68.5$136.7 million from $51.4$115.8 million for the nine months ended December 31, 2016.2020. Gross margin was 84%82.1% for each of the nine months ended December 31, 20172021 and 2016, respectively.80.9% for the nine months ended December 31, 2020.
The increase in cost of product revenue was related to higher demand for our Impella devicesfrom the three and higher production volume and costs to support growing demand for our Impella devices. The increase in gross margin for the threenine months ended December 31, 20172020 to the three and nine months ended December 31, 2021 was primarily due investment in direct labor and overhead as we expanded our manufacturing capacity of our facilities in the U.S. and Germany and increased production volume. The decrease in gross margin from the three and nine months ended December 31, 2020 to the three and nine months ended December 31, 2021 was primarily due to the shipment of more Impella pumpshigher direct labor and higheroverhead costs as we expand manufacturing production during the quarter as compared to the prior year.capacity in preparation for future sales demand, partially offset by increased sales volume and favorable pricing mix on products sold.
Research and Development Expenses
Research and development expenses for the three months ended December 31, 20172021 increased by $1.4$7.9 million, or 9%24%, to $17.7$40.9 million from $16.3$33.0 million for three months ended December 31, 2016. 2020.
Research and development expensesexpense for the nine months ended December 31, 20172021 increased $3.9by $29.7 million, or 8%33%, to $54.0$119.6 million from $50.1$89.9 million for the nine months ended December 31, 2016. 2020.
The increase in research and development expenses wasfrom the three and nine months ended December 31, 2020 to the three and nine months ended December 31, 2021 is primarily due to our increases in regulatory and quality hiring, ongoing product development initiatives onrelating to our existing and pipeline products, and new technologies inthe development such asof the Impella ECPECP™, preCARDIA, Impella BTRTM, Impella 5.5TMBreethe OXY-1 System™ and Impella BTRTM as we expandedXR Sheath™ devices, the expansion of our engineering organization, increasedcontinued investment in our clinical spending primarily related to ourtrials, most notably the STEMI trialDTU and continuedPROTECT IV studies, and our focus on clinical, technological and quality initiatives for our existing Impella devices.products.
We expect research and development expenses to continue to increase for the remainder of fiscal 2018 as we continue to increase engineering, product development and clinical spending related to our cVAD Registry™, STEMI trial and incur additional costs as we continue to focus on engineering initiatives to improve our existing products and develop new technologies.technologies and conduct clinical studies. Research and development expenses can fluctuate with project timing.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended December 31, 20172021 increased by $12.7$21.4 million, or 24%25%, to $66.6$107.6 million from $53.9$86.2 million for the three months ended December 31, 2016. 2020.
Selling, general, and administrative expenses for the nine months ended December 31, 20172021 increased by $29.1$80.1 million, or 18%34%, to $187.2$313.9 million from $158.1$233.8 million for the nine months ended December 31, 2016. The increase in selling,2020.
Selling, general and administrative expenses was primarily due to the hiring of additional field sales and clinical personnel in the U.S. and Germany, increased spending on sales and marketing initiatives as we continue to educate physicians on the benefits of hemodynamic support after receiving PMAs in the U.S. for Impella 2.5, Impella CP, Impella 5.0, Impella LD and Impella RP devices, higher stock-based compensation expense, higher legal expenses related to the FCA Investigation, ongoing patent litigation and other legal matters discussed in “Note 10. Commitments and Contingencies—Litigation,” to our condensed consolidated financial statements and higher professional fees to support the growth of our business.
We expect to continue to increase our expenditures on sales and marketing activities, with particular investments in field sales and clinical personnel with cath lab expertise to drive recovery awareness for acute heart failure patients. We also plan to increase our marketing, service and training investments as a result of recent PMA approvals in the U.S. for our Impella devices and as we continue our expansion in Japan and other new markets outside of the U.S. We also expect to continue to incur significant legal expenses for the foreseeable future related to the FCA Investigation and patent related matters.
Our income tax provision was $32.2 million and $36.6 million forfrom the three and nine months ended December 31, 2017, respectively, and $10.4 million and $24.8 million for2020 to the three and nine months ended December 31, 2016,2021 primarily due to increases in commercial hiring, marketing, clinical training and education initiatives and higher stock compensation expense.
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.
Operating Income
Operating income for the three months ended December 31, 2021 decreased by $6.8 million, to $64.6 million, compared to $71.4 million operating income for the three months ended December 31, 2020. Operating margin was 24.7% for the three months ended December 31, 2021 compared to 30.8% for the three months ended December 31, 2020. The decrease in operating income and margin was primarily due to strategic investments in clinical, engineering, commercial, training and marketing initiatives which increased operating expenses as described above, partially offset by increased sales volume and favorable pricing mix on products sold.
Operating income for the nine months ended December 31, 2021 decreased by $91.1 million, to $75.7 million, compared to $166.8 million operating income for the nine months ended December 31, 2020. Operating margin was 9.9% for the nine months ended December 31, 2021 compared to 27.5% for the nine months ended December 31, 2020. The decrease in operating income and margin was primarily due to the preCARDIA acquisition in May 2021. 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 $116.0 million to the condensed consolidated statements of operations for the nine months ended December 31, 2021.
Other (loss) income
Other (loss) income decreased by $2.7 million, to other loss of $6.7 million for the three months ended December 31, 2021, compared to other income of $9.4 million for the three months ended December 31, 2020. The decrease was primarily due to the recognition of a $8.2 million loss from our investment in Shockwave Medical for the three months ended December 31, 2021, compared to a $8.3 million gain from our investment in Shockwave Medical for the three months ended December 31, 2020.
Other (loss) income decreased by $7.9 million, to other income of $40.1 million for the nine months ended December 31, 2021, compared to other income of $48.0 million for the nine months ended December 31, 2020. This decrease was primarily due to a $21.0 million gain related to our previously owned minority interest in preCARDIA recognized upon the acquisition of preCARDIA in May 2021 and a $14.3 million gain from our investment in Shockwave Medical for the nine months ended December 31, 2021, compared to a $34.7 million gain from our investment in Shockwave Medical and higher investment income in marketable securities for the nine months ended December 31, 2020.
Income Tax Provision
Our income tax provision was $12.1 million and $18.9 million for the three months ended December 31, 2021 and 2020, respectively. Our effective tax rate was 70.6%21% and 32.7%23.4% for the three months ended December 31, 2021 and 2020, respectively. Our
income tax provision was $39.6 million and $46.1 million for the nine months ended December 31, 2017, respectively,2021 and 40.2%2020, respectively. Our effective tax rate was 34.2% and 40.0%21.4% for the three and nine months ended December 31, 2016,2021 and 2020, respectively. The increasechange in the effective tax rate for the three and nine months ended December 31, 2017 was2021 is primarily due to the $22.0 million provisional income tax expense estimate from the re-measurement of our net deferred tax assets duea non-deductible charge for in-process research and development related to the Tax Reform Act, as discussedpreCARDIA acquisition offset by an increase in “Note 9. Income Taxes.” As discussed in “Note 2. Basis of Presentation and Summary of Significant Accounting Policies,” we also recognized excess tax benefits associated with stock-based awards of $3.2 million and $24.5 million as an income tax benefit for three and nine months ended December 31, 2017, respectively. These recognized excess tax benefits resulted from restricted stock units that vested or stock options that were exercised during the three and nine months ended December 31, 2017, respectively. These recognized excess tax benefits resulted from restricted stock units that vested or stock options that were exercised during the three and nine months ended December 31, 2017.related to share-based compensation.
Net Income
ForNet income for the three months ended December 31, 2017, net income2021 was $13.4$45.8 million, or $0.30$1.01 per basic share and $0.29 per$1.00 diluted share, compared to $15.4net income of $61.9 million, or $0.36$1.37 per basic share and $0.34$1.35 per diluted share, for three months ended December 31, 2016. For2020.
Net income for the nine months ended December 31, 2017, net income2021, was $75.3 million,$76.2 million, or $1.71$1.68 per basic share and $1.65$1.66 per diluted share, compared to $37.2net income of $168.7 million, or $0.86$3.74 per basic share and $0.83$3.69 per diluted share for the nine months ended December 31, 2016. As discussed above, the enactment of the Tax Reform Act resulted in a decrease in net income of $22.0 million, or $0.50 per basic and $0.48 per diluted share for the three and nine months ended December 31, 2017. As discussed above, the adoption of ASU 2016-09 resulted in an increase in net income of $0.07 per basic and diluted share for the three months ended December 31, 2017 and $0.56 per basic share and $0.54 per diluted share for the nine months ended December 31, 2017.
Our net income for fiscal 2018 was also driven by higher Impella product revenue due to greater utilization of our Impella devices in the U.S. and Germany.2020.
Liquidity and Capital Resources
AtAs of December 31, 2017,2021, our total cash, cash equivalents and marketable securities totaled $350.7$931.9 million, an increase of $73.6$84.1 million compared to $277.1$847.8 million at March 31, 2017.2021. The increase in our cash, cash equivalents and marketable securities during the nine months ended December 31, 2021 was primarily due primarily to positive cash flows from operations in the nine months ended December 31, 2017.offset by our investing activities.
Following is a summary of our cash flow activities:
|
| For the Nine Months Ended December 31, |
|
| For the Nine Months Ended December 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Net cash provided by operating activities |
| $ | 136,147 |
|
| $ | 77,861 |
|
| $ | 206,418 |
|
| $ | 188,103 |
|
Net cash used for investing activities |
|
| (112,307 | ) |
|
| (57,109 | ) |
|
| (288,416 | ) |
|
| (187,101 | ) |
Net cash used for financing activities |
|
| (11,688 | ) |
|
| (6,533 | ) |
|
| (6,947 | ) |
|
| (13,432 | ) |
Effect of exchange rate changes on cash |
|
| (690 | ) |
|
| (1,381 | ) |
|
| 490 |
|
|
| 1,107 |
|
Net increase in cash and cash equivalents |
| $ | 11,462 |
|
| $ | 12,838 |
| ||||||||
Net decrease in cash and cash equivalents |
| $ | (88,455 | ) |
| $ | (11,323 | ) |
Cash Provided by Operating Activities
For the nine months ended December 31, 2017,2021, net cash provided by operating activities consisted of net income of $75.3$76.2 million, adjustments forplus non-cash items of $76.5$162.4 million andoffset by cash used in working capital of $15.7$32.2 million. The increaseAs discussed above, the change in net income was primarily due to higheran increase in operating expenses partially offset by an increase in revenue from increased utilization of our Impella devices.in fiscal year 2022 compared to fiscal year 2021. Adjustments for non-cash items consisted primarily of $29.2$116.0 million for acquired preCARDIA in-process research and development, $40.7 million of stock-based compensation expense, a $34.7$21.0 million gain related to our previously owned minority interest in preCARDIA recognized upon the acquisition of preCARDIA in May 2021, $20.8 million of depreciation and amortization expense, a $14.3 million change in deferred tax provision due to the revaluationfair value of our net deferred tax assets related to the Tax Reform Act, $8.1 million of depreciation expense on propertyinvestments in Shockwave Medical and equipment and $3.2other private medical technology companies,$8.9 million in inventory and other asset write-downs.write-downs, $7.0 million in deferred tax provision, and $2.7 million in accretion on marketable securities. The change in cash from working capital included a $10.3$7.7 million increasedecrease in accounts receivable associated with higher revenue, $12.0due to timing of collections, a $9.1 million decrease in accounts payable, accrued expenses and other liabilities offset by a $11.9 increase in prepaid expenses and other assets and a $19.6 increase in inventory due to support growingthe mix of customer demand for our Impella devices, a $6.5 million increase in accounts payable and accrued expenses and a $1.2 increase in deferred revenue.production.
For the nine months ended December 31, 2016,2020, net cash provided by operating activities consisted of net income of $37.2$168.7 million, adjustments for non-cash items of $45.9$43.1 million and cash used in working capital of $5.2$23.6 million. The increaseAs discussed above, the change in net income was primarily due to higherlower fiscal year 2021 revenue compared to fiscal year 2020, with some offset of lower operating expenses and gains from increased utilization of our Impella devices.investment in Shockwave Medical. Adjustments for non-cash items consisted primarily
of $24.5$33.7 million of stock-based compensation expense, an $18.8$22.9 million change in deferred tax provision, $4.6 million in excess tax benefits on stock-based awards, $4.5$17.3 million of depreciation and amortization expense, on property, plant and equipment and $2.1$5.1 million in inventory write-downs.and other write-downs, $3.0 million change in fair value of contingent consideration and $1.2 million in accretion on marketable securities. The change in cash from working capital included a $7.6$6.9 million increase in accounts receivable associated with our higher revenue, an $8.6due to timing of collections, a $6.6 million increasedecrease in inventory due to support growing demand for our Impella devices, $14.6lower production volumes, an $18.1 million increasedecrease in accounts payable and accrued expenses due to lower operating expenses and a $0.3$1.9 million increase in deferred revenue.
Cash Used for Investing Activities
For the nine months ended December 31, 2017,2021, net cash used for investing activities primarily consisted of $61.7$177.7 million in purchases (net of maturities) of marketable securities and $44.2(net of sales), $82.8 million for our acquisition of preCARDIA, $20.9 million for the purchase of property and equipment primarily related to the purchasecontinued expansion of our corporate headquarters buildingmanufacturing capacity, office space and research development facilities in Danvers Massachusetts duringand Aachen, Germany and $7.1 million for our investment in private medical technology companies.
For the threenine months ended December 31, 20172020, net cash used for investing activities primarily consisted of $149.4 million in purchases from the sale of marketable securities (net of maturities), $52.2 million for our acquisition of Breethe and $27.3 million used in 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 have made $6.4an additional $26.1 million of investmentsinvestment in a private medical technology companies during fiscal 2018.
For the nine months ended December 31, 2016, net cash used for investing activities primarily consisted of $32.9year 2021. These amounts were partially offset by $67.9 million in purchases (netproceeds from the sale of maturities) of marketable securities and $24.0 million for the purchase of property and equipment mostly related to expansion of manufacturing capacity and office space in Danvers, Massachusetts and Aachen, Germany.Shockwave Medical securities.
Capital expenditures for fiscal 2018year 2022 are estimated to range from $50$27 million to $60 million. Most$35 million to support the long-term development of the significant capital expenditures were for software development projects and expanding research facilities,our business, including manufacturing capacity, and building improvementsexpansions in our Danvers Massachusetts,and Aachen Germany, Berlin, Germanyfacilities and Tokyo, Japan locations.information systems development projects.
Cash Provided byUsed for Financing Activities
For the nine months ended December 31, 2017,2021, net cash used for financing activities included $19.9$16.4 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards and $0.5$2.3 million in principal payments on capital lease obligation. The capital lease obligation previously recorded was removed as a resultrelated to payment of the acquisitioncontingent consideration due to achievement of our headquarters in October 2017.related milestone. These amounts were offset by $7.6$8.8 million in proceeds from the exercise of stock options and $1.1$3.0 million in proceeds from the issuance of stock under the employee stock purchase plan.
For the nine months ended December 31, 2016,2020, net cash used for financing activities included $19.9$11.3 million for the repurchase of our common stock and $11.2 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards and $0.3 million in principal payments on capital lease obligation.awards. These amounts were offset by $8.3$7.1 million in proceeds from the exercise of stock options $4.6 million in excess tax benefits on stock-based awards and $0.8$2.0 million in proceeds from the issuance of stock under the employee stock purchase plan.
Operating Capital Resources 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 December 31, 2021, our total cash, cash equivalents, and short and long-term marketable securities totaled $931.9 million, an increase of $84.1 million compared to $847.8 million as of March 31, 2021. Marketable securities as of December 31, 2021 consisted of $787.6 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 $206.4 million and $188.1 million for the nine months ended December 31, 2021 and 2020, respectively. At December 31, 2021, we had no debt outstanding. We believe that our revenue from product sales together with existing resources will besources of liquidity are sufficient to fund the current requirements of working capital, capital expenditures, and other financial commitments for the foreseeable future.
We primarily fund our operations for at least the next twelve months, exclusive of activities involving any future acquisitions of products or companies that complement or augment our existing line of products.
from product sales. Our primary liquidity requirements are to fund the following: expansion of our commercial and operational infrastructure, increaseinfrastructures; expansion of our manufacturing capacity incur additional capital expenditures as we expand ourand office spacespace; the procurement and manufacturing capacity in Danvers and Aachen, increase ourproduction of inventory levels in order to meet growing customer demand for our Impella devices, funddevices; funding of new product and business development initiatives, continue oursuch as the recent acquisitions of preCARDIA and Breethe; ongoing commercial launch in Japan and expand toexpansion into potential new markets, increasemarkets; increased clinical spending,spending; legal expenses related to the FCA Investigation and ongoing patent litigation and other legal matters and payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards and to provide for general working capital needs. To date, we have primarily funded
We believe that our operations through product salessources of liquidity are sufficient to fund the current requirements of working capital, capital expenditures, and other financial commitments for at least the sale of equity securities.
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, investments in collaborative arrangements with other partners, and our ability to collect cash from customers after our products are sold. We also expect to continue to incur legal expenses for the foreseeable future related to the FCA Investigation, ongoing patent litigation and other legal matters. We continue to review our short-term and long-term cash needs on a regular basis. At December 31, 2017 we
Off-Balance Sheet Arrangements
We had no long-term debt outstanding.off-balance sheet arrangements or guarantees of third-party obligations during the periods presented. An “off-balance sheet arrangement” generally entails a transaction, agreement or other contractual arrangement to which an entity unconsolidated with us, is a party under which we have any obligation arising under a guarantee contract, derivative instrument or
Marketable securities at December 31, 2017variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Contractual Obligations and Commercial Commitments
We have various contractual obligations, which are recorded as liabilities in our condensed consolidated financial statements. Other items are not recognized as liabilities in our condensed consolidated financial statements but are required to be disclosed. There have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017 consisted of $300.2 million and $238.1 million held in investment funds that invest in U.S. Treasury, government-backed and corporate debt securities, respectively. We are not a party to any interest rate swaps, currency hedges or derivative contracts of any type and have no exposure to commercial paper or auction rate securities markets.
Cash and cash equivalents held by our foreign subsidiaries totaled $13.7 million and $8.2 million at December 31, 2017 and March 31, 2017, respectively. Our operating income outside the U.S. is deemed to be permanently reinvested in foreign jurisdictions. The recently enacted Tax Reform Act allows for a 100% deduction for the repatriation of foreign subsidiary earnings with minimal U.S. income tax consequences other than the one-time deemed repatriation toll charge. Since most of our cash and cash equivalents are held by foreign subsidiaries which are disregarded entities for domestic tax purposes, any repatriation of such funds to the U.S. would likely have a nominal tax impact, if any.2021.
Primary Market Risk Exposures
Our cash, cash equivalentsThere have been no material changes to our quantitative and marketable securities are subject to interest ratequalitative disclosures about market risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% from levels at December 31, 2017, we believe the decline in fair market value of our investment portfolio would be immaterial.
Currency Exchange Rates
We have foreign currency exposure to exchange rate fluctuations and particularly with respectas compared to the Euro, British pound sterlingquantitative and Japanese yen. Therefore, our investmentqualitative disclosures about market risk described in our subsidiaries is sensitive to fluctuations in currency exchange rates. The effect of a change in currency exchange ratesAnnual Report on our net investment in international subsidiaries is reflected in the accumulated other comprehensive (loss) income component of stockholders’ equity. If rates of exchangeForm 10-K for the Euro, British pound and Japanese yen were to have depreciated immediately and uniformly by 10% relative to the U.S. dollar from levels at Decemberfiscal year ended March 31, 2017, the result would have been a reduction of stockholders’ equity of approximately $9.7 million.
Fair Value of Financial Instruments
At December 31, 2017, our financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and contingent consideration. The carrying amounts of accounts receivable and accounts payable are considered reasonable estimates of their fair value, due to the short maturity of these instruments. The estimated fair values of the financial instruments have been determined by us using available market information and appropriate valuation techniques. Considerable judgment is required, however, to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
2021.
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 Securities Exchange Act, of 1934, as amended, or the Exchange Act), as of December 31, 2017.2021. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2017,2021, these disclosure controls and procedures arewere 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 the Securities and Exchange CommissionSEC 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.
Evaluation of Changes in Internal Control over Financial Reporting
During the third quarter of our fiscal year ending March 31, 2018,2022, 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.
PART II — OTHER INFORMATION
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. We record a liability inexpenditures and could impair our condensed consolidated financial statements for these actions when a loss is known or considered probablebusiness and the amount can be reasonably estimated. We review these estimates each accounting period as additional information is known and adjust the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the condensed consolidated financial statements.results of operations. Material legal proceedings are discussed in “Note 10.“Note 16. Commitments and Contingencies—Contingencies” to our condensed consolidated financial statements and aresuch information is incorporated herein by reference.
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, 2017,2021, 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 ofThe risk factors set forth below update, and should be read together with, the risk factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017,2021.
Risks Related to Our Business, Industry and Operations
Government orders and regulations directing employers to require their employees to be vaccinated could lead to labor disruptions, which could have a material adverse effect on our business and results of operations.
On September 9, 2021, President Biden issued an executive order obligating parties that contract with the federal government to require their employees to be fully vaccinated against COVID-19, with limited exceptions for certain accommodations. That executive order was struck down by the U.S. Supreme Court on January 13, 2022. However, the Biden Administration may seek to impose alternative vaccine mandates and other governmental authorities have imposed more targeted vaccine and testing orders and regulations, and may do so in the future.
Given current information, it is not possible to predict with certainty the impact that any vaccine or testing orders or regulations could have on us. Mandates may result in increased costs, labor disruptions or employee attrition, which could be material. If we lose employees, it may be difficult in the current competitive labor market to find replacement employees, and this could have an adverse effect on future revenues and costs, which could be material. Additional uncertainty could be caused by competing and potentially conflicting laws and regulations, such as supplementedan executive order issued by the governor of Texas prohibiting vaccine mandates. Accordingly, vaccine or testing orders and regulations could have a material adverse effect on our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.business and results of operations.
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(a) | Not applicable |
(b) | Not applicable |
(c) | Not applicable |
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
NoneNone.
Not applicable.None.
NoneNone.
Exhibit No. |
| Description |
| Filed with |
| Incorporated by Reference |
| Description |
| Filed with This Form 10-Q |
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2.1 |
| Agreement on the Sale and Transfer of all shares in ECP Entwicklungsgellschaft mbH |
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| 8-K |
| July 7, 2014 (File No. 001-09585) |
| 2.1 | ||||||||||
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2.2 |
| Agreement on the Sale and Transfer of all shares in AIS GmbH Aachen Innovation Solutions |
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| 8-K |
| July 7, 2014 (File No. 001-09585) |
| 2.2 | ||||||||||
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3.1 |
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| S-3 |
| September 29, 1997 |
| 3.1 |
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| S-3 |
| September 29, 1997 |
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3.2 |
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| 10-K |
| May 27, 2004 |
| 3.2 |
| Amended & Restated By-Laws, as Amended and Restated February 4, 2020 |
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| 10-K |
| May 21, 2020 |
| 3.2 | |
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3.3 |
| Certificate of Designations of Series A Junior Participating Preferred Stock. |
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| S-3 |
| September 29, 1997 |
| 3.3 |
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| 8-K |
| March 21, 2007 |
| 3.4 | |
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3.4 |
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| 8-K |
| March 21, 2007 |
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10.1 |
| Lease agreement for additional space in Danvers, Massachusetts dated February 2, 2017 |
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10.2 |
| Lease agreement amendment for additional space in Danvers, Massachusetts dated December 14, 2017 |
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10.1* |
| Form of Indemnification Agreement by and between the Company and its directors and officers |
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| 8-K |
| August 13, 2021 (File No. 001-09585) |
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31.1 |
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| Rule 13a—14(a)/15d—14(a) certification of principal executive officer |
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31.2 |
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| Rule 13a—14(a)/15d—14(a) certification of principal accounting officer |
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32.1 |
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101 |
| The following financial information from the ABIOMED, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of December 31, 2017 and March 31, 2017; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2017 and 2016; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2017 and 2016; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2017 and 2016; and (v) Notes to Condensed Consolidated Financial Statements. |
| X |
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| The following financial information from the ABIOMED, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, formatted in inline Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 2021 and March 31, 2021; (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended December 31, 2021 and 2020; (iii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended December 31, 2021 and 2020; (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended December 31, 2021 and 2020 (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended December 31, 2021 and 2020; and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited). |
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104 |
| Cover page from the ABIOMED, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 formatted in iXBRL and contained in Exhibit 101 |
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* Management contract or compensatory plan, contract or arrangement.
ABIOMED, INC. AND SUBSIDIARIES
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.
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| ABIOMED, Inc. |
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Date: February |
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| Vice President and |
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