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HeartWare International Inc. (NASDAQ:HTWR)

Q3 2013 Earnings Conference Call

November 7, 2013 08:00 AM ET

Executives

Chris Taylor - IR

Doug Godshall - President and CEO

Peter McAree - CFO

Analysts

Jason Bedford - Raymond James

Danielle Antalffy - Leerink Swann

Bruce Nudell - Credit Suisse

Jason Mills - Canaccord Genuity

Mike Weinstein - JPMorgan

David Roman - Goldman Sachs

Larry Beigelsen - Wells Fargo

Matthew O’Brein - William Blair

Matthew Taylor- Barclays Capital

Suraj Kalia - Northland Securities

Mimi Pham - ABR HealthCo

Mark Landy - Summer Street

Operator

Good morning ladies and gentleman and thank you for standing by. Welcome to the HeartWare International 2013 Third Quarter Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, November 07, 2013.

And I would now like to turn the conference over to the company. Please go ahead.

Chris Taylor

Thank you, operator, and thank you all for joining us for the HeartWare International conference call and webcast to review the results for the third quarter of 2013. During the course of this conference call the company will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, development pipeline and business trends. These statements are neither promises nor guarantees but involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.

A detailed discussion of the risks and uncertainties that affect the company’s business and qualify the forward-looking statements made on this call is contained in HeartWare’s filings with the SEC, particularly under the heading Risk Factors described in the company’s Annual Report on Form 10-K and contained within other filings that the company makes from time to time with the SEC.

Copies of HeartWare's SEC filings and the news release for this earnings call are available online from the SEC or by clicking on Investor Relations within the HeartWare website. Any forward-looking statements are based on judgment, assumptions, estimates and other factors that are subject to change and therefore these statements speak only as of the date they are given. The company does not undertake an obligation to update any forward-looking statements.

Participating on our call today HeartWare’s CEO and President, Doug Godshall; and our Chief Financial Officer, Peter McAree. Each will provide commentary on the Company’s second quarter financial results as well as a corporate update. These prepared comments will be followed by a question-and-answer session. In the interest of time and with the goal of allowing as many of you to propose questions as possible we respectfully ask that you limit yourself one question and one concise follow up and then please feel free to return to the queue. Thanks very much.

And now I’d like to turn the call over to Doug Godshall. Good morning Doug.

Doug Godshall

Thanks Chris and good morning everyone. We are please to report our third quarter results which are a positive reflection of the hard work and dedication of our worldwide as well as a testament to the benefits and appeal of our HVAD platform. Following in second quarter in which we continued to build on the foundation of our U.S. launch, we are quite pleased to have witnessed another strong quarter in our global ramp as well as solid progress in our clinical trail and pipeline initiatives. While we are making a policy not to over emphasize the results of any one quarter, we believe this past quarter nicely demonstrates the long term trend and the meaningful role that VAD will play in the treatment of advanced heart failure. As one looks at HeartWare’s growth year-to-date and the VAD markets growth acceleration, it appears to support our long held belief that the HVAD will helps stimulate the U.S. market as it did internationally when we launched in 2009.

Here are some highlights of the third quarter. We achieved record revenues of $54.8 million. We experienced a 12% sequential increasing U.S. unit sales driven by increase pump utilization. We saw substantial unit growth of 34% internationally versus the prior year third quarter and overall international market growth that appears to be well in excess of 20%. We gained full protocol approval from FDA for a supplemental destination therapy cohort. We can firm performance advantages of the enhanced MVAD impeller and made great strides to move the platform back towards the clinic.

We expanded our domestic sales team to enhance customer service and further penetrate existing sites in the U.S. We added large new centers in the U.S. with several other large centers coming on board in the fourth quarter, positioning ourselves nicely for sustained growth. More than 300 clinicians joined us for our first U.S. users meeting in August, by far our largest clinician meeting to-date.

Having past all us of our new facility without a single observation, we shutdown our former Miami Lakes location and now have 100% of our production earned in our newer work efficient Miami Lakes facility, a tremendous accomplishment by our operations in quality feeds. We witnessed a marked increase in for our academy interest and implants as roughly 15% of U.S. HVAD implants we tracked in the third quarter were done by our thoracotomy, more than double the rate from the second quarter. I will talk more about thoracotomy later.

For the third quarter and year to date performance, we have established clear positive momentum in the U.S. to compliment our strong international position. And as we state often, we will continue to strive to provide the best technology and the best service to our customers in order to provide them with an opportunity to achieve the best possible outcomes for their patients.

I'll now turn the call to Peter and I will return to provide some additional perspective later.

Peter McAree

Thank you Doug. We are pleased to report another solid quarterly performance as we progress towards the close 2013. Beyond the solid top line growth we posted in the third quarter, our continued strong gross margin improvement and careful management of expenses, the working capital yielded our first ever quarter of positive operating cash flows, which was a ninth historic first-time milestone for the company.

As Doug noted we achieved record revenue of $54.8 million in the third quarter on the strength of commercial launch revenues in the U.S. which contributed 140% total revenue growth compared to the third quarter of 2012. Favorable currency effect contributed 6 percentage points of this increase. We sold 252 systems resulting in U.S. revenues of $28.2 million in the third quarter of 2013, up 677% from $3.6 million in Q3 of 2012.

U.S. revenue grew nicely by 12% over the second quarter based on continued strong HVAD adoption. We trained three U.S. sites during the third quarter therefore stocking was not a significant factor. Thus far in Q4, we have trained nine U.S. sites bringing our total to 94 as of today.

International revenue in the third quarter was $26.6 million representing an increase of 38% compared to international revenue of $19.2 million in the third quarter of 2012. We sold 287 systems outside the U.S., nearly matching the 288 systems in the second quarter of 2013 and well above the 214 systems sold in the third quarter of 2012. As of September 30th, we had a total of 131 hospital sites outside of the U.S. having added 11 new sites during the third quarter.

For the third quarter, gross margin was 64% compared to 52% in the third quarter of 2012 and reflective of 1 point sequential improvement compared to the second quarter due to manufacturing efficiencies. The 12 point gross margin improvement year-over-year reflects approximately 3 percentage points attributable mainly to commercial pricing in the U.S. introduced post FDA approval,, as well as 9 points from cost improvements, volumes and manufacturing efficiency. We're expecting modest gross margin percentage gains to continue in relation to increase in volumes and further cost improvement.

Third quarter total operating expenses for 2013 were $45.8 million,, up $10.6 million or 31% compared to total operating expenses of $35.2 million in the third quarter of 2012. The overall increase compared to last year was the result of our commercial expansion and considerable R&D pipeline initiatives.

Looking at operating expenses on a sequential quarter basis compared to the second quarter SG&A expenses increased by approximately $2.6 million to $19.8 million in the third quarter from $17.2 million in the second quarter. The sequential increase was spread among increased employee costs including $1.2 million of higher share-based compensation expense as well as marketing and general administrative expenses. The increase in share-based expense was mainly one-time catch-up due to the revision of the estimated fore-mature rate underlying outstanding employee stock report. Overall we stood at approximately 45 field physicians in the U.S. at the end of the third quarter up from 30 at the time of FDA approval as we continue to scale our commercial presence in the U.S.

In the fourth quarter we expect share based expenses to return to their prior quarter levels, but overall SG&A will increase 3% to 5% over the third quarter based upon increases of other growth oriented investments.

Research and development expense increased by approximately $1.7 million to $25.9 million in the third quarter from $24.2 million in the second quarter of 2013. Nearly half of this increase was related to the R&D portion of the share based compensation expense catch up I mentioned earlier. The remaining increase of spending was primarily headcount product related. In the fourth quarter, we expect R&D expense to trend modestly higher as we progress upon key R&D initiative as well as expand the DT supplemental study enrolment in plans of the U.S. thoracotomy and sustained HVAD trials.

Net loss for the third quarter of 2013 was $11.4 million or $0.69 per share as compared to a net loss of $25 million or $1.75 per share in the third quarter of 2012. There were approximately $16.4 million weighted average shares outstanding during the third quarter. As of September 30th, we had approximately $225 million in cash and investments, an increase from approximately $222 million at the end of the second quarter.

As I said earlier, we generated positive cash flow from operations of approximately $2.8 million during Q3, this was enabled by favorable accounts receivable collection timing, as well as the absence of payments which were not present in the third quarter namely convertible note interest which is paid in our second and fourth fiscal quarter.

We are pleased to demonstrate the cash positive operations are within close reach however given our investments in vital R&D programs, infrastructure and market expansion, we are not yet poised to repeat the speed of every year, every quarter.

Summing up the quarter, we were quite pleased by our overall revenue momentums including the commercial progress that we achieved in the U.S. and even more encouraged by our sequential and year-on-year international performance especially in light of strong showing we have had internationally to repeat in 2012.

As we look to the fourth quarter in the U.S. we anticipate mid single digit sequential revenue growth coming off an extraordinarily robust third quarter. This includes the modest number of ETM plans as we underway on our supplemental PC study. We anticipate international year-on-year revenue growth in the fourth quarter to be north of 20% not unlike our robust international growth in the third quarter. This is consistent with our expectations communicated earlier in the year.

At this time this morning I will welcome your questions when we move to Q&A and now back to Doug.

Doug Godshall

Thanks Peter. I would like to start with an overview of our international business before speaking to the U.S. and our pipeline. The enthusiasm for HVAD in markets where we participate has never been higher and the strong desire by physicians to the HVAD available in new markets is quite encouraging. With 225 worldwide sites in 37 countries around the globe we have broadened our footprint to a level where we can drive our growth in multiple ways. Our first driver is increasing HVAD utilization in geographies where our representation was less mature or entirely dependent on distributors. Fortunately we have strong distributor partners and yet we are learning that we have opportunities to supplement their relationships with direct local investment to ensure our customers in distributor markets receive the same high caliber technical and clinical support that our customers do in countries where we have direct representations. This hybrid approach has been proving very successful wherever we have implemented and we have targeted a few additional geographies for incremental investment in the coming six months.

Our second driver is market development and deeper account penetration within geographies where we have strong existing presence. This is showing great results in places like Germany and the UK. Market development has come in the form of both general VAD awareness campaigns as well as direct outreach to the cardiologist to still own the patients even in surgeon centric Germany. We are increasing conduct that there is very substantial upside even in the most penetrated international markets. And there are very positive results and incremental referrals for market development programs we have implemented over the past year to support our belief.

Our third growth driver is new country startup which has become an increasingly important part of our international story. Through outstanding preparatory work a reimbursement team outside the U.S. has enabled us to move into some new countries with certainty of payment which historically has been the biggest governor on bad utilization in new markets.

This green field component of our international growth strategy continues to demonstrate both near term benefits and long term upside, adding to our confidence in the future. Clearly our international team has distinguished themselves and our tireless commitment to serve their customers and by expansion to patients, as said at an extraordinarily high bar the rest of us in the organization.

Our growing international strength has never been more apparent than in early October with three events in succession; The European Association of Cardiothoracic Surgery meeting in Vienna or EACS; our first Asia Pacific users meeting and the tick off of our Japan clinical trail with our investigators training meeting.

The energy surrounding HeartWare at EACS was infectious. We had a series of compelling presentations including an excellent presentation by the team at Hanover reporting our positive results at thoracotomy patients. We observe the markedly lower leading rates and no rate heart failure in their thoracotomy implants. There was also an impressive technical demonstration in front of over 1,000 physicians of an off-bypass thoracotomy case, but with the outflow graft connected subclavian artery instead of the aorta by doctor Martin Strurber of Leipzig.

We have mentioned thoracotomy frequently and for a good reason, but the technique of connecting the outflow graft to the subclavian artery instead of the aorta is gaining increasing traction. The approach is appealing as it further reduces the invasiveness of the procedure, since the infusion for the outflow graft is outside the thoracic cavity.

The clinicians who begun to adopt this technique are also observing anecdotally that it seems to result in better outcomes generally. Patients are responding better, the outflows is away from the crowded arteries which reduces neurologic risk and there appears to be less load on the aortic valve which they say is enabling patients to recover from the surgery even faster than their other thoracotomy patients, which of course was already faster than sternotomy patients.

We are holding our first subclavian registry investigators meeting next week in Germany, where we are mapping out a strategy to capture outcomes in the prospective manner in order to validate the early positive anecdotal observations.

As we first witnessed with bypass in 2009 then pediatrics in 2010 and thoracotomies in 2012, the thoracotomy to subclavian approach highlights the major advantage of using our miniaturized pump. Doctors are able to take advantage of the versatility of the HVAD and use it in ways that have never been used before. Our growing strength is in March part due to the fact that with HVAD you can do more, treat a broader range of patients and tailor the procedure towards less of the major approaches.

We now have 94 sites trained in the United States and the pipeline of new sites continues to be full. Perhaps more important than the run number of sites is the caliber and scale of some of the institutions that have come on board recently and are in queue to join us over the next couple of months. We are also beginning to see traction on the couple of the sites that have traditionally been stronghold for our competitor and we are pleasantly surprised by how receptive they have become to using the HVAD.

We know that it would take time, but we also had confidence that they would eventually recognize that what HeartWare and the HVAD offer is too compelling to ignore. Our commitment to drive down invasiveness and improve outcomes and enhance the quality of length of patients is what physician we feel is looking for.

Our new destination therapy cohorts began enrolling in October and our clinical team has been focused on obtaining IRB approvals and conducting site initiations. Our best estimate is that this cohort of patients which is kicking in the year now will complete enrollment around the end of 2014 with follow-up for one year thereafter. We're eager to confirm the benefits of blood pressure management and feel that this study will have a major impact on how all VAD patients will be treated in the future. As we've been working to initiate sites and begin enrollments in the new DT cohort, we've also been working on plans for filing our PMA for the DT implication and presenting data from these patient groups.

In the past few months we've had multiple meetings with our investigators for that trial and to developer PMA filing and data presentation strategies, while we're continuing to finalize our plans it is our intention to present at least some of the ENDURANCE data prior to the completion of follow up of the new cohort. As you’re likely aware that two year follow-up for the last enrolled patient from the initial cohort of ENDURANCE trial occurs in May of 2014. Allowing time for data entry, characterization and adjudication of adverse events which for protocol could take an additional six months, suggests that the study data should be available for final analysis and calculation of the primary endpoint towards the end of 2014. Together with our investigators we will look for an opportunity to present that data as well as other available relevant data in early 2015.

As we've said from the very beginning of the ENDURANCE study, it is our expectation that the primary endpoint will be met. Our next new data presentation will be a subset from our post approval study for bridge to transplant and is planned for the ISHLT next April. This timing allows for completion of data entry to sites, data analysis by Intermax and then delivery to us. ISHLT is the biggest meeting for the VAD field so it is an IPO setting for first cut of BTT post approval study data.

We're also beginning to just pull up other trials. We also would be submitting a thoracotomy in the US this month which should enable us to kick it off early in 2014. We believe this study could service an important catalyst for us and based on feedback from those who are doing thoracotomies that VAD therapy will bind heavily towards this approach within a year or two. There is growing interest in this study both at existing HVAD side, as well as those who are preparing to bring the HVAD on board.

We’re also planning a global BiVAD trial for commencement in the middle of next year, which should help with reimbursement in many countries. Lack of reimbursement has increasingly limited the impact of BiVADs over the past couple of years outside the US and offers us upside down the road. Not to mention that there are a handful of key thought leaders who are incredibly interested in this BiVAD trial. As noted before, subclavian outflow study is being planned amongst our European users. Lastly our Japan study of six patients in [Biosite] is expected to commence enrolment early next year. These studies will further highlight the meaningful benefits offered by our small versatile pump.

On the product development front, we have had an excellent recent stretch. First and perhaps most importantly, we have bolstered our R&D organization. We've been joined by Mark Strong as our Vice President of R&D who spent 20 years in the cardiac rhythm management world at Guidant and Boston Scientific. He served in a variety of roles in quality and R&D and in areas such as implantables, leads and remote monitoring. Mark has an exceptional track record of execution on programs and budgets which is already having a very positive impact here as he leads the overall day-to-day R&D efforts.

Jeff LaRose continues as our Chief Scientific Officer. And we will look to him to continue generating breakthrough concepts for future growth and help the team on challenging technical issues. The partnership of Jeff and Mark gives us the best of both worlds; near-term execution excellence and long-term growth. And we believe will result in a stronger more effective company.

The MVAD program is going quite well. While pursuing a resolution to the cannula issue we discovered in the summer, we had an unanticipated breakthrough on the original ceramic tube approach which is extremely beneficial since we can now leverage the 150 animals and GLP data we already have with ceramic inflows. The technical resolution was already low risk, but being able to stick with ceramic is a pleasant windfall.

In addition preclinical confirmation of the enhanced MVAD impeller was also very positive with notable improvements in power consumption versus the old impeller. This supports our models which predicted that this version of the impeller would have very low shear stresses. It’s simply didn’t fighting the fluid as much. We are marching through the manufacturing process changes and are on track for first in man early next year. Our fully implantable test system is in the midst of chronicle animal studies currently and is performing well at the six day mark. We are looking forwarding to up-regulating that program next year now that we are well through the technology development phase.

Lastly our PAL controller is coming together nicely and should be ready for regulatory submission for HVAD early next year. This will be a major upgrade for VAD patients both in terms of ease of use and safety. Also our robust pipeline is tracking very positively and with our enhanced R&D leadership structure we should see a marked improvement in R&D efficiency near-term and growth long-term.

That concludes our prepared quarterly commentary let’s open the call to questions.

Question-And-Answer Session

Operator

Thank you. Ladies and gentlemen we will now begin the question-and-answer session. (Operator Instructions) And our first question comes from the line Jason Bedford from Raymond James. Please go ahead.

Jason Bedford - Raymond James

Good morning. And thanks for taking the question. I guess lot of places to go here, but in terms of your initial experience with the supplemental DT trial, the requirement of a conferred or [doppler] has that been a hurdle or met with any resistance out there from some of your trials life?

Doug Godshall

Thanks Jason. No, at this juncture we have not seen any resistance focusing, seem particularly interested in financing the question that there has been a long held belief that keeping blood pressures down across in that patients as with any regular patients would have a benefit, but now they are kind of enthusiastic that they will be able to prove it one way or the other.

Jason Bedford - Raymond James

Okay. And then just quickly as a follow-up. Once you are finished with the additional cohort, it’s your expectation that you will continue to be granted caps, the FDA hasn’t indicated that they won’t do so, correct?

Doug Godshall

Right. Our belief is assuming we enrol as expeditiously as we anticipate that they are looking for data and since we believe the data will be compelling with the introduction of blood pressure management then there would be no reason why they wouldn’t grant as a cap. The only caveat being that if were at that time enrolling our MVAD DT trial, we may choose to shift our patients to MVAD rather than try to compete with ourselves for DT population.

Jason Bedford - Raymond James

Fair enough. Thanks.

Operator

And your next question comes from the line of Danielle Antalffy from Leerink Swann. Please go ahead.

Danielle Antalffy - Leerink Swann

Thanks so much, guys and congrats on a good quarter. Doug I was just hoping maybe you could provide some more color on your commentary about your pipeline of centers to come on. Can you give us any sense of, do we still have a high volume centers yet to come online, are you basically penetrated in that sort of Tier 1 center population?

Doug Godshall

We are definitely not fully penetrated in what could be characterized as Tier 1. We haven't used that nomenclature. But as we step back and look at the 50 sites that were in our trial when we selected those sites some years ago, they were by and large the biggest centers, although some were thought leaders without necessarily being having quite the same volume. I think we missed some of the larger centers, A and B, there were also several centers that grew up and became quite substantial overtime either new surgeons came on board or their volumes have simply picked up. So they grew up and became larger than a significant percentage of the centers that we have in our trial.

And then when we launched, we to some extent took the path of least resistance and so folks who already had our device budgeted or were ready willing and able to bring us on board quickly whether they were larger centers or not with the centers we went to for obvious reason and then since the next quarter or so bringing them on board, training them, creating relationships. And as we noted, sort of reinitiated our expansion efforts towards the end of the second quarter which appears to be very improved now, but some of those larger centers just take longer because there are more cooks in the kitchen, more cardiologists to meet more administrators to get sign off et cetera. So some of the centers we’ve brought on very recently are like top 20, 30 in terms of overall VAD volume. So they would have been in that clearly a Tier 1A category, though we have a queue of multiple centers in that category as well.

So there is substantial volume that we has yet or not, did not have access to until very recently or don’t yet quite have access to but anticipate we will within the next three to six months.

Danielle Antalffy - Leerink Swann

Okay, great. And just one follow-up on that, the centers that you’re not in yet it sounds like you’re saying it’s more and tell if I am wrong, it’s more bureaucratic rate case issue of cutting through that [rate case] versus centers sort of saying, we want to wait to see more clinical data, is that right?

Doug Godshall

I’d say it’s a mix of, they weren’t waiting for us, they had a single device that seems to be working okay for them, they weren’t in our trial. And so part of it was us expanding our capability so we could actually reach them. And once you get there it just takes time because either they've got get through that bureaucracy that you described but first have to have the desire to bring your product on board. And variably we’ll get part of that clinical team energized but then you've got to get the rest of clinical team on board as well. So it’s building the consensus that they want to be part of it that the whole team wants HVAD on board so that they can push the administrative team. And so it’s just, we haven’t seen sites that say no. We've seen sites that’s say, not now, I don’t have the budget or here is the process we've got to work through to get everybody on board and it’s a multi-month process which is starting to come to closure as we have seen recently into the fourth quarter. So we’re, I’d say it’s a mix and we try to tailor our approach based on the specific dynamics of each site, because each site is a little bit different one from another.

Danielle Antalffy - Leerink Swann

Okay. Thanks so much for all the color.

Doug Godshall

Thank you.

Operator

And your next question comes from the line of Bruce Nudell from Credit Suisse. Please go ahead.

Bruce Nudell - Credit Suisse

Good morning. Thanks for taking my question. Doug, could you just comment briefly on potential significance of the ISHLT post approval DT dataset. How applicable do you think it will be with regards to giving us a glimpse of likely outcomes with tight blood pressure management? Are there any confounding issues associated with that dataset that might render it not a perfect apples-to-apples with other DT population?

Doug Godshall

Sure. So we were, it’s been an issue in process trying to understand the data flow from INTERMACS. I think we finally have a handle on how, what the lag is from data-entry to delivery to us which is worth leading to the ISHLT. We don’t as yet know exactly how many patients were going to be able to have our abstract, it will probably be a very conservative assumption on the number of patients we can treat on, we can present on just to be a 100% confident that it will be at least that number and hopefully more.

In terms of the specifics around the data, it will be a more heterogeneous set of centers obviously than in our clinical trial because of both the sites that were in our trial and sites that are outside our trial and not. And that’s why it’s following IFU [knot] under a tightly controlled protocol. So to our mind very interesting just like the revolved registry data was in Europe very interesting because it’s real world.

I anticipate that it will be the first step towards the kind of tight understanding of blood pressure management that we will see in our DT supplement because this is in our eye we strongly encourage blood pressure management and intervention and we’ve certainly trained extensively besides on the importance of blood pressure management. And yes, again it’s real world so they want all be quite as tight as they will probably evolve to overtime as there is broader understanding in data to support the importance of blood pressure management.

So I would expect it will be a probably better than what we have seen historically in terms of mean arterial pressures and not as good as it’s going to be in the future as the understanding continues to evolve and broaden, but certainly the appreciation of mean arterial pressure and the impact on neurology event has improved markedly in the past 12 months since it first started to be communicated to the clinicians.

Bruce Nudell - Credit Suisse

And I guess could you comment just briefly on what you mentioned about the thoracotomy approach coupled with a outflow to the subclavian artery and the likely impact on ischemic stroke? And also are there any downsides to that in terms of cardiac artery filling? Thanks.

Doug Godshall

Yeah. So if you -- back to the, I guess it was seven or eight years ago, a lot of the [Jarvik] implants were done with the outflow going to the descending aorta. And there was a movement away from that technique because there was a perception that the approach was leading to an increase in neurologic events. We’ve actually, there was actually an article that just came out the past week of one of our sites in the US that has been actually employing that technique where they have announced to most of the descending aorta which is actually further stout than the subclavian if you think about it sort of anatomically.

And yeah what we’ve seen in Europe and outside the US there doesn’t seem to be any negative effect of outflow into descending aorta and maybe a positive effect on neurologic events if I go into the descending as long as the aorta [babble] when they closes. And I think that also translates in terms of coronary perfusion to the subclavian.

The only thing, the only downside to the subclavian seems to be that you are arm swells for a couple of days as you develop collaterals and adjust to that location. It also take for us slightly creative and [Anson’s] technique because 10 millimeter outflow that tends to be 10 or sub 10. But we started talking about subclavian about a year ago and we couldn’t seem to get our colleagues or our customers in Europe interested in doing a study because they just, we are trying to work out this technique.

And it came as the surprise to us when a few of them came up to us -- and just they were amazed that how quickly the patients were recovering sort of the antiphysiologist could tell with the patient on the table who have subclavian who didn’t have subclavian just by how easily they were coming off of anesthesia and how quickly the aortic valve is responding etcetera. So it was very intriguing. If you just think about the pumping, if you are flowing towards the arm and not towards the carotid, all things being equal, if you are not getting -- if you are getting adequate perfusion -- systemic perfusion, why wouldn't you rather go kind of away from the carotid if you had a choice. So, it would be really interesting to see.

Bruce Nudell - Credit Suisse

Thanks so much.

Operator

Your next question comes from the line of Jason Mills from Canaccord Genuity. Please go ahead.

Jason Mills - Canaccord Genuity

Doug, you’re are playing, sorry for the sports analogy, were you playing a lot more often seemingly over the past three months, manifested in this quarter than the last quarter when you obviously announced the change to the embed timing etcetera. I'm wondering just qualitatively how that’s manifesting in the marketplace, what's the change and what you are hearing from your sites, both your old sites and your new sites with respect to the HVAD, concern they may have had in the past, we’ve heard a lot about stroke, maybe that’s it, maybe it’s other things that you not hear anymore? And then how it's manifesting in terms of things that they’re really excited about, really seemingly change in the tide if we’re looking at these results relative to the second quarter results in my view or pretty good too, but it seems like you just embedded this quarter?

Doug Godshall

Yes. So, this as a [traffic of the Alex] space analogy for you there and congrats on the nine notes just ridiculous.

Jason Mills - Canaccord Genuity

You’re enjoying it.

Doug Godshall

So it’s not like we shifted to defense in the second quarter and we felt great about the second quarter in part because we felt that and based partly on what we've seen historically. We tenders to establish levels and build, I don’t know maybe the base camp kind of at that level and then continue to send from there and we've seen internationally where we hit by those and then grow again and hit by [toes]. And so we kind of felt like that’s what’s happening in the second quarter, we were building the relationships and out on scouting efforts to buying new sites to bring on board.

And we weren’t getting negative feedback from sites what we I think discovered was as I -- I didn’t articulate it as I would like to it with Danielle, it’s just that bringing on new sites is not always easy. I think we for the first couple of quarters it was easy because they were ready, willing, able and waiting and then we have to do machinery work and work through hospitals which aren’t eager to bring on $100,000 pieces of equipment every day. So it takes considerable effort and we've got a great team in the field, they work really hard and have to break through impediments constructed by customers and roadblocks that competitors try to put in front of us.

So it’s not -- each quarter to us is an interesting check, but it’s not the story to us, the story is always the longer view and certainly as we look at the longer view that has evolved internationally, we be happier and we’re certainly doing everything we can to replicate that model in the U.S. and it’s really a thrill frankly to see the partnership is evolving between our international sales teams and by extension. We’re actually building bridges between the U.S. and international customers, which I think it’s what's yielding things like expand due to thoracotomy, it’s relationships that didn’t exist and so we've got approved in the U.S. that are now being forge which is really fun to see.

Jason Mills - Canaccord Genuity

My follow-up is on thoracotomy, so good segue. I wonder if you could give us any more detail as you submit that IDE this month, what that study will look like next year in terms of size sites, whether it will include subclavian, etcetera?

Doug Godshall

Yeah. We've really struggled with that subclavian, I think it still a little too green and it’s having this registry in Europe as a first confirmation and refinement will be better first step and then may be rolls to clavian in next year. We are looking to have Intermax add data fields for outflow graph and as most its location. Right now it’s just I think because with the -- so there is no choice but to put everything to the ascending aorta previous before we showed up and it taught on us well if the guys intend to see you’re doing the descending and the guys in (inaudible) doing ascending and then somebody starts doing subclavian, it’d be kind of nice to be able to delineate between the outflow just in case there is a benefit one approach to another. So that data field has not been added yet but should soon.

For the specific IDE, we’re looking at roughly 100 patients in the study, the data will be collected by Intermax control arm will be still not to be patients out of Intermax. So good news is very cost effective trial by the way and probably outflow to the ascending where we will have an investigator meeting shortly to confirm whether it should be all ascending or if we are going to be outflow agnostic. So the downside is with Intermax it’s just going to cause the data like that we are seeing with the ISHLT data presentation, but I will take that over a multimillion dollar expense of monitors and database creation etcetera.

Jason Mills - Canaccord Genuity

Make sense. Thanks Doug.

Operator

Your next question comes from the line of Mike Weinstein from JPMorgan. Please go ahead.

Mike Weinstein - JPMorgan

Thank you and congratulations Doug. There was a lot there for us on today’s call. Let me start with the MVAD update. So you said you had a breakthrough with the ceramic tubing, so you’re going forward ceramic and you are testing on the new impeller has born out. So in this you see that could set back the person main timeline on MVAD?

Doug Godshall

Well, there is always the what I don’t know, but based on what we know it’s a little embarrassing how simple the fixes are for ceramic which actually makes me incredibly confident because usually simple solutions are better and complex solutions like bracing that we’re trying to be pour harder and more susceptible. So sure, there is always a risk that there is just some bogyman that we haven’t found. I think a really interesting benefit of having Mark’s join us is that we’ve got an incredibly sharp set of eyes that are able to look at things like the way we give connections and wiring inside of our pump from really experienced implantable electronics perspective.

As further reduce embed risk which is now looking as a fluid dynamic guy who is just looking at simple wire and you are looking at as a guy, how do I make for super high integrity electronics on the inside. So perfect timing for him to arrive in terms of further risk reduction and the team that was tasked with fixing the cannula issue has really hit strives, it’s amazing how much progress they have made in really short order.

The empower looks fantastic even early sceptics internally are just thrilled with what they are seeing. We are getting the same flows at 15,000 RPM, if we are getting 18,000 RPM the animal data is looking great. And even though probably you and I if we held two impellers in our hand it would be difficult to tell the difference as they are so similar, but it’s just enough from a pump design perspective to apparently they are quite meaningful.

Mike Weinstein - JPMorgan

Let me just my one follow-up here, the commentary around ENDURANCE, as you know people were trying to read too much into your comments on the last earnings call relative to ENDURANCE in the data presentation. And you made the comment on this call that I think you said it's our expectation that primary end point would be met, you talked about the plan for presenting some data set from ENDURANCE once it's available likely early 2015. Can you just maybe explain for people why you are confident in ENDURANCE and what we should expect (inaudible) guys going forward on that trial?

Doug Godshall

Yeah. So based on -- we have to be cautious that we don't spend every day reanalyzing our primary end points, but based on the most recent downloads for DSMB and FDA and like. We’re tracking towards in the right direction that it seems struck us that overtime we would meet that primary end point based on the best we could do in terms of projection.

And as a reminder the primary end point is two-year survival on the original device without an exchange and without a major stroke modified rank in a forward greater. And that modified rank and is assessed six months after the neurologic event to confirm whether it was major or minor.

So what we’re going to have to frankly stop doing since we are the company and it’s our investigators data is we're going to have to stop saying whether we are hitting our primary endpoint or not because we're now getting close to May and if we are sitting there in April saying, oh, we think we're going to hit our primary endpoint that we've really under-mind the investigators’ ability to be the ones who present the trial data. And so we are one of the motivations frankly for pulling the presentation of the data forward to 2015 is in our mind the importance of allowing the, giving the investigators the opportunity to present what is really their data their patients and so the strong partnerships we look forward through them, it’s uncomfortable that we are the ones who in an earnings call say, great news, we hit our primary endpoint and then in six month we're going to let our investigators present the data which we have just shown on their front and we present the data for them.

So, in the future we will probably, when asked the question we will probably say remember last year we said we thought we were going to hit primary endpoint and that’s sort of the last reference point we're going to get until the data gets presented. But at this juncture we're saying, yes we remain confident.

Mike Weinstein - JPMorgan

Perfect. Thank you Doug.

Operator

And your next question comes from the line of David Roman from Goldman Sachs. Please go ahead.

David Roman - Goldman Sachs

Thank you, good morning everyone. I was hoping would you come back to international markets which look very strong for you in the quarter. Doug in your prepared remarks you talked about both enhancing your presence in markets where you already have strong market share as well as entering new markets. Can you maybe give us some of the sense of what’s happening in the overall European environment and are you seeing more growth from new country ads or sort of ‘same store sales growth’?

Doug Godshall

Thankfully it’s kind of all the above, yeah, when you sit here. Two years ago if you predicted, is somebody said, you are going to do this much business in Germany and Germany is going to be ex-much larger than it was in 2011. I don’t think people have believed you, because they would have said well, Germany is already pretty much saturated. Well Germany is not saturated, we are adding sites in Germany and the sites where we are doing quietly nicely. Some of the largest centers are up quite substantially. And I had lunch last week with probably the largest VAD implanter, at least in Europe if not the world. And he thought like that easily had capacity to do three times as many patients and he was thrilled to be working with us on outreach to his cardiologists and figuring out how to build awareness about that therapy, but sales he sees so many that by the time, they get to him it’s just simply too late so he knows they are out there. He felt a very analogous to a U.S. market development conversation, which traditionally had not been the case in Germany because this surgeon just sort of got the patients and they are thinking much more proactively and creatively about how to build their VAD programs, which is really quite encouraging.

So even within Germany there is great opportunity new countries in Europe obviously are more limited, so most of the new country expansion is outside of Europe.

David Roman - Goldman Sachs

Okay. That's helpful and maybe just for my follow-up, I just want to make sure, I was clear on the timing of the U.S. definition therapy filing that you are going to present the data from the ENDURANCE trial in the spring or early 2015 the PMA probably will get filed sometime before that based on the incremental disclosure you gave today about timelines, but are you still going to wait for the CAP to file a full PMA and what do you think you actually need to get approval at this point?

Doug Godshall

So the base plan is that the supplemental cohort of patients plus the original cohort of patients would be combined for our filing. Some have argued some of our investigators have argued quite adamantly that if we have other sources of information, even if our supplemental cohort isn’t all the way followed up and we have post approval study data et cetera that one could argue you could submit sooner than when the full supplemental cohort is completed enrolling.

So we will sort of assess as we go assuming all goes well with the original cohorts. And we obviously don’t have those other data sets yet to know, well, we don’t know of any data sets. So we don’t have those data sets yet to be able to assess whether there is an earlier filing option otherwise it would be after the one year follow up of the supplemental cohort consolidation of that data and then submission.

David Roman - Goldman Sachs

Alright got it. Okay. Thank you.

Operator

Your next question comes from the Larry Beigelsen from Wells Fargo. Please go ahead.

Larry Beigelsen - Wells Fargo

Hey good morning. Thanks for taking the questions and congratulations on the good quarter. Can you hear me okay?

Doug Godshall

Yeah.

Larry Beigelsen - Wells Fargo

Good. I wanted to start with the NCD and I had one follow up on the post approval study. So Doug when we cross the centers we consistently hear that the new NCD will lead them to do more DT implants and less BTT implants because; one, transplant centers won’t be able to do, the BTT implant anymore because they cannot list the patient with UNOS. And two, certain patients such as smokers, patients with pulmonary hypertension et cetera can’t be listed with UNOS so they will have to get DT implant now whereas the prime to do those patients could be put on the internal hospital list and given a BTT implant. So do you agree that the revised NCD will likely drive more DT implants and less BTT implants and what might be amplifications be for you guys?

Doug Godshall

Yeah. As reminder, only 18% of our patients as of last quarter, we have not done a recut, but 18% of our patients since commercial approve over the age of 65. So we are not a Medicare centric business at this juncture. And very high percentage of our patients are already listed for transplant, much higher than we had frankly anticipated. We are not told everybody this one is listed, this one is not listed, so we don’t know. Based on our early cut communication with private payers, there is no evidence to suggest that they, from the ones we have spoken to which are the many of bigger payers, they are aware of the NCD and they don’t appear interested in changing their policy and shifting to one that matches Medicare. So we don’t expect a change in amongst payers.

And so will there be a patient here and there that we would have gotten because; a, hospital keeps a private list or was keeping a private list and they are know not going to. Sure, there will probably be some. There I think the broader opportunities that we see for HeartWare is further penetration of BTT both private payers and Medicare, because we certainly know we are near tapped out the potential we have there.

And in new centers likewise penetrate those. If we do continue to see the clinical response to our device specifically and then our device by things like thoracotomy, I would expect that the benefits and enthusiasm for the device and therefore the desire to use it as broadly as possible will vastly overwhelm, what a handful of patients we might lose as a result of constraint cause by NCD.

So, we're not surveying everybody, but we talk to sites everyday and generally the feedback we have gotten is they are really not going to change my HeartWare utilization. So there probably are some sites up there where we'll have a bigger impact, but it strikes up that it sets a small minority.

Larry Beigelsen - Wells Fargo

Thanks. That's helpful. On the post approval study, Doug you sounded optimistic on public calls that the BTT post approval study data will show reduction in stroke from the advanced study and the cap data. So, my questions are; first, is there a fair characterization in other words, that you are optimistic to data will show a substantially lower stroke rate. Second, can you tell you whether you are unblinded to this data set so we can understand your source of optimism? And then just lastly, will the initial data presentation at ISHLT includes the HeartMate to control. Thanks.

Doug Godshall

My enthusiasm is largely based on the enthusiasm the customers are showing for our device in the U.S. And given that they are constantly reminded that they should worry about our device and stroke, they will be far more concerned about a stroke with our device than a stroke with the other device just because somebody is tripping in their ear as I am telling them that they should be worried about the stroke with our device. So I think the fact that they are hyper sensitized and yet getting more enthusiastic about the device strikes means that we're doing well in the clinic.

So it’s anecdotal because the data downloads from Intermax are still far too early and primitive for me to feel comfortable drawing any conclusions out of this. And they’re starting to mature again because of that there is sort of the patient chose up for a visit and then the coordinator gets around entering the data when he or she finally has a break in their day and you've got to get time for those two things to happen and then for Intermax to analyze the data, adjudicate it and then send it out to us. So we've gotten data downloads and I sort of ignore it, so I frankly couldn’t even tell you what the data says because I don’t want to be, I don’t want to get too excited or too depress on data that is too immature. So I don’t even know what it says yet. So my enthusiasm for our overall device performance is strictly reflection of the enthusiasm we're hearing from the customer.

Larry Beigelsen - Wells Fargo

And HeartMate II Control Doug?

Doug Godshall

Sorry, yeah. No, we won’t get the HeartMate II Control until the entire study is complete so it will simply be our arm, a subset of our patients, it won’t be the all 600 patients.

Larry Beigelsen - Wells Fargo

Thanks for taking the questions.

Doug Godshall

Yeah. Thank you, Larry.

Operator

Your next question comes from Matthew O’Brien from William Blair. Please go ahead.

Matthew O’Brein - William Blair

Thanks. Doug you mentioned in your commentary an improved receptivity to HVAD in the US. Is that commentary specific to trailing it initially in some BTT patients and since then feeling more and more comfortable to use it incrementally in DT patients?

Doug Godshall

Well, we hopefully, I feel fairly confident that we will see incremental DT activity next year given that we had basically none this year without a trial. So we’ll certainly see in our supplemental cohort a chance to both expand DT experience with the HVAD and importantly test the hypothesis, confirm the hypothesis that improve blood pressure management results and improve outcomes.

Matthew O’Brein - William Blair

Sure, but just beyond the DT?

Doug Godshall

Yeah. So in terms of commercial experience, I mean nobody ever said to us, just I am using this thing off label. Unless it’s hey I need help this is a BiVAD I need help with the FDA or how do I do this, this is clearly a DT patient and I really need your device so how do I do compassionate use or emergency use or the like. So in those instances we know that it is a literal off label in other instances where they have a private pay patients who may or may not be listable, if they just put the device in, we know that they put it in by thoracotomy or they put it in by sternotomy, we know the age of the patient and the like, but we don’t know if they are listed or not.

I think my commentary aside from just general there is a general feel that enthusiasm is growing. There is also, there are certain sites that I thought would be, it would take us years to get them even to be open minded to talk to us. And we’re pleasantly surprised that some of them who have been I thought anti-Heartware people, either I was wrong or they’ve evolved their thinking. So we are encouraged by what we are seeing in some of those sites. Not all of them, there is still a couple entrenched that no matter what we do they just, they don’t seem interested, but that’s a shrinking number.

Matthew O’Brein - William Blair

Okay. And then for my follow-up on thoracotomy, by my math about 4% of cases in the US today are done via this approach. Can you just talk about how challenging it is for the surgeon community to get trained on this or their staff to get trained on this? And then where do you think that metric can go over the next maybe 12 to 24 months?

Doug Godshall

Yeah. So if I ask the guys that are now doing it whenever possible, they would say it should in the next couple of years be they believe every case that doesn’t require contaminant repair like a tricuspid valve or something like that or PFO then every case should be done by thoracotomy because they are getting patient on to the ICU the same day or the next morning they are excavating patients on the OR table just are, even guys that hated thoracotomy three years ago and told me I was stupid to be talking about it are loving it now. So probably about and I am guessing about 30% of the cases are done with other repairs usually tricuspid that kind of leaves the mitral valve alone.

So those are probably excluded from thoracotomy there is no benefit of doing a thoracotomy and then opening the patient to do some other repair. So your math is maybe 70%. And there are certainly some European centers that seem to be in that 50% to 70% thoracotomy. It’s surprising that the US has caught on as quickly as it has with the European tend to be a little more thoracotomy comfortable in the US guidance so US is catching up quickly.

So much is just going to depend on things like this registry does it confirm, does the anecdotal experience physician continue to be good everywhere like it has been so far and does this registry confirm it, if the registry confirms it then will become the primary mode for every patient who qualifies going to meet that.

The training is quite simple, I mean as long as you have good echo and confirmed that there is not thrombus in the ventricular, you can do it up bypass most are more comfortable doing it on bypass, so they just don’t cut their [echo] yet. Tumbling up to the ascending aorta and doing a hemisternotomy to get the examined aorta as a piece of cake, tumbling up to the subclavian frankly is even easier because you are not going, you don’t even have to go under the chest and you don’t have to do the hemisternotomy, I don’t think that’s going to catch on for a couple of years, at least in the US until we have some data.

Descending aorta is very simply -- thoracotomy so you lose some of the benefit on the other hand its only one and two, so you could put it in and then ask the most same incision. So in a way descending aorta could be easiest, there is just a widespread [ankhs] about descending aorta anastomosis because of the performance of the prior device in that location. People blamed, they blamed the outflow graft anastomosis not the device and that definitely have been misplaced.

Matthew O’Brein - William Blair

Okay. Thank you

Doug Godshall

Yeah.

Operator

And your next question comes from the line of Matthew Taylor from Barclays. Please go ahead.

Matthew Taylor- Barclays Capital

Hi Doug, thanks for taking the question. So just wanted to ask one on your center additions, there is still number of centers that your competitors own outside the US that you are not in and you have been adding a pretty good [grip] here. Can you talk a little bit about how you maybe adding centers going forward and what are some of the key markets that you are not in obviously including Japan?

Doug Godshall

Yeah. Can we get to Japan? We are hopeful on that Japan topic. We're getting encouraging reads on potentially a faster review time that has been historical in Japan of course you got to enrol it first and employ those first six patients are going to take (inaudible) sort of a silly construct. But so assuming you enrol them quickly follow them for six months we're currently contemplating bringing in our own internal expectations for Japan approval really not next year. I feel we got a enrolment and follow them, but we're looking forward to get into Japan where our small device will be particularly helpful I think.

So then in non-Japan markets, where on the cost of getting approved in a new geography although we start to go through some audits for them. It's really impressive how a fairly small team led by their leader Pedro Marques, our international sales leader has expanded to broadly geographically and with again good traction in such power plant reaches.

So we try to target geographies where we have confidence both in the likelihood of good clinical outcome and likelihood that it won’t just be one case and done that you’ll that there is adequate funding to continue implanting after the first one. That was our mistake a few years ago where we would get traction we get two cases and then discover that the entire budget for the country was two cases and that was it. And they would do a press release, the doctors would get on TV and then they would never do another case and that was sort of a bad news of our resources. So we've been more thoughtful about how we go into countries now which I think is helping us.

In the last quarter it was a little different, in the past few quarters we've been adding about 50% or more sites that we would add. We're brand new VAD centers this past quarter we had a higher percentage that were I think about 70% were competitive sites that we entered. I anticipate that we keep thinking that our rate of site additions is going to decrease and at some juncture it will. So far we seem to continue to add an encouraging number each quarter and we still have a pipeline of sites that we're after so we're not done adding internationally and we're still number two in number of sites although we're pleased with the volume that we generate out of those sites obviously.

Matthew Taylor- Barclays Capital

And just a quick one on the interest of time, what’s your next decision point on whether you are going to be submitting with the ENDURANCE data or the full data and what sort of the look that you are going to have?

Doug Godshall

We have a new finish follow-up of ENDURANCE obviously. We fairly started enrolling, because we’re just building the supplemental cohort trial status is getting throughout the [RBs] and contracts and site negotiations and everything so that really is likely to happen in high volume starting in the first quarter.

And so we don’t have any, zero data from that study, we don’t have all of our data from ENDURANCE. So it’s, I’d say probably back into next year when we start to have adequate aggregate datasets to figure out do we wait or do we or is there sufficient supplemental information to combine the various sets of data and submit them together earlier than we had anticipated. So five year for again the next year that we’ll make that call.

Matthew Taylor- Barclays Capital

Okay. Thank you very much.

Operator

And your next question comes from Suraj Kalia from Northland Securities. Please go ahead.

Suraj Kalia - Northland Securities

Doug, congrats on the nice quarter.

Doug Godshall

Thanks Suraj.

Suraj Kalia - Northland Securities

So Doug, I think so I heard in the call you say about the original ENDURANCE study and the post approval BTT to be presented at ISHLT was I think so if this going to be favorable or at least that's what I have gone through some of the commentary. I guess Doug, I am just trying to understand clinically sort of [uncensored] HVAD will there in the ENDURANCE study, so to hit ENDURANCE endpoint, the center HVAD would have to significantly be better on neurologic events than HeartMate II or HeartMate II has to really drop off on its arrival. I guess I am trying to parse through all this and see what’s changed especially that the FDA just asked for a new supplemental DB trial which as we understand it now the sample trial has increased I know a long question, but hopefully you can tie all of these together for me and help me to reconcile your statement on the data versus the ongoing trial?

Doug Godshall

Sure. I think you’ll see we are looking to present post approval study data. We are hopeful that the data is positive and reflects the very positive feedback we are getting from our clinicians in the US about how well their patients are doing, but we don’t have really visibility into much of that data. So it will be hopefully pleasing to all of us. But again it’s real world data no including criteria other than getting into INTERMACS et cetera are no really constraint to include in criteria, so that’s the ISHLT.

ENDURANCE completes enrolment in May and we are predicting I guess we remain optimistic that we will hit our primary endpoint which again as I think I reviewed with Mike is patients who are alive after two years without having a device exchange and without a major stroke. So that’s a composite endpoint and the trial was designed with -- well it was designed with un-centric pumps and then we integrated separate pumps and so for that cohort the aggregate would have to be noninferior to the control arm in that composite. Whether one arm had more or less mortality and more or less other events you would have to combine the three parts to get to your answer.

And what we observed in that trial as we’ve discussed in the past is that there appear to be a notably lower neurologic event rate if you did in the size that some patients come with blood pressure management equipment or moderator equipment and who track those patients more regularly and intervene when the blood pressure went high they had really low neurologic event rates.

So we approached the FDA and asked if we could please do a study looking at those having all the -- we had all the patients since go home in a supplements cohort with blood pressure monitoring equipment and all the safe efficacy, a consistent way of intervening when pressures got high. Then we would be able to confirm what we saw retrospectively. And given that I take a few recommends to a pressures of area below and we had no ones ever really confirmed prospectively with how managed blood pressure, how it would impact adverse events and particularly neurologic events. I think the fact that the FDA agreed to let us do the study and give us adequate sample size to really prove that our hypothesis was to my mind really great endorsement.

And so I hope we are right and think have they were nine or so sites that send all their VAD biggest chunk with blood pressure equipment just like many of our German centers do. They had not been sending all of their VAD patients home without equipment. We probably would not have had the ability to learn from our experience that there is a sort of well controlled patients versus less controlled patients and that with our pump which is more pressure sensitive as there seems to be in effect. So long-winded answer, but hopefully that answers the question.

Suraj Kalia - Northland Securities

Thanks for taking my question, Doug.

Operator

Your next question comes from the line of Mimi Pham from ABR HealthCo. Please go ahead.

Mimi Pham - ABR HealthCo

Doug, can you quantify your comments on the Greenfield international sites, is the pipeline heading into 2014 comparable or better than what you converted in 2013?

Doug Godshall

I'm guessing it's comparable because I can think of at least one new country that should come online probably first, second quarter assuming we thought we're going to get approved last week and so it's soon, but (inaudible) come and visit us, there is another country that similarly has to come and visit us to out of our facility. So I think it’s probably an elegance may not be quite as many sites and yet as we've seen number of sites is fund account, but it’s a whole lot better when you can count them and they can get paid for the device and one site that does ten is a lot better than five sites that do one.

Mimi Pham - ABR HealthCo

Got it. And then just to follow up with the CMS listing requirement being reaffirmed. Are you hearing any discussion on this in listing late age in terms of patients overall getting being more easily listed on the transplant?

Doug Godshall

Having modifying transplant listing criteria?

Mimi Pham - ABR HealthCo

Yeah. Is there any with CMS reaffirming their list requirement, are you hearing any discussions or any surgeons warning list requirement fees that for change just to make it easier for patients?

Doug Godshall

At once so far, which doesn’t mean it will happen. And so I believe once they will I guess we’ll just have to reassess our listing criteria and we’ll be listing more patients, but it’s an interesting local opportunity for a site to address the CMS requirement.

Mimi Pham - ABR HealthCo

Thank you.

Operator

Your next question comes from the line of Mark Landy from Summer Street. Please go ahead.

Mark Landy - Summer Street

Thanks for taking my question. Doug, you are kind of nine months into your U.S. launch and infrastructure build outs and I guess a lot of folks also process on kind of head to head competition on each patient. But have you been able to quantify some of the impact that your launch in infrastructure build out has had on organic growth, and if not, when do you think that you will get it to us benefit from your investment into market?

Doug Godshall

Peter and I were talking about that yesterday, if you look at 2012 U.S. growth versus the 2013 percent growth year-to-date, it was rather surprising to me that we’ve long felt that…

Peter McAree

I mean right around 10% last year, year-to-date it’s high side that you see.

Doug Godshall

And maybe that's just that market is lumpy and it’s a coincidence. Certainly we know that there are patients that we treat like the feeds, which is in a fake number, but it’s a number and BiVADs which isn’t a big number, but it’s a number. Those are almost by definition market expanding because they otherwise would have got nothing.

So it’s, say that might had a percent or two to market growth those novel so HVAD only type patients. So outside of those, it’s hard to know, okay are they seeing patients and saying I like this little pump and I can treat this patient, so I am going to buy it towards putting of ad in them, where I otherwise would not have.

I don’t know if that's happening in the U.S. yet, it certainly we believe started to happen in Europe as they started to observe better outcomes with the HVAD than what they were accustomed to traditionally and coincidentally heart transplant waiting time started going through the roof right around the time we got approved. So it was a perfect storm for us, better outcomes, easier device use, ability to treat less invasively BiVADs and pediatrics, all came together in ‘09 and ‘10 which was really great for us as we’re trying to build out our little company and we still think we are kind of little bit getting less little every day.

So it would appear by the numbers that having two companies in the market in the U.S. both working diligently to educate the referring community about the merits of bad therapy and our ability to pull patients into bad therapy who otherwise would have been I don’t know left to die I suppose may have had -- maybe having or at least at the early stages of simulative effect on overall market growth. I am very cautious just because I know that sort of the bad market give us and the bad market take us away and some product will freak out because the numbers are lumpy, in the next quarter they get excited because the numbers are lumpy. So the long-term pattern that we always point to looks fantastic and we hope that this at least near term 2013 pattern plays out over the coming years as we have expected it would.

Mark Landy - Summer Street

You could benefit I guess sort of where I would guess that first quarter was a little lighter, second quarter seem to be good, third quarter ahead of expectations from the content perspective. So I guess this just takes a little time to fill the growth and get away from as there are [some gains].

Doug Godshall

Yeah, thanks. So I think that’s it. We apologize for keeping you guys past 9, but appreciate everybody’s time, attention and great questions. We are certainly looking forward to sharing news additional progress. We’ve got some conferences coming up so I look forward to seeing many of you over the coming weeks. And for the investors on the line, [I am share with those] too many of you starting in Arizona next week. So thanks for your time and attention and [speak to].

Operator

Ladies and gentlemen, this concludes the HeartWare 2013 third quarter conference call. Thank you for your participation. You may now disconnect.

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