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Abiomed, Inc. (NASDAQ:ABMD)

F4Q 2014 (Qtr End 03/31/2014) Earnings Call

May 1, 2014, 8:00 AM ET

Executives

Aimee Genzler - Corporate Communications Manager

Mike Minogue - Chairman, President and Chief Executive Officer

Bob Bowen - Chief Financial Officer

Analysts

Matthew O'Brien - William Blair

Danielle Antalffy - Leerink Partners

Anthony Petrone - Jefferies Group

Erica Layon - Benchmark

Operator

Good day, ladies and gentlemen, and welcome to the Abiomed Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I'll now introduce your host for today's conference, Aimee Genzler, Manager of Corporate Communications. You may begin.

Aimee Genzler

Thank you. Thanks everyone for joining us for the Abiomed fourth quarter fiscal 2014 conference call. I'm Aimee Genzler, Manager of Corporate Communications, and I'm joined today by Mike Minogue, Chairman, President and CEO; and Bob Bowen, Chief Financial Officer of Abiomed.

The format for today's call will be as follows. First, Mike will provide you with strategic highlights for the fourth quarter. Next, Bob will provide details on the financial results outlined in today's press release. And we will then open up the call for your questions.

Before we begin discussing the fourth quarter fiscal 2014 results, it is necessary to remind you that during the course of this call, we will be making forward-looking statements, including statements regarding development of Abiomed's existing and new products, the company's progress towards commercial growth and future opportunities and expected regulatory approval.

The company's actual results may differ materially from those anticipated in these forward-looking statements based upon a number of factors, including uncertainties associated with development, testing and related regulatory approvals, including the potential for future losses, complex manufacturing, high quality requirements, dependence on limited sources of supply, competition, technological change, government regulation, litigation matters, future capital needs and uncertainty of additional financing and other risks and challenges detailed in the company's filings with the Securities and Exchange Commission, including the most recently filed annual report on Form 10-K and quarterly report on Form 10-Q.

Listeners are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of the conference call. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this release or to reflect the occurrence of unanticipated events.

Also, we remind our participants that the products discussed on this call, including the Impella 2.5, Impella 5.0 and Impella CP are 510(k) cleared for partial to full regulatory support for periods less than six hours and during clinical procedures that do not require cardiopulmonary bypass. Other products discussed, including the Impella RP, Symphony and Impella pediatric are currently investigational devices and are limited to investigational use.

Finally, comparative references made financially in this call to revenue, expenses, gross margin or other increases or decreases will be indicated by references to fourth quarter of fiscal 2014 as compared to the fourth quarter of fiscal 2013 or fourth quarter of fiscal 2014 as compared to the third quarter of fiscal 2014.

I'm now pleased to introduce Mike Minogue, Abiomed's Chairman, President and Chief Executive Officer.

Mike Minogue

Thank you, Aimee. Good morning, everyone. Abiomed delivered another strong quarter with 15% increase in total revenue of $50.4 million, driven by record patient utilization and 200% growth in Impella CP patients. Impella utilization was also robust with the highest number of reported patients treated in a month, week and day. We've grown topline revenue double-digits for 18 straight quarters, supported over 19,000 US patients, maintained profitability and generated $118 million in cash without incurring debt. Impella is now the most widely used heart pump in the United States, with approved and standardized DRG and CPT codes for hospital and physician reimbursement for Medicare and major commercial insurers. Impella is in approximately 859 US hospitals with over 2,000 physicians trained.

For the full fiscal year, Abiomed had solid Impella growth of 19% with overall revenue of $183.6 million and set new records for patients supported and quantity of clinical publications. On the regulatory side, we completed our Impella 2.5 PMA submission and our Impella RP FDA trial. We are proud of our execution this fiscal year and grateful to our stakeholders. On today's call, we will cover two of our four corporate goals, so we can devote the majority of time discussing our specific progress on our US regulatory goals.

So starting with our second goal, achieving significant patient and revenue growth. Patient growth was 15% year-over-year and increased double-digits sequentially. As a percentage of total case mix, prophylactic support and emergency support each represented 44%, with the remaining 12% distributed in the all other categories of total usage. To be clear, all Impella prophylactic and emergency procedures are considered high risk, because our patients have poor hemodynamics and require complex treatment. Impella CP is in the sweet spot of addressing the clinical needs of our physicians and it now accounts for approximately half of our patients.

Over the last several months, we have had 28 Impella publications on both the clinical and cost effectiveness data. One important recent publication: Health economics of percutaneous hemodynamic support in the treatment of high-risk cardiac patients was published in expert reviews and encompasses a systemic review of Impella and demonstrates reduced days in hospital stay and overall cost effectiveness.

Now we will spend the rest of the time on our fourth and final goal, executing our clinical and regulatory processes in order to achieve approvals in Japan and the United States. We continue to progress in Japan as planned. So for today's call, we will focus on the US Impella 515 PMA submission and briefly cover the Impella RP study. This is the first time many investors have experienced the 515 process, and we would encourage all to review on the FDA website for more details on the long history. As a reminder of what the 515 process is, I will quote the FDA website.

"The FDA will reclassify devices, types into Class I or II or sustain the classification of Class III and call for PMA applications." These devices are FDA 510(k) cleared and are routinely being used by physicians in the practice of medicine, even though most devices have not completed any FDA studies. All temporary circulatory support devices such as Impella, the intra-aortic balloon pump, all adult ECMO devices, TandemHeart and CentriMag are included within the 515 process. And except for the intra-aortic balloon, all of these products are proposed by the FDA to remain Class III and required to complete a PMA submission.

Per the FDA 515 guidance, all products remain on the market under existing 510(k) clearances until each company completes its respective PMA process and demonstrates reasonable assurance of safety and effectiveness. The 515 category in which Impella is covered is called non-roller type cardiopulmonary bypass blood pump or NRP and it's one of 26 categories encompassing hundreds to thousands of products. The FDA 515 proposed order creates a new category within NRP defined as temporary ventricular support devices, which includes Impella. Therefore, we believe our future PMA indication will broadly encompass this function of temporary support and will be based on the totality of the clinical data in discussion with the FDA.

Immediately following our 515 panel in December of 2012, Abiomed worked interactively with the FDA to leverage our three FDA studies and the US Impella registry to create the most comprehensive clinical analysis on the totality of the Impella data. The FDA formally approved our modular PMA submission outlined or Shell last February, which identified information necessary to support the filing and approval of Impella 2.5 as a Class III product. The overall submission included the components of preclinical and engineering testing, manufacturing and quality systems and clinical data. Abiomed submitted the fifth and final module to the FDA as planned last quarter.

Our PMA submission alone is a major achievement for our company. The package contains thousands of pages of documents and represents more than eight years of clinical research after an investment of greater than $35 million.

Now what is new and what is different from regular PMA submissions? With credit to the FDA, the initial discussions in 2008 to grant Impella the 510(k) clearance post the PROTECT I study has provided over 19,000 Americans access to this unique innovation. Impella technology has also supported thousands of patients in Europe since approval in 2004 for multiple indications. These six years of real world clinical experience in the US combined with the EU experience allows for a rare record of data unavailable to any routine PMA product approval, because controlled clinical studies alone do not fully represent the benefit/risk profile in clinical practice.

The totality of the data in our PMA submission contains clinical data from 215 publications, references 1,638 Impella 2.5 patients, includes two FDA studies PROTECT I and PROTECT II and for the first time announced 791 new high-risk Impella patients from the US Impella registry. The US registry is an existing ongoing multi-center retrospective registry with data from approximately 40 sites in the US and Canada. Our PMA submission under the 515 program also provides the FDA with real world data demonstrating the safety record under the medical device reporting analysis or MDR from 13,981 Impella 2.5 patients.

Additionally, the PMA analysis encompasses clinically accepted hemodynamic science described in the literature and validated in computational modeling with a variety of preclinical and clinical studies. We believe the totality of the data supports reasonable assurance of safety and effectiveness of the Impella for temporary ventricular support.

Concerning the practice of medicine, Impella has been evaluated for multiple uses by physicians that determine protocols and reimbursement policy based on the medical guidelines and clinical publications along with cost effectiveness data available. To be more specific, Impella is now incorporated into five guidelines, four high-risk PCI, PCI with cardiogenic shock, STEMI and cardiogenic shock, acute heart failure, patients with multi-organ failure and bridge for patients with profound hemodynamic compromise. These recommendations from ACC, AHA, SKY and ISHLT range from Class I to Class II(a) and II(b). And all of these guidelines were released before our most significant publications from PROTECT II and the US Impella registry were available.

We expect that overall 515 process to last between 12 months to 14 months before completion of a panel and the potential Impella 2.5 PMA approval. However, it's hard to predict, because there are no historical comparisons for the 515 process. Abiomed will submit data for the Impella CP and the Impella 5.0 as PMA supplements. Until each product completes the 515 process, Abiomed will operate under its existing 510(k) clearances for Impella 2.5, Impella CP and Impella 5.0.

Now changing topics to our Impella RP study to support the Humanitarian Device Exemption for HDE submission, we've completed enrollment of 30 patients from up to 15 hospitals. The FDA support for this IDE study has been outstanding, and we have already submitted for a continuous access protocol approval in order to continue enrolling appropriate patients. We recently announced approval of the Impella RP CE Mark in Europe and anticipate US FDA approval by March 2015. The Impella RP operates on a same AIC console as the other Impella products and will be introduced into our established hospital install base. As a reminder, there is no other product like the Impella RP. And for the first time, it enables percutaneous right-heart and biventricular support for heart failure.

In summary, we are on track to transform into a FDA PMA and Japanese PMDA company. Our portfolio of products and applications continues to expand through a growing population of high-risk patients and developing global install base. As always, we want to thank our shareholders for their support and all our employees for their hard work and dedication to our mission. We look forward to continued growth this year and meaningfully impacting the lives of our patients.

I will now turn the call over to our CFO, Bob Bowen.

Bob Bowen

Thank you, Mike, and good morning, everyone. As noted in this morning's full earnings release, fiscal fourth quarter revenue was $50.4 million, an increase of 15% from $43.7 million in the prior year. Worldwide Impella product revenue grew 17% to $46.1 million off of a difficult prior-year comparable of $39.3 million.

The components of fiscal fourth quarter worldwide Impella revenue include: US Impella reorder revenue of $35.6 million compared to $29.6 million in the prior year, a year-over-year increase of 20%; US Impella revenue of $2.1 million from opening 23 new Impella 2.5 sites compared to revenue of $2.8 million from opening 30 sites in the prior year; Us Impella revenue of $3.7 million from placing Impella CP at 77 existing sites compared to revenue of $3.2 million from 60 sites in the prior year; and OUS Impella revenue of $4.3 million compared to revenue of $2.8 million or up 54% from the prior year.

On a unit basis, reported US Impella patient use again exceeded unit reorders as total US Impella unit reorders were approximately 95% of reported patient use. As previously noted, reorder rate of less than 100% of patient use is largely due to the initial CP stocking at new sites combined with hospitals maintaining lean Impella catheter inventory levels.

Hospital-owned unit inventory level of Impella 2.5 and Impella CP combined averaged 2.6 units per hospital compared to 2.5 units per hospital in the prior sequential quarter. At the outset of the year, the average was 2.4 units per hospital. So we have seen a slight increase over the course of the year, as expected, with the introduction of the Impella CP at an increasing number of sites.

45% of US customers now have the Impella CP. 48% of reported patient use was with the Impella CP in Q4 fiscal '14. And 55% of US Impella revenue was from the Impella CP. This reflects the continued strong demand of this higher flow device along with growing emerging patient use, which as noted by Mike was 44% of overall patient use during the quarter.

Worldwide service revenue grew 23% to $3.1 million as a result of the increased installed base of Impella AIC consoles and related service contracts. Legacy products revenue, which is largely the AB5000 product, totaled $1 million in the most recent quarter. We expect to experience continued declines in legacy product revenue due in part to cannibalization from the Impella CP and 5.0.

For the full year, worldwide revenue totaled $183.6 million, an increase of 16%. And worldwide Impella revenue totaled $167 million, up 19%. Also notable is that we grew sequentially in each of the past three quarters. Gross margin for the quarter of 79.9% was essentially equal to 79.8% in the year-ago period.

Taken together, R&D and SG&A expenses totaled $36.6 million compared to $30.7 million in the prior year and reflect our continuing investment in developing and bringing products to market along with investments in field personnel, training and customer support.

During the quarter, we incurred $2.9 million in stock compensation expense and $1.3 million related to the DoJ investigation. The comparable numbers in the prior year were $2.6 million of stock compensation expense and $2.4 million of DoJ and shareholder litigation related outside legal cost.

GAAP operating margins for the quarter were 7.3% and on total year basis were 4.6%. GAAP net income for the fiscal fourth quarter was $3.6 million or $0.09 per diluted share compared to GAAP net income in the prior year of $3.7 million or also $0.09 per diluted share.

The balance sheet remains in excellent shape and we continue to prudently manage working capital, which is reflected in our growing cash position. We ended the quarter with cash, short and long-term marketable securities of $118 million, up $30 million from the prior fiscal year. And we have no debt.

Turning to guidance, full year revenue guidance for fiscal year '15, as noted in our press release, is in the range of $205 million to $212 million or a growth rate of 12% to 15%. We have not at this time included Impella revenue from Japan in our guidance and we have included very modest Impella RP revenue in our US Impella estimates related only to expected approval from the FDA of the continuing access protocol now that enrollment and the trial is complete.

Consistent with the past two years, we expect 47% to 48% of revenue to occur in the first half of the year. And at present, we expect the fiscal first quarter to be essentially equal to the fiscal fourth quarter of last year. Our expense plan for the year includes what I would describe as a placeholder for DoJ related legal expense of approximately $2 million. The submission of documents stage has essentially been completed. We do not expect the recent request for information from HHS to materially affect our spend profile. The requested data is limited in its timeframe and is pretty much readily available and we believe we will be able to provide the requested information promptly.

We expect to incur pre-revenue startup cost in Japan of approximately $3 million to $4 million, most of which will occur in the second half of the year. Also, please note that our stock compensation expense tends to be the highest in our fiscal first quarter. In addition, in Q1, we will incur a $1.5 million R&D expense related to the initial payment of the Opsens agreement.

For the full year, we expect operating margins to be in the range of 5% to 7%, and we expect to start off the year at about breakeven and improve operating margins as we progress through the year. Last year, we had $1.3 million loss from operations in fiscal Q1. As previously noted, operating margins could vary outside the total year expected range of 5% to 7% in any individual quarter.

We will no open the call to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Matthew O'Brien of William Blair.

Matthew O'Brien - William Blair

I was hoping we could start off with the prophylactic performance in the quarter. Mike, it was 44% in total sales of the units. And it seems to be even though the number of hospitals continues to grow, kind of stabilized at about this 950, 960 unit number. Can you just give us a little bit more color as to why we've seen that taper off here somewhat and then maybe next inflection points we should expect?

Mike Minogue

So starting off with the mix, as we said, was 44%, 44% and 12%. And on the prophylactic support, it was up high single-digits, 5% to 7% over the prior year and it was up as well a little more sequentially as well. The growth in the emergency population was in the mid-20% range. And in the all other, it was in the high-20% range. But we want to point out that it's not necessarily really a binary definition between a prophylactic and an emergency patient or all other. Some of our patients have extremely poor heart function and putting them on a table for procedure when they lay flat, they can potentially go into active heart failure. So we break it out as best we can, so that you can see the mix of that elective type of approach versus the emergency. But as you've seen, they're all growing together double-digit. And sequentially, they grew double-digit as well.

Matthew O'Brien - William Blair

And then heading into guidance, the first look at it was a bit below what we were thinking. But digging in a little bit more, it seems like there were some things that were kind of tailwinds for fiscal 2014, be it a little bit higher inventory levels at your hospitals and then some CP benefit as well. When we look at actual just patient number and volume growth there, is it fair to say that growth of that metric should be pretty similar in fiscal 2015 as far as what we saw in 2014?

Mike Minogue

Our guidance is our guidance. And we don't necessarily want people to get ahead of us and we want to have an execution where we can deliver in the $205 million to $212 million range. That being said, our big focus really is on the Impella PMA approval, the Impella RP HDE approval and the Japan approval. And in that guidance, you don't have any revenues or any type of benefit associated within that fiscal year. So those come along obviously that would be upside.

And then back on the growth rate, what you're seeing is that the Impella CP is an accelerator or a catalyst. And what we've tracked internally is when the sites receive that, their overall volume on average goes up. So it drives more utilization. And if you think about our entire installed base, there's probably 1,300 potential accounts. So we've got a long way to go for just the 2.5, where we're at today in the mid-800s. We've got even longer way to go with the CP and then the RP, as well as 5.0. So we're going to continue to have a focus on going deeper. That's why we limit the amount of new sites we open as well as how many sites can get CP. And we'll do the similar approach with the RP in the US.

Matthew O'Brien - William Blair

And then just one more for me if that's okay. You mentioned Japan. I just want to make sure that generally speaking, we're still kind of on track for a summer approval there, not necessarily reimbursement, but just still on track for that approval?

Mike Minogue

We're still on track for late summer and reimbursement to follow within six to nine months.

Operator

Our next question comes from Danielle Antalffy of Leerink Partners.

Danielle Antalffy - Leerink Partners

One of the questions has been what's the high-risk patient population. What do we have coming down the pipeline from a data perspective that could help better define that market?

Mike Minogue

So, Danielle, I'll make sure I understand the question. You are asking what data publications are coming out around what is the definition of a high-risk patient versus an emergency patient?

Danielle Antalffy - Leerink Partners

Exactly, because one of the pieces of feedback that I get from physicians is that it's tough to figure out who is a high-risk patient and who is appropriate for an Impella. So I know we had talked in the past about a white paper that could be coming. So just wondering if you could comment on that.

Mike Minogue

Sure. So we've had extensive publications on the PROTECT II study. So we have the first version, which covered everything, the PROTECT II in circ. Since then, we've had a learning curve paper on PROTECT II. We've had the atherectomy paper on PROTECT II. We've had PROTECT II, where we've just used the current definition of the FDA uses for a higher rate of MI 8x. And in all of those, you see statistical benefit at 90 days.

The way we would define high-risk PCI is the way the FDA has run or accepted the PROTECT II study or PROTECT I study, which is lower EF, which the cut-off point would be 35% relative, whether it's triple-vessel disease or unprotected left main with some type of complex treatment.

Also in that protocol, those are the hemodynamics and the anatomy, but what we also ask is the physicians have to believe that the patient requires hemodynamic support. So that would be the third caveat. And that population, if you look at what the balloon pump has seen in usages, around 25,000 patients a year. But we believe there is another population of patients that today or in the past were not treated in the cath lab and many today are turned down by surgeons, because the risks were from STS or SYNTAX is very high. And one thing that we've been looking at is if you look at the SYNTAX study, which was done years ago to define patients that should get a PCI as compared to CABG, patients that were turned down for surgery were put in the SYNTAX PCI registry. So again, these are patients 100% were turned down for surgery and they're listed and they're noted in the PCI SYNTAX registry. And those patients actually are not as complex as our PROTECT II patients. And we have those broken out based whether you look at rate of heart failure or diabetes or prior heart attack. They are not as sick.

And what we believe happens in the future, similar to these other technologies, is that there is going to be a population that we can enable in minimally-invasive procedure that potentially the surgeons feel are not appropriate or they prefer not to treat them with a sternotomy and an open heart. So there'll be more to follow on that. But you can imagine that there is difficulty collecting data and predicting a population that doesn't get treatment today. But generally speaking, there is a large class of patients in Class III, Class IV that have complex disease that have poor hemodynamics and are being turned down from surgery.

And just one last point on that. We're also tracking trends and if you read some of the reports up to 2013, the trends on PCI are significantly down with exception of patients that are getting PCI for triple-vessel disease or have low EF or getting atherectomy and have low EF. So that's a population we're going for. And this is a population of patients that likely in the past had limited treatment options.

Danielle Antalffy - Leerink Partners

And one follow-up question if I could. You have a competitor that's going to start enrolling a CE Mark trial and then a US trial at some point before year-end. Just wondering how we should think about the impact to 2015 sales growth guidance and what you guys have maybe included in that guidance for the competitor trial.

Mike Minogue

So the competitor is a good company and makes very nice heart pumps that help a lot of patients live and get to a transplant. So we wish them the luck on any technology that helps patients. But just to point out, we get thousands of patients before we ever did our first patient in the US. And we have eight years of clinical research. So there is a strength of having all this information. And now this segment of category will require a PMA. But we don't have anything in there for 2015, because this is a long regulatory process and we wish them luck, but know that we'll require a lot longer than fiscal 2015 in order to bring that product into a commercial package.

Operator

Our next question comes from David Lewis of Morgan Stanley.

Unidentified Analyst

It is actually James in for David. Mike, a follow-up question on the 515 process. You mentioned earlier in the call you expect the future PMA indication to broadly encompass the function of temporary support. In our prior conversations, we understood that initially perhaps the FDA would draw a distinction between high-risk PCI versus shock. Is that still your expectation?

Mike Minogue

That is our expectation. We're not proposing to get AMI shock. However, we are proposing a type of bail out or emergency support. And when you get into something like shock, now you're talking about bridge to recovery type of approach, and we will be in discussion with the FDA about using our registry to collect data to reinforce our current submission, but also use it to collect data on smaller populations that are difficult to study with the hope that we can expand our indications. But remember that our patients that are getting hemodynamic support for PCI whether they got there through either a prophylactic or emergency nature, what we're providing is temporary support to enable the procedure.

Unidentified Analyst

And to the extent that you get a label that does not initially include shock, I mean do you think that creates any marketing or messaging challenges to physicians relative to the current use in those types of procedures?

Mike Minogue

We have a 510(k) labeled today just for six hours of use to have a PMA would is really showing that you have reasonable assurance of safety and effectiveness. And again, it's for hemodynamics for procedures, not necessarily shock. We don't have that today at all. And again to point out that the practice of medicine under the 515 is all of these products are already on the market. We've been on the market for six years. So in the practice of medicine and how things are paid for, they do get very specific indications and that's what we've been evaluated for and that's where we're already currently in the guidelines.

Operator

Our next question comes from Anthony Petrone of Jefferies Group.

Anthony Petrone - Jefferies Group

Mike, maybe you could touch on Germany a little bit. That's been a source of strength for Impella post-shock and maybe just the latest trends in Germany? Are you still seeing share gains from intra-aortic balloon pump in that market?

Mike Minogue

Europe and Germany continue to be strong. And again, we want to compliment the FDA support and speed in our Impella RP study, allowed us to actually transition from doing the European study to moving directly into the US, collecting data under the US study and then using that data to submit for the CE Mark. So we're going to be again very diligent in how we roll the Impella RP out. But certainly Germany would be one of the places that we go to first to start implementing the protocol around Impella RP utilization.

Anthony Petrone - Jefferies Group

Maybe to stay on RP for a moment, can you maybe give us a look at what the US market potentially looks like in terms of uptake across the existing hospital customer base that you have and then maybe your expectations for utilization of that catheter? I assume it would be significantly lower than the 2.5 and CP, but maybe just a little bit of color around that, that would be helpful.

Mike Minogue

So we don't have it in the current numbers, but we do expect to have it at the end of our fiscal year. As far as the demand for it, I'd encourage everyone to do their surveys. Of the 865 hospitals or 859 hospitals in the US, nearly all want it and will likely order it right away. And as far as utilization, I think what we're going to propose is under the HDE we have two different discrete populations, some that are post-LVAD and some that are just right-side failure, biventricular failure. So we'll approach those in kind. But our long-term goal is to collect data and submit to the FDA, so we can have a bridge to recovery biventricular PMA approval. That way, you can use any Impella device in the left side and the RP on the right and you can do biventricular or left or right only. So that's also something we're going to be continuing to collect data on and work with the FDA for that expansion.

Anthony Petrone - Jefferies Group

What would be the timing on that expansion just maybe to follow-up there?

Mike Minogue

Our goal right now is get the HDE approved. And then in there, you have two discrete populations for the RP. There was cohorts in the HDE study. We'll give more details out of it further out. But we are already planning to collect the RP data as well in our registry post-approval.

Anthony Petrone - Jefferies Group

Last one for me is just on Japan. I know it's not in numbers here. But maybe expenses early on and sort of entering that market, are you going to be incurring expenses this year ahead of the launch? And then as you look at the market, maybe just a review again of the initial target sites you're going after and your expected utilization in that market as well?

Bob Bowen

Yes, we have $3 million to $4 million set aside in our plan for this year, some of which is currently ongoing, but most of which is we expect to occur in the second half of the year. And these are pre-revenue startup costs with regard to getting our infrastructure in place and along with clinical personnel and maybe training of clinical personnel. We're also at early stage of doing some training at the physician level. And we plan to open initially 10 to 20 sites that will be across the country. Key sites for us that will be training sites for us and we will serve those on a direct basis and then subsequently use a partner for servicing the remainder of the cath labs in Japan.

Mike Minogue

And then just on the execution again, we plan to have a hybrid model in Japan, where we have a direct team covering the top 15 to 20 sites. And then we'll partner with a strategic to cover the rest of Japan.

Operator

Our next question comes from Jan Wald of Benchmark.

Erica Layon - Benchmark

This is actually Erica in for Jan. Just have two quick questions for you. The first is on the timeframe for the 515, is the panel within that 12 to 14 months, or do you expect that to be after that 12 to 14 month period?

Mike Minogue

We expect the panel within that 12 to 14 month. But as we said, it's hard to predict, since this is the first of its kind type of approach.

Erica Layon - Benchmark

And then the second question is about the HHS investigation. Is that something that's related more around the Massachusetts laws, where it's inappropriate to buy someone a coffee, or is this on a more national basis just coming out of the Boston office?

Mike Minogue

It's more national, but we received a subpoena late Friday. So as we're investigating this, it's been fairly discreet set of materials for a fairly limited period of time. However, we believe our physician reimbursement policy has been and is compliant. And so we have to be prepared for this type of business in this regulatory world and we are. And just as a point, in the future, the Sunshine Act, this type of data will be posted on the website for all companies. So we'll cooperate and move on.

Operator

Our next question comes from Jason Bedford of Raymond James.

Unidentified Analyst

Hi. This is Mike calling in for Jason. Just first on the 2.5 PMA process, once you get approval, do you expect to see a change in practice patterns in terms of utilization? And then a follow-up to that, do you expect to change your marketing strategy at all in terms of aggressiveness with doctors?

Mike Minogue

So, Mike, we sell very clinically today. And that's why you see the amount of publications that we have. And what I do think it'll make it a little easier for us to market. We're uber-conservative today, because our focus is really just to get to the PMA and move on. And I think it will allow us a little bit more freedom. But from a general sense, I don't think you'll see a change in our kind of policy of how we interact with physicians or the hospitals.

Unidentified Analyst

And then I'm sorry if I missed this, but when we look at the 2015 guidance, I was hoping you can give us an idea of what some of the underlying assumptions were for Impella sales growth both US and OUS and then what sort of rate of new center adds we should be assuming?

Mike Minogue

I think essentially right now, the business is largely Impella business. I think most of the service revenues come from the AIC consoles, which are Impella controllers. And the only non-Impella piece of the business is the AB5000, which is about 3% of the overall. So I think you can think of the guidance to be basically Impella-based guidance. We haven't specifically split out OUS from US. So we are expected to continue to see strong growth out of OUS, and we would expect to open about the same number of Impella 2.5 sites as we have in each of the last three years. So that's somewhere around 110 or so sites. And we would expect to continue to see the existing sites for the Impella CP at about the same rate as we did in the most previous yer. So it's probably going to be around 240 to 260 sites.

Operator

I'm not showing any further questions in queue. I'd like to turn the call back over to Mike Minogue for any further remark.

Mike Minogue

Thank you. So just to remind our investors, our goal is to become the new standard of care for percutaneous circulatory support. We believe we're on track. And we look forward to another record year. Thanks for your support.

Operator

Ladies and gentlemen, thanks for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.

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