Thoratec's (THOR) CEO Gerhard Burbach on Q2 2014 Results - Earnings Call Transcript

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 |  About: Thoratec Corporation (THOR)
by: SA Transcripts

Thoratec (NASDAQ:THOR)

Q2 2014 Earnings Call

August 06, 2014 4:30 pm ET

Executives

Neil Meyer -

Gerhard F. Burbach - Chief Executive Officer, President and Executive Director

Taylor C. Harris - Chief Financial Officer, Principal Accounting Officer and Vice President

Analysts

David H. Roman - Goldman Sachs Group Inc., Research Division

Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

Lawrence Biegelsen - Wells Fargo Securities, LLC, Research Division

Bruce M. Nudell - Crédit Suisse AG, Research Division

Matthew Taylor - Barclays Capital, Research Division

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Jason R. Mills - Canaccord Genuity, Research Division

Christopher T. Pasquale - JP Morgan Chase & Co, Research Division

Danielle Antalffy - Leerink Swann LLC, Research Division

Operator

Good day, and welcome to the Thoratec Corporation Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Neil Meyer, please go ahead.

Neil Meyer

Good afternoon, and thank you for joining us today. With me is Gary Burbach, President and Chief Executive Officer; and Taylor Harris, Vice President and Chief Financial Officer. Gary will discuss highlights from the second quarter of 2014, and Taylor will review the financial results for the quarter, as well as our 2014 outlook. We will then open the call to your questions.

Before turning the call over to Gary, I want to remind you that during the course of today's conference call and the question-and-answer session that follows, we may make projections or other forward-looking statements that are subject to the Safe Harbor provisions of the securities laws regarding future events or the financial performance of the company. We caution you that these statements are only predictions and that actual results may differ materially. We also alert you to the risks contained in the documents we filed with the Securities and Exchange Commission, such as our annual and quarterly reports on Forms 10-K and 10-Q. We do not undertake any obligation to update or correct any forward-looking statements. Gary?

Gerhard F. Burbach

Thank you, Neil, and good afternoon. Thoratec reported revenues of $118.1 million, and non-GAAP earnings per diluted share of $0.43 during the second quarter of 2014. We are clearly disappointed with this revenue performance and our guidance revision, and are determined to successfully implement our plan to improve near-term results. At the same time, we remain confident in the positive outlook for our core market and the HeartMate franchise. We are also increasingly encouraged with clinical progress in our pipeline product, HeartMate III and HeartMate PHP, and the exciting potential of our recent Apica acquisition. We believe 3 primary factors continue to have a greater than previously expected negative impact on our business. These factors include an ongoing focus on adverse events, including thrombus, the growing surgical interest in less invasive implant techniques, particularly in Europe, and a lack of growth within the non-transplant or open-heart centers in the United States.

My comments today will focus on thoughts around each of these issues along with our plans to improve results going forward. I will then provide an update on the substantive recent progress with our product pipeline, which continues to bolster our conviction in Thoratec's opportunities ahead.

Beginning with adverse events, we believe perceptions about pump thrombosis since the late 2013 New England Journal of Medicine article along with greater scrutiny of clinical outcomes overall continues to be the largest factor impacting our business on a worldwide basis. While we expect that this would be a headwind during the first half of the year is now clearly the impact is persisting longer than expected. Specifically, we believe some implanting clinicians have become more selective in their patient evaluation criteria. As a result, we believe the current conversion of referrals to implants within these centers may be trending lower than historical experience, while growth in overall referrals remained less robust than we planned despite our ongoing market development efforts.

These factors are difficult to quantify with precision, although we believe the incremental changes in physician behavior are collectively having an adverse impact on both overall market growth and our market share.

Since the New England Journal article, we've engaged in a comprehensive efforts to both generate and publish a robust set of recent data supporting HeartMate II clinical outcomes. These efforts have included the broader and more favorable thrombus related data presented at ISHLT. A highly transparent discussion with our customer base about thrombus mitigation at our Annual Users Meeting in May, and focused efforts to partner with centers experiencing challenges. We've also worked with centers to help identify best practices, including implant technique anti-coagulation management and pump speed. We believe variation overtime in these 3 factors could be a contributing factor to the increase in HeartMate II pump thrombosis observed in recent years, and that focusing on consistent management will help to optimize results.

In order to validate these practices, we will be initiating a new clinical trial called PREVENT in the coming months. PREVENT will seek to generate clinical data supporting the potential to minimize pump thrombosis with HeartMate II when following specific best practices for pump implantation and patient management.

We currently plan that this prospective study will enroll up to 300 patients at 20 centers in the United States. Interest to participate in PREVENT has been very high from centers with a diversity of HeartMate II experience.

Moreover, while PREVENT will likely remain in the patient enrollment phase until late 2015, we believe the discussions and enthusiasm generated by the study could produce some benefits prior to full data becoming available, even among centers not participating in the trial.

As the company focused on delivering and maintaining superior clinical outcomes, I strongly believe we will effectively address the current clinical concerns impacting our business. We continue to believe that HeartMate II offers a best-in-class outcomes profile and remain confident in its performance. This consistently demonstrated by broader sets of clinical data, a trend we expect should continue over the coming quarters.

As examples, we believe INTERMACS will update its annual data on freedom from pump thrombosis later this year to incorporate more recent experience from 2013, which our internal data suggest should validate a stabilization of thrombus trends with HeartMate II. Preliminary results from the European arm of our TRACE study will be presented in October at the EACTS conference, and include low thrombosis and stroke rates from a multicenter experience. Moreover, we expect the ROADMAP data, which should be presented in early 2015, and which includes the 3 centers in The New England Journal article should also show a 6-month thrombosis rate in line with previously published INTERMACS data.

Furthermore, the FDA recently approved the addition of information on both the HeartMate II DT post-approval study, and a summary of available clinical information on thrombus to future versions of our product labeling. This FDA-reviewed information highlights the improvements in HeartMate II outcome such as survival and stroke, while also presenting a balanced assessment of thrombosis data that is both consistent with our perspectives in emphasizing the clinical practices similar to PREVENT protocol could help to optimize results.

The overall clinical benefits of HeartMate II continue to overwhelmingly outweigh the risks. The potential gains in survival and quality of life that far surpassed most medical therapies. While we believe the clinical community should be determine to minimize adverse events and Thoratec should help drive these efforts, we will also be focused on appropriately directing attention towards the tremendous gains in LVAD technology and successes of the therapy, which should favorably impact how physicians currently view the benefits versus risks of implantation.

Next, increased surgical preference for less invasive VAD implantation is impacting growth in our business, particularly outside the U.S., as many surgeons in Europe have adopted these approaches. While we continue to believe that HeartMate II delivers industry-leading clinical outcomes, the impact of this value proposition is challenged by the concentrated nature of the European market where some of the largest centers have also most aggressively adopted LIS as a primary determinant of device selection. Interest in LIS has also grown somewhat in the U.S., although we do not expect a broad and rapid adoption here that would materially impact our business in the near-term.

U.S. surgeons have been less likely than their European counterparts to quickly adopt LIS without supported multicenter data and the availability of enabling tools, which we believe our recent Apica acquisition will ultimately address. In addition to the less invasive trend, our field team in Europe has experienced significant turnover at both the customer facing and leadership levels. Purposeful efforts to strengthen our team have driven much of the recent turnover. We're currently focused on increasing both the size and quality of our European team, which we believe will materially improve our position as we continue to put the proper resources in place.

Looking forward, we will aggressively move to implement initiatives design to improve recent results in Europe. We're confident in our ability to address our challenges through personal investments, our sharpened focus on clinical outcomes and market development, and growing excitement for HeartMate III, which we expect that once approved, will have an immediate positive impact on our competitive position by allowing us to more fully compete in specific European centers that have heavily migrated toward less invasive implants. Furthermore, our recent acquisition of Apica, which I will discuss further in the pipeline update, provides a foundation for Thoratec to develop a best-in-class, less invasive implant platform that we expect would deliver unique capabilities in the marketplace.

At the same time, we'll not stand still in Europe while waiting for HeartMate III, and we'll leverage the enthusiasm generated by our CE Mark trial, as an opportunity to improve our current business. First, we will have an immediate renewed focus on market development after our recent execution in this area has not met expectations. We have recently expanded our organization, particularly our team targeting distributor markets in order to help address this goal. Specifically, we plan to open over 10 new HeartMate centers in Europe and the Middle East during the remainder of 2014, including our entry in the multiple new countries that will materially expand our current geographic footprint. Each of these new centers and countries has been identified and we will work diligently to meet our goal of bringing them all online in the new future. On the LIS front, we will seek to proactively facilitate training program to loyal HeartMate II customers in Europe that have expressed interest in alternative implant techniques. These programs will promote ongoing customer satisfaction and potential growth by highlighting a subcostal implant technique that is being actively practiced by a small number of clinicians.

However, we recognized that less invasive implants with the HeartMate II device are more challenging, and this international training program will not be widely promoted beyond Thoratec customers expressing significant interest. While our European business does face headwinds, we do believe that the strength in team executing in our initiatives should favorably impact performance.

Outside of Europe international revenues were also negatively affected by the expected reduction of sales in Japan during the second quarter, as market dynamics and distributor stocking patterns are impacting this business. While Japan continues to represent our most compelling geography for long-term expansion, the market is in early stage of development and HeartMate II implant volumes have declined recently after a period of rapid initial growth following our commercial launch in 2013.

We've stated that realizing the potential opportunity in Japan will depend upon market development and building clinical infrastructure along with receiving a Destination Therapy approval. While we continue our development efforts in Japan, this market remains nascent with recent competitive entrants and a unique dynamic where clinicians are utilizing VAD technologies that have minimal adoption throughout the rest of the world. These trends continue to limit the growth of HeartMate II as our market leading share position has declined from peak levels against the backdrop of flat overall implant activity.

With regard to the ongoing regulatory process in Japan, we continue to hold discussions with both the government authorities and influential medical societies about DT approval for HeartMate II. In spite of a wealth of worldwide data, we now expect a small trial in Japan will be required to receive this approval. We have not yet finalized the follow-up period required for a DT trial, although this regulatory pathway will elongate the approval process and limit our opportunities for near-term growth with only a bridge indication.

We did realize approximately $1.5 million of HeartMate revenue in Japan during the quarter and expected reduction compared with the significant first quarter stocking activity. However, the result of lower-than-expected implant volume, channel inventory in Japan has remained at elevated levels and we now expect minimal or no additional HeartMate revenue in Japan during the remainder of 2014.

In the longer-term, we continue to believe Japan could become one of the largest international VAD markets, and will continue to pursue this opportunity as the industry leader through additional clinical data and market development, pursuit of DT approval for HeartMate II and seeking to minimize our time to market with HeartMate III.

The third primary factor impacting our outlook is the slowdown in growth among our smaller open-heart centers in the U.S. This group now includes 60 centers without transplant programs that have historically been among our fastest growing customer segments with growth of almost 40% in 2013.

We expected this trend of positive growth would continue during 2014 and counter balance some of the anticipated headwinds in larger U.S. centers, related to the ongoing destination therapy trial and increase center footprint for HVAD.

However, sales volume in our OHCs has instead declined by 5% in the first half of 2014 compared with the second half of last year due to specific issues impacting these centers. In addition, the current dynamics in the overall VAD market, we believe the Medicare NCD issued in late 2013 continue to negatively impact OHCs specifically. During our last earnings call, we discussed how disruption in securing approvals from transplant facilities related to the MCD implementation limited OHCs implants activity, particularly within bridge to transplant cases.

This dynamic has continued, manifested by significant ongoing declines in BTT implants within open-heart centers since the NCD took effect. Moreover, we now estimate the NCD is currently having a net negative impact on our overall business as the tailwind of increased reimbursement classification within DT is being more than offset by the shift of volume away from OHCs.

However, we continue to believe in the growth opportunities with open-heart centers and view the unexpected NCD impact is temporary in nature. We will focus on actively helping centers to solidify appropriate relationships with transplant facilities that will allow these OHCs to resume growth.

Included in this effort is the OHC summit attended by 24 customers that we mentioned last quarter, and which cover discussion of issues unique to these centers including the topic of transplant facility partnerships. Although still early to fully assess, we believe this event was able to have positive impact on centers that attended with these customers experience a sequential uptick in implants activity during the second quarter, compared with the lack of growth in the remaining group of OHCS. We plan to sponsor additional peer-to-peer events specifically for OHCs throughout the rest of this year that should help to address current concerns, and while the NCD-related disruption will take longer than expected to resolve, we remain confident that our significant resources available to these customers will prove effective in this endeavor.

In addition, we expect center development efforts will also help to restart growth among the OHCs. We opened one new center during the second quarter after adding none during the first quarter and expect to add at least 3 new OHCs during the second half of 2014.

More importantly, we continue to increase our ability to effectively identify the highest quality candidates for new centers, and expect that our current development efforts will yield a higher conversion of new centers in the meaningfully productive VAD programs going forward.

Joint commission certification for Destination Therapy is another driver of expected growth for an OHC program. While no additional centers received DT certification during the second quarter, we expect that 8 sites will reach this goal during the remainder of 2014. Receiving this important designation should allow these programs to broaden their activity in the future.

Each of these OHC-focused initiatives will take time to mature and we now assume volumes in this segment during the remainder of 2014 will persist to current levels. This lower level of performance and assumed growth in OHCs accounts for approximately 1/4 of the overall reduction in our revised outlook for the year.

Turning to the product pipeline, we continue to see this is as an area of opportunity and good news. We're very excited that CE Mark clinical trials for both HeartMate III and HeartMate PHP have now started. And believe that reaching these important clinical milestones are critical as we remain on track to achieve commercial approval for both devices in Europe next year. Additionally, we recently acquired Apica Cardiovascular, which we believe adds to our ongoing development efforts to further strengthen both the HeartMate product line specifically, and our industry-leading pipeline overall.

With regard to HeartMate III, the most significant news is our commencement of the CE Mark clinical trial, which we announced in late June. As a reminder, this important clinical achievement marks not only the beginning of our European regulatory approval process, but also the first human implants of our next generation pump platform.

The first 2 patients in this trial received implants in Germany and Austria and total enrollment in the trial has now reached 12 patients at 5 sites. While it remains premature to draw any clinical conclusions given the early and limited stage of experience with HeartMate III, we're encouraged by the strong desire from centers to enroll patients in the trial and the overall positive feedback from implanting surgeons.

Although, we started the trials slightly later in the year than originally planned, enrollment has proceeded at a quicker than anticipated pace, and we continue to expect that we will complete enrollment of this 50-patient trial by the end of 2014.

We believe this should position HeartMate III to receive CE Mark approval in late 2015 after a 6-month follow-up period and regulatory submission. In the U.S., we submitted the IDE in late June and recently received conditional approval from the FDA for the initial safety phase of our HeartMate III study. We are working with the initial group of U.S. centers to secure final site approvals, which should put us on track to start enrollment in the U.S. clinical trial in the near future, ahead of our original schedule.

Our U.S. regulatory plan remains for a randomized non-inferiority trial versus HeartMate II, designed to generate data for both a short-term bridge to transplant indication and a long-term Destination Therapy indication in 1 study that will accept advanced heart failure patients subject to a universal enrollment criteria. We believe our pre-clinical activities in the U.S. as we prepare for this trial should further build enthusiasm for both HeartMate III and Thoratec generally.

In early July, we announced the acquisition of Apica, which develops implant systems and devices for transapical surgical access currently applicable to valve procedures, and ultimately expected for use during LVAD implantation. We believe this exciting acquisition will further strengthen and differentiate our HeartMate product line, once the Apica VAD surgical implant system, or SIS, is fully developed. The SIS is specifically designed to enable both less invasive and off pump VAD implants without the use of cardiopulmonary bypass. While we recognize the growing surgical preference for these techniques going forward, Thoratec has always remained focused on optimizing clinical outcomes.

We believe that customized products to effectively enable wider surgical adoption in a manner that ensures consistent and reproducible results without compromising clinical quality are crucial for both our company and the therapy in general. We believe the VAD SIS represents the most effective and elegant approach available to address these important needs over time. The SIS will use the same proprietary coil and one way valve technology to provide suture-less access to the left ventricle with minimal blood loss that has proven to be affective in Apica's current transcatheter valve product. We expect this novel technology will be ready to enter clinical trials in Europe, shortly after our expected CE Mark approval of HeartMate III.

While the VAD SIS remains in development stage and benefits from the Apica acquisition are not immediate, we are very excited about the potential to further differentiate Thoratec technology in a meaningful way, as availability of the SIS product for use with our HeartMate product line should influence the competitive landscape.

With regard to HeartMate PHP, our acute percutaneous support system, we reported today that enrollment in the CE Mark trail has commenced with a series of patients treated recently at 2 sites in South America. This study will examine the use of PHP to provide prophylactic support of patients undergoing a high-risk PCI procedure. We expect to enroll up to 50 patients in the study from sites in Europe and South America, and continue to expect a CE Mark approval for PHP in 2015.

During the initial set of 9 cases in the CE Mark trial, the device performed as designed and physician feedback was highly enthusiastic with regard to both use and performance.

Additionally, we remain on-track to begin an IDE trial in late 2014, examining urgent multi-day PHP support in patients suffering from cardiogenic shock. We have received positive feedback from FDA on protocol design that should allow us to submit the IDE later this month.

In addition, we will also seek to complete a small series of cardiogenic shock patients outside the U.S. before starting this trial. Thoratec continues to believe that HeartMate PHP will offer clinicians a breakthrough technology for treating patients requiring acute hemodynamic support. Once approved, the PHP along with CentriMag will uniquely enable Thoratec to offer a full suite of acute circulatory support devices for use in both surgical and percutaneous applications.

In closing, I'd like to be clear that neither I nor anyone else on the team is satisfied with our recent results. However, our recent performance does not reflect the strong potential of our company and the opportunities ahead. We will work diligently to implement key initiatives necessary to achieve our vision. The capability of our leadership team, dedication of our field force and commitment to product innovation has never been greater at Thoratec. We've made significant clinical progress with our pipeline products that will build the foundation for sustainable future growth. I believe that we can and will execute to our potential and that despite current setbacks in our business, the opportunities for Thoratec remain compelling and unchanged.

With this in mind, we have also announced an accelerated stock repurchase program today that reflects our conviction in the business.

I will now turn the call over to Taylor, and look forward to answering your questions following the financial review. Taylor?

Taylor C. Harris

Thank you, Gary. Before reviewing our results, I want to remind you that non-GAAP net income excludes the tax affected impact of amortization of intangible assets, share-based compensation expense and acquisition-related expenses, including transaction costs, inventory fair market adjustments and contingent consideration adjustments. You can find a reconciliation between our GAAP and non-GAAP results in our earnings press release at www.thoratec.com.

Thoratec generated revenues of $118.1 million during the second quarter, a 10% decrease compared with revenues of $130.5 million in the second quarter of 2013. The lower revenue was primarily due to the decline in HeartMate II, and was partially offset by continued double-digit revenue growth in our CentriMag business. PVAD revenues were also stronger than expected during the second quarter, particularly in the U.S., although we do not view this as sustainable, and still believe that PVAD will continue to moderate overtime.

As a reminder, PVAD sales are no longer included in our quarterly pump unit disclosures. In terms of geographic breakdown, we reported revenues of $94.2 million in the U.S., a decline of 5% compared with the prior year, while international revenues declined to $23.9 million compared with $31.7 million last year. The international decline was spread across Europe and Japan, both of which experienced their most difficult quarterly comparisons of the year during the second quarter. Changes in foreign currency positively impacted total revenue growth by 90 basis points compared with the second quarter of 2013.

During the second quarter, we shipped 863 HeartMate pumps worldwide, a decline of 16% compared with the second quarter of 2013. Included in this figure are 4 HeartMate III pumps that were shipped internationally for the CE Mark clinical trial during the second quarter. Domestically, HeartMate II unit volume declined 10% compared with the prior year as volume was primarily impacted by the issues Gary discussed earlier. Internationally, HeartMate unit volumes fell 30% due to competitive and market dynamics throughout Europe and Japan.

On a sequential basis, our European direct business in markets, including Germany and France was stable. However, shipments into Japan declined by 50 units compared to the first quarter due to the large stocking order that we had previously noted. And our EMEA distribution business declined as well leading to an overall sequential decline of 70 pump units.

Our CentriMag acute surgical product line continues to perform well with revenues of $13.1 million during the second quarter, an increase of 14% compared with the prior year. Growth in pump units was the primary driver of our results in the quarter with double-digit unit increases in both our U.S. and international business, including particularly strong demand in United Kingdom and Latin America during the second quarter.

CentriMag revenues during the quarter also benefited from higher than expected non-pump sales in the U.S., related to increased console purchases, which we estimate added approximately 6% to revenue compared with the prior year.

We believe CentriMag remains well-positioned as a premium product in the acute surgical support market and that adoption will continue to increase.

Moreover, we remain focused on our clinical efforts to expand utilization, including pursuit of an integrated oxygenator and an approved 30-day indication, both of which we see as important to the long-term sustainability of CentriMag growth.

Non-GAAP gross margin for the quarter was 72.4% compared with 70.4% in the second quarter of 2013. The increase in gross margin during the current period is due primarily to favorable manufacturing absorption variances, as well as underlying efficiencies. For the first 6 months of 2014, non-GAAP gross margin of 70.9% declined slightly from 71.2% during the same period last year. Non-GAAP operating expense for the second quarter was $50.3 million, an increase of 5% from $47.7 million in the second quarter a year ago. This increase is primarily due to the incremental expenses attributable to the DuraHeart II program, which we acquired in the third quarter of 2013 and the timing of sales and marketing expenses.

Second quarter operating expenses were reduced by approximately $2.5 million on a year-over-year basis and approximately $1.5 million sequentially, due to lower incentive compensation as a result of our reduced 2014 outlook.

Year-to-date, total non-GAAP operating expenses increased 2% compared with the first 6 months of 2013.

On a non-GAAP basis, the effective tax rate for the second quarter was 32%, up from 31.5% in the prior year. For the first half of 2014, our non-GAAP effective tax rate of 32.4% increased over 200 basis points compared with the first 6 months of 2013. The increase in our tax rate in 2014 is associated with the lack of federal R&D tax credits, in the absence of an active legislation.

Non-GAAP earnings per diluted share in the second quarter were $0.43 compared with $0.52 in the prior year. Weighted average diluted shares outstanding for the quarter were 57.2 million down from 58.1 million in 2013 due to share repurchase activity over the past year. Our financial position remains strong with approximately $295 million in cash and investments and no debt at the end of the second quarter. Early in the third quarter, we funded the $35 million Apica acquisition out of this cash balance. However, we utilized offshore cash for this transaction, given Apica's domicile in Ireland, leaving us with approximately $260 million of cash, almost all of which is located in the U.S.

Our top priority for capital allocation remains to preserve the ability to fund internal growth initiatives and strategic investments, including opportunities such as Apica. While we will also take a disciplined and opportunistic approach to share repurchases, we repurchased $25 million of stock during the second quarter, and the $30 million accelerated share repurchase announced today allows us to deploy capital at attractive levels relative to our long-term opportunity. While also maintaining flexibility to evaluate additional strategic and share repurchase activity going forward.

We're revising 2014 financial guidance to account for lower-than-expected results in the second quarter, along with our current assessment of the challenges that will continue to impact our business during the second half of the year. We now expect revenues in the range of $455 million to $470 million and non-GAAP earnings per diluted share of $1.25 to $1.35. The revision in our revenue guidance is driven entirely by lower assumptions for our HeartMate II product line as a result of the near-term challenges discussed on this call.

As a reminder, our prior 2014 guidance assumed double-digit market growth with growth dynamics improving during the middle part of the year. We haven't yet seen this improvement materialize and our revised guidance assumes that the overall product VAD market stays relatively stable in the second half of the year relative to the first half, leading to full-year market growth in the single digits.

Our prior guidance had also assumed an ability to recapture a portion of the market share losses experienced early this year. However, given the trends experienced through midyear and the likely uptick in competitive clinical trial activity for the next few quarters, our revised guidance reflects modest share loss in the second half of the year.

Our assumption for non-GAAP gross margin has been revised to approximately 70.5%, modestly below the level experienced in the first half of the year due primarily to the reduced volume outlook. We continue to expect that operating expenses will increase during the remainder of 2014, with the ramp of our clinical trial activity, targeted commercial investments and approximately $3 million of expense related to Apica.

However, our spending outlook is lower now than it was at the beginning of the year in large part due to reductions in incentive compensation. We believe in the long-term effectiveness and returns associated with our key product development in commercial initiatives, and we plan to continue funding these priority areas in order to drive future growth.

At the same time, we're committed to discipline and focus in terms of our expense base, particularly in light of our reduced near-term revenue outlook. We have a highly leverageable business model, which in the past has allowed us to drive significant margin expansion, but for the balance of 2014, this leverageable and, therefore, deleverageable business model is the primary driver of a disproportionate reduction in our guidance for earnings relative to that revenue.

Turning to our tax rate. We are now expecting a full-year 2014 rate of approximately 31% including 100-basis-point benefit from the federal R&D tax credit that we expect to recognize later this year following legislation to extend the program. This tax rate forecast is lower than our previous guidance due primarily to a higher anticipated mix of earnings generated in lower tax jurisdictions.

While second quarter results represent a near-term setback relative to our expected performance, we do view this challenging period as transitory in nature, and we have the financial flexibility to continue to invest in our business and to pursue growth enhancing opportunities, while at the same time returning capital to shareholders. I share Gary's optimism about the future for Thoratec based on the unmet market need and the performance profile of our existing products, as well as the potential of our next-generation devices, HeartMate III and HeartMate PHP, which form the basis of a significant value creation opportunity.

We thank you, again, for joining us today. We will now open the call to your question. [Operator Instructions] Operator, we're now ready to begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] We will go first to David Roman with Goldman Sachs.

David H. Roman - Goldman Sachs Group Inc., Research Division

I want to come back a little bit more to what's going on in the end market here, because when you add up both you and HeartWare having reported here for the second quarter on a unit basis it looks like the global market was down just to add with most of that pressure coming in the U.S. And Gary, I understand, in your prepared remarks, you talked about some of the smaller centers obviously, having a more acute impact on your business, but could you maybe just put in broader context what you think is really going on here, why the market has stalled out and what it really is going to take to reinvigorate the growth profile here?

Gerhard F. Burbach

Sure. Yes, as we -- as I mentioned, in my comments, we believe that thrombus and the kind of general adverse events kind of the impact is the most significant factor, both in terms of the kind of market growth and the slowing that we've seen in market growth. And it's also, obviously, for us impacted our market share. So that certainly is our #1 priority amongst the various things that we talked about during the course of our comments.

Number one, definitely is focused on that issue, regaining confidence amongst the clinicians that have some question marks at this point about how aggressively they should be using the therapy, both by giving more confidence around thrombus and the level of risk that there is associated with that being less significant than what was portrayed in the New England Journal, all the other data, is showing a pretty consistent profile, be that our data, the INTERMACS data, data that came out of ISHLT from some other groups of centers. We're certainly very encouraged by the additional FDA approved labeling that we will be rolling out that again is consistent with that message around that thrombosis risk, what it is. And then also some ways to utilize the device that hopefully will minimize that potential risk. So continuing to drive that messaging, using some of the additional information, some of the additional data that we have to more effectively drive that messaging here through the back half of the year, also to enhance the recognition of the value of the therapy that obviously, dramatically outweighs those risks and again that labeling that we just received approval on from the DT post-approval study will be beneficial we believe in that regard. And other key focus area associated with kind of this particular issue is the PREVENT trial. So we're in the process of bringing centers into that trial. I mentioned there is a high level of interest. And so I do expect that that's going to have a benefit here, during the course of getting the trial started and enrolling the trial, not just waiting until the results of that trial occur. And during the course of bringing trials into the -- sites into the trial, we're able to have conversations with them around these key criteria in terms of implant technique, pump speed management, anti-coagulation management. And we're able to have those conversations with a broad range of centers that do have concerns around thrombus. And so I think the PREVENT trial should be a real enabler to improve those -- our ability to deliver that message and drive that message here in the back half of the year.

David H. Roman - Goldman Sachs Group Inc., Research Division

Okay. So I guess, if I try to put all that together, there are clearly a number of moving parts here. And I guess would you disagree with the statements that really to get this market going again, you're going to need all of that data that you just referenced to get broadly disseminated and accepted and then the real kicker is going to be when safer devices come to market that potentially directly address some of the safety concerns and hence we're talking about market reacceleration in 2016 and beyond with the advent of HeartMate III and other such devices?

Gerhard F. Burbach

Yes. So certainly, I think the first part of your statement that kind of effectively delivering those messages, getting some of the clinicians, there's not a kind of broad base kind of every clinician has this concern. It is a targeted population. So it's really focusing in on that universal clinician and advancing their thought process forward in terms of this risk reward trade-off is a key to reenergizing growth with the current generation of device, in particular HeartMate II. Certainly, I believe that HeartMate III then represents kind of another higher level of potential growth. And I believe that, that can have an impact not just as you get to commercial approval, but also as you are in the clinical trial. And these centers are very actively engaged in trials and recruiting patients into trials. And so I would expect that, as we move from the safety phase of the trial here this year into the broad-based phase of the trial next year, that will be a positive catalyst in 2015 in the United States and then in Europe, with an approval late in 2015.

Operator

We will go next to Steven Lichtman with Oppenheimer.

Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division

I guess, just first, Gary, in Europe, if you think about the different components, how much of the impact do you think, what is the thrombosis issue versus some of the changes that you're making in terms of personnel versus the minimally invasive trend that you're seeing in Europe, anyway you can kind of give us a sense of which is there one that's sort of much more impactful as you talk to the guys on the ground there?

Gerhard F. Burbach

Yes. In Europe, the thrombosis I think is the kind of primary overhang on growth. So similar to the United States in that regard. In terms of the share dynamic, in Europe, LIS, and then some of our executional capabilities, particularly in some of these newer markets, I think have been a significant impact in terms of our share position and something that we're certainly expecting to impact here as we work through the back half of the year, bring a broader range of centers on board in some of those distributor geographies. But so it's a little bit of a split between whether you're talking about market growth where I think it's predominantly thrombus or share where it's more been LIS as a core component, and certainly see this distributor opportunity as one of the areas that will also be focused on in Europe here in the back half along with the thrombus types of initiatives that I mentioned relative to the U.S.

Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division

Okay. And then just in the terms of the U.S. referrals. I mean you've talked about post the first quarter, you got ISHLT, which was more balanced, you had the users meeting. I guess there were some editorials to the New England Journal, how much of that information has been sort of disseminated into the field to the referring docs? And is that not having any sort of impact at that point, because the sense was that things are -- have gotten more balanced since November?

Gerhard F. Burbach

Yes. I think what the -- the key with the referring community is really impacting the implant that's kind of universe of implanting physicians that are kind of a bit more reticent to drive the therapy aggressively. Because where we have them on board, we're able to drive the activity in the referring community. So I think the lynchpin, the good news here I believe is that the lynchpin isn't the kind of very diffuse referring community, the lynchpin is really the much more concentrated set of physicians that are at the implanting centers, and kind of a defined universe of those centers, where we're seeing less traction in terms of growth and more concerns around some of these adverse events.

Operator

Our next question we will go to Jayson Bedford with Raymond James.

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

It looks like you're now forecasting market growth kind of mid-single digits maybe high single digits, I'm wondering if you can give your assumptions around U.S. versus international growth?

Taylor C. Harris

Sure. Jason, its Taylor. Yes, you're right. As you look on a full-year basis, as well as in the second half of the year, that's right. I'd say, we are assuming a little bit higher growth outside the U.S. than we are in the U.S. But just generally speaking the way we built the expectation for the full year was seeing this air pocket of growth that we've entered here midyear, and just assuming that we stay in that for the balance of the year, such that the second half of the year is very similar to the first half of the year in terms of absolute volume of implants.

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

And just as a follow-up on that. Can you give us what percent DT implants were in the quarter and then, how quickly do you think the bridge market is growing?

Taylor C. Harris

Sure. Yes, Jason, it's -- we still think it's over 60% of our U.S. Business. This one is a bit hard to gauge just because there has been a change given the NCD in the way physicians classify implants. So if you look just precisely at the data we see, it would suggest that the bridge market has been down modestly this year, but we do think that part of that is probably this reclassification affect.

Operator

We'll take our next question from Larry Biegelsen with Wells Fargo.

Lawrence Biegelsen - Wells Fargo Securities, LLC, Research Division

I just wanted to clarify on the market growth. I have for the first half about 10%, 11%. What do you guys have? And I just wanted to just be clear on what you're expecting for the market in the second half, because you said you expect it to mirror the first half? And then I had a follow-up, so I'll just pause it there.

Gerhard F. Burbach

Yes. Mirroring the first half, Taylor was referring to the absolute volume of activity not the percentage of growth.

Taylor C. Harris

Yes, so Larry you're right. Our numbers conform with yours that the overall worldwide market grew 10% roughly in the first half of the year. The implication for the second half of the year would be lower growth, a single-digit growth, because there's a tougher comparison against the second half of last year.

Lawrence Biegelsen - Wells Fargo Securities, LLC, Research Division

I got it. That's helpful. And then third quarter versus fourth quarter, I'm just wondering if you can share anything that you're seeing with us through July. I mean do you expect a recovery in the third quarter, do you expect that kind of to be even third quarter and fourth quarter? And I just wanted -- and then just maybe, Gary, any color on how to think about preliminarily 2015? Obviously, we have to update models here today. I know you're not giving guidance, but any thoughts you can share with us on how to think about 2015 and I'll drop?

Gerhard F. Burbach

Sure. Yes, obviously, we don't give specific quarterly guidance. I guess 1 thing I would point to is that we do have pretty consistent seasonality in terms of the summer being softer. Q3 being softer than Q4. So that's the pattern that we've seen pretty consistently over the years. Relative to 2015, I think there are a number of important factors to point to relative to Thoratec. Certainly, there's the HeartMate III trial. As I mentioned earlier, we expect to be going through the safety initial phase here in the balance of 2014 and just to give you some additional specifics around that, that's 30 patients randomized one-to-one between HeartMate III and HeartMate II. The first 10 HeartMate III patients after 30 days of follow-up, we submit that to the FDA for review. They have 30 days to review that. And hopefully, at that point, would give us the okay to broaden to the full-blown pivotal trial. So we'd expect that in 2015, we'd be kind of ramping that trial broadly and that, that would have a positive impact on our business in 2015.

From a competitive perspective, we're also expecting that HeartWare will finish the enrollment in their DT trial in the early part of '15, and so that would reduce the headwind that we'd be facing, that's certainly a significant part of what's happening during 2014. To a lesser extent, HeartMate PHP, we expect will get an approval in Europe and then HeartMate III in the latter part of 2015. So those I think will be less significant in absolute dollar impact perspective in 2015, but those are few that kind of major factors that I think you should be incorporating as you work on your 2015 numbers.

Operator

We will take our next question from Bruce Nudell with Crédit Suisse.

Bruce M. Nudell - Crédit Suisse AG, Research Division

Gary, the -- my impression on ISHLT is that there's just a growing awareness of the overall burden of the therapy in the management -- long-term management of the patients, so like we talk to doctor recently and he basically said, a relatively high percentage of the patients are in the hospital in any one given time. And that there's a lot of interaction between anti-coagulation pump speed, thrombus, bleeding, right ventricular failure, aortic valve incompetence, et cetera. Do you -- what is it really -- David's question? I mean what's it going to take, I mean what compendium of data that you think is necessary to get the market back to the targeted 15% worldwide growth rate?

Gerhard F. Burbach

Right. Yes, well, I think it is important to put that kind of as you put it, burden into the context of the impact on patient outcomes. So I'm certainly, quite enthusiastic about this new set of data that we're adding to the FDA labeling, which can bring the conversation back to not just focusing on the adverse events and kind of an increase in thrombosis, but really to, what's the impact overall on patients' lives, survival, quality of life. And that reality is, that adverse events, as you look at the totality of the adverse events from the DT approval 4 years ago to today in terms of those rates as you look at the compilation of stroke, infection, bleeding, thrombus, device replacement, is down on an events-per-patient year. So it's really a matter of -- kind of intensive engagement with the physicians we are looking to bring more clinicians here to our site during the course of the back half of the year to really engage them kind of over the course of a day in that kind of more engaged review and discussion of the outcomes. Again, really kind of getting back to basics of the impact that we're having on patients lives and kind of pulling them away from some of those day-to-day challenges. And I think the key is for programs to catch-up in terms of staffing, I think, a number of the programs need to add VAD coordinators, cardiologists to really distribute that burden of follow-up care as their census of ongoing patients, not just patients that are in the hospital, but the ongoing universal patients that are out there in the community and that are generally living phenomenal lives goes up. That's been going up dramatically now for 5 years. So I think that's really the key. I don't think we have to generate a new set of data. I think it's really engaging them with the data and the experiences that we have now. Certainly, there is more data that will continue to come from various studies that we perform like SSI, TRACE, data will continue to come from those, ROADMAP will roll out at the beginning of next year at the ACC we expect to see that data come out, and then as I mentioned PREVENT, which we expect will be a very positive experience in that regard as well.

Bruce M. Nudell - Crédit Suisse AG, Research Division

And so just with regards to the thrombus rates within -- with HeartMate II, where do you think they really are? And secondly, could you just recap when we're going to get data updates on the rates that are achievable with best technique and best medical management?

Gerhard F. Burbach

Yes. So all of our data shows that the rates have stabilized now for well over a year. It depends on how many months follow-up, et cetera, you're talking about, but at 6 months, about 6% kind of is the rate that we've seen of stabilization around, as I mentioned now for some time. In terms of the best practices, we believe we see that in the data that was presented at ISHLT by that group of 7 centers. We have the best practices around implant technique, pump speed, anti-coagulation management that we're rolling into the PREVENT trial. So there will be additional data that comes out of that PREVENT trial, but I believe that we have the data today that shows, hey this is stable, it's a known risk with best practices. Here's the rate that we believe that is achievable and is less than that overall experience. And now we are looking to prove that with a broader universe of centers in the PREVENT trial.

Operator

We'll take the next question from Matthew Taylor with Barclays.

Matthew Taylor - Barclays Capital, Research Division

I wanted to first ask about the program that you have outlined here with open-heart centers. I guess, can you talk about your expectations for the effectiveness of establishing these relationships with transplant centers and over longer period of time, how do you think these open-heart centers will grow, do you think any of them are going to move away from doing VAD implants altogether?

Gerhard F. Burbach

Yes. So it's another key focus area here in the back half of the year is to engage in working with them and with transplant center partners to really kind of work through some of the challenges that they are having and, hopefully, get them back onto a growth pathway. So certainly, our objective is the back half of this year to have worked through the core of those and moving that group towards the growth profile as we work through the back half of this year. I think that both of them will continue in the therapy and are committed to the therapy. They're certainly a portion of them that I think will fall out and kind of won't ultimately turn into scalable centers. That's one of the thing that I mentioned. I feel like over the last year or so, prior little more than a year, we've gotten quite a bit better at targeting centers that are going to be -- more likely to remain committed to the therapy and ramp-up successfully. So I think there will be some fall out, but I don't think it will impact our ability to grow this universe of centers. So the fallout will really come from centers that really haven't gotten started and fall out, but that the core of the group will remain, will work through this particular issue and get them back onto a growth trajectory.

Matthew Taylor - Barclays Capital, Research Division

And then just on HeartMate III and PHP, when you think you might be able to share in the next update or any color on the performance that you're having with some of your first experiences here?

Gerhard F. Burbach

Yes. So we will certainly keep you updated on enrollment in the trials. So that you will be able track our progress around getting the trials enrolled and then how that should translate into the regulatory process. We don't have a specific plan at this point in terms of release of the clinical data, but, I think, generally, you should expect that, we would get through the enrollment, through the follow-up period before we would release data that comes out of those trials. So that will happen earlier for HeartMate PHP, given that it's a 30-day follow-up period. So we would expect to enroll that trial this year and so kind of by early next year, we should be at that point versus with HeartMate III it's more like the middle of next year before we would be through that 6-month follow-up period.

Operator

We will go next to Bob Hopkins with Bank of America Merrill Lynch.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Just a couple of quick questions. Gary, I've heard everything you had to say. I'm just curious. Do you think that the global LVAD market can get back to double-digit growth in 2015, based on everything you're discussing today?

Gerhard F. Burbach

Yes. We can't -- we're not ready to make that specific kind of guidance statement relative to 2015, Bob. But I'm, certainly, more optimistic about '15. And given some of the positive drivers that I mentioned for Thoratec in terms of the HeartMate III trial in the U.S. some diminished competition from the HVAD DT trial, as well as the approvals that we're expecting for HeartMate PHP and HeartMate III.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Sorry, I was asking about the LVAD market, not about Thoratec guidance for 2015. I'm just curious you gave single-digit guidance for this year for the global LVAD market. I'm just curious if based on everything that you're talking about with the trial and getting in front of doctors and the label, if you think the LVAD market can reaccelerate to double digits in 2015?

Gerhard F. Burbach

Yes, Bob, we're just not going to give market guidance for 2015 right now, but what we have said is that the issues that we think are hampering the market right now are transitory in nature. We, earlier this year, said we thought we could start moving through that in the middle part of this year. That as we're updating guidance right now, we don't think that's the case. And so we're just not ready to call the exact timing on that, but we do think these are transitory issues that we're working through.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Do you think the issue is more related to referring doctors or implanting doctors?

Gerhard F. Burbach

We believe it's more implanting doctors, that a subset of those implanting doctors, cardiologists in particular have gotten a bit more conservative in terms of some of the patient selection criteria, also impacts kind of their activity in driving that referral process. So we believe that if we can get those doctors over the hump, that driving the referral activity really shouldn't be impaired and that the referring physicians, there's not kind of another barrier there. That's really the core of it is in the implanting centers.

Operator

We will go next to Jason Mills with Canaccord.

Jason R. Mills - Canaccord Genuity, Research Division

Gary, I'd like to follow-up on Bob's last question and your comment. Is the -- it's was a bit surprising that you're seeing more of the barrier on the implanting side. And so that could be the case is just in some of the due diligence we've done it, it seems to be more on the referring side. I know years ago, the referral physician was definitely the primary barrier and certainly saw that change albeit glacially over the last 2 to 3 years or 5 years and it improved. But what we've heard is, definitely, New England Journal medicine article is causing some referring physicians in the field to take a step back. So I'm wondering if you could help differentiate what you mean by that, when you're talking about more of the barrier coming from the implanting physicians, is that more of the cardiologists working for them as they work, those cardiologists work with field, heart failure cardiologists in patients selection. So it really is more of a referral than -- referral issue than it is in implanting surgeon issue not wanting you do the procedure because it seems like the implanting surgeons profitability is pretty good for hospitals, they're getting leaned on, et cetera. It seems like the environment is decent at the implant centers.

Gerhard F. Burbach

Yes. No, I'm not referring to the implanting surgeons. I'm referring to the heart failure cardiologists, which in the center, which are not just the heart failure cardiologists that kind of are the leads of those programs. There's kind of a broader population of heart failure cardiologists in those centers that are responsible for managing and for determining, which patients that they're managing are going to get referred for a potential implant. So there's obviously 2 levels of referral. There is kind of the referral from out in the community and there's them within the center itself. So that's the group that I'm talking about is the group in the center, because that group, when they're kind of engaged, committed driving the therapy which we see still at many of the centers. So I want to be clear that there's not kind of a universal dynamic. There's kind of a range of behavior that's going on. And so it's where we have centers, where there is not the same level of enthusiasm and they're not as actively engaged in outreach out into the community and really getting those primary referring cardiologists from outside the implanting center bringing the patients in. Though if we have that group at the center engaged, the cardiologists as well as the surgeon, the referral channel will happen.

Jason R. Mills - Canaccord Genuity, Research Division

Okay. That's helpful. And along that same vein, also you mentioned that there are several centers within your customer base that are doing just fine, and others aren't. It's interesting as we've seen some of the same things, where it seems like some centers are growing 2x their program year-over-year and others are declining. So there's definitely a dichotomy there and also it seems like, perhaps, some of the centers that were historically really big sort of pioneering implant centers may be growing little slower than some new up and coming programs that are at implant centers, not the OHCs that you talk about. Could you talk about whether or not you're seeing that phenomena as well. And whether or not there's sort of a shift in the balance of power among centers in this country and whether that's having an impact on sort of the transition in the market and growth?

Gerhard F. Burbach

Yes. I don't think I'd use the term balance of power, but in terms of where is some of the greatest growth happening? Certainly, I would agree that it's -- at a lot of centers that have been at 20, 30, 40 implants versus the very largest centers, which is a bit of a natural -- it kind of gets harder as they get extremely large to kind of drive that same pace of growth, to drive 15%, 20% plus growth versus that kind of a 30, 40, 50 patient size. It's easier to drive that kind of more aggressive pace of growth, but the themes that you describe, I would say are consistent with what we see.

Operator

We will go next to Chris Pasquale with JPMorgan.

Christopher T. Pasquale - JP Morgan Chase & Co, Research Division

I just want to follow-up on the comments around the heart failure cardiologists, here is the real bottleneck in the market. You build a referral focused sales force over the past few years. I believe to target to those guys in particular. Can you just provide an update on the size of that group, whether you made any changes there or intend to make any changes going forward, and whether that can be an effective tool to help trying to resolve this particular issue?

Gerhard F. Burbach

Yes. So we have about 40 people in that group, Chris. We have added a few people and are looking to continue to add to that group, just given the importance of this as a bottleneck in the process. We feel like those investments are still merited and you know that, we need to continue to hone in on those physicians, drive aggressively with those that are committed, ready for growth per the last question. There are many of those centers, so really redouble our efforts there. And then with those that are not really driving for growth right now work through that process of getting them reengaged and providing them the support to be able to get back onto a growth track.

Christopher T. Pasquale - JP Morgan Chase & Co, Research Division

I would assume that that's a group that's relatively close to the clinical data in the field, certainly, much closer than the true referring cardiologist who is dealing a lot of other stuff. And I'm a little surprised that, that will be a group that would be having such a big shift in their behavior given what we saw at ISHLT and everything is kind of followed on from the New England Journal articles, which were 9 months ago now. So what is that you think that group needs to see to kind of come back into the fold? Is the INTERMACS update we get later this year going to be enough, or is it really going to take the PREVENT data, which may be quite a while before we have?

Gerhard F. Burbach

Yes. I'd say they're close to the data to varying degrees. So it's certainly not the case that they're universally kind of fully versed in all the data. So there's still very important activity there to continue to bring the data and not just once, but multiple times to kind of continue to really drive that. And they can be heavily influenced by their own experiences and kind of what's happening at their center at a given point in time. And so that's where something like PREVENT can have an impact before the data comes out in terms of engaging them in okay, you have some challenges, here is what we believe are best practices as demonstrated by other sites. Let's gets you engaged in enrolling patients and managing them consistent with these kinds of best practices to really impact them not just when that data comes out but now.

Operator

We'll take our next call from Danielle Antalffy with Leerink partners.

Danielle Antalffy - Leerink Swann LLC, Research Division

So I understand all the commentary around market growth. I think, I guess, my question is actually on market shares and just curious, as you do see some market share shifting to BTT in part because of this thrombus issue, how sticky do you think these market share shifts are? And do you think you are going to need the HeartMate III now before you see -- before you're able to drive share shift back towards Thoratec?

Gerhard F. Burbach

Right. Yes, what we've observed so far is that those shifts away from HeartMate II in the U.S. have not been as sticky as has been the case in Europe, kind of in Europe with the whole LIS dynamic as the primary driver in the kind of concentrated nature of the market. And also I think a -- our organization was not as strong as our U.S. organization that we weren't able to recapture that share as readily as we have been able to in some instances in the U.S. We have seen already here in the short-term some instances where we've been able to engage with customers who had shifted a significant amount of their activity away from HeartMate II and regain ground by engaging with them on these kinds of topics like we've been discussing. But I definitely don't think we have to wait till HeartMate III, that we do have the tools and the capabilities to impact that share shift in the shorter-term as well.

Danielle Antalffy - Leerink Swann LLC, Research Division

Okay, great. That's helpful. And then I know you guys have been working with some of the centers that have been seeing increasing rates of thrombus or have been concerned about this. Is your message just not resonating with them, is it still too early to tell why haven't centers started to turnaround here?

Gerhard F. Burbach

Yes. So again, it's not a kind of one-size-fits-all answer. So I think there are centers that we've made some progress, but there are certainly many centers that we haven't really achieved the progress that we had hoped to as we got to the mid of the year. So we are certainly behind where we hope to be at this point. And so it is proving to be more challenging than we anticipated. And some of that is that there is continued pushback from the authors of that New England Journal article, there's also kind of counter-data that kind of continues to come out. That's one of the reasons that I'm very encouraged there with this FDA labeling, because that's something that's not just kind of Thoratec putting data out there. It's obviously the kind of completely independent third-party that has approved labeling, that is very consistent with the messaging that we've had out there. So clearly, we need to continue to push, we need to bring more effective data like this labeling to the table, we need to bring some other tactics into play like the PREVENT trial. We're getting a very enthusiastic response from the clinician community to that trial and the best practices that we're looking to roll out as the part of that. So I do feel like we have a set of tactics here in the second half that should successfully build on what we've accomplished so far, which, obviously, a short -- falling short of our expectations, but I do feel like we have a good program here in the second half of the year focused on that issue.

Operator

There are no more questions at this time. Mr. Burbach, I'd like to turn the conference back to you for any additional or closing remarks.

Gerhard F. Burbach

Okay. I just like to thank, everyone, for your time today and we look forward to updating you in the future.

Operator

That concludes today's conference. Thank you for your participation.

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