ABIOMED, INC. Forward Looking Statements
This Report, including the documents incorporated by reference in this Report, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. These forward-looking statements may be accompanied by such words as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "potential," "project," "target," "should," "likely," "will" and other words and terms of similar meaning. Each forward-looking statement in this Report is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include: the impact of the COVID-19 pandemic, efforts to contain the pandemic and resulting economic downturn on our operations and financial condition; our dependence on Impella® products for all of our revenues; our ability to successfully compete against our existing or potential competitors; the acceptance of our products by cardiac surgeons and interventional cardiologists, especially those with significant influence over medical device selection and purchasing decisions; long sales and training cycles associated with expansion into new hospital cardiac centers; reduced market acceptance of our products due to lengthy clinician training process; our ability to effectively manage our growth; our ability to successfully commercialize our products; our ability to obtain regulatory approvals and market and sell our products in certain jurisdictions; enforcement actions and product liability suits relating to off-label uses of our products; unsuccessful clinical trials or procedures relating to products under development; our ability to maintain compliance with regulatory requirements; mandatory or voluntary product recalls; shutdowns of theU.S. federal government; third-party payers' failure to provide reimbursement of our products; changes in healthcare reimbursement systems in theU.S. and other foreign jurisdictions; our failure to comply with healthcare "fraud and abuse" laws; our failure to comply with theU.S. Foreign Corrupt Practices Act and other anti-corruption laws, export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations; uncertainties associated with our product development efforts; our ability to increase manufacturing capacity to support continued demand for our products; our or our vendors' failure to achieve and maintain high manufacturing standards; our ability to attract and retain key personnel; our suppliers' failure to provide the components we require; our ability to expand our direct sales activities into international markets; the economic effects of "Brexit"; poor performance of our distributors in the international markets; our ability to sustain profitability; our potential "ownership change" forU.S. federal income tax purposes and our limited utilization of net operating losses from prior tax years; impact of changes in tax laws, including recently enactedU.S. Tax Reform; our ability to develop and commercialize new products or acquire desirable companies, products or technologies; our failure to protect our intellectual property or develop or acquire additional intellectual property; increased risk of material product liability claims; inventory write-downs and other costs due to product quality problems; liabilities due to failure to protect the confidentiality of patient health information; disruptions of critical information systems or material breaches in the security of our systems; risks and liabilities associated with acquisitions of other companies or businesses; changes in accounting standards, tax laws and financial reporting requirements; liabilities, expenses and restrictions associated with environmental and health safety laws; changes in methods, estimates and judgments we use in applying our accounting policies; fluctuations in foreign currency exchange rates; the outcome of ongoing securities class action litigation relating to our public disclosures; and other factors discussed in Part I, Item 1A. Risk Factors of our Form 10-K for the year endedMarch 31, 2020 and the filings subsequently filed with or furnished to theSEC . Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Report. Unless otherwise required by law, we undertake 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 Report or to reflect the occurrence of unanticipated events.
Overview
We are a leading provider of temporary mechanical circulatory support devices, and we offer a continuum of care to heart failure patients. We develop, manufacture and market proprietary products that are designed to enable the heart to rest, heal and recover by improving blood flow to the coronary arteries and end-organs and/or temporarily assisting the pumping function of the heart. Our products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists, the electrophysiology lab, the hybrid lab and in the heart surgery suite by cardiac surgeons. A physician may use our devices for patientswho are in need of hemodynamic support prophylactically, urgently or emergently before, during or after angioplasty or heart surgery procedures. We believe that heart recovery is the optimal clinical outcome for a patient experiencing heart failure because it enhances the potential for the patient to go home with their own heart, facilitating the restoration of quality of life. In addition, we believe that, for the care of such patients, heart recovery is often the most cost-effective solution for the healthcare system. 27 -------------------------------------------------------------------------------- Our strategic focus and the driver of our revenue growth is the market penetration of our family of Impella® heart pumps. The Impella device portfolio, which includes the Impella 2.5®, Impella CP®, Impella 5.0®, Impella LD®, Impella 5.5® and Impella RP® devices, has supported thousands of patients worldwide. We expect that most of our product and service revenue in the near future will be from our Impella devices. Our Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella 5.5 and Impella RP devices haveU.S Food and Drug Administration or FDA and CE Mark approval which allows us to market these devices in theU.S. andEuropean Union . We expect to continue to make additional pre-market approval, or PMA supplement submissions for our Impella portfolio of devices for additional indications. Our Impella 2.5, Impella CP and Impella 5.0 devices have regulatory approval from theMinistry of Health, Labor and Welfare , or MHLW, inJapan .
COVID-19 Pandemic
InMarch 2020 , theWorld Health Organization categorized the novel Coronavirus disease 2019, or (COVID-19) as a pandemic. COVID-19 continues to spread throughoutthe United States and other countries across the world, and the duration and severity of its effects are currently unknown. The global pandemic has adversely impacted and is likely to further adversely impact our business and markets, including our workforce and operations and the operations of our customers, suppliers, and business partners. Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of responses taken on international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, have already created significant negative economic impacts on a global basis. Beginning inmid-March 2020 and continuing into the first quarter of fiscal 2021, the Company experienced a significant decline in patient utilization in theU.S. ,Europe andJapan as healthcare systems diverted resources to meet the increasing demands of managing COVID-19. The Company's business was most impacted inApril 2020 , in terms of the decline in patients and revenue from the shelter-in-place restrictions in a majority of countries and limitations on procedures in hospitals. The Company experienced sequential quarterly improvement globally through the second quarter of fiscal 2021 as restrictions were lifted and limitations eased. In the second quarter of fiscal 2021, patient procedure volume trends have improved gradually as both demand for procedures and availability of healthcare resources improved during the summer months. While we currently expect to see sequential quarterly improvement in the remainder of fiscal 2021, the COVID-19 pandemic remains fluid and continues to evolve differently across various geographies. We believe we are likely to continue to experience variable impacts on our business based on some of the resurgence that is now occurring in cities across the globe. During these challenging times, our priorities have been to support our clinician partners, protect the well-being of our employees, and maintain continuous access to our life-saving technologies while offering front-line in-hospital support. We have also taken proactive actions to mitigate the business impact of COVID-19 on our financial operations. These actions taken to date include temporary salary reductions and furloughs for certain employees, a hold on most hiring, eliminating non-critical consultants, contractors, and temporary workers, reducing discretionary spending, travel restrictions and implementing alternate work schedules for the Aachen and Danvers production teams. These actions are designed to preserve full-time jobs, preserve cash and retain the ability to ramp up quickly when demand returns, while at the same time continuing to invest in innovation. We are closely monitoring the impact of COVID-19 on all aspects of our business and geographies, including its impact on our customers, employees, suppliers, vendors, business partners and distribution channels. The extent to which the COVID-19 global pandemic impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and are difficult to predict these developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact,U.S. and foreign government actions to respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts on our financial condition and results of operations.
Acquisition of
We acquiredBreethe, Inc. ("Breethe"), aMaryland corporation, onApril 24, 2020 . Breethe is engaged in research and development of a novel extracorporeal membrane oxygenation ("ECMO") system that will complement and expand our product portfolio to more comprehensively serve the needs of patients whose lungs can no longer provide sufficient oxygenation, including some patients suffering from cardiogenic shock or respiratory failure, such as ARDS, H1N1, SARS, or COVID-19. We acquired Breethe for$55.0 million in cash, with additional potential payouts up to a maximum of$55.0 million payable based on the achievement of certain technical, regulatory and commercial milestones. InOctober 2020 , theAbiomed Breethe OXY-1 System received a 510(k) clearance from the FDA for an all-in-one, compact cardiopulmonary bypass system.Abiomed plans to have a controlled launch of the Breethe system at a limited number hospitals in theU.S , with fullU.S. commercial availability expected in fiscal year 2022. 28 --------------------------------------------------------------------------------
Our Existing Products Impella 2.5® The Impella 2.5 device is a percutaneous micro heart pump with an integrated motor and sensors. The device is designed primarily for use by interventional cardiologists to support patients in the cath labwho may require assistance to maintain circulation. The Impella 2.5 heart pump can be quickly inserted via the femoral artery to reach the left ventricle of the heart, where it is directly deployed to draw blood out of the ventricle and deliver it to the circulatory system. This function is intended to reduce ventricular work and provide blood flow to vital organs. The Impella 2.5 heart pump is introduced with normal interventional cardiology procedures and can pump up to 2.5 liters of blood per minute. Our Impella 2.5 device has FDA and CE Mark approval which allows us to market these devices in theU.S. andEuropean Union . We expect to continue to make additional pre-market approval, or PMA supplement submissions for our Impella portfolio of devices for additional indications. Our Impella 2.5, Impella CP and Impella 5.0 devices have regulatory approval from theMinistry of Health, Labor and Welfare , or MHLW, inJapan . The Impella 2.5 device also hasHealth Canada approval which allows us to market the device inCanada .
Impella CP®
The Impella CP device provides blood flow of approximately one liter more per minute than the Impella 2.5 device and is primarily used by either interventional cardiologists to support patients in the cath lab or by cardiac surgeons in the heart surgery suite. Our Impella CP devices has FDA and CE Mark approval which allows us to market this device in theU.S. andEuropean Union . We expect to continue to make additional pre-market approval, or PMA supplement submissions for our Impella portfolio of devices for additional indications. InMarch 2019 , we received PMDA approval from MHLW for our Impella CP heart pump inJapan . We began selling the Impella CP heart pump inJapan in fiscal 2020. InApril 2019 , the FDA approved the initiation of the STEMI DTU Pivotal Randomized Controlled Trial. The prospective, multi-center, two-arm trial plans to enroll 668 patients undergoing treatment for a STEMI heart attack at up to 60 sites. Half the patients will be randomized to receive delayed reperfusion after 30 minutes of left ventricular unloading with the Impella CP. The other half will receive immediate reperfusion, the current standard of care. The trial will test the hypothesis that unloading the left ventricle for 30 minutes prior to reperfusion will reduce myocardial damage from a heart attack and lead to a reduction in future heart failure related events. The trial allows for an adaptive design, which permits adjustments to the study sample size after an interim analysis. We began the trial in fiscal 2020 and we estimate that it will take three to four years to complete enrollment.
Impella 5.0® and Impella LD®
The Impella 5.0 and Impella LD devices are percutaneous micro heart pumps with
integrated motors and sensors for use primarily in the heart surgery suite.
These devices are designed to support patients
Our Impella 5.0 and Impella LD devices have FDA and CE Mark approval which allows us to market these devices in theU.S. andEuropean Union . We expect to continue to make additional pre-market approvals, or PMA supplement submissions for our Impella portfolio of devices for additional indications. Our Impella 5.0 devices have regulatory approval from theMinistry of Health, Labor and Welfare , or MHLW, inJapan . Impella 5.5® The Impella 5.5 device is designed to be a percutaneous micro heart pump with integrated motors and sensors. Impella 5.5 delivers peak flows of greater than six liters per minute. The Impella 5.5 has a motor housing that is thinner and 45% shorter than the Impella 5.0 and it improves ease of pump insertion through the vasculature. InSeptember 2019 , the Impella 5.5 device received a PMA from the FDA for safety and efficacy in the therapy of cardiogenic shock for up to 14 days in theU.S. The Impella 5.5 pump was introduced in theU.S. through a controlled rollout at hospitals with established heart recovery protocols beginning in fiscal 2020. Impella 5.5 received CE marking approval inEurope inApril 2018 and was introduced inEurope through a similar controlled rollout. We are also targeting a submission to the PMDA inJapan in fiscal 2021. The adoption of the Impella 5.5 device may lessen the utilization of Impella 5.0 and Impella LD at certain sites. Impella RP® The Impella RP is a percutaneous catheter-based axial flow pump that is designed to allow greater than four liters of blood flow per minute and is intended to provide the flow and pressure needed to compensate for right side heart failure. Our Impella RP device has FDA and CE Mark approval which allows us to market these devices in theU.S. andEuropean Union . The Impella RP is the first 29 -------------------------------------------------------------------------------- percutaneous single access heart pump designed for right heart support to receive FDA approval. The Impella RP device is approved to provide support of the right heart during times of acute failure for certain patientswho have received a left ventricle assist device or have suffered heart failure due to AMI, a failed heart transplant, or following open heart surgery. We expect to continue to make additional pre-market approval, or PMA supplement submissions for our Impella portfolio of devices for additional indications.
Impella SmartAssist®
The Impella SmartAssist platform includes optical sensor technology for improved pump positioning and the use of algorithms that enable improved native heart assessment during the weaning process. The Impella SmartAssist platform currently developed for the Impella CP SmartAssist and Impella 5.5 SmartAssist heart pumps. The Impella SmartAssist platform is also approved under CE Mark in theEuropean Union and other countries that require a CE Mark approval.
Impella Connect®
Impella Connect is a cloud-based technology that enables secure, cloud-based, remote viewing of the Automated Impella Controller, or AIC, for physicians and hospital staff from anywhere with internet connectivity. The Impella Connect is intended to provide enhanced monitoring capability, reduce setup time and improve ease of use for physicians. We began a controlled roll-out of Impella Connect at certain hospital sites during fiscal 2020 and plan to transition the majority of our significant customers in fiscal 2021.
Our Product Pipeline
The
Impella ECP™
The Impella ECP pump is designed for blood flow of greater than three liters per minute. It is intended to be delivered on a standard sized catheter and will include an expandable inflow in the left ventricle. We began patient enrollment inOctober 2020 . The Impella ECP pump is still in development and has not been approved for commercial use or sale.
Impella XR Sheath™
The Impella XR Sheath is a sheath designed to expand and recoil to all for ease of use upon insertion of an Impella heart pump and minimize the size of the arteriotomy. The Impella XR Sheath device is still in development and has not been approved for commercial use or sale. We submitted an application for FDA 510(k) clearance for our Impella 2.5 pump inAugust 2020 and we also continue to work on development of an Impella XR Sheath on our Impella CP device for an FDA submission in fiscal 2022. Impella BTR™ The Impella BTR device is designed to be a percutaneous micro heart pump with integrated motors and sensors. The Impella BTR device is designed to be smaller, provide up to one year of hemodynamic support and is expected to allow for greater than five liters of blood flow per minute. The Impella BTR device also includes a wearable driver designed for hospital discharge. The Impella BTR pump is still in development and has not been approved for commercial use or sale.
Critical Accounting Policies and Estimates
Other than the accounting policy changes discussed in "Note 2. Basis of Preparation and Summary of Significant Accounting Policies" to our consolidated financial statements, which is incorporated herein by reference, there have been no significant changes in our critical accounting policies during the three and six months endedSeptember 30, 2020 , as compared to the critical accounting policies disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2020 . 30 --------------------------------------------------------------------------------
Recently Issued Accounting Pronouncements Not Yet Effective
Information regarding recent accounting pronouncements is included in "Note 2. Basis of Preparation and Summary of Significant Accounting Policies" to our consolidated financial statements and is incorporated herein by reference.
Results of Operations for the Three and Six Months Ended
The following table sets forth certain condensed consolidated statements of operations data for the periods indicated as a percentage of total revenue:
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses as a percentage of
total revenue:
Cost of revenue 18.5 17.0 19.9 17.4
Research and development 14.6 11.7 15.2 11.6
Selling, general and administrative 37.7 41.9 39.4 41.7
Total costs and expenses 70.8 70.6 74.5 70.7
Income from operations 29.2 29.4 25.5 29.3
Other income and income tax 0.5 23.0 3.0 4.4
provision, net
Net income as a percentage of total 29.7 % 6.4 % 28.5 % 24.9 %
revenue
Revenue
The following table disaggregates the Company's revenue by products and
services:
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2020 2019 2020 2019
(in $000 's) (in $000 's)
Impella product revenue $ 199,676 $ 196,939 $ 355,093 $ 396,804
Service and other revenue 10,088 8,035 19,521 15,836
Total revenue $ 209,764 $ 204,974 $ 374,614 $ 412,640
The following table disaggregates the Company's revenue by geographical
location:
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2020 2019 2020 2019
(in $000 's) (in $000 's)
U.S. revenue $ 172,147 $ 172,015 $ 306,872 $ 347,500
International revenue 37,617 32,959 67,742 65,140
Total revenue $ 209,764 $ 204,974 $ 374,614 $ 412,640 Impella product revenue encompasses Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella 5.5, Impella RP and Impella AIC product sales and related accessories. Service and other revenue represents revenue earned on service maintenance contracts and preventative maintenance calls.
Total Revenue
Total revenue for the three months endedSeptember 30, 2020 increased by$4.8 million , or 2%, to$209.8 million from$205.0 million for the three months endedSeptember 30, 2019 . Total revenue for the six months endedSeptember 30, 2020 decreased$38.0 million , or 9%, to$374.6 million from$412.6 million for the six months endedSeptember 30, 2019 . The increase in total revenue in the second quarter of fiscal 2021 was driven by both Impella product revenue and our service and other revenue, as further described below. 31 --------------------------------------------------------------------------------
Impella Product Revenue
Impella product revenue for the three months endedSeptember 30, 2020 increased by$2.8 million , or 1%, to$199.7 million from$196.9 million for the three months endedSeptember 30, 2019 . Impella product revenue for the six months endedSeptember 30, 2020 decreased by$41.7 million , or 11%, to$355.1 million from$396.8 million for the six months endedSeptember 30, 2019 . Most of the increase in Impella product revenue during the three months endedSeptember 30, 2020 was related to sales growth outside of theU.S. with product sales being relatively flat in theU.S. Impella product revenue outside of theU.S. increased primarily due to higher utilization inGermany andJapan . Impella procedure volumes have varied greatly since the end ofMarch 2020 by geography, and even by hospital, as patients and their physicians manage through the COVID-19 pandemic. Through the second quarter of fiscal 2021, patient procedure volume trends have improved gradually both demand for procedures and availability of healthcare resources have improved. We experienced sequential quarterly improvement during the second quarter of fiscal 2021 as restrictions were somewhat lifted and limitations eased. While we currently expect to see sequential quarterly improvement in the remainder of fiscal 2021, the COVID-19 pandemic remains fluid and continues to evolve differently across various geographies. We believe we are likely to continue to experience variable impacts on our business based on some of the resurgence that is now occurring in cities across the globe. While we cannot reliably estimate the extent to which the COVID-19 pandemic may continue to impact patient utilization and revenues of our products, we expect revenue from our Impella devices to increase sequentially each quarter during fiscal 2021 with our focus on growing key usingU.S. sites, our controlled launch of Impella 5.5, primarily in theU.S. , and our focus on growing our business internationally, with a continued focus onGermany andJapan .
Service and Other Revenue
Service and other revenue for the three months endedSeptember 30, 2020 increased by$2.1 million , or 26%, to$10.1 million from$8.0 million for the three months endedSeptember 30, 2019 . Service and other revenue for the six months endedSeptember 30, 2020 increased$3.7 million , or 23%, to$19.5 million from$15.8 million for the six months endedSeptember 30, 2019 . The increase in service revenue was primarily due to an increase in preventative maintenance service contracts. We have expanded the number of Impella AIC consoles at many of our existing higher volume customer sites and continue to sell additional consoles to new customer sites. We expect revenue growth for service revenue to be consistent with recent history as most of these using sites in theU.S. have service contracts that normally have three-year terms.
Costs and Expenses
Cost of Revenue
Cost of revenue for the three months endedSeptember 30, 2020 increased by$3.8 million , or 11%, to$38.7 million from$34.9 million for the three months endedSeptember 30, 2019 . Gross margin was 81.5% for the three months endedSeptember 30, 2020 and 83.0% for the three months endedSeptember 30, 2019 . Cost of revenue for the six months endedSeptember 30, 2020 increased by$2.8 million , or 4%, to$74.7 million from$71.9 million for the six months endedSeptember 30, 2019 . Gross margin was 80.1% for the six months endedSeptember 30, 2020 and 82.6% for the six months endedSeptember 30, 2019 . The increase in cost of product revenue and decrease in gross margin during the three and six months endedSeptember 30, 2020 was related to lower production volume of our Impella devices and costs associated with our initial launch of our Impella CP SmartAssist and Impella Connect products.
We expect that our ongoing investment in manufacturing capacity and the expansion of our Impella CP SmartAssist and Impella Connect platform may decrease gross margin slightly in the near future.
Research and Development Expenses
Research and development expenses for the three months endedSeptember 30, 2020 increased by$6.5 million , or 27%, to$30.5 million from$24.0 million for three months endedSeptember 30, 2019 . Research and development expense for the six months endedSeptember 30, 2020 increased$9.1 million , or 19%, to$56.9 million from$47.8 million for the six months endedSeptember 30, 2019 . The increase in research and development expenses was primarily due to product development initiatives relating to our existing and pipeline products, the development of the OXY-1 System, Impella XR Sheath™ and Impella ECP™ devices, the expansion of our engineering organization, investment in our clinical trials and studies, most notably the DTU-STEMI study and our continued focus on clinical and quality initiatives for our Impella products. 32 --------------------------------------------------------------------------------
We expect research and development expenses to continue to increase as we continue to increase engineering, product development and clinical spending related to our initiatives to improve our existing products and develop new technologies and conduct clinical studies. Research and development expenses can fluctuate with project timing.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months endedSeptember 30, 2020 decreased by$6.8 million , or 8%, to$79.2 million from$86.0 million for the three months endedSeptember 30, 2019 . Selling, general, and administrative expenses for the six months endedSeptember 30, 2020 decreased$24.4 million , or 14%, to$147.6 million from$172.0 million for the six months endedSeptember 30, 2019 . The decrease in selling, general and administrative expenses was primarily due to the proactive cost actions to mitigate the business impact of COVID-19 on our financial operations, including reducing discretionary spending primarily related to travel and marketing expenses, decreases in hiring, eliminating certain non-critical consultants and contractors. In addition, stock compensation expense was lower due to a lower number of restricted stock units granted and earned. Despite the ongoing challenges posed by COVID-19, we expect to continue to invest on sales and marketing activities, with a particular focus on training and education initiatives to drive utilization of our Impella devices and recovery awareness for acute heart failure patients. We also expect to continue to incur legal expenses for the foreseeable future related to ongoing patent litigation, securities class action litigation and other legal matters discussed in "Note 14. Commitment and Contingencies" to our consolidated financial statements. For the impact of COVID-19 on our business, see "COVID-19 Pandemic."
Operating Income
Operating income for the three months endedSeptember 30, 2020 increased by$1.1 million , to$61.3 million , compared to$60.2 million for the three months endedSeptember 30, 2019 . Operating margin was 29.2% for the three months endedSeptember 30, 2020 compared to 29.4% for the three months endedSeptember 30, 2019 . Operating income for the six months endedSeptember 30, 2020 decreased by$25.5 million , to$95.4 million , compared to$120.9 million for the six months endedSeptember 30, 2019 . Operating margin was 25.5% for the six months endedSeptember 30, 2020 compared to 29.3% for the six months endedSeptember 30, 2019 .
Other Income (Expense), net
Other income (expense), net increased by$54.4 million , to other income of$11.6 million for three months endedSeptember 30, 2020 , compared to other expense of$42.8 million for three months endedSeptember 30, 2019 . Other income (expense), net increased by$39.0 million , to other income of$38.6 million for the six months endedSeptember 30, 2020 compared to other expense of$0.4 million for the six months endedSeptember 30, 2019 . This increase was primarily due to a gain of$10.8 million and$34.7 million from our investment in Shockwave Medical during the three and six months endedSeptember 30, 2020 , respectively, compared to a loss of$45.6 million and$5.9 million on the same investment for the three and six months endedSeptember 30, 2019 , respectively.
Income Tax Provision
Our income tax provision was$10.7 million and$4.3 million for the three months endedSeptember 30, 2020 and 2019, respectively, and our income tax provision was$27.2 million and$18.5 million for the six months endedSeptember 30, 2020 and 2019, respectively. Our effective income tax rate was 14.7% and 24.7% for the three months endedSeptember 30, 2020 and 2019, respectively, and 20.3% and 15.4% for the six months endedSeptember 30, 2020 and 2019, respectively. The decrease in the effective income tax rate was due primarily to higher excess tax benefits recognized associated with stock-based awards of$7.9 million and$0.5 million as an income tax benefit for three months endedSeptember 30, 2020 and 2019 respectively, and of$8.5 million and$13.3 million for the six months endedSeptember 30, 2020 and 2019. These recognized excess tax benefits resulted from restricted stock units that vested or stock options that were exercised during the three months endedSeptember 30, 2020 and 2019, respectively.
Net Income
For the three months endedSeptember 30, 2020 , net income was$62.2 million , or$1.38 per basic share and$1.36 per diluted share, compared to$13.1 million , or$0.29 per basic share and$0.28 per diluted share, for three months endedSeptember 30, 2019 . For the six months endedSeptember 30, 2020 , net income was$106.8 million , or$2.37 per basic share and$2.34 per diluted share, compared to$102.0 million , or$2.25 per basic share and$2.22 per diluted share for the six months endedSeptember 30, 2019 . Net income for the three months endedSeptember 30, 2020 included excess tax benefits related to stock-based awards of$7.9 million , or$0.18 per basic share and$0.17 per diluted share, and a total$8.2 million gain, net of tax, or$0.18 per basic and diluted share, related to our investment in Shockwave Medical. Net income for the three months endedSeptember 30, 2019 included excess 33 -------------------------------------------------------------------------------- tax benefits related to stock-based awards of$0.5 million , or$0.01 per basic and diluted share, and a$34.5 million unrealized loss, net of tax, or$0.76 per basic share and$0.75 per diluted share, related to our investment in Shockwave Medical. Net income for the six months endedSeptember 30, 2020 included excess tax benefits related to stock-based awards of$8.5 million , or$0.19 per basic and diluted share, and a$26.1 million gain, net of tax, or$0.58 per basic and$0.57 per diluted share, related to our investment in Shockwave Medical. Net income for the six months endedSeptember 30, 2019 included excess tax benefits related to stock-based awards of$13.3 million , or$0.29 per basic and diluted share, and a$4.5 million unrealized loss, net of tax, or$0.10 per basic and diluted share, related to our investment in Shockwave Medical.
Liquidity and Capital Resources
AtSeptember 30, 2020 , our total cash, cash equivalents and marketable securities totaled$735.7 million , an increase of$84.8 million compared to$650.9 million atMarch 31, 2020 . The increase in our cash, cash equivalents and marketable securities during the six months endedSeptember 30, 2020 was primarily due to cash flows provided by operating activities offset by cash used to fund our annual bonuses and proceeds from the sale of shares in Shockwave Medical. These amounts were offset by taxes paid related to net settlement of vesting of stock awards during the period and purchases of property and equipment.
Following is a summary of our cash flow activities:
For the Six Months Ended September 30,
2020 2019
Net cash provided by operating activities $ 108,968 $ 138,887
Net cash used for investing activities (81,314 ) (38,011 )
Net cash used for financing activities (14,711 ) (71,005 )
Effect of exchange rate changes on cash (3,043 ) (613 )
Net increase in cash and cash equivalents $ 9,900 $ 29,258
Cash Provided by Operating Activities
For the six months endedSeptember 30, 2020 , cash provided by operating activities consisted of net income of$106.8 million , adjustments for non-cash items of$19.7 million and cash used in working capital of$17.5 million . As discussed above, the change in net income was primarily due to modest increases in Impella revenue, lower selling, general and administrative expenses to reduced discretionary spending and hiring and gains from our investment in Shockwave Medical, partially offset by increases in research and development expenses due to product development and clinical initiatives relating to our existing and pipeline products and lower excess tax benefits. Adjustments for non-cash items consisted primarily of$20.9 million of stock-based compensation expense,$14.2 million in deferred tax provision,$11.1 million of depreciation and amortization expense,$3.1 million in inventory and other write-downs, and$0.5 million in accretion on marketable securities. The change in cash from working capital included a$4.8 million decrease in accounts receivable due to timing of collections, a$6.1 million decrease in inventory due to lower production volumes, a$32.1 million decrease in accounts payable and accrued expenses primarily due to payment of annual bonuses during the quarter endedSeptember 30, 2020 , and a$2.0 million increase in deferred revenue. For the six months endedSeptember 30, 2019 , cash provided by operating activities consisted of net income of$102.0 million , adjustments for non-cash items of$54.5 million and cash used in working capital of$17.6 million . As discussed above, the change in net income was primarily due to lower excess tax benefits partially offset by higher revenue from increased utilization of our Impella devices and an unrealized loss related to our investment in Shockwave Medical. Adjustments for non-cash items consisted primarily of$26.4 million of stock-based compensation expense,$10.2 million in deferred tax provision,$9.1 million of depreciation and amortization expense,$2.3 million in accretion on marketable securities, and$2.2 million in inventory and other write-downs. The change in cash from working capital included a$12.2 million increase in inventory to support demand for our Impella devices,$3.8 million increase in accounts receivable due to timing of collections, a$3.0 million increase in deferred revenue, and a$0.5 million decrease in accounts payable and accrued expenses.
Cash Used for Investing Activities
For the six months endedSeptember 30, 2020 , net cash used for investing activities primarily consisted of$74.4 million in purchases from the sale of marketable securities (net of maturities),$52.2 million in net cash for our acquisition of Breethe and$19.6 million used in the purchase of property and equipment primarily related to continued expansion of manufacturing capacity, office space and research development facilities in Danvers and Aachen,Germany . We also made an additional$3.1 million investment in a private medical technology companies during fiscal 2021. These amounts were partially offset by$67.9 million in proceeds from the sale of Shockwave Medical securities. For the six months endedSeptember 30, 2019 , net cash used for investing activities primarily consisted of$5.6 million in maturities (net of purchases) of marketable securities and$24.6 million used in the purchase of property and equipment primarily 34
-------------------------------------------------------------------------------- related to continued expansion of manufacturing capacity, office space and research development facilities in Danvers and Aachen,Germany . We invested an additional$7.8 million in private medical technology companies during fiscal 2019. Capital expenditures for fiscal 2021 are estimated to range from$30.0 million to$50.0 million , including additional capital expenditures for manufacturing capacity expansions in our Danvers and Aachen facilities, additional office space, building and leasehold improvements and information systems development projects.
Cash Used for Financing Activities
For the six months endedSeptember 30, 2020 , net cash used for financing activities included$11.3 million for the repurchase of our common stock and$10.9 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards. These amounts were offset by$5.6 million in proceeds from the exercise of stock options and$2.0 million in proceeds from the issuance of stock under the employee stock purchase plan. For the six months endedSeptember 30, 2019 , net cash used for financing activities included$41.2 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards and$34.9 million used in the repurchase of our common stock. These amounts were offset by$2.7 million in proceeds from the exercise of stock options and$2.4 million in proceeds from the issuance of stock under the employee stock purchase plan.
Operating Capital and Liquidity Requirements
Our sources of cash liquidity are primarily from existing cash and cash equivalents, marketable securities and cash flows from operations. OnSeptember 30, 2020 , our total cash, cash equivalents, and short and long-term marketable securities totaled$735.7 million , a decrease of$84.8 million compared to$650.9 million atMarch 31, 2020 . Marketable securities atSeptember 30, 2020 consisted of$533.5 million held in funds that invest inU.S. Treasury securities, government-backed securities, corporate debt securities and commercial paper. We generated operating cash flows of$109.0 million and$138.9 million for the six months endedSeptember 30, 2020 and 2019, respectively. AtSeptember 30, 2020 , we had no debt outstanding. We believe that our sources of liquidity are sufficient to fund the current requirements of working capital, capital expenditures, and other financial commitments for at least the next twelve months. Our primary liquidity requirements are to fund the following: expansion of our commercial and operational infrastructures; expansion of our manufacturing capacity and office space; the procurement and production of inventory to meet customer demand for our Impella devices; funding of new product and business development initiatives, such as the recent acquisition of Breethe; ongoing commercial launch inJapan and expansion into potential new markets; increased clinical spending; legal expenses related to ongoing patent litigation and other legal matters; stock repurchases and payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards and provide for general working capital needs. To date, we have primarily funded our operations through product sales and the sale of equity securities. Our liquidity is influenced by our ability to sell our products in a competitive industry and our customers' ability to pay for our products. Factors that may affect liquidity primarily include our ability to penetrate the market for our products, our ability to maintain or reduce the length of the selling cycle for our products, our capital expenditures, and our ability to collect cash from customers after our products are sold. We continue to review our short-term and long-term cash needs on a regular basis. As discussed in "COVID-19 Pandemic," we have taken proactive actions to mitigate the business impact of COVID-19 on our financial operations. While we currently expect to see sequential quarterly improvement in the remainder of fiscal 2021, the COVID-19 pandemic remains fluid and continues to evolve differently across various geographies. We believe we are likely to continue to experience variable impacts on our business based on some of the resurgence that occurring in cities across the globe.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or guarantees of third-party obligations during the periods presented. An "off-balance sheet arrangement" generally entails a transaction, agreement or other contractual arrangement to which an entity unconsolidated with us, is a party under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Contractual Obligations and Commercial Commitments
We have various contractual obligations, which are recorded as liabilities in our consolidated condensed financial statements. Other items are not recognized as liabilities in our consolidated condensed financial statements but are required to be disclosed. There have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2020 . 35
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