Q4 2019 Earnings Call
Good afternoon and have your conference I deeply.
One to 876 to seven.
Thank you may I get the spelling of your first and last names.
First thing David D.A.B.I.D.
And our last name Brown, who we are all level here.
No company.
A I.E.R.A. IRA.
Thank you and your email please.
David at a euro dot com.
[noise] CAD, one moment <unk> Kumar.
Keith many of which are beyond Atricures control, including risks and uncertainties described from time to time nature cures FTC filing.
Atricures results may differ materially from those projected Atricure undertakes no obligation to publicly update any forward looking statement. Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA and adjusted loss per share a reconciliation of these non-GAAP financial measures within most directly comparable GAAP measures.
Is included in our press release, which is available on our website with that I'd like to turn the call over to Mike Carroll, President and Chief Executive Officer, Mike.
Thanks, Lynn good afternoon, and thank you for joining us today.
As I reflect on 2019 as Usher in and you decade, I'm struck by the transformational development that age occur over the past 10 years.
What concentrating our efforts on the three pillars of our mission.
Nation clinical science in education, we have made tremendous progress on multiple fronts and have meaningful have meaningfully expanded our market opportunity.
Some of these highlights include.
We have achieved 29 consecutive quarters of double digit revenue growth year over year.
We diversified and bolstered our product portfolio launching over 12, new products and innovations beginning with the launch of the age of a franchise 10 years ago and strength in more recently by the launch of Christ fear for Crown nerve block therapy in 2019.
We completed significant acquisitions, including in contact in 2015, and most recently in August 2019, Central Hart with the Lariat suture device.
We have invested heavily in clinical trial to develop significant differentiation for the treatment of a fed over the long term.
We have trained over 3000 physicians nurses and other practitioners globally through our training programs, which were recently endorsed by the society for thoracic surgeons in early 2019.
And finally.
We have built the infrastructure and team to support accelerated growth and ongoing expansion. We now have 725 people across the organization, including over 200 in the field globally supporting ourselves.
We have built a winning foundation and achieved critical milestones and setting the stage for success across our franchise in 2020.
And over the next decade.
To that end and as previously announced we expect another year of double digit revenue growth in 2020 with revenue in the range of $254 million to $261 million.
Turning now to our landmark I'd trials, we have underway, which address market expanding opportunities both converge and amaze.
Through these two clinical trials, we're the only company attempting to treat the most difficult patient population.
The 70% of a fit patients that have persistent and longstanding persistent afib. We're catheter ablation alone is typically not effective.
Treatment of this patient population remains vastly underpenetrated and were represents well more than $1 billion of market opportunity today.
As it relates to the converged trial, we submitted our final PM a module to the FDA at the end of 2019.
The results will be submitted to be released as part of late breaking presentations at the heart Rhythm Society meeting in early May.
To remind everyone converge as a 153 patient superiority trial.
It's a randomized controlled trial the first of its kind and quite frankly, the only one of the market today.
We're comparing our approach, which is a hybrid procedure, combining catheter ablation with our epicenter technology versus catheter ablation alone.
We continue to prepare for potential panel and are optimistic that we could receive FDA approval toward the end of 2020.
Our other market changing trial amaze is a 600 patient randomized controlled trial also designed to show superiority.
Superiority in this case is catheter ablation, plus the leery of technology, which excludes the appendage versus the catheter ablation alone.
Since it is known and clinically accepted that some of the abid triggers originate from within or around the left atrial appendage. We believe this approach should effectively increased 800 treatment success rate by adding Epicardial appendage management to the catheter ablation.
The goal here is to show that our technology is again additive.
We completed enrollment in amaze in December 2019, and expect to have follow up on those patients in early to mid 2021, followed by data analysis and our full pmeight submission.
Under this timeline, we are hopeful we can receive FDA approval sometime in 2022.
I will finish my remarks on these key clinical trials by emphasizing that we're not competing against catheter companies. Both of our solutions are complementary and use in conjunction with catheters. We believe bold procedures will help grow and expand the overall market and more importantly, the number of patients that can get treated.
More so than today.
Now moving onto our full year and fourth quarter results.
Our performance remains strong we closed out 2019 with $231 million in revenue up 14% annually and capped off by fourth quarter revenues of 61 million and 16% growth over Q4 2018.
US strength was again broad based driven by our appendage management franchise.
In particular, our V. Glip line of products continued to be additive to our growth and appendage management.
Both the open chest and minimally invasive minimally invasive version of eclipse continue to grow nicely as the benefits of the ease of placement of those devices are recognized by our customers.
We also saw strong growth internationally in our appendage management business and we're excited about continued prospects as we have full year view eclat products being available in Europe after securing CE Mark in late 2019.
We continue to focus on accelerating growth within our open ablation platform.
As such we recently submitted our five 10-K to the FDA on our new opened clamp encompass and remain on track to launch later this year.
This new plant will provide a simpler and faster approach to bleeding heart and open procedures, and we expect to resonate with cabbage surgeons in the open contaminants space and to be accretive to our open ablation revenue in future years.
The crusher probe our dedicated device for managing post operative pain in cardio thoracic surgical patients once again contributed to our open ablation platform growth in the fourth quarter.
This growth is encouraging despite the fact that the overall revenue contribution from the Cryotwo probe is small.
To build the pain management account base, we're continuing to expand our thoracic team in select markets. We can see that therapy is clearly resonating with our customers and continue to see long term growth opportunities in this space.
Transitioning to our minimally invasive ablation business revenues were slightly down year over year in 2020, we expect volatility in this franchise will continue longer term, we believe FDA approval of our epicenter system via the converse trial in treating symptomatic persistent and longstanding persistent afib patients will provide an meaning.
For growth in the minimally invasive abroad ablation franchise.
Now looking at our other supporting clinical programs, which are focused on markets, which we're in today with the goal of obtaining additional labeling.
We initiated we initiated our Icesave clinical trial in 2019, and we have a total of nine sites actively enrolling we expect that successful completion of this trial will generate systematic clinical evidence on the safety and effectiveness of concomitant cryo surgery for the treatment of a fit patients undergoing structural heart surgery.
We also continue to make progress in our deep AF I'd trial with 15 sites now enrolling.
As a reminder, deep AF provides another alternative for minimally invasive approaches we believed that the successful conclusion of each of these studies in which we are partnering with some of the best institutions globally provides an opportunity to further support our comprehensive platform and increased awareness to promote expansion of available therapies.
Internationally fourth quarter results were positive primarily driven by appendage management and open franchises throughout 2019, we strengthened our position in Asia with growth in Japan led by our Asia Club and Cryo ice device sales and in China with our partner by yield and the expansion of our team.
In Europe, especially the UK, France, and Germany, we saw expanded growth of episodes and Atriclip products and steady growth in the open ablation franchise.
In summary, our future is bright with our overall performance throughout 2019, reflecting our continued product portfolio investment and expansion.
I'll now turn the call over to Andy weight, our Chief Financial Officer to review, our financials and outlook and we'll turn for closing comments.
Thanks, Mike So the fourth quarter of 2019 worldwide revenue was $61.3 million representing growth of 15.9% on a GAAP basis, and 16.4% on a constant currency basis over the fourth quarter of 2018.
Revenue from us product sales increased 14.9% to $49.5 million.
US open ablation revenue grew 12% driven by the addition of the Crouse Fair probe launched in early 2019.
US sales of minimally invasive ablation products were down 5% to $9 million showing continued volatility from this business.
US sales of appendage management products were $19.1 million, an increase of 31.6%.
The atriclip flex to be along with our minimally invasive Ellie Mae exclusion system devices continue to lead growth in the appendage management franchise.
The fourth quarter of 2019 also includes a small impact from the lariat system.
International revenue totaled $11.8 million up 20.5% on a GAAP basis, and 22.8% on a constant currency basis as compared to the fourth quarter of 2018.
As a reminder, the transition of the China distributor was in process during 2018, and we did not receive orders for that market in the first and fourth quarters of 2018.
In addition to the contribution from China in the fourth quarter of 2019, we saw strong growth in our Asian markets, notably, Japan, as well as our European markets, driven by the UK, Germany, and the Benelux region.
International growth was also led by appendage management product sales.
Gross margin was 73% for both the fourth quarter of 2019 and 2018, while we saw an increase in gross margin in the fourth quarter of 2019, as a result of operational improvements and lower production costs in our core marketing operation manufacturing operations. This was offset.
By the absorption of Central heart manufacturing operations, as well as mix between us and international sales.
In the fourth quarter of 2019, we had an adjusted EBITDA loss of $5.4 million compared to positive point $3 million adjusted for EBIT adjusted EBITDA for the fourth quarter of 2018.
The change in adjusted EBITDA was driven heavily by the absorption of the central heart business predominantly within cost of revenue amazed clinical trial expenses in the field Mark the field team supporting the amaze clinical trial enrollment.
Our operating loss for the fourth quarter of 2019 was $15.3 million compared to an operating loss of $2.6 million for the fourth quarter of 2018.
Our net loss per share was 42 cents for the fourth quarter of 2019 compared to a net loss per share of nine cents for the fourth quarter of 2018.
Note that in the fourth quarter, we recorded a $2 million noncash charge to operating expenses relating to a change in contingent consideration liability.
During the fourth quarter of 2018, we recorded a $4.1 million noncash credit related to this liability.
The variance in the contingent consideration adjustments year over year is largely a result of a change in the discount rate used to measure the liability.
Without these noncash adjustments to operating expenses, our adjusted loss per share was 37 cents for the fourth quarter of 2019, and 21 cents for the fourth quarter of 2018.
Note that adjusted EBITDA results for all periods exclude noncash adjustments related to the contingent consideration liability.
Excluding the impact of the noncash adjustments to the contingent consideration liability operating expenses increased approximately $12.8 million from $45.3 million in the fourth quarter of 2000 $18 million to $58.1 million in the fourth quarter of 2019.
Research and development expenses, which include clinical and regulatory activities were $13.1 million for the fourth quarter of 2019 or 21% of sales an increase of $4.6 million from the fourth quarter of 2018.
The increase was driven primarily by additional headcount and clinical trial costs related to the amazed trial.
SDMA expenses, excluding the noncash adjustments previously described increased approximately $8.1 million from the fourth quarter of 2018 to a total of $45 million or 73% of sales.
The increase results from our continued investments in the commercial organization worldwide absorption of the Lariat field team legal expenses and training activities.
For the full year 2019 worldwide revenue was $230.8 million, an increase of 14.5% on a GAAP basis, and 15.2% on a constant currency basis.
US sales grew 14.6% to $185.8 million.
US open ablation revenue increased 11% to $80.2 million, which with growth led by the Cryoprobe and somebody supplemented by increases across all other open ablation products.
US sales of ablation products used in minimally invasive procedures were $34.8 million, reflecting a slight decrease of 0.6% from 2018.
This decrease was driven by a decline in volume of fusion products, partially offset by increases in legacy RF ablation devices.
US sales of appendage management products grew 28.9% to $68.2 million driven by strong performance of the Atriclip Flex Ve elissa exclusion system as well as the minimally invasive elie exclusion system products.
International revenue grew 13.9% on a GAAP basis, or 17.6% on a constant currency basis to $45 million.
We continue to see increased growth in Asia, and our European markets, notably, the United Kingdom, Germany, and France for both open ablation and appendage management product lines.
Gross margin was 73.8% for 2019 compared to 73% for 2018, the increase demonstrates continued operational improvements and lower production costs at our headquarters a decrease in share based compensation from a onetime charge for the retirement of an operator.
Patients leader in 2018 and mix changes.
These improvements were partially offset by absorption of the central hard business acquired in August 2019.
Loss per share for 2019 was 94 cents compared to 62 cents for 2018 and the adjusted EBITDA loss was $6.7 million for 2019 compared to $2.7 million for 2018.
Our adjusted EBITDA loss for 2019, and 2018, both exclude noncash adjustments related to the contingent consideration liability without these noncash adjustments to 2019 adjusted loss per share is $1.07 and the 2018 adjusted loss per share.
There is 94 cents.
We ended the year with approximately $94.5 million in cash cash equivalents and investments.
Lastly, we are providing guidance for 2020.
We anticipate topline revenue growth of approximately 10% to 13% year over year or approximately 254 million to $261 million on a GAAP basis.
We anticipate gross margin will be approximately 73% to 74% for the year.
We expect margin improvement driven by mix changes and cost control efforts with pressure caused by full year absorption of the central heart operations.
As we've noted many times, we do continue to expect our business to generate 75% gross margins within the next few years as we scale our operations.
We expect R&D expenses to be 20% to 22% of sales for the year.
The increasing investment reflects a full year of amazed trial costs, including the continued access protocol and continued investments in ice age Afib and deep AF I'd trials converge pmeight costs and continued access protocol, new clinical science activity along.
With R&D pipeline development.
We expect SGN a expenses, excluding noncash adjustments to the contingent consideration liability to be approximately 69% to 71% of sales in 2020, a slight decrease to 2019.
The increase in Mdna expense dollars is driven by thoughtful expansion for the worldwide sales team, particularly in our ERP focused team and crowned nerve block team.
Additionally, there are important investments in our training and marketing activities with continued leverage in the general and administrative areas.
We expect adjusted EBITDA for 2020 to be a loss of approximately $10 million and adjusted loss per share between one dollar in 14 cents to $1.24 cents.
Both of these metrics exclude noncash chart charges for the change in control in contingent consideration liability.
We expect approximately 10 million to $12 million of noncash charges for the accretion of the contingent consideration liability in 2020.
The GAAP reported loss per share for 2020 is expected to be between $1.40 cents to $1.55 cents with the inclusion of these noncash charges.
For modeling purposes, we expect revenue growth in Q1 to be in the lower end of our guidance range into pickup as the year progresses.
Additionally, we anticipate the adjusted EBITDA loss to be highest in the first quarter as a result of heavier marketing and training costs typically incurred in the first quarter.
We expect to generate an adjusted EBITDA loss in the first quarter of 2020 of approximately 6 million to $7 million, which translates to an adjusted loss per share in the range of 38 cents and 41 cents.
We expect to decline in quarterly adjusted EBITDA loss throughout the rest of 2020 as revenue ramps.
At this point I'd like to turn the call back to Mike for closing comments.
Thank you Andy before we open up for questions I want to take a moment to thank our team in nature.
We have helped over 90000 patients worldwide during 2019 in over 500000 this past decade.
Together, we have built a strong platform of products supported by clinical evidence and training, which provide multiple treatment alternatives for 800 patients globally.
Our work truly matters and I appreciate each and every one of your contributions toward impacting patient lives everyday.
In closing we remain confident that we are poised significantly change the landscape of Afib treatment and we are committed to accomplishing our strategic initiatives to that end.
We look forward to delivering a future on on the foundational growth in the catalyst, including converge amaze crowned nerve block encompass in future Atriclip clinical data, we'll now turn the call over to questions operator.
Thank you Sir as a reminder to ask a question for me to press Star one on your telephone. So was there your question press the pound.
Due to the assets of time, we ask that you. Please limit yourselves to one question and one follow up.
Our first question comes from Jason Mills from Canaccord. Please go ahead.
Hi, Mike and Andy can you hear me okay.
That was bigger Jason.
Super Congratulations on another great year.
So I wanted to ask you a few questions that I get asked a lot from investors so opportunity for you to address them head on.
Probably the most often ask question is the future of Vms business and revenue growth of my US post conversion. So perhaps you could address a few issues within that question one would be.
The development of the market from a sales force perspective, so your plans on that front.
Where you are now where you might expect to be upon FDA approval hopefully at the end of this year and how that might expand in 2021 and I guess.
I'm guessing you're not going to give.
Any sort of growth guidance quantitatively for 2021, but often times I get asked should.
That opportunity does that portends accelerating growth potential in the overall businesses that big enough is that market.
Exciting ups to excite back kind of trend acceleration, maybe you could address that head on two of them on a follow up on the clip business.
Sure. Thanks for the question and obviously that has a question that we get a lot relative to RMBS business with converge.
The data coming out here soon and obviously looking forward to the approval sometime in 2020.
I'll address your first question or kind of the.
He started with which is the kind of the growth in the guidance in the acceleration of the growth rate and the way. We look at at this is we absolutely look at this is a multibillion dollar market.
70% of the patients that are out there have persistent our longstanding persistent afib.
Within that category, 40% of longs. This long standing persistent afib. It is a massive market with millions of patients globally and in the United States alone and so it is a big market opportunity and today, we're only doing a couple of thousand cases on the converged side. So we see this as.
It's going to be very large market opportunity I don't see a reason that by the end of the decade, we shouldn't be doing 25000, plus procedures at some point in time remember is complementary to the catheters. There is 150000 catheters that do catheter ablation today for a fed patients that number's projected over the next five years to be well over 200000 will be.
Scratching the surface on this patient population, it's a very large population from that standpoint. So to answer. Your question, Yes, I think it's a big enough market to generate and accelerate our growth rate I'm not going to pick the quarter, that's going to begin, but obviously, we are getting ourselves ready for it. So that 2021 can begin some of that acceleration and.
And as you look at 2022 in 2023, we should begin to see acceleration in the overall growth rate for the whole company as a result of of the size of the market that exists there as it relates to the Salesforce. We've been building this out as I mentioned before.
Prior to the acquisition of the Lariat team, we had about 25 plus people in our am I asked group that team has been built over the last three plus years, they've got incredible expertise and knowledge.
About on as side understanding mapping what does this technology look like after Youve used it that team has made up of both direct reps and Clinicals on top of that we've also got a clinical education team of about 12 to 15 or so people that are really dedicated to the procedural development and training aspect of this and then now.
With the Lariat team, there's going to be cross training, obviously their focus is on malaria technology.
But there will be knowledge transfer.
And the out in the field. So we're going to have an EPS salesforce by middle of this year of over 40 people by the end of the year closer to 50 people.
That are dedicated to really calling on in serving that kind of LP space, but also understanding how that hybrid component takes place with the with the surgeon.
So hopefully that gives in context in terms of the growth. This year as we see how it picks up and as we kind of get ourselves ready for the PM. A launch later this year early early part of next year, we're going to be more than ready for that and really looking forward to it.
Great color, Mike. Thank you for that on the appendage management business I wondered if you could give us take a step back and give us your sense for the next couple of years in L.A. management, we've seen an evolution certainly over the last couple of years and and you both driven and benefited from that with the acquisition of Center heart.
Clearly you are looking to capitalize our seems to be continued evolution in the direction of more a more cases more more elway's being being treated proactively could you could you talk about where you are now from a penetration standpoint in the markets in which in the second nieces about market.
You participate with synar it adds to it and does that also sort of.
You get by beyond next year, you start to see growth potentially accelerating because of that business too right can you talk a little bit of ourselves and I think you've kind of set it up really well there Jason which is one of the things that we have as a business is that with these acquisitions and also just the investments that we've made over the last several years to get ourself.
I was ready for catalysts over the next five years and the appendage management is a great space for that so im you're absolutely correct. I mean, if you think about I'll start with the lariat piece of it.
The market is just as big as additive technology to converge and of the catheter ablation, because basically the converts take up the back while the catheter does a great job with the PV eyes, and then you've got the appendage management to kind of close that out and as I mentioned in my script in lot of that triggers as we will know come from.
Around the base of the appendage and through the appendage quite frankly, and so thats kind of the theory behind the trial.
And that should be another accelerator to growth in 2023 in 2024. So you begin to kind of layer on some of these as you kind of getting the outer part of those years.
And we bought center hard obviously last year with the anticipation of that helping us accelerate our growth into the back half of the decade and be another a really big multibillion dollar market for us.
From that standpoint, as it relates to clip.
Which you're very well aware of that's done concomitantly with other cardiac surgery.
Primarily today that is pretty much how that product is being used and the penetration we sold just over 50000 or so in 2019 totally around the globe.
So thats a lot that's kind of industry, leading were at over 220000 clip sold to date. So those are some pretty big numbers, we know the product works incredibly incredibly well.
And yet we're only scratching the surface. If you just look at the U.S market. We believe there are 300000 cardiac surgeries that go on every year within that 300000 about 90000 of them had a fib and we think about 30 or so thousand about 30 plus percent over 30% are getting a clip concomitant with.
Eighth of ablation and there are some that are getting it done on prophylactically as well.
With that are putting it on where somebody has made a decision on on the end of the surgeon to do that as well and we believe that the prophylactic is going to be something that people are going to want to do long term. Most these patients have a very good chance of getting a fair when their lifetime, we did a trial called Atlas that showed positive.
Results and they were shown last year at several different shows in terms of some abstracts and some papers that have been submitted on that and so we're now going to look at doing a full blown clinical trial likely to start sometime in 2021, that's going to go after a stroke labels specifically for that concomitant treatment and to go after the prophylactic treatment as well.
And so we think there's a lot of room for growth over the next decade, it's kind of wag kind of started this call with when you look at the decade.
We've had an unbelievable last 10 years and now we're building onto what we think is going to be an exciting next 10 years in the history of this company.
Thank you.
Our next question comes from Matthew O'brien from Piper Sandler. Please go ahead.
Thanks, just quick clarification for Andy that 10% to 13% topline guidance does that include any kind of impact.
Just given that said market that you have right now, it's what's going on there as far as declares grows.
No the 10 to 13, it's our best.
As our range for the business don't expect to just given the size of of the Asia business overall.
A huge impact, but obviously, we're still evaluating as times going on and we're working with our teams on the field.
At a better understanding of what that how that could potentially impact of business overtime, but we're comfortable with attendant to 13% as it stands.
Okay, and then Mike.
Certainly talking about this in your engine Jason's questions about the quick business, but as I look at the guidance for 2020, it's probably going to be pretty quick heavy again I know opened you're excited about converge, but thats March 2020, 120 is way too event and then.
Okay, and should benefit a little bit from cryo, but it's still seems like it's going to be largely a clip heavy.
A year this year so.
What what gives you the confidence of that tend to 13 with tough comps in the clip business doesn't sound like prophylactic is going to be a massive tailwind this year.
The label expansion and clips going to help visit more sales reps just just a comfort level you have for that business specifically this year in 2020.
Yes, I mean, weve, if you recall over the last several years, we came out with many innovations in the space. The de clip as I mentioned has really been a boost and as more and more people get used to using their product the finding new ways to use it.
And it's helping us grow the market and we're still really really underpenetrated in that space.
Even in the treatment phase seven there's 90000 patients as I mentioned before and just over 30000 or actually getting a clip on so.
Pretty much every one of those patients should be getting a coupon or having their appendage manage walter in cardiac surgery. So.
We see that Theres still just in Underpenetration game going on within the next several years within the equipped space can comment.
And that's really what's driving most of the bullishness and the comfort on the clip I'd like you said, it's going to be a big driver for our growth. This year overall, and we think that the v. clip is really kind of helped out quite a bit on that front.
Okay can I sneak in one more real quick one.
Sure on the clinical data side. There was there is the frost abstract was posted you hit the primary endpoint I think you missed the secondary endpoint on the pain score on just I'll be here, a little bit more about how significant that isn't any kind of response or getting from the field.
On that date I just in totality. Thank you.
On the response has been very very good I mean, the primary endpoint as you as you mentioned was really lung function.
And kind of restoration of of breathing and and we that the primary endpoint was met in a big way on that particular front. So.
I feel very good about the results that came out with that that was really the primary one we're looking at the other end point as you said was more of a subjective measure on pain. They were pretty equal now with interesting about that as they were actually equally low on the pain management because they were using standard of care in some of the pain management thresholds that we kind of expected that within that area, but it was definitely something where we kind of saw they were there almost.
Equivalent on the pain scores, specifically, but how they recovered how quickly recover was significant and at STS. This year Dr. Lu basically presented that and there was a very positive response.
From the audience when he was presenting and conversations afterwards as well.
Very helpful. Thank you.
Thank you. Our next question comes from Robbie Marcus from JP Morgan. Please go ahead.
Thanks I appreciate the question.
I wanted to touch on converge and.
We're going to be getting hopefully add.
Add.
HRS, we'll get a late breaker.
But I just wanted to understand the confidence in the timing to move it into a presentation and away from a potential FDA panel pack was there something that data you saw that give you confidence to presenting it.
As a late breaker and do you still at this point expected potential FDA panel.
Yes, I mean as were the reason that we made the decision to go for the HRS.
Late breaker was because we didnt want to be the first ones in the eighth in market specifically to go down that path and win some other companies that were doing some trials in the space decided to a different patient population for sure but they were they came out today from symposium that really kind of led the way for us to be able to kind of come out at a scientific.
Session and the closest one to when we got the data and that we could actually submit for late breaker was HRS. So it really had nothing to do with the underlying data and everything to do with just the timing of somebody else kind of submitting for a different one that we felt comfortable not being the first one at that point in time and net it made a lot of sense to have our key leading physicians presented.
Net as close as we possibly could from.
When the data came out so thats. The primary reason why we make why we made that change to kind of get it out there again, we just in one of the first one is out there and so we're kind of now following a model much like other medical device companies have with the data comes out at the at the trials and hopefully this will be something that continues to happen.
Within the space now that several companies have done it.
I think during the second question I can't recall, what it was though.
Yes ill just kind of rapid into my follow up question at wise, What's your latest thoughts on timing for may be approval or a potential FDA panel ahead of approval and then second that part we can all dream really big numbers on what this.
Opportunity could look like over time.
So what's your latest thoughts on potential timing of approval and then just walk us through may be the headwinds or steps you have to walk through to drive adoption at this end and help us set expectations ramp should it be positive. Thank you sure.
I mean I'll add to it it allows and really quickly the country's walk through time and so we submitted all the updated data back in December of 2019, There's 100, a clock that kicks. In then we plan on having an FDA 100 day meeting sometime in the April timeframe mid to late April is likely when we'll get feedback from the FDA on whether or not.
We're going to half that a panel at that time, obviously I don't know at this point.
Whether or not I think I've talked in this call before it really comes down to.
Conversations with them not really necessarily about the data per se.
But about we've had the technology out marketplace for a long time has been used.
For a longer to timing so it's really that how does that affected and and can we get them ticket basically kind of move away from doing the panel, but obviously, we're we're at the women the conversations we're going to wind up having with the FDA in that April timeframe or so some should all good questions for us to kind of worked through.
That will obviously drive a lot of the timing if we go to panel panels likely sometime in the July August timeframe, and then hopefully and approval would be shortly thereafter, three to six months I mean depends on kind of feedback or questions. They've got on labeling that hopefully the sooner part of that so right. Now we're just on a clock with the FDA and can be having good I should say, though that.
While the 100 day clock starts we have already started on many of the other operational items underlying it not the labeling aspect of the data, but we have had audits of several different sites. We've had audits of several of our different suppliers to make sure that they all than Pmeight ready the team on our end has done a wonderful job and and I feel like we are more.
And ready to handle all of those and we're working collaboratively with the FDA on all fronts relative to that as it relates to the ramp once we do get an approval for.
Our products.
And are able to kind of move forward with the pmeight from that standpoint.
As I mentioned earlier and Jasons question I feel like we've got the team in place.
We've been training that team and getting them up and running and ready I think that there there's still work to be done this year, but it's kind of around the edges, we will absolutely be ready.
You asked about what would be the headwinds upon the adoption, it's not going to be about coverage in the United States. We will have proper coverage and well trained team in place, it's going to be around really working through the sites for.
On a logistics adoption how did they fit within their current program how do they fit with they've got these patients and do three hours at some point in time and each sites can have a little bit different perspective on that so one is going to be logistics to is going to how's that fitness system. In three I think is going to be really making sure. They have got good surgeons that can do to procedure that they can collaborate.
With and getting those new surgeons up and running and trained is going to be critical we have sights set up around the country, they're able to do that training, but it's a matter of just kind of getting throughput through some of that.
Thats why as I mentioned in my comments adjacent 2021, we should see some acceleration, but really the bigger acceleration begins in 2022 and beyond as as it's kind of gotten through some of that.
Really appreciate it thank you.
Thank you.
Next question comes from Danielle Antalffy from SVB Leerink. Please go ahead.
Hey, good afternoon, guys. Thanks, so much for taking the question congrats on a strong year I wanted to ask the other side of the guidance question and and that is why only the I think it was 10% to 13% I mean, if you look at what you put up in 2019, you actually saw growth acceleration and.
Specifically in the back half of the year and this was off of what we thought were tough comps in 2018, So just curious on.
What you are seeing that would.
Make you expect some deceleration in 2020.
Number one number two specifically as it relates to the open ablation business really nice growth acceleration in that business.
In 2019 versus 2018, so Mike could you just remind us on on what's driving that growth and how sustainable that is.
And then when you look at our business you look at our guidance, obviously, we want to make sure that we're able to.
Meet and exceed the guidance for the year, that's something that we pride ourselves on overall as a business numbers, obviously do get larger as we look out to 2020 120.2, we've got really big catalysts that are going to change the market in general and accelerate our growth rate in really big ways. This year really it's.
It's another good strong double digit revenue growth year, if you actually look back to when we entered into 2019, our guidance was 9% to 13%, we obviously exceeded that and had a really really good and strong year.
Beginning part of the year, we feel really good about the year, we feel good about the team we've gotten place.
But we want to set it appropriately so that we can make sure that we can.
Meet and exceed that guidance for the year, that's really what fall behind it overall and then as you look on the outer years, hopefully, we'll be able to accelerate based on the catalyst of these big clinical trial dates that are coming out in the future and then also as I mentioned, it's not just the clinical trials, we've got new products coming on the pipeline with encompass.
And then you've also got the possibilities and other trials as well.
Okay got it and maybe I'll ask the question. This way is there any different sort of stance on our approach that you're taking to guidance. Because you did handily beat guidance for 2019. So as you look at 2020 or you are you doing things differently are approaching guidance differently to.
The more realistic or you, leaving that same sort of level of conservatism baked in.
We're always look and I wouldn't say that our philosophy or has changed in any way.
We constantly look at the business from 10 different angles to make sure we're not missing anything to make sure that weve accounted for things on all sides will upsides and downsides relative to it. So nothing fundamentally is changing the way that we're viewing it or looking at the year given that we're only six weeks ended the year, we kind of.
Nothing has fundamentally different in the way we looked at last year.
Thank you.
Our next question comes from Mike Matson from Needham and company. Please go ahead.
Yes. Thanks for taking my question wanted to ask about this new encompass ablation probe. So I understand that this is something that would help.
Maybe drive increased adoption in the cabbage procedures, but is it something you may also be able to get a price and mix benefit on as well.
The answer is yes, I mean, it's a it will be a higher price product. It's a really innovative product that basically makes a lot easier to go around the heart and really kind of ablate in multiple different areas with having to do a lot fewer dissections for those that.
Have more difficulty doing some of those dissection as I mentioned cabbage, because it tends to be in cabbage or HDR patients when they're not opening or they don't feel comfortable opening up the atrium for one reason or another it really does allowed you to ablate more comprehensively in various different areas in the existing clamps that we have today that are really focused.
On the veins only initially kind of gives a more complete procedure from that standpoint. So yes. It will it is more comprehensive it's a really simple and easy to use product.
And our team has done a really wonderful job on the on that front and the price point will be higher than existing clamps, because it's much more comprehensive and the ablations that it does.
Okay. Thanks, and then Andy I think you indicated that we expect the first quarter to be account with a lower in the revenue guidance range that rate and I guess or more than halfway through the quarter now so I guess, what what's driving that.
Sorry.
I mean for the quarter, having quite frankly, just as we entered the year. We just want to make sure that we're in a really good spot or the overall year and that there is nothing like to to read into it per se, but as we look at the are we kind of look at the year building as we kind of get ourselves ready for conversion get ourselves ready for launch at the end of the year and so we wanted to make sure that we're kind of guidance appropriately.
Okay and then finally, just on the open harder I mean, it's good to see the double digit growth there, where you are including the client Bourbon there I think so.
We've seen even Edwards.
As now seen some deterioration in their domestic problem solver sales from a TAVR cannibalization. So what are you seeing there you see any impact at all from from Palaver on.
On the open heart business.
No not at all and we've talked about this before we've talked about on this call before the market is incredibly underpenetrated in that front sever is a very very small percentage of our overall business, we don't see really any pressure.
Patients that have a favour typically continuing to go in for surgery, and so that's not impact that doesnt have a real impact on our overall business I mean, it's not a it's not material or meaningful piece to it.
Overall.
No talked about at length in this call before and.
I'd say, it's even less so today than it was a year ago and less so than it was the year before that and so it becomes a smaller smaller component of our business overall.
Thank you.
Our next question comes from Rick Weiss from Stifel. Please go ahead.
Hi, Mike and Andy It's drew on for it Tonight.
Just wanted to start with Larry for second so it's been about six months since you've had Larry and under the belt. Just how is the conversation with the piece has been evolving as you kind of continue to work towards.
Converge approval in are you seeing increased interest from Larry at trial sites to pursue converge just talk about any traction that you're seeing in these early days.
Yes, we estimate to date, we've really focused delivery of team on lariat. There has been really not much crossover other than training and awareness and making people, but we've really had the teams separate all the way through the end of last year, we needed to get that trial down. The trial was our number 123 or five priority and that was really what we're doing we're getting the team ready behind the scenes we're getting.
Turning the field and making sure. We're in the cases, the cases were being done well that really hasn't changed that team is incredibly clinical.
Really are they are great ambassadors for us overall, the business, but we haven't leverage them in any way towards converge.
In any kind of meaningful way that will change lightly as we progress towards the pmeight at the end of this year, but we really haven't done much trend to kind of get them up to speed on that front. We have moved the teams together so that they are actually working more they can work more collaboratively, but it's more so so that they're not bumping into each other in hospitals and things like that again by the end of the.
Sure I think that will change, but we're really kind of during this in a very methodical way and havent seen any kind of uptake per se on the converts that Matt.
Got it and then just from the asked symposium and the let Pedro appendage meeting a couple of weeks ago, I mean converge could clearly drive adoption. If it's if it's positive but when you when you're talking about the market. It seems like you're talking just more on catheter ablation and salvage procedures and we've been hearing clinician.
Feedback, saying that they could even think of this as a frontline therapy. So just how are you kind of.
I know you can't really market does but how are you positioning at or thinking about converge as a frontline therapy versus a.
Redo procedure for previously failed catheter ablation.
I mean, we think that it can it can be both I think that theres a practicality of it. So the trial itself has actually done in a frontline therapy, putting all that randomization was done on the noble heart that had never been ablated before so the data is actually going to be on patients that had not been ablated before had not gone through a PPI.
And so thats, obviously, how the it is going to its can be pushed out that way. Once we actually are able to get that label in the approval.
Relative to that so we do see that at a really big market opportunity. We're also realistic to know that a lot of times. These patients do go through a catheter first especially as the as trying to treat budget and that that's going to be kind of can comment to that particular procedure at that time, So I'd say that the way we're looking at it is.
It really applies to both will wind up marketing it as the FDA gives us whatever less leeway in latitude they give towards that will basically levers that.
But it can be both the frontline therapy, and obviously one that can be after a catheter ablation has already been done and they felt I see both having an impact on this patient population.
We we intend to goes at one of the number of happens there's really three now use at 100 number Catherine number is because the numbers are so large.
Like when I start talking about there are 6 million patients in the United States that have a bit 4 million of them have.
Persistent longstanding persistent and were during 2000 procedures today. It is likely well, that's a pretty big market and that is completely on that is really on path that I try to bring it down to okay, well, what's the reality of who's getting ablated today and as through that it's close to depending on what numbers. You look look at 120 to 150000 catheter ablations that are being done every year 50.
50, or 50% our PAREXEL early stage and 50% of the later stage ones that were we tend to focus on and even just attaching to some of those and being complimentary to that as I mentioned in my in my comments that also just a huge market and that market is growing as we all know in north of 10%. So that's why we tend to focus on the number of catheter ablations just to kind.
To make it easy for people to think through it.
Thank you.
Our next question comes from Mary evolve from BTI James. Please go ahead.
Hi, Andy Thanks for the questions.
I wanted to start here I wanted to get a few more details on the V. clip launch in Europe. You have this year I know, it's in a strong product in the us.
And how should we think about that launched throughout this year. It sounds like you should be helping both on the pricing side as well as supporting kind of sustained strong Ritchie CJR grants that are there any more details and give us on that launch I think it's.
The European market has been clamoring for the V. clip. It is a higher price markets are there more price sensitive over in Europe, and so we don't anticipate that it's also I'm just going to take off.
It will take a little bit of times this you're going to be kind of about ceding the market and beginning to grow it but I think the biggest excitement is just that clip is the fastest weren't part of our market overall in Europe, and then you combine that with now we've got our most innovative and great technology. That's out there that they're going to get access to its going to create buzz and excitement about eight years, bringing new products into this market has spent.
The time that we care about that market and we do care deeply about it and that you'll begin to kind of see it kind of as a an additive piece to the growth overall, there, but not nationally some hockey sticks going to happen because eclipse enter that market because they're a little more price sensitive and we're pretty disciplined on the price on it.
Okay understood and my second follow up it's more a modeling question I appreciate the uptick in R&D spend for 2020, given the multiple research programs you have to when we think about converged data at HRS Apostle Akshay panels, the amaze cap the other trials the pipeline.
Can you help us how to think about you know the quarterly R&D spend cadence throughout the year.
Okay.
Sure. It's as you think about it theres going to be some some ups and downs kind of I would say throughout the year, just given cadence of the different trials and as the caps come online.
But quite frankly the.
Easiest way to think about it is just as a starting point the percentages, we given the script.
Just to kind of keep you in line, there's going to be some movements up and down obviously.
Around those on a quarterly basis, but you're right. It's a lot of moving parts and so without giving you very specific quarter by quarter numbers.
Let's start with with what we've kind of provided in the prepared remarks.
Thank you.
Thank you.
Sure no further questions in the queue at this time I'd like to turn the call over to Mike Carroll, President and CEO for closing remarks. Please go ahead.
Again, everyone. Thank you for joining the call today as you can tell we're excited about the next decade together and we look forward to talking again soon and seeing you.
At HRS for the late breaker talk you soon have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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