Q4 2019 Earnings Call

<unk> conference call.

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply put star followed by the number one on your telephone keypad. If he would like to withdraw your question. That's the problem Keith. Thank you I would like to introduce MS. GE Hamlin Harris Investor Relations with the number salmon Harris.

They begin your conference.

Thank you operator, and thank you all.

Joining us on today's call to discuss the numbers earnings release for the fourth quarter and year end 2019, a copy of the press release and financial table, which include the GAAP to non-GAAP reconciliation can be viewed under the investors Tab Hotel company website at Www Dot pin number dotcom.

During the course of this conference call. The company will make forward looking statements to see went to the safe Harbor provisions of the private Securities Litigation Reform Act 1995, including statements regarding our financial performance commercialization clinical trials regulatory status quality compliance and business trends.

Actual results could differ materially from those stated or implied by our forward looking statement due to certain risks and uncertainties, including those described enough 10-K for the year ended December 31, 29 team, which is scheduled to be filed with the FCC on February 25th Twentytwenty.

The results, we caution you against placing undue reliance on these forward looking statements. We encourage you to view periodic filings with the FCC, including the 10-K previously mentioned for a more complete discussion of these factors and other risks that music Duffy's result, open market depressive, though.

A number disclaims any duty to update or revise that wouldn't be statements. As a result of new information you truven developments or otherwise.

On this call certain financial measures I presented on a non-GAAP basis, a reconciliation of GAAP to non-GAAP financial measures is provided you now pushed in the press release.

We anticipate the prepared comments on today's call when approximately 18 minutes I didn't l. set something up as chairman and CEO, who will provide an update from the fourth quarter and yearend followed by a review of the business.

Maggie you in a chief Financial Officer will then discuss fourth quarter and you find that result entry cost Raj I President lenses have twentytwenty revenue guidance and closing remark, we sat I would like to turn over the call Adam Elsa.

Thank you chief.

Good afternoon, and thank you for joining or fourth quarter and year end 2019 conference call.

Number had a strong fourth quarter and finish to 2019.

Total revenues for the fourth quarter 2019, $445.3 million, an increase of 20.3% as reported from the fourth quarter 2018, we had operating income in the quarter of $10.6 million compared to $6.7 million for this.

Same period last year.

From a financial metrics standpoint, 2019 was an exceptional year.

Our total annual revenues were $547.4 million, which represented growth of 23% over last year.

Our gross profit growth was even greater at 27.2% and we ended the year generating $47.5 million in operating income.

Our balance sheet continues to be in a strong position with over $189 million in cash.

And no debt.

Importantly, we made great progress in 2019 towards our mission of helping more and more patients around the world.

On December 3rd we held our first ever Investor day, where we outlined several key themes that had been important to our success and which we believe will remain.

He to our future I would like to take a moment to touch on three of those specific thieves.

The first innovation.

Since 2015, we have launched over 18 new products.

Our engine driving innovation.

He's getting more powerful every year.

Last year. This continue with the launch of jet seven with extra flex technology.

This latest technology has been a significant step forward for for a number and for the field.

In addition, we're confident in a strong upcoming pipeline and cadence of new technology launches and Twentytwenty and beyond.

The second theme is patient markets.

We expanded the number of patients that can help we can help in 2019.

Within our vascular business, we gained FDA clearance for indigo system for the treatment of pulmonary embolism or P E.

With the inclusion of P.E., we believe that they're around 425000 addressable patients a year in the United States that can be treated with our indigo system.

By comparison this represents over twice the addressable patient opportunity that we see in a scheming stroke.

Additionally, last year within our neuro business, we expanded our global reach.

2019 represented our first full.

Full year of launch in China for the per member system for scheming stroke.

We see vast opportunities in bringing our latest cutting edge technologies to the rest of the world.

The third theme that we touched on his new medical conditions are new areas.

We are continually looking to pursue the development of new areas. As an example last year, we announced the F.D. clearance of the real system for neuro rehab.

This represented a multiyear development project that penumbra and in 2019, we began growing a dedicated team to support the ongoing development and commercial launch of the real system.

This has been an exciting new endeavor for our company.

It will allow us to work more deeply with physicians and providers and to bring better solutions to potentially millions of patients in aftercare.

This is a great example of how we look to do things that matter.

And bring future growth to our company.

As we exit 2019, we have a broader business.

Reader growth opportunities than ever before.

Our combined global opportunities are well over $10 billion and total addressable market and we are motivated to pursue further opportunities to grow upon that.

As per numbers business skills, we're intently focused on the foundations that we believe are important for us to drive durable growth.

We are cultivating a highly diverse and co-operative work environment, attracting and retaining talented individuals and developing strong leaders from within the company.

I'd like to in my commentary with a few business updates in a review of our strategies for future growth.

We have confidence in the trajectory of our business.

And in our pipeline of innovation, which we believe can accelerate our growth trajectory.

As Sri will describe when he provides our revenue guidance for 2020.

This year, we will have a headwind from Japan as a result of reimbursement changes and recent discussions with our distributor partner.

Despite this impact we see the potential for our growth to accelerate in the back half of this year and into 2021.

Looking at our vascular business it continues to grow rapidly.

The fourth quarter, we saw exceptional sequential growth from both are thrombectomy and embolization franchises.

This growth is driven by our ability to reach new specialist physicians, new centers and our ability to grow our procedure penetration, we see vast opportunities over the next several years for us to being more centers more procedures and to be treating significantly more patients.

Another port important part of our best good growth will be our ability to innovate over current technology.

In 2019, we did not launch any new technologies in this area.

2020, we plan to launched two new peripheral thrombectomy technologies, one in the middle of the year and one at the ended the year. We believe these new products will contribute to the strong growth and momentum of our vascular business.

Within our neuro business the fourth quarter saw good sequential growth.

Our ability to estimate the stroke thrombectomy market has become more challenging given recent market unevenness and competitive entries.

Our latest 2019 estimate is that approximately 43000 to 45000 patients were treated with mechanical thrombectomy in the United States. Our sense is that the market will continue to grow by similar absolute number of patients in 2020.

As it relates to our most recent stroke technology launch physician experience with jet seven with extra reflects technology has been very positive.

We have not had a product in our history with this level of Tractability.

As we mentioned in her last earnings call. The performance attributes of this product are allowing some positions to begin to move away from needing to use a century.

As we look ahead into 2020.

Our growth strategy in neuro will focus on continuing to innovate in stroke, thrombectomy and broadening our portfolio along the care continuum.

As we've stated we expect to launch new interventional stroke product in the United States. This year, which will continue to drive the transformation of how stroke procedures are done and address the critical need to chew fast and complete revascularization.

We also recently launched the real system for neuro rehabilitation and I want to take a moment to.

To share a few early updates.

At our Investor Day in December we introduced the real system and discuss the scientific foundation underlying technology addressable market and our initial commercial strategy.

Although it is very early I have been extremely impressed with the initial discussions with providers.

Over the last several weeks, we estimate that we've had over 200 initial customer meetings with in acute care hospitals, almost everyone understands the scientific foundations and the importance of our unique combination.

For immersive.

Full presence virtual reality in a completely mobile wireless device.

There is great enthusiasm to see a novel solution that can help neuro patients in aftercare.

Our interventional must physician customers are helping to bring together their rehab colleagues and administration to think about how real can fit into their care settings and strategy.

Additionally, just two weeks ago, we attended the American physical therapy Association or eight gay meeting in Denver.

This is the largest conference for physical therapists in the United States.

Brought over 15000 professionals together.

We had over 40 demo stations that were busy for three straight days, which reaffirmed the feedback about the novel technology and what it can do for patients.

This is a new sales cycle, we're still learning how the process will unfold, but it is clear that this is important.

Provider see great possibilities for their patients.

As we move forward with the launch this year, we will look to provide further updates.

I would like to conclude my remarks today by introducing a valuable new member to the pin number leadership team, our new Chief Financial Officer Maggie.

Meg is a seasoned finance executive with over 20 years of experience. Most recently Vice President finance at the genetic Sciences Division of Thermo Fisher scientific.

In her new role Maggie will focus on internal finance operations priorities that will help support our next phase of growth and scale.

She is a great complement to our team and will work closely with Sri and Lambert shoe, our chief Accounting Officer.

We're excited to have are here with us at the number.

Megi welcome aboard.

Thank you Adam.

On a personal note I want to take them Atlanta, Thank you and sorry for the appointment and opportunity to join dependent but family.

My first few months at Penumbra have only added to my enthusiasm about the company and his future in a short time I've been part of our first Investor Day, I'll U.S. National sales meeting and my first year end close at the company.

On to meet many great terrific people and gotten better understanding of the numbers positive collaborative environment.

Looking forward to the next several years ahead.

Well the fourth quarter ended December 31st 2019.

Total revenues were $145.3 million, an increase of 20.3% reported and 20.8% in constant currency compared to the fourth quarter of 2018.

Our geographic mix of sales in the quarter were 66% U.S. and 34% International.

Neuro and vascular represented 59% and 41% of sales respectively.

Revenue from our vascular business grew to 15.8 million dollar in the fourth quarter of 2019.

An increase of 27.9% reported or 28.1% in constant currency compared to the same period last year.

We saw strong sequential growth and our year over year comparison includes a previously discussed launch I felt peripheral embolization products in Japan in the fourth quarter of last year.

Revenue from our neuro business grew to 85.4 million dollar in the fourth quarter of 2019.

An increase of 15.4% reported or 16.1% in constant currency compared to the same period a year ago.

On your growth was primarily driven by sales of up a number system for a skill mix stroke, which benefited from strong procedural volumes.

Our gross profit in the quarter was $98.1 million or 67.6% of revenue compared to $78.7 million or 65.2% of revenue for the same quarter last year.

Total operating expense for the quarter was $87.5 million or 60.2% of revenue compared to $72 million of 59.6% of revenue for the same quarter I hear ago.

Our research and development expenses were $12.9 million for Q4, 2019 compared to $10.9 million for Q4 2018.

She any expenses for $74.7 million for Q4, 2019 compared to $61.2 million for Q4 2018.

I will spend increased primarily due to increase in head count and related compensation expense.

We had operating income in the quarter, what $10.6 million compared to operating income of $6.7 million for the same period last year.

For the full year 2019 al total revenues for the year were $547.4 million, which represents an increase of 23% reported and 24.2% in constant currency compared to the full year of 2018.

Revenue from our vascular business was $215.7 million for the full year 2019, and increase of 43.2% reported and 44% in constant currency.

Revenue from our neuro business was $331.7 million for the full year, 2019, and increase up 12.7% reported and 14.1% in constant currency.

Our gross profit for the year, what 60% of revenue compared to 65.7% of revenue for the full year 2018.

We had operating income of the for the full year $47.5 million compared to a comparable non-GAAP operating income of $30 million for 2018.

And now I'd like to turn the call to street to cover guidance and closing remarks.

Thank you Maggie.

I would like to add how excited I am for you to join our team. It is a great complement to our organization in many ways and we're already seeing the positive impact that you bring.

Today, we are introducing revenue guidance for the full year 2020 in the range of $635 million to $645 million, which represents 16% to 18% growth over last year.

As it's been our past practice, our initial revenue guidance represents our latest views on our markets timing of new product introductions and other relevant conditions.

For 2020, there are three significant factors to consider with our initial revenue guidance.

The first factor is related to the expected launch a four new technologies across vascular and neuro.

Including the real system.

These four launches are currently expected to have positive impact in the back half of 2020.

The second factor in our guidance is Japan.

And relates to the recent discussions with our distributor partner regarding current market dynamics in stroke.

And our future market opportunities in the country.

Reimbursement changes for the pin number system, which came into effect in November.

Pack to the current market.

As background reimbursement for the number system was first established in Japan, almost a decade ago with our first stroke system.

Since then our system has evolved with better performance and the need for fewer ancillary devices such as separators.

The recently updated reimbursement level represents a decline of roughly 40% and takes into account. The latest stated devices in today's stroke cases in which physicians are no longer using a separate or.

The third factor is the declining need for stent retrievers.

With our latest stroke aspiration technologies.

While our three D. Revascularization device is not a significant portion of our revenues. We believe this is a trend worth highlighting and we believe it can have long term benefit to our overall market position.

The net result of these three factors a slower growth in the first half of 2020, followed by accelerating growth in the back half a leader, which we expect will continue into 2021.

While we typically do not break down the components of our revenue guidance, we expect that our business, excluding Japan will continue to grow above 20% in 2020.

In closing.

A number has made incredible progress over the last few years and has set the foundation for the next phase of growth inpatient impact.

This is an exciting time.

At our Investor day in December our talented senior leaders detailed our long term growth opportunities across several distinct patient markets and they shared why this next phase can make penumbra one of the most compelling companies in health care.

It has been extremely motivating for me to watch many different functions within the company stepping up to tackle new challenges that arise as we execute on our future plan.

I have seen teams within development engineering production marketing sales and support functions all working hard to overcome hurdles that many others could not cross.

This is the result of an incredible environment, where people are highly motivated and work together to solve problems.

This is what makes pin number unique and is what will allow us to be a company that can positively impact millions of patients and families across the world in the future.

Thank you for joining us today and we appreciate your time and interest in penumbra.

Operator, we can open for questions certainly as a reminder, if you'd like to ask a question at this time. Please press Star then the number one on your telephone keypad, well pause for just a moment to compiled acuity roster.

Your first question comes from the lineup Jason Mills with Canaccord Genuity. Please go ahead.

Hi, folks can you hear me okay.

Yes, Hi, Jason.

Hi, good afternoon.

So when you start with Sri left off on the guidance right. If we could sort of a broad question with maybe a couple of questions within it.

Sure. He understands the concept it's already grow through the year could you give us a sense since we model. This.

Around let's say the midpoint of your guidance at 17% sort of what level. The first half could look like relative to the second half and also within that.

We shouldn't gate contribution incremental contribution from the real system as the year progresses, and then I had one follow up.

Yes, Jason Thanks for that for the guidance question. There are couple of components of this and I'll reiterate a couple of things that we mentioned on the call just to bring it home.

The four launches are obviously in our view impactful and many of them will be new products with distinct new revenue streams given that they come at the back half of the year.

As it relates to the full year, there's very little contribution of those.

We're not going to break out is we typically don't sort of the specific contributions of what those.

New product contribute revenue contributions are particularly for real so when you look at it the real impact.

Of Japan.

Is is sort of the Delta if you will for how people think about our guidance compared to maybe what we typically introduced at the beginning of a year and that is pretty easy to quantify that lies entirely in neuro and mostly within stroke in 2019, our Japanese business you can read in the filings was about 40.

In dollars and as I highlighted.

The reimbursement change of roughly 40% you can sort of do the math to understand what what the Delta is.

And I just want to make one one point to come back to something I mentioned about the new product introductions, given there's not a lot in 2020.

That really means we're set up to see it in 2021 and accelerating growth as we go into 2021.

Okay. Thank you Sri that's that's helpful.

I guess as follow up warrants broken war on peripheral thrombectomy.

Can you did filings now yet so we'll get asked this I suppose when it comes out but could you talk about the market.

And your position within the fourth quarter in stroke.

It seems like you saw maybe a bit of the uptick in both instances, but specifically in general.

Then on peripheral thrombectomy, I guess, Adam specific to pulmonary embolism with the indication.

How do you plan to address that market sort of prior to.

Your new product launch and then how much more impact will you have in that market beyond or after that launch occurs later this year. Thank you for taking the questions.

Jason maybe maybe I'll start and Adam will will add on to the response here I.

I think a lot of folks try to assess where are we versus you know the competitors, who have already announced the results for for the December quarter.

If you look at the numbers for the fourth quarter, our neurovascular business grew 16.1% on a constant currency basis.

I think that puts us at that at the highest if not the high of the group in terms of neurovascular results as it relates to the stroke market I think it's also consistent with what our peers have have described as you recall in the third quarter, we mentioned that the market.

Had a little bit of a pause.

We saw that carry into the beginning of the fourth quarter, but we saw strong into the year, particularly in December.

We're going to continue to watch the market as we go forward I think our expectations on next year as a market are pretty much the same as how we led into this year a similar number of absolute patients.

And as it relates to to further on the stroke, Mark and our technology, maybe I'll ask Adam to to chime in.

Yes, hi, Jason that sort of give you a sense.

As you know I'm in the field, a lot talking to customers and.

The reaction to our current.

Just to have an extra flex is remains kind of remarkably strong I mean, it's.

It really is as we alluded to the best tracking catheter we've ever had.

And the results.

Have been really kind of extraordinary that being said as we've said in the past we're not done.

And we think there are things that can be done.

To make that even better.

One of those products, we're confident we'll come this year.

And then we're pretty excited about what will continue develop so all of the conversations that we have about the other parts of parts parts of our business, including our amazing vascular business and now real.

Should not.

Fire take away anything from the pride.

And the excitement in the feelings we have about how we are positioned within this group market.

We can do both of those and I think our teams have proven that.

As it relates to the other part of your question around our pulmonary embolism RP indication.

Really.

He is pretty.

Simple we.

Pretty excited about the opportunity it openly talk talk to doctors and decisions about what this product can do indeed cases, a lot of these cases or emergent and urgent patients in real crisis.

And we I think have shown with the data that came out of our trial.

That.

We can really have an impact.

The time of the procedure as you know from the data is quite short and and very compelling.

I think we'll have a big impact on people who.

Haven't thought about our product for that indication until now.

And that that is something we actively are going after that being said.

We haven't alluded to and described with new product will do.

There's a series of products will do.

But one can assume that it will make that argument or make that point even better.

And without going into any competitive.

Advantage here.

You can rest assured that it will be a lot of fund launched the new ones as well.

Thank you for on that.

Your next question comes the line of Robbie Marcus with JP Morgan. Please go ahead.

Great and thanks for taking the question.

Since the analyst day.

I wanted to see since you've gotten out with real VR started talking with people have you gone in and started to have conversations and what's been the feedback so far.

Yes.

We.

Quantified it a little we've had over 200 conversations in the acute hospital setting this is starting with our.

Current neuro customers and having them bring in.

Their colleagues, who do we have been those acute settings I've personally been in a number of those conversations.

And our team has has been doing is now.

Sure.

A little over a month, plus and I will tell you.

The conversations have gone extraordinarily well.

People understand this immediately our physicians understand it because they see that not every patient is totally fine after stroke in that.

There's real work ahead.

To be ahead, and and that's really challenging sometimes and doesn't always turn out in a in a seamless way for some of these patients.

But the real excitement is coming from the physical than occupational therapists themselves.

Not only in the meetings in hospital, setting, which I've been in but also in the APTP meeting that I mentioned in Denver.

We are they really kind of get it pretty quickly.

They recognize the work that they're already doing but they understand the benefit of being in a full presence immersive environment, where you can really use that tool.

Two in a CLO fuel setting or word choice a trip the brain.

To do things that you can't do in the real world.

And it's really rare that somebody doesn't get it pretty quickly so.

As the year unfolds.

Give you more and more information around it but in the early stages of this.

There really hasn't been something that has tempered our enthusiasm.

Great and maybe just a follow up on on the guidance question Pat.

I didn't hear it but Sri can you give us any color on narrow verses peripheral growth I know you typically don't break it out, but maybe just qualitatively how to think about that.

No I think you talked about Japan, and how to think about that which maybe wasn't fully baked into street models, but even still the guidance range came in lower than most people were thinking so any color you can add on that people just want to get comfortable that it's it's not losing share in the U.S. stroke or.

No competitor is becoming more public on the peripheral side any color you could give us to just give more confidence in the underlying numbers would be great. Thanks, yes, yes in its that's a great.

Thats, a great opportunity to kind of reiterate something that we added in our comments today that.

The Japan business, we continue to have.

A lot of optimism over in the future.

Market volumes for stroke or growing so this the price impact of the reimbursement changes really felt in one year in 2020, but we highlighted are the growth of our business outside of Japan, and if you take a step back and think about what we're talking about here the progression of what we introduced at the Investor Day.

And talking about the for new product launches and the ability to add to growth.

We said what the guidance means as the rest of our business grows over 20% in 2020 now I also answered in Jason So question that the timing of those launches because there's so weighted towards the back of the year, we don't really see a lot of that in 2020, which again tells you that were.

We're set up for accelerating growth in 2021, so from an isolated perspective of 2020, yes, Japan is weighing on the growth, but if you think about sort of the long term trajectory of our business and what we laid out at the Investor day for 2023.

I would say, we're not only very much on track, but I think in today's call.

It should come across that we feel even more confident in the b and our ability to get there.

Great. Thanks.

Your next question comes the line of Bob Hopkins with Bank of America. Please go ahead.

Hi, Thanks, and good afternoon.

I wondered if they come back to the just the understanding the guidance in Japan, because I felt like I left the analyst day with you guys, saying I mean, you preview this to a certain degree said it was only growing 5% in the first nine months and you said you didn't think it would grow in 2020 and so.

Did something change from analyst day to today in terms of your learnings on how bigger reimbursement cut was or did I, just misinterpret, what you're saying at the analyst day.

Bob It's Adam let me, let me try to address that.

Yes, they can go.

As it relates to Japan, we're sort of looking at our business in two categories right now the first categories sort of our existing products that are in Japan.

And maybe I should start we have a great relationship with a very long term time distributor in Japan, we worked with for many years, they distribute our stroke products and coils, primarily or peripheral coils and those businesses, particularly stroke remain strong but for this reimbursement issue.

The second category.

And this is I think not something we've talked about.

And in our prepared remarks, we addressed that we've had recent conversations the second categories sort of new products that aren't in Japan.

And we've agreed with our distributor partner that they'll continue to distribute.

Our new interventional products like indigo.

Which is not yet approved in Japan, but non interventional products like the real system.

We will commercialize those directly.

So.

There's a little bit of nuance, there and notwithstanding the short term issues that we just outlined around reimbursement and all we really still expect that we have significant opportunities with all our products.

Including real in the long term in Japan.

No. That's helpful color I, just but I'm just curious if some of the stuff happened after the analyst day, because I really thought like I had the message on Japan at the Analyst day and then.

Obviously.

It's a good it's not a big deal bigger picture, but I'm just kind of curious.

It was this stuff that's sort of was already well known as the analysts they are kind of happened afterwards.

Yes, the reimbursement thing was obviously very well known at the analyst day, and I think we even mention it and use the same commentary about the magnitude of of the reimbursement change. So I think the math on that is the math on that in December and today, what is different if you call. It different is that discussion.

And we're on going about sort of the next phase of products and I think thats what were clarifying today and that is new and obviously from our perspective.

It's great for us and our partner.

In how we both look at the future together.

Okay and then the other little thing I just wanted to ask about real quickly into 2020 guidance that you gave.

I appreciate your commentary on the U.S. stroke market from a patient perspective.

And sorry, if I missed this but do you assume that.

Your market share is basically stable you basically grow in line with with.

Numbers that you provided in terms of the number of new patients or do you assume.

Share loss per share gain just wanted to get a sense for what's in there on not U.S. stroke.

Yes, we.

Like prior years.

Haven't sort of provided the detail on how we see our share moving I think we try to give our best view of the market, which I think is getting a little bit harder to be honest to kind of be precise about but I think we feel confident in that market view.

I think the other thing we can say on the on the share part, we obviously have jet seven extra flex out there.

It for a little bit and the experience I think is pretty well known.

The additional technologies that we have coming in 2020 and beyond I think as the other way to measure you know sort of our our position. If you will and we'll we'll have to wait on those to provide more color, but just like we've done in prior years, Bob the guidance takes into account.

You know all of those factors and we don't necessarily try to guide on market share.

Okay, and do you assume any real sales and your guidance for this year, sorry, just one last one.

Yes, so again.

Sorry to give you an satisfying response on this about not breaking down the components.

Just to go back or what Adam said, we are out talking to people about it obviously, we're learning a lot. It's a new sales cycle for us I I'd characterize.

What I think we characterize the feedback to be.

I'd say on the on the better end, if not better than what we had expected when we went out for this exercise in our first few months to characterize sales right now is a little too premature. So the way that we are planning to provide updates as a little bit more on the qualitative side similar to what we provided today and as we get closer to.

Having revenue discussions and visibility, we're certainly going to provide that.

Okay. Thanks, so much.

Your next question. Thanks about a line of Larry Biegelsen with Wells Fargo. Please go ahead.

Hey, guys. Thanks for taking the question.

No I understand you will talk about share going forward, but in the past at least up based on the Q4 results in the past you've talked about put on a stroke products being used in 60% to 65% of show procedure. So is that still the case through through 2019 and.

As a follow up to that.

How are you seeing conversion to jet seven or some customers.

For the clinicians.

Preferring to stick with 68.

The first part of your question Larry on the 60% to 65%, yes, we very much still.

Believe.

We're in that range and just to make it really clear I think not to misinterpret the guidance today I think our confidence on our stroke business and what we have coming is.

The same if not better than where it's been before and that can be evident in how we talk about our innovation pipeline. So I think the prospect of our ability with new technology and what it can do is is the same if not better and.

Just to be clear nothing about the guidance has any impact on how we view the rest of the business. This is purely about Japan and reimbursement.

And conversion to Larry.

Sorry, Adam.

Yes, sorry.

Good to address the jet seven conversion question the conversion is definitely continuing.

And frankly as Weve indicated the past its pretty sticky.

There are some physicians as you know the this is a very.

Personal sort of choice people.

Like different access tools, some use long she's like Gardner on Max product other use balloon guide.

And that sometimes will impact.

Their catheter choices based on what fits into those various access tools.

So there may be certain positions who.

Who don't convert for those reasons, which is fine we think again as I alluded to that as our tools continue to evolve.

This year and next.

That we will provide compelling reasons for them to continue to reconsider their current techniques into sort of more and more modern techniques were pretty good at that.

And our technologies done that for many years as you know five years ago.

We're talking about converting people from dentures do aspiration that conversion processes is well underway. So so we think that there's room to continue to make those moved as our products.

Evolve and frankly good.

Easier tracking and faster to remove costs, so which is the goal of the case.

One thanks for that one on unreal.

What I appreciate the earlier color what about real is resonating most with the accounts you've spoken too so far and are there any kind of early barriers to adoption or tweaks you've had to make to the business model. Thanks for taking the questions.

Yeah Larry.

Delighted.

Answer that question, it's a great question.

The them the immediate there's a sort of a layer of up sort of Aha moment.

That I've seen pretty consistently again I've been in a number of these conversations to really sort of get a feel for it.

The first Aha moment from.

All the therapists, who see it is is very simple which is.

My God. This is a tool that will engage might patients that will take patients that many times are resistant to therapy. They are depressed their situation is very different than what it was just several days ago before they've had.

And event. This is conversations in acute hospital setting and we can engage them, we engage them very quickly in a way that we can't do if you will in the real world and that's the first sort of magic reaction.

After that when they start to understand what the system is doing.

In the scientific foundation.

It just sort of cemented.

Because then it it all makes sense.

So the written so that's the pathway or the typical reaction that we've seen and it's really powerful.

Then to answer the final question about are there.

Any.

Sort of barriers are things that have made us tweak.

Our financial model or business model the answer is no.

Not yet.

Okay perfect. Thanks for taking the questions.

Yes, thank Larry.

Your next question comes some Margaret Kessler with William Blair. Your line is open.

Hi, Thanks for taking my question Brendan on for Margaret I wanted to focus first on the peripheral side on peripheral vascular.

If I recall correctly from analyst day, you have.

New product slated to launch through 2020. So do you think about those new products, where do you think you'll see the most benefit from them. How do you think they can help open new accounts, maybe opened new market opportunities, perhaps different sizes confusing.

Seizures.

He just drive utilization. So how are you kind of thinking about those products, especially as you think about 20 to 20.

It's a great question without really revealing.

What those products are yet, which which as you know I got to be careful for competitive reasons.

The way we look at it.

Is sort of all of the above if you will you know were in both the arterial side endovenous side as well as PE.

And the products or sort of slightly different that will be beneficial for for those those different.

Vascular beds.

And we think that the suite of tools that will launch midyear and ended the year will cover.

The the entirety of those applications or is close to it as we can with this phase.

And.

We think we can they will do better we think they will make the cases.

Easier faster better all the things that will begin to continue to compel physicians to realize that just removing the blood clot.

In an acute setting is better than dissolving masquerading incenting throughout the rest of the body and it's that journey that we think these new products will continue to help us do throughout the various vascular beds.

Got it okay that makes sense.

As a follow up kind of thing in the peripheral side.

Operation side of the vascular business is a pretty.

Meaningful business as well and I feel like we give it a little less focus.

Maybe can you can you just kind of talk about from a high level, what the market opportunity is there I.

I think.

Medical conferences or even on some of your earnings calls there have been why it very useful for those embolization coils.

How do you kind of size up that market, where are you today in penetrating that market.

Much do you have left to go going forward. Thanks.

Yes, Brian.

Good question, we haven't yet quantified.

That market in terms of patients are cases.

But let me sort of address it this way. So if you look at just the detachable coil market.

You know that's that's a defined.

Market, if you look at the larger.

Market in which.

Any tool any embolization tool whether its.

Push people coil detachable coils liquids glues you know.

Phones Intel's, there's there's a lot of products that can be used plugs.

We we view that opportunity.

Where we can make a difference in all of those.

Where if you look at the reason we've succeeded we have very unique offerings our products do not temp to look like other companies products, they're bigger coils are softer coiled their coils that can stop in the middle of a high flow vessel and not run further down.

These are very uniquely designed products.

I think that effort that are amazing engineers have.

I have spent time doing is paying off because they needed in state.

And we're seeing that continue to grow so I don't think we can quantify it as a as the scale of a market in quite the same sizes, the peripheral thrombectomy market, but it's still not insignificant and we do think there's growth left in it.

Yes.

There are currently no further questions at this time Ms. Hamlin Harris I turn the call back over to you.

And with that on behalf of our management. Thank you again for joining us today until your interest in Penumbra, we look forward to updating you on our next on out first quarter coal.

This concludes today's conference call. Thank you for joining you may now disconnect.

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