Q3 2020 Inari Medical Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to <unk> third quarter 2020 earnings Conference call. At this time, all participants lines are in a listen only mode. After.
After the speaker's presentation, there will be a question and answer session to ask a question during the session you'll need to press star one on your telephone. Please be advised that today's conference maybe recorded if you require any further assistance press star Zero I would now like to hand, the conference over to your speaker today Ms. Caroline corner. Please go ahead ma'am.
Thank you operator.
Operator, welcome to <unk> third quarter 2020 earnings call. Joining me on today's call are Bill Hoffman, President and Chief Executive Officer, and Mitchell Chief Financial Officer. This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, all statements made on this call that do not relate to matters of historic.
Mark the facts should be considered forward looking statements, including statements regarding the markets in which an already operates trends and expectations for an artist product and technology trends and demands for an artist product and our expected financial performance expenses a position in the market and the impact of COVID-19, itineraries operations have been already customers operations.
These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results performance or achievements to differ materially from any results performance or achievements expressed or implied by the forward looking statements. Please review and our most recent filings with the SEC, particularly the risk factors described in inventories as one.
Filing and in our quarterly report on form 10-Q for the third quarter ended September Thirtyth 2020 for additional information any forward looking statements provided during this call including projections for future performance are based on management's expectations as of today and are you undertakes no obligation to update these statements except.
Required by applicable law.
In our press release with third quarter 2020 result is available on inventories website www Dot NRT medical dotcom under the investors section and includes additional details about our financial results and.
Its website also has the latest FCC filings, which you are encouraged to review.
A recording of today's call will be available on <unk> website by five P.M. Pacific time today, now I would like to turn the call over to Bill for his comments and third quarter of 2020 business highlights.
Thank you Caroline and thank you everyone for joining us today.
We've enjoyed a busy and highly productive Q3, which we.
He will review in a moment.
But I'd like to start first with the story that might help remind you of who we are and what we do.
Last quarter I shared with you a story about a patient with a massive pulmonary embolism, who is in such poor condition that his wife, we summoned to the Cath lab to say goodbye.
Months later, the physician use our float.
We we were technology to extract several large blood clots from the patients pulmonary arteries, leading to immediate improvement of symptoms and vital signs while the patient was still on the table followed by a remarkable in rapid recovery.
I'd like to share now with you at very different story about a deep vein thrombosis or DVT patients with.
With a guarded prognosis due to his underlying.
Cancer.
This patient in fact has terminal metastatic prostate cancer patient.
Patient presented multiple times to the hospital for various cancer related procedures drug infusions and follow ups.
He complained of heaviness pain and swelling of his legs worsening with each.
Okay is it further and further limiting.
Lead to even walk.
During a multi disciplinary tumor board meeting at the hospital in which various imaging and cancer treatment strategies are discussed the interventional radiologist asks a simple question how's the patient doing.
The answer was the patient could not walk.
Okay.
Simple imaging tests revealed extensive blood clots in both legs extending into the pelvis and even into the early indicator in the abdomen, which was causing the leg swelling insignificant paid sadly clotting disorders and deep vein thrombosis are very common in cancer patients.
The interventional radiologist lobby the consulting oncologists all of.
Whom were consumed with his cancer treatments to consider treating the blood clots.
After some discussion about whether it is quote unquote worthwhile to treat DVT in a terminally ill cancer patients.
The patient was ultimately treated would be in our backlog trigger large volumes of Clos were removed from both legs. The patient was discharged from the hospital the next.
Okay, the pain swelling and having this resolved a few weeks later the patient Sun sent a letter to the treating physician thanking him for paying attention to the patients chief complaint.
In allowing him to enjoy whatever time he has left in the highest quality way.
The letter included a picture of the patient playing EMEA hard with his grandchildren.
Deep vein thrombosis, unless it enables us to the lungs to become pulmonary embolism is rarely a life threatening condition. It is however.
One of the most miserable and severely lifestyle limiting conditions imaginable.
We along with our physicians and customers are committed to impacting the lives of our patients regardless of the quantity of life remaining.
Meaning in the most beautiful and important ways. This is this is not just what we do this is who we are.
We remain so thankful for this opportunity.
And for the responsibility interested in us by our physicians, our customers and our investors as you'll hear shortly we are growing our DVT business, along with our PE business.
Aggressively despite our success to date fewer than 5% of all patients who can and probably should benefit from our devices are being treated with flow tree reclass schriever most of them.
Never even see a physician who knows about our devices or these treatments even exists we have work to do and we love the work.
With that I'd like to turn now to our quarterly performance.
Revenue in Q3 was $38.7 million up.
Up 172% from the same quarter last year and up 52% sequentially from Q2.
As you know we pay close attention to procedure volume as this metric more closely than any other aligns with our mission.
Read our patients and over time, we believe a correlates strongly with revenue.
During Q3, our physicians performed more than 3700 procedures up over 185% from the same quarter last year and up 48% sequentially from Q2 our.
Our sequential growth of approximately 50% in both revenue.
The procedures with strong like Q2, we saw positive intra quarter trends as procedure volume in July August and September we're all sequentially higher.
We have seen that trend continue into the early part of Q4 as procedure volume and revenue were up modestly in October again.
Please note so.
Due in part to other companies, we are offering this monthly intra quarter information due to the pandemic and we May just continue this practice in future earnings calls.
In Q3, we believe we took a strong step toward returning to the company's pre pandemic growth. We found the hospital operating environment in Q3, mostly constructive and Weve.
We have found ways to execute effectively through the kept pandemic in all areas of our business. We are however, encouraging a bit of caution as we look forward Cath lab volumes have not returned to normal.
While Colby cases and hospitalizations.
Already at all time highs continued to rise.
As we approach winter.
We again see.
So in impact on our hospital customers on patients seeking in gaining access to care.
On our commercial efforts at various hot spots throughout the country and on our day to day operations, while we remain confident in our growth drivers.
And our medium and long term prospects for aggressive and sustainable growth.
We continue to recognize the uncertainty the immediate term.
We're not in position to issue forward looking guidance at this time.
During Q3, our DVT procedures represented 54% of total case volume, while PE represented 46% procedure mix has been consistent within just a few percentage points since the beginning of two.
Mhm 19.
Suggesting that adoption of each product and procedure is equally strong perhaps useful to note that this consistency and case mix is organic there are no differential sales incentives messaging or emphasis on one device or procedure compared to the other not coincidentally, we believe this ratio of our PE the DD procedure volume.
Them closely reflects the ratio of total addressable market measured by procedures.
Revenue mix favored.
Flow tree or 63% compared to clots river at 37%, owing largely to the higher average selling price for flow trimmer compared to clutch River and the fact that floats river is used in a small percentage of DVT procedures.
Only revenue mix.
Has also been consistent from quarter to quarter.
Before jumping to our discussion about growth drivers I'd like to update you on the progress of our Flash registry.
Interim data from the first 230 patients enrolled into our Flash registry were presented on October 18th as a late late breaking clinical trial.
Art, the annual Trans catheter cardiovascular Therapeutics conference or TCT.
The results further confirming excellent safety record of flow tree for treatment of pulmonary embolism, there were no deaths.
At the 48 hour follow.
Patients with similar risk profile, historically carry a significant mortality risk.
In addition.
There were no cardiac injuries no pulmonary injuries no procedure related Deteriorations and importantly, there were no instances of intracranial hemorrhage, a devastating complication associated with both systemic and catheter directed thrombolytic based treatments.
Efficacy data were equally compelling statistically and clinically significant.
Decreases in heart rate and pulmonary artery pressure were shown along with statistically and clinically significant increase in cardiac index all while the patient was still on the table.
These data are consistent with anecdotal observations that patients feel better even before they leave the cath lab.
Finally.
I see.
Tuesday post close we have a procedure was zero days.
This is of course always important for clinical and economic reasons, but even more so in the midst of a pandemic while hospitals are doing their very best to preserve IC you beds for coated and other very sick patients 30 day results of this cohort will be presented at the annual meeting of the American.
Second Heart Association and available Tomorrow November 13th perhaps the most important metric in this new dataset will be the 30 day mortality endpoint attention will also be paid to the 30 day readmission rate.
As well as the continued improvement in hemodynamics and dismiss scores.
PE studies to this point have invariably focused.
Just on surrogate endpoints, primarily RBL the ratio, whereas the flash study shows significant impact on clinical endpoints that are considerably more important and relevant implications for patient care.
We believe these endpoints represent an important step forward in the assessment of PE treatments.
I'd like to turn now to our key growth drivers and the progress we have made on each in the third quarter first.
We continue to expand our sales organization to target new hospitals and physician given the estimated size of our U.S addressable market, which comprise more than 440000 patients and $3.6 billion in revenue potential we continue.
I believe our sales organization will rival in size the largest interventional refocused sales organizations in the market today.
Historically, we have added about 10 territories per quarter, although that cadence was interrupted by cold in Q2, we increased our pace of hiring and began Q3 with approximately 90 territories.
Throughout Q3, we.
Found the candidate pool, especially deep perhaps as a result of our IPO and the increased awareness of our company and our story and we seized the opportunity to hire more aggressively as a result, we entered Q4 with approximately 120 territories.
Between now and the end of year, we will be pursuing our next quarterly cohort of sales.
Signals in anticipation of their joining the company in January of 2021 at this time, we do not anticipate this group will be as large as our Q4 cohorts increase.
Increasingly this expansion has and will continue.
To provide opportunity to split territories to.
To focus on our second growth driver.
Which is building awareness and driving deeper adoption at existing hospital customers.
Our goal is to access the patient population conventionally treated with conservative medical management, which represents perhaps 90% of our PE Tam and about two thirds of our DB TTM. We believe we are beginning to have some success on this front.
We see grow.
Interest in our procedures from referring physicians, such as Pulmonologists hospitalist critical care physicians and emergency room physicians and we have increased our efforts to educate and communicate regularly with these physicians at the account level.
Similarly, we are increasing our efforts to help install more systematic processes for identifying tree.
Triaging treating.
And following up on PE and DVT patients such programs are standard for heart attack and stroke treatment butter virtually nonexistent in PE and DVT treatment.
We also continued to execute and expand our clot Warrior Academy, which is a virtual training education and physician engagement platform. In addition to our weekly.
Roadside series and techniques series, which we have discussed in the past we recently installed several additional clot warrior Khattami programs. These include a patient series in which we invite patients to share their life savings stories to a broader audience.
Our leadership series.
Which is an interactive form for our faculty and clot warrior.
Academy Unplugged.
Which is an interactive peer to peer education program tailored to the specific needs.
Of our local physician groups at the account level.
Conduct five seven such unplugged events each week.
Even more recently, we have added plot, where your academy lives in which we streamlined cases to invite.
Biden customers, our vision, which we expect to execute in 2021 is to conduct full days of live cases on a regular basis, our commitment to training and education be a clot warrior Khattami represents yet. Another example of our comprehensive approach to advancing the understanding of these disease states and improving the standard of care for our patients.
Our third growth driver is to continue to build upon our base of clinical evidence. In addition to the flash registry results, which we discussed earlier.
We continue to make progress on our flame study a multicenter prospective two arm trial for high risk patients. The protocol is complete and we expect first patient enrollments in the first half of 2000.
One.
Finally.
During the third quarter, we saw the publication of 14 articles in peer reviewed journals feature featuring the NRT technology. The highlight was a retrospective multicenter analysis by Thoma at all.
In which 30 for high risk patients were treated for centers only one mortality was reported.
20 mean 205 day follow up for reference patients have similar risk carry a mortality rate up to 40%. Our continued investment in clinical data useful not only for expanding the market and driving adoption, but it will also inform the eventual design of definitive controlled trials for both of our technologies our fourth growth driver.
That is to continue to expand our product portfolio. For example earlier this year, we introduced the trigger 24.
Which is a 24 French aspiration in delivery catheter for pulmonary embolism.
This resulted in significant migration from our smaller 20 French platform. This is important as larger more catheters remove more plot and the clock matters.
We believe.
This is critical to both acute and longer term outcomes more recently, we introduced the 24 flex, which is 40% more flexible than the original 324, making it even more deliverable.
The early response from our customers to the 24 flex has been highly favorable and we expect it will drive further migration to the larger platform.
Beliefs, we anticipate introducing several additional product enhancements over the coming months, including our flow savard device.
This device is a simple disposable filtration system that will enable physicians to reintroduce extracted blood back into the patient this.
This will enable the physician to be more aggressive making more aspiration passes without concern for.
But loss the goal again is to remove as much cloud as possible.
We'll have more to say about this and several other new product offerings over the coming months looking further into 2021.
We are very excited about the robust lineup of new products and innovation in our pipeline.
Our fifth and final growth driver is expansion into adjust.
Once in international markets.
There are multiple large and unmet needs in the venous space beyond our current Tam and in the vascular space more broadly we are actively exploring these ideas.
We're also making tangible progress toward international expansion with an initial focus on Western Europe. We've recently received.
Obligated CE Mark.
For our current generation of plot Traver system, and we also anticipate an updated CE mark for flow Traver early in 2021 beyond Europe, we have begun initial market assessment and regulatory work for other key international markets targeting countries with the largest market.
But also with the longest regulatory and reimbursement.
Intelligent lead times.
With our focus on best possible patient outcomes and treating physician experience, we expect our international commercial ramp to be gradual.
I'd like to conclude by reminding you that we are committed to our mission to save and transform the lives of our patients as for the anecdotes we shared earlier.
Members causes bigger than ourselves and much more important than business.
We believe that nothing is more important than taking care of our patients.
We believe that all business success and consequent value creation.
Our merely by products of.
Of doing the right things for our patients while taking care of our customers and our teammates we believe we're in the early.
Early earliest phase of our mission and that we can and will grow sustainably and aggressively for many quarters and years to come.
With that I'd like to turn things over to Mitch. Thank.
Thank you Bill and good afternoon, everyone.
And our revenues for the third quarter of 2020 or $38.7 million compared to.
$25.4 million for the prior quarter and up $24.5 million or 172% from $14.2 million for the same period of the prior year. This year on year increase was driven by the continued expansion of our sales force the opening of new accounts and deeper penetration of our products in existing.
In accounts.
Revenue is split between the two products as follows 37% of our revenue is derived from the sale of cloud tripper products during the third quarter of 2020, compared with 38% in the prior year and 63% was derived from the sale of flow Traver during the third quarter of 2020 compared to 62% to the third.
Quarter of 2019.
Gross margin was 91.7% for the third quarter of 2020, compared with 89.4% in the third quarter of 2019.
During 2020, the company has reported gross margins of 90% in Q1, 86.3% in Q2 and now 91.7%.
Sent in Q3.
As you recall, our Q2 margin was adversely affected by the write off of idle capacity cost during the month of April had these cost not occurred both our Q2 and Q3 margins would have been in the 90% range or consistent with Q1.
Operating expenses were 28.3.
$10 million in the third quarter of 2020, compared with $11.8 million in the same period in the prior year R&D expense was $5.2 million in the third quarter compared with $1.7 million for the same period of 2019 that 3.5 million increase in R&D expenses, primarily driven by an increase in head count as well as product.
Development and clinical evidence development costs.
DNA expense was $23.1 million in the third quarter of 2020, compared with $10.1 million for the same period last year. The increase was primarily due to personnel related expenses as a result of increased head count across our organization and increasing commission.
Success due to higher revenue higher facility costs and public company compliance costs.
Net income for the third quarter of 2020 was $6.5 million compared with a net income of $2.4 million for the same period of the prior year.
I'd like to make a quick comment on the company's positive net income during Q3, which we appreciate.
By the way as a reminder, we are not optimizing the company to produce net income rather we are building in our a to deliver sustainable revenue growth and niacin income as a positive byproduct of the company's performance and it allows us to invest more aggressively in the growth drivers reviewed by bill rather than using the company's capital.
And cover operating losses.
The basic and fully diluted net income per share for the third quarter were 13 cents and 12 cents, respectively, and the weighted average basic and diluted share counts were 48.3, and $55.4 million, respectively, compared with the basic and fully diluted net income.
Per share of six cents, and one cents, respectively, and a weighted average basic and diluted share counts of 6 million and $43.9 million respectively for the same period of the prior year. The number of shares last year is significantly lower because of the conversion of preferred stock and additional common shares issued.
Ticker result to the IPO.
I'd like to move on to a few balance sheet updates our cash balance at the end of the third quarter was $168 million. During Q3, we repaid a $30 million term debt facility that existed at the time of the Companys IPO back in May.
Along with the repayment of the term debt facility we established.
As a new revolving credit facility with a capacity of $30 million.
During the first nine months of 2020, our cash flows from operating and investing activities were point $4 million compared to a negative $6.2 million. During the first nine months of 2019 as demonstrated by these figures and Ari continues to operate.
Just with a relatively neutral cash flow profile we.
We believe our cash on hand is sufficient to fund our current operating plans for the foreseeable future. This includes these investment initiatives as outlined during our recent public offering.
With that I'd like to thank you for your attention and I'll now turn the call back over to the operator for your questions.
Hi, Chris.
Thank you.
Ask a question you would need to press Star then one on your telephone to lift all your question. Please press the pound key.
Our first question comes from the line of Bob Hopkins with Bank of America. Your line is now open.
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Oh, Thanks, and good afternoon.
Hey, Bob about you Bill.
And Mitch.
My first question is really on the market because these extraordinary results that youve put up here.
Clearly suggests that this market for treating venous clots with mechanical thrombectomy technologies is.
Not only inflected, but inflected in the middle of a pandemic, which is just pretty amazing so what I'd love to get a better understanding from you was there anything one time in these results in your view and maybe how much of the pro thrombotic nature of Covance has played a role in increasing awareness of this problem and of your therapeutic option just level.
Thoughts on the market.
Yes. So you are seeing the same things that we're seeing I think there's a self evident nature of the clot thats been.
It's very satisfying physician say, it's satisfying patients get better on the table and you can see why you can you can see the clot and I do think.
Is that there's an inflection that is not onetime in nature. There is no reason to believe it's onetime in nature.
There is.
Theres, probably dozens maybe even 100.
Peer reviewed journal articles at this point showing me the correlation or the causative effective cultivated.
On clotting disorders, and yet we really havent seen.
Confirmed a lot of confirmed colvin positive patients being treated were just not seeing much of that I suspect we've treated more than we know some of them are probably positive.
But not not known at the moment the procedure, but.
But there is as you suggest a lasting impact I mean, my mom my mom knows that we.
Deep vein thrombosis pulmonary embolism associated with cold until I mean, there is a very common knowledge of this and I don't think theres ever been.
That's sort of knowledge and appreciation of the nature of this disease prior to.
To Covance, so I do think Thats lapping so we'll see how that goes but we don't anticipate.
We're not we're not seeing anything that suggest this is a onetime sort of phenomenon just based on kobin.
Or any other variable.
Yes. Thank you for that and then I guess the other thing I wanted to ask.
You mentioned a couple of technologies in the pipeline that could be Tam expanding and I'm sure. It's too early to go into much detail, but I'm just curious if there is anymore.
Detail you'd be willing to provide on on where you might be headed next.
Yeah, Thanks for that Bob not probably not yet.
Good.
There may be another earnings call or two away from providing a little bit more color on that but suffice to say that a clot management. The simple extraction, it's not simple, but the the extraction of Claude.
He's not the only unmet need in the venous space. So we've been very very aggressive it really just trying to understand.
And on the.
The unmet need that overlap with our core competencies, which we believe are related to not just engineering, but also commercialization and knowledge of the disease state.
Relationship and in a commercial organization, that's that's capable of being replicated.
So were.
Not quite ready yet, but we do like what we've seen we think the unmet needs reflect.
Just a real lack of attention has been paid to the venous space until very very recently and so we'll have more to say about that soon but we are really excited about it.
Great. Thank you I'll leave it at that thanks, so much congrats on the quarter.
Thank you.
Steve.
Thank you. Our next question comes from the line of David Lewis with Morgan Stanley. Your line is now open.
Hi, good afternoon it off.
Bob's comments on the quarter congrats on a nice quarter I wanted to just maybe follow up on that last question Bill a little bit.
In terms of the expansion is happening in the marketplace just.
Sense of whether the markets inflecting more in DBT relative to PE and sort of related to that I mean, I know that your your salesforce or commercial sales force theoretically could double this year based on your commentary you just provided where are they being deployed relative to DVT and NP.
So the answer to the first question.
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We have not seen any differential uptake in DVT compared to PE or vice versa. There is happening at roughly the same pace and I think thats. The evidence for that is that our.
The ratio of DVT repeat procedures has been very very remarkably consistent.
Now do you any noise.
Since.
Since January since really the beginning of our real commercial effort our commercial efforts in earnest so to speak about the beginning of last year. So I don't think theres any uptake deferred.
The differential between the two.
Second question, David as Salesforce Phil.
Salesforce.
Thank you Rob since the beginning of the year. So the rep count could double this year I'm, just kind of curious where they're being deployed so.
Well first of all I would say don't don't count on it doubling.
Well I don't want to say about that later, but what I will say that our sales organization is.
The same people sell.
Two DVT or selling PE theres no.
Bifurcated sales organization in that sense, we don't have any differential.
Messaging or incentives or anything of that nature. So we believe that every every hospital that has.
A cath lab for an interventional suite is capable and probably will occur.
At some point be treating DVT and PE right. These patients show up not in a hub and spoke or exit center of excellence sort of way that stroke, maybe characterize.
These patients show up whatever catchment area they happened to be they stumble into the order I mean literally do stumble into the our sometime.
So.
We believe that our sales organization is going to continue to penetrate.
The increasing number of these centers were probably in roughly 800 centers maybe.
Probably a little over half of those centers have.
Both.
Products and that continues to increase as we sometimes you get the first first though we get the DVT procedure installed and then PE.
So we think that will continue to grow.
But there is there is there is no bifurcation, we see just tons of running room, not just the an expansion into new hospitals.
Think much more importantly.
Expansion into further adoption deeper penetration into the patients who are showing up at hospitals, we're already in.
And I think there is a ton of runway on both.
Okay, I'll, just do one more and I'll jump back in queue. Just a couple of datasets came out here inter quarter, obviously, flashier registry as well as sunset and there.
But other smaller datasets I just wonder if you could share what impact.
Had these data sets had on the marketplace or do you think these datasets could have in the marketplace and the next next couple of quarters and I'll jump back in queue. Thank you.
Okay. So I'll I'll take that and we have Tom to our Chief Medical officer here as well Theres additions.
Personal detail, we can allow him to to weigh in so we were really really excited about the the flash data of course will be 30, a follow up tomorrow be presenting tomorrow at the AJ, we can't really comment much on that just yet, but you know the most important thing we're seeing here is safety and.
Conventionally are traditionally the.
Yeah.
PND treatment, mostly because they're lytic based or have been conventionally lytic based suffer from a fairly important harm signal and what we're showing here is that there. There. This is safe right. We have now flash showed 230 patients. Our flare showed 106 patients waibel is published with his own.
The.
Retrospective trial at 46 patients Thoma at 34 patients high risk. These are the most sick patients and we've seen one gas in all of those thats almost for a little over 400 patients. So that really matters to flash showed no pulmonary injuries no.
Cardiac injuries, which cranial hammered.
Of course, and I suspect if you took 230 patients in almost any peripheral procedure you'd see some harm signal stronger than what we are seeing we we believe this procedure is very very safe and that matters.
Likewise, I think the impact on the clinical variables, the hemodynamic variables pulmonary artery pressure.
Pressure decreasing.
While cardiac index and increasing part rate decreasing those things matter and they correspond very closely to what weve seen anecdotally. This the satisfaction of treating patients.
Who feel better and tell you they feel better on the table. So we think all.
Average all of that is very useful that said.
I think we've communicated this before there is no inflection point anywhere in our product development cycle.
As we can see it right now nor in our clinical.
In our clinical Q right for better or for worse, our potential to grow is related to our bill.
Billy to just execute the plans all of these things are contributory, they're all very useful we love the story that we're able to tell there's been tremendous interest in this we've had dedicated clot Warrior Academy, specifically to flash there is a lot of interest in it but we don't see it necessarily as inflection point, it's just additive and our our success is determined by our.
Our ability to execute.
If there's further question pumpkin dive in here.
Oh.
If we lose you.
Yes.
I guess from my end.
Okay. Thank you. Thank you.
Thank you.
Our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is now open.
Good afternoon, guys. Thanks for taking the questions and congratulations on the.
Hi.
Hi, Kevin Strange.
Thanks, Larry the name rings the bell.
Yeah, Theres, a nice pickup for you guys.
So just let me start with one short term question just on a on Q4.
You know I heard the comments on October I think.
Hi modestly higher.
Than the run rate you exited Q3, if I heard correctly.
Should we be thinking about Q4 sales similar or better than.
In Q3, and I had a couple of follow ups.
Yes, Larry so thank you.
There's a reason why we're not delivering guidance and you're seeing the same.
Things that we're seeing with the headlines they literally change.
Every single day, and it's all all negative.
But I think we're in a little bit better spot. This time, so let me say this we.
In in the third quarter.
We saw momentum like each month was significantly better like an acceleration in.
Celleration, we're very very excited on the second derivative type type stuff, we were very very excited about that.
Right from the very beginning of this quarter we saw.
Some some increased headwinds almost all related to cold it right just restrictions.
The ability to get into see our non interventional.
Stakeholders things are just slow us down didn't stop the growth, but but slowed things a little bit we've seen the same sort of thing in November little bit better than than October thus far.
But.
I don't want to I want to offer.
I want to just make sure there is a bit of caution because.
Just.
Anecdotes pile in everyday tomorrow, we were supposed to do a alive plot worry Academy lives and we just found out that the procedure was canceled because of cold and we see these sorts of things pop up on a on a fairly regular basis. So that makes a difference I will say that hospitals are in a much better much better condition much better position. This time.
Just to deal with it with coded as we've seen use more equipment, there's more ventilators, although maybe we don't need those.
The pain is more distributors not one or two centers, it's distributed over a much larger.
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Much wider swath of hospitals, so I want to be a little bit careful despite the fact that we have.
Continued to grow thus far just want to be a little bit thoughtful and cautious about what might happen through the remainder of Q4.
That said.
Our growth drivers remain intact all of the things we talked about in the prepared remarks.
Remained true we have shown that we can execute in.
Sub optimal.
Issues, if there is even a modicum of constructive operating environment, we can.
Execute we found a tool box that we did not have intravenous it's cold in crisis. So we feel good long term about our ability to execute a plan that is very very aggressive, but again I think a note of caution here for Q4 is.
He is in order.
That's helpful.
Let me just too.
Two more for me and I'll ask them, both right now on international you're going to have at the beginning of next year approval for both of your devices in Europe. So can you talk about what you're doing to plan for the the international launches.
And should we expect some revenues in 2021, and then just lastly, Mitch the PML really stood out this quarter I heard your color commentary, but.
A little more color on the gross margin sustainability.
And how we should think about you know opex going forward. Thanks.
Taking the questions guys yeah. Thanks Bye.
So regarding international markets. We had we were very very excited up until about a month.
Few weeks ago and.
Europe started to shut down and that's that's going to create some challenges.
So again.
The coated.
Impact is real that's.
We have.
Sales organization in the beginning of a sales organization real sales organization on its pretty fired up Weve had lots and lots of discussions both from the home office here in our in our new sales professionals with with thought leaders and top positions in the markets that we're targeting right now we found a way to train we can't obviously get on.
Second take Tom or our top sales professional hearing go train.
In in Europe, but we do have anatomic models, we've certainly learned how to use EU, we're super users and so we have found ways to to be effective from afar. So I like our chances of being able to execute this plan and as much as we are able to be in hospitals.
So we'll stay tuned.
We do expect revenue next year, although I would say at this point it's.
It's measurable not not not meaningful is the way we're thinking about this so far.
I will turn the other question over to Sir Yes, Larry. Thanks for your question and what I was trying to get to in my prepared remarks through the.
Gross margin I'd say normalized gross margin for 2020.
And because we had some dislocation there in Q2 due to idle capacity, if you sort of factor that out and you flow that through to Q3, we're sort of looking at a 90% gross margin for the business throughout 2020, I think on a longer term basis.
This as we discussed before we see this business properly.
In some part due to the international expansion that they'll just mentioned in some part due to the fact that we're still adding more tools. If you will to the toolkit on the price per procedure basis for the flow Cheever device, we see them margin moderating a bit in the company and we're still looking for a margin kind of in the low to mid eighties over the longer term.
The business, but clearly in the near term we feel like we're going to continue to have a very very positive margin performance in the company in terms of the operating expense.
Obviously, we've had some significant uptick compared to prior year and also compared to our second sequential quarter.
And I think the the best.
The most exciting thing guess is the growth in the R&D line. So there were looking at the product development team as well as the clinical evidence Thelma group and the opportunity you've had there really is a result of the resources, we acquired through the IPO to invest significantly in those two areas and we see a tremendous opportunity to do that we.
See ability to as Bill mentioned, a couple of questions ago to continue to improve the safety and effectiveness and performance of our devices as well to look at some adjacent spaces in the Venus.
An enemy and.
And to see what we can do that so the clinical evidence Feldman side of the business is very there's a very robust plan.
Added significantly to the head counted both the R&D area in the clinical evidence Spillman area and I think we've talked before the the waive that we're trying to create essentially of evidence and also a product performance and basically the kind of the <unk> cock come out of people were more and more physician.
<unk> will say hey, this is something that we have to do this the right way to treat these patients who are suffering from VT.
Thank you very much Mitch.
Thank you. Our next question comes from the line of bail <unk>, where the Canaccord Genuity. Your line is now open.
Hey, great. Thanks, good evening.
Can you hear me, Okay sure High Bill got your Bill High Bill.
I guess so.
A couple of questions first is.
How important is the 30 day flash data and then what what do you think is needed to really change the treatment guidelines for <unk> for <unk>.
Yeah. So.
As I said before I mean, I think the flash data that we've seen thus far has been very favorably received.
Without getting into any any details since the information is embargoed until tomorrow morning, We we think the the flash 30 day data will be useful as well and yet.
It's not guideline changing it is additive it's a terrific story and it's contributory to the story that we have been telling.
With some evidence now.
And it's all highly highly favorable, but it's an execution story and.
In order to change guidelines, it's almost a trailing indicator right.
It's it's something that occurs long after.
Long after people kind of recognize the obvious to some extent of.
Of the of the need to treat I suspect. It is level one level. One evidence is required to change guidelines, that's prospective multi ramp multicenter randomized trial, New England Journal of medicine quality sort of study that typically results a guideline changes.
We're ways away from that as we've discussed in the past we are using the information from flash and from cloud, which we haven't talked about in this call.
To to inform the ultimate kind of definitive trials that we think will be useful it changing guidelines, but for now there's a ton of runway and again I think there's you cannot underestimate the self evident nature of the cloth is just never have time to cloud comes out and someone says well I'm just not sure.
That really mattered.
There's no chance that makes him a healthier right. So I think we've got a long long runway.
And we're even seeing some doubters people that that down to the story.
Beginning to come around with especially with the safety data that's emerging from our from our trials.
Yeah, no definitely evident TCT hurt and even fever.
The second question is is more for Mitch is just on if you look at it I mean, it's.
Three X growth year over year is impressive and.
Just as you think about that I think you mentioned over 800 accounts is our facilities is that as you look at the growth you're seeing is this coming out of the expansion into new facilities or is this just getting that much deeper into where you are if one or even if one outbalance the other would be nice.
Trying to understand a little.
Good question Bill and we're we're seeing it really is a kind of a balanced growth story for the company. So we do continue through the horizontal footprint expansion of the business.
To add more and more folks to our sales team and to increase the number of territories and we think we've got.
Pretty good growth path in front of us for that.
So there is some kind of net new accounts and net new territories that are involved in this story, but I think as as or maybe even more important than that they're going deep idea, which is the second growth driver that bill talked about earlier is something we're seeing some great results out of that and is.
Kind of more and more institutions are interested in the idea of forming per teams and.
The opportunity that we have to educate the referring physician community and to show them sometimes the.
The evidence.
Cloth that Bill mentioned a minute ago that comes out of some of these patients.
Everyone recognizes that that matters and so we believe that we have a pretty balanced growth approach and we're very focused in both of those areas to drive the company forward.
And then just if I could one last question is just if you think of.
Think bill your commentary was calling card has historically been DVT and then kind of you get all you educate them on the <unk> side of things and it's kind of once you're in there, but given COVID-19 does that started to transition more toward the p/e first leading with P E.
Yeah.
So.
It may have misspoke I was maybe using that as an example, sometimes it's DVT for some times at first I think it's equally likely that P E as the driver and.
And DVT is the follow up and sometimes they're both introduced together, depending on which operators are targeted and which ones are you kind of driving the the.
The introduction of the devices. So I don't I don't really think that DVT has been the driver in the past I'm not sure that P E as a driver now.
Again, I think the the real benefit of the real impact I shouldn't say benefit it's been an awful disease for all the reasons, we know, but the real impact on Btu's. The simple awareness of ETE generally not just pay and in fact.
Well I'll I'll leave it there and that's the that's the nature of the of Covid. So no I don't think that <unk> is now being introduced first more than it has in the past.
Great. Thanks for taking my questions. Thanks, I appreciate a bill.
Thank you. Our next question comes from the line of Danielle and Taffy with SBB learning. Your line is now open.
Good afternoon bye. Thanks, so much for taking the question and congrats on a really strong quarter.
Danielle.
Yeah no problem. Thank you. So just just a question on that though deep contacted and I guess I'm just trying to get a sense of sort of if you look at the total market and where we are from the penetration perspective for interventions in DVT and especially P. E. It's still very low so at your centers that have readily adopted this technology.
<unk> you would may be characterized as high volume users where have those numbers kick too and I guess I'm I'm just I'm asking the question in the context, you're trying to get at like what's a reasonable assumption for where penetration for example in P. E. Can go 10% today can I go are you seeing centers already.
Getting that number up to 25% high you know any any color you can get there.
Yeah, I think so I think.
What you're asking is how well how we've been able to penetrate.
The market on a more local level rather than these global numbers that we've been sharing if that's the question.
Right Yeah, that's it yeah, yeah, okay. So.
So the answer is we have seen a handful maybe even smaller than a handful of customers.
Nearly maximize just in the way we talked about penetration, we think there's a ratio.
Of P E per bed per year right.
And that that ratio determines kind of how many patients a.
Given hospital of a given size is likely to see so so that's the way we measure there is a little bit of noise and that but we've seen a handful of hospital smaller than a handful penetrate.
Very very close to the the levels that we might think of as full penetration, but that's rare most of them are in the very very low.
Single digits or teens in terms of penetration.
Really excited about however is we have been able to increase it right. We have been able in hospitals in which we focus on communicating with non interventional stakeholders Pulmonologist hospitals ER physicians for example.
We have been able to increase the number of patients being referred and that that that's why that's very very encouraging in the long haul eventually what we'd like to do.
Is is get to a point, where this is systematized if you stumble into a ER with chest pain. The first thing that happens you will get an E. K G. Right. There is very low chance that someone's going to Miss your if you are unfortunate enough to have one.
There's also no chance that once it's identified they know exactly what to do with that patient. These things are all protocol is we know who's going to treat we know how to follow up goes we know how long the patient is going to be in the hospital and who follows up with the patient after they leave the hospital and so forth. None of those things are true right now and Dv TMP treatment. So I think there's opportunities.
Not only just in the conventional sort of education of all of the non-intervention stakeholders, but there's also really really important upside potential for us to system of ties. This process overtime. So that's going to take a little bit longer, but we are really encouraged to see our ability to impact us at the local level.
Danielle just one other idea to sort of put some numbers to bill scene.
We believe over approximately 440000 people present or it could be eligible for these intervention procedures. Each year. So if you think about that on a quarterly basis call at 110000 people and we did 3700 procedures. In Q3, you can see that we're still this as a sub 5%.
Type of penetration.
At the moment and so we have some institutions that are very well penetrated but for the most part across the market. We're just getting started.
That that's Super helpful. And then just a question on the competitive landscape. I mean, you guys put up such a strong quarter I need are you seeing competition out there or.
Is it.
Is this not even a is just not even the right way to look at it and this is not a zero sum game I mean, that's my bad, but I don't want to buy sure and Sir.
So yeah, I guess, just any comment you can make on the competitive landscape would be helpful. Thanks. So much thanks to Daniel So, yes, I think I think you're right. It's clearly not a zero sum game.
Our we've communicated about competition in the past and I think I'll reiterate that now that it's been highly highly net positive anybody bringing a thrombectomy Katherine there's a number of of new competitors there'll be other ones coming down the pike as well.
They are communicating high quality rivals communicating.
Story that is about 80% the same as ours right the cost bad the clock should come out here's a way to get the clot out eliminate thrombolytic drugs eliminate the consequent ICU stand the potential for bleeding, that's about 80% similar to our story. So it's been highly highly value I can't emphasize enough the net positive impact on.
Of of competition entering the space the awareness and the communication of these stories as an all time high and it's probably going to increase and that's been really terrific and if you can see that from the growth numbers.
So that said are products of differentiated we like our chances head to head we are as aggressive as you might expect head to head because there's a patient on the other end of that catheter. These aren't just whimsical sort of trials and we're very serious about that and we will continue to be.
But net positive overall and the.
The more the merrier for for all these things really good for patients.
Thanks for that.
Thank you.
No further questions at this time Lady.
Ladies and gentlemen. This concludes today's conference call me. Thank you for your participation you may now disconnect.
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