Q3 2021 AtriCure Inc Earnings Call

Okay.

Good afternoon, and welcome to H B Care's third quarter 2021 earnings conference call.

My name is Catherine and I'll be your operator for today's call. At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call.

As a reminder, this call's being recorded for replay purposes, I would now like to turn the call over to Marisa bites Wesco more group for a few introductory comments.

Thank you.

By now you should have received a copy of the earnings press release. He has not received a copy please call 513 Atlas.

54136 to have one emailed to you.

Before we begin today, let me remind you that the company's remarks include forward looking statements forward looking statements are subject to numerous risks and uncertainties many of which are beyond <unk> control, including risks and uncertainties described from time to time and any tricks or SEC filings. These.

These statements include but are not limited to financial guidance and expectations expectations regarding the potential market opportunity for each of first franchises and growth initiatives.

Converge and the adoption of the converge procedure and future reimbursement.

<unk> results may differ materially from those projected.

<unk> undertakes no obligation to publicly update any forward looking statements.

Additionally, we will 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 with the most directly comparable GAAP measures is included in our press release, which is available on our website with that I would like to turn the call over to Mike.

President and Chief Executive Officer, Mike.

Thanks, Marissa and good afternoon, everyone and thank you for joining US today, we hope that you're well.

Against a difficult backdrop, driven by the pandemic headwinds, we delivered solid performance in our third quarter year, reaching $75 million in total revenue.

This represents a 29% growth compared to third quarter, 2020, and a 1% sequential decline from our strong second quarter 2021 results.

We saw year over year growth across key product lines, United States, including contribution from continuing edition of new pain management in hybrid therapy accounts.

We were also pleased with robust performance of our open ablation and appendage management franchise across Europe and Asia.

As many of our peers have stated the third quarter brought continuing challenges driven by the COVID-19 pandemic will.

We began the third quarter with a record sales month in July and August and September. However, we began to see some impact from the surge in Covid cases in hospitalizations, along with hospital staffing constraints, which affected the industry broadly.

While many healthcare systems have become adept at managing through Covid related peaks. There are few options to mitigate the shortages of health care workers and we are not immune to these developments.

However, the fundamentals of our business as well as well as our 2021 financial outlook remain very much intact.

Taking a step back I would like to highlight our key growth initiatives, beginning with our hybrid <unk> therapy.

In the second quarter, we received PMA approval of the <unk> system as a result of our pivotal converge clinical trial.

This achievement marks the only FDA approval for the Standalone treatment of patients with long standing persistent afib, which represents approximately 45% of all diagnosed afib patients.

We are pleased with our progress since receiving the PMA, having conducted several didactic physician training programs executed weekly mobile labs, all over the country initiating many new accounts and expanding physician use within existing accounts.

These early efforts are a very small step on the way to reaching the broad base of accounts and patients.

And so much opportunity remains.

In addition to the activities noted we continue to expand our hybrid sales force and add significant dedicated training resources as a result, even with Covid related headwinds. We are encouraged by the uplift in mis ablation revenue in the United States every quarter and the continued progress and appendage management at the same time.

As I mentioned, we have only started with establishing art with our goal of establishing the hybrid convergent procedure as the standard of care for patients with the most complex and difficult to treat forms of afib.

It is worth repeating that we believe this is a multibillion dollar annual opportunity, which should impact many tens of thousands of patients every year.

Moving to our open franchise <unk>.

Following FDA 500, 10-K clearance in late July we report our first encompass device sales in the United States.

Initial sales came from our limited launch as we work toward broader commercial availability later this year.

The encompass clamp as an innovative addition to our open ablation platform.

Providing a simpler and faster approach to ablate to bleeding and open heart procedures.

As a reminder, our open ablation platform includes the Isolator synergy system. The first medical device to receive FDA approval for the treatment of persistent afib in late 2011.

Even after a decade of market development and training since approval, we estimate that less than one third of cardiac surgery patients with afib in United States are treated today and even fewer globally.

We expect the encompass device along with our legacy technology to deepen our penetration of the cardiac surgery market for over over the next decade.

There is a substantial addressable market for both our open and hybrid ablation platforms with hundreds of thousands of patients annually representing billions of dollars.

Complementing the ablation opportunity is our appendage management franchise.

As many of you know we have steadily expanded our <unk> product line through innovation.

Coupled with increasing awareness for treatment of the appendage growth of our <unk> franchise has outpaced our ablation products in recent years, we remain excited by the outlook for continued adoption of our appendage management and surgical procedures as a result of the growing body of clinical evidence.

Finally, turning to the cryo sphere probe our dedicated device for managing post operative pain and thoracic patients.

Our unique technology uses a differentiated freezing method to block nerves from transmitting pain signals after thoracic surgery, providing a long lasting form of pain relief for patients.

Cryo nerve block continues to be one of our fastest growing therapies.

And we are very pleased with our growing account base in.

In the third quarter, we surpassed $30 million and our life to date sales of the <unk> probe in the United States, just two and a half years after the initial product launch.

This represents more than 12000 patients who have been treated with cryo nerve block therapy since early 2019.

More recently, we reported our first craft beer sale in Europe.

While we are proud of our progress we believe the market for cryo nerve block remains vastly underpenetrated and we continue to increase investments in our dedicated commercial and education teams to drive therapy awareness and adoption.

In closing, we continue to execute and are making progress in each franchise around the world.

We see robust underlying demand from patients and physicians for the critical treatments that our products enable.

We expect to end the year in a strong position for 2022 and beyond and we remain excited by the potential of our portfolio in the future for <unk>.

I will now turn the call over to Andrew <unk>, Our Chief financial Officer to discuss more detailed results for the quarter.

Thanks, Mike our third quarter 2021 worldwide revenue of $75 million increased 28, 7% on a reported basis and 28, 6% on a constant currency basis, when compared to the third quarter of 2020.

On a sequential basis this quarter, we experienced a decline of one 3% in revenue from the second quarter. The sequential decrease was partially driven by normal seasonal variation in our business, but also impacted by the ongoing pandemic and staffing constraints that Mike noted.

In the third quarter 2021 U S revenue was $57 $5 million, a 28, 7% increase in the third quarter of 2020, reflecting healthy activity across product lines and promising growth trends, despite reducing case volumes as the quarter progressed.

U S sales of appendage management products were $23 $4 million up 34, 3% over the third quarter of 2020 on strong each of clip pro V and flex V product sales.

U S sales of open ablation products, which include our cryo nerve block business were $23 $8 million up 19, 4% over 2020.

Sales of the cryo sphere probe alone accounted for $6 2 million in revenue in the third quarter up nearly 10% sequentially.

Finally, minimally invasive ablation sales in the U S reached $10 million up 43, 1% from 2020, showing the recovery in elective procedures from last year as well as growth in <unk> device sales.

International revenue totaled $12 $9 million up 28, 5% on a reported basis and up 27, 9% on a constant currency basis as compared to the third quarter of 2020.

Rebounding activity in most countries in Europe accounted for $7 $8 million of third quarter revenue, a 19, 3% increase from the third quarter of 2020, while Asia and other international markets contributed $5 1 million in revenue up 45, 5% from the third quarter of 2020.

Our gross margin was 74, 1% up roughly 40 basis points from the same quarter in 2020.

The modest improvement in our gross margin this quarter reflect a blend of factors, while we experienced a more favorable product mix and the benefit of leverage from increased revenue. These gains were largely offset by an inventory management charge related to the lariat system and an unfavorable geographic mix in comparison to the prior year.

Looking forward, while we are cautious with the increasing stream. Many suppliers are facing in the current environment, we expect to benefit from an increased revenue and strong production volume.

As mentioned in the prior quarter, we are making incremental investments to expand production capacity in support of our long term growth and remain focused on key partnerships throughout the supply chain.

Now turning to operating expenses research and development spend in selling general and administrative costs.

Total of $61 $2 million for the third quarter of 2021 up $17 million or <unk> 38, 6% over the third quarter of 2020. The increase resulted mainly from personnel costs driven by the addition of head count over last year and variable compensation programs, reflecting topline growth track.

We'll spend returning to normal and expanding training and market activities as we launch our hybrid <unk> therapy and continue to drive awareness across our platforms.

Separate from these expenses, we reported noncash adjustments driven by the amaze clinical trial results discussed on last quarter's call.

<unk> third quarter 2021 operating expenses include a credit of $189 $9 million from the reduction of the contingent consideration liability and an impairment charge of $82 $3 million related to the amaze IP R&D asset.

Both adjustments reflect a change in our forecasted timing and probability of obtaining FDA pre market approval for the lariat system and have been excluded from adjusted EBITDA and adjusted earnings and loss per share metrics.

We had positive adjusted EBITDA of $691000 compared to positive adjusted EBITDA $4 $2 million for the third quarter of 2020 basic.

Basic and diluted net income per share was $2 15, $2 11, respectively and in the third quarter of 2021 compared to a basic and diluted loss per share of <unk> 11 in the third quarter of 2020.

The adjusted loss per share each period was 23, <unk> and <unk> 11, respectively.

Our balance sheet remains stock position remains solid and we ended the third quarter with approximately $225 million in cash and investments.

Now as we move towards the end of the year, while we faced headwinds from the impact of the pandemic continued burden on the global health care system, we remain confident in our previous guidance of approximately 270 million to $275 million in annual revenue.

As we look beyond Q4 and into 2022 with continued progress on each franchise as well as recent product launches are many tailwind gives us confidence in our ability to grow above historic rate for many years ahead.

We continue to expect adjusted EBITDA to be a loss of approximately $10 million for the full year 2021, as we invest in strategic growth drivers across the business.

We are growing the Asia care team and focusing on expanding education programs continuing device in therapy innovation and growing clinical evidence in support of all of our platforms.

We also expect the adjusted loss per share for 2021 to be approximately $1 20.

At this point I will turn the call back to Mike for closing comments.

Thank you Angie I would like to end the call by recognizing the team at <unk> and then for <unk> continued success I am impressed with the dedication and adaptability of our people the high level of collaboration across our company and the commitment and excitement for our mission and our future.

Thankful for each and every one of our employees and know that together as a team we will have the greatest impact on patients globally with that I will now open it up to questions operator.

Thank you to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Could you please limit yourself to one question and one follow up and then return to the queue for any additional questions.

First question comes from Robbie Marcus with Jpmorgan. Your line is open.

Hi, This is lilly on for Robbie Thanks for taking the question.

Maybe just to start with a question on overall trends can you give us any color on how COVID-19 trends play throughout the quarter and what you've seen so far in the first month of the fourth quarter.

And second what's assumed in guidance in terms of the recovery.

Sure I mean, the trends, we saw where we had a record month of July as a business and then we saw kind of a combination of Covid and summer vacations in the August timeframe Covid had some impact on the September and October months.

And so we definitely saw that but we did see some pickup a little bit in the October month, but it definitely had a lingering effect into the into the fourth quarter much like what you are hearing from a lot of other companies the impact on Covid there.

And Thats all baked into our guidance in terms of our thoughts you know everything that we know as of today is kind of in our guidance, we reiterated our guidance of $2 $702 75.

For the full year and we're confident in that number.

Great. That's helpful. And then just a quick follow up on converge.

<unk> been training doctors and Onboarding centers, how long does it take for doctors to get comfortable with the procedure and come up the learning curve and when do you think you can really start seeing an inflection in procedure volumes.

Yes.

For a doctor to get really comfortable it typically takes about three years to five cases, where they feel comfortable and I would say 10 cases, where they're getting really good at it and then.

I'd say, that's kind of in terms of just the surgeon getting comfortable with understanding the maps.

From that perspective in terms of kind of the inflection point of impact it's going to be kind of a continuous growth for the next <unk>.

Many many years to come.

We'll take our system, let's call. It six to 12 months to kind of really go through that process, where they get.

Get trained they start recruiting patients they get their first patients and they start to get comfortable with it and then they kind of get to some critical mass over time, and so you're starting to see some of those sites that start at the beginning of the year really start to get and open up a little bit more and get more patients. Obviously COVID-19 has had an impact so it's tough to kind of.

Look through some of that as we look at it right now, but I would say that youre going to start to see continued growth into next year. It's one of the main reasons why when Andrew talked in her guidance, we talked about the fact that we're very comfortable that we will be able to grow at above historical numbers. So if you look before COVID-19, we were pretty consistent growing that 14% to 15%.

Every year or seven year CAGR was about that we will grow faster than that.

For the foreseeable future at this time.

Great. Thank you.

Thank you. Our next question comes from Matthew O'brien with Piper Sandler Your line is open.

Afternoon. Thanks for taking my questions just a follow up a little bit on <unk> question there Mike.

Youre, an inpatient procedure for convergent.

It's a little bit Marvin involved procedure versus other other EP cases that are out there. So I'm just wondering if that staffing shortage.

Overly affect a procure versus others in this space and then what kind of slowdown that may cause as new centers or building here towards the end of this year into next year as a result of the labor side and then the Covid side of things. The things that you can do internally to kind of offset those those headwinds that you may be seeing versus others in this space.

Yes, it's a really fair point, Matt I mean, I think you're correct in stating that in general obviously being inpatient for a longer period of time, there are more staffing concerns for cardiac surgery and we'd be kidding ourselves if that wasn't the case that being said, we've also got a new label.

It really shows the demonstrable benefit of doing this procedure and so you counter that with the fact that we're adding a lot of net new sites. Those sites are now getting their program is up and running they want to build momentum they want to build what that looks like and so they are really dedicated to getting these patients in and moving it. So I think it's going to have some impact and we've obviously baked that into our revenue for our guidance for.

The remaining portion of this year, but it does not take away from any of my confidence long term and our ability to really grow this business as we look at 'twenty two 'twenty three and 'twenty four I'll go back to we will be growing at a faster pace than we've historically grown in a lot of it's going to be driven by the strong growth that we expect coming off of the converged platform.

Okay. That's really helpful. And then a question for Andy just on the gross margin side. It looks like it's probably more a function of just.

Geographic mix more than anything as far as the slight pullback in gross margins here I'm, just curious as far as that metric as we head into 'twenty. Two and then you are still spending pretty aggressively on R&D and I think that's important for the company from from that.

Developmental standpoint, and a clinical trial standpoint, but given now that lariat is pretty much out of the picture is that an area of leverage we should expect next year for.

For the company and maybe even a little bit on the SG&A side as well. Thank you.

Starting with gross margin the biggest impact this quarter was a charge on on the Lariat inventory reserve. We did have some unfavorable geographic mix, but offset by some favorable product mix at <unk> and the flex V and pro V. Clip. Those are high revenue are high margin products for us when you think about leveraging the P&L.

Not at a point, where we're giving guidance long term I think if you look at this particular quarter, we saw a downturn in R&D expenses as a percentage of revenue. It's a function of where projects are at in their lifecycle longer term, we would expect that to return kind of at the historical levels that we've been in we would expect some leverage off of SG&A I say that but also <unk>.

To remind investors that we're making investments to fuel our growth we continue to build out our commercial teams and then training and education programs as we're attacking our launch for the hybrid as therapy cryo nerve block and expanding other products.

Great. Thank you.

Yes.

Thank you. Our next question comes from Danielle and policy with SBB Leerink. Your line is open.

Hey, good afternoon, guys. Thanks, so much for taking the question and congrats on a good quarter. Despite all the all the headwinds.

If I could just ask a question on what Youre seeing as it relates to the logistics around converge and whether that is complicated I think maybe I'm following up on matts question, a little bit here, but how do you think about that in the hospital labor shortage is that a procedure, that's maybe more at risk from a hospital labor.

Our shortage perspective, or am I thinking about that incorrectly and I do have one follow up.

Okay.

As I can I mentioned, a little bit Danielle.

Sure there is an impact when <unk> got a labor shortage and you've got somebody of the hospital for longer. So there is no question that there is an impact on it.

Countered by the positive of a brand new procedures to entering into the hospital that is treating patients. They couldn't treat before that is enabling them to save time on some of their other procedures on the EP side and the time they are spending in the Cath lab. So it's freeing up resources on that side and so while theoretically yes. There is an impact of that I'd say, it's kind of.

Overcome by the fact that they want to get these programs up and running and we're really at the beginning stage of getting them moving we've seen continued growth.

In that franchise and in that area, we had our best <unk> quarter this quarter and so we're in a really good place overall and we'll continue to see volumes go up in that area, even despite what youre talking about relative to some of the labor shortages. So yes theoretically there is some impact, but I'd say that overall, we do see positive trends and we don't see.

It really impacting anything from a long term standpoint.

Okay. That's helpful. And then my follow up question is really on the commentary around the above historical growth I mean, that's helpful. Color I was wondering if you could put a little bit more behind that as far as how to think about 'twenty, two and beyond and thinking of it as sort of a step function or is it more gradual acceleration.

I mean, I think it's a really fair question, we're not ready to give guidance for 2022.

That is more specific at this time, we'll definitely do that at the beginning of next year, we will give much more specific guidance, but we do anticipate again I don't want to give any more than what we've already said, which is that we're going to grow for not just next year, but for many years to come above those growth rates and I think that thats something that you can expect from us and again, we'll get into some more specifics in January I know everybody wants it now, but I think it is.

It would be more prudent to kind of see how the year ends up and then kind of give everybody a broader view of that for 2022 in January.

Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.

Hi, this is actually.

Jon on for Rick Thanks for taking my question.

First you mentioned earlier on the call the.

Training of doctors for converge and I'm just wondering if you could quantify kind of how that process is going given COVID-19 and if you can give any more color there.

And so we've got multiple angles for training. So the first pieces of the didactic training we've had.

I think up to five different didactic trainings are typically like a Friday Saturday type training they get they basically come to a city.

That training and then they go through they've got several EPS and surgeons basically, giving the course lots of dialogue and discussion generates interest and a much greater knowledge of it we usually end those courses with a wet lab or some sort of lab afterwards.

In addition to that we have a mobile lab that we've got two mobile labs moving to three that travel across the country. Those are basically busy every week theyre doing anywhere, but each one of them are doing two labs, a week and those labs basically they go into the hospital parking lot or to a local parking lot nearby the surgeons and EPS come into that we base.

We do some of the didactic and a shortened version and then they get their hands on the product and are able to use it and those are basically we're already fully booked through the beginning part of next year.

We're continuing to train people on a regular basis, there and so that's gone extremely well, we do use those labs, mostly today for hybrid, but we're going to be adding within the encompass launch and as we add more sites next year, we'll start to add quite a bit from that standpoint as well. So those are kind of two of the main thrust around some of the training that we're doing we will do.

<unk> courses and things like that as well.

And we're doing a lot of those those are driven more by the local we've given the local teams and we've given them materials to be able to drive kind of an initial kind of one hour to hour kind of conversation about the procedure that typically leads to them going to some sort of weekend core searches on mobile apps.

Thanks. That's helpful. So then just one more follow up for me <unk> clip continues to be a big performer for you guys were curious what else you kind of have in the pipeline, how youre thinking about that in the future.

Any developments potential products that could grow at that rate.

Well if you look at our franchise portfolio, we've got I'd call three really major drivers of accelerated growth.

First one is.

On the hybrid side, obviously convergent and episodes is growing at great pace and doing very very well and we anticipate that we're going to create hopefully create the standard of care within that over the next five or so years.

For long standing persistent patients there is a huge market opportunity and a lot of patients can benefit from that treatment I've talked about the numbers before but I mean, we're just so low and the penetration there and so many patients can benefit from that treatment number two is on the cryo nerve block side Thats also continued to grow quarter over quarter every quarter, we're opening up net new sites with more than <unk>.

The size of our sales team over the last year, continuing to get access to that adding clinical support to that team as well that has been a very fast grower for the business and also provides real growth I mentioned on the call. We're at about $30 million of kind of life to date sales and Andrew talked about $6 $2 million in this quarter until you can kind of.

See it's continuing to be a very strong contributor to us in growing our business.

Third is we believe that the encompass clamp combined with.

Reimbursement changes that happened that not necessarily we will get into the same kind of accelerated growth mode that will enable us to continue to grow at very strong rates within our open franchise.

And get more and more adoption as I mentioned only one third of patients are getting treated today. So that are on the table.

And we believe that number should be much higher than with encompass and several others. We think we can make an impact in that area as well and continued solid growth in our open franchise and then on the.

Together account on board with the idea of convergent <unk> have you had any challenge is there where he have a surgeon who wants to do it but the E. P is not cooperating or vice versa, and how do you deal with that that's happening.

Yeah. Unfortunately entering that we're not seeing a lot of that I mean, we definitely I would say the area. We see mostly is we've got EP interest everywhere I mean, there's just a lot of EP interest finding a surgeon that we can make sure. They find the time and dedicate themselves to it it's not that there's not interest, but they've got to be ready to dedicate it as a specialty for themselves and so fine.

Being that surgeon, that's going to be a good fit with the EP is a really good collaborator is what we spend a lot of time on it as expected and so we've got a targeted list of those that we think are going to be good fits for that that have the right skill set and have the right temperament to really work collaboratively with their ep's, we're not getting a lot of pushback.

Quite frankly, it's more just the process of kind of getting them up and running and walking through water program looks like and getting administration aboard and getting the workflow or patient flow to work is really kind of the biggest lift not as much about getting people interested.

Okay. That's good to know and then just.

They encompass clamp I know, it's early days for the launch, but I was wondering if you could share any kind of feedback you've gotten from from the surge of they're using it.

The feedback has been fantastic, it's basically reduced the time they need to spend on the ablation. The ablation lines have been really really good we've only been doing testing, it's getting complete walk on it.

During it so we've had really really good results.

So far we just want to make sure that we're taking insulin getting some learnings. So that we can make sure that when we bring it out to the masses that we can train appropriately and that everybody is going to be doing incredibly safely and it's a great product. So the feedback has been very good and and we're going to move forward, probably with a really full launch early part of next year and the feedback we've gotten so far has been.

Been positive, but also informative about how they even trained better with it.

Okay, great. Thank you.

Thank you and we have a question from Marie So baulk with B T. Igene. Your line is open.

Thank you so much for taking the question and congrats on a strong quarter I'll ask one more here on converge.

Forward looking I wondered if you could tell us how many new sites you are able to add since the launch and uhm from these new sites are you hearing anything about how they plan to market. The procedure you know we've heard feedback.

Something that that is that hospitals apart in that region. So I'm just curious what you're hearing from some of your newer customers on that.

Yes, it's a fair question everybody wants to know the number of new sites and I think it's a good question, we're not ready to give that number quite yet because I don't want people to begin to think Oh, you're going to add this number of new sites, yet we're not ready to show a consistency on that because some of our areas of the country, we're going deeper into into there and we're not necessary trying to add new sites into depending on the area of the <unk>.

Country, what established space they might have we might be going deeper within their <unk> versus adding sites and so I don't want that to be a misleading figure for you guys are put into your models quite yet revenue is going to be the key driver. We continue to grow that we are adding a lot of net new sites more than we had expected at this point I can tell you that and they're and we're getting repeat customers from them too so they're doing their.

The first couple then they're coming back and they want to do more and really figuring out that worked for us. So that's all gone really really well.

Overall for the business and remind me what was the second part of the question Marie sure. What are you hearing in terms of marketing plans and how they primo market and they're ready to.

Converge procedure.

Yeah, we are definitely starting to see more and more where they're putting together proactive marketing campaigns out to their referring cardiology community. We just saw one I just saw one this week at the Cleveland clinic, where they're talking about their procedure and kind of their internal newsletter, that's going out to all of everybody within the cardiology group not just the.

Surgeons in the fees to really talk about the fact that they've got this new procedure at Cleveland clinic, they've been using it and they're pushing it out kind of throughout their internal network. They are starting to do internal trainings in classes of that Cardialgy community as well not just of the EP community. So they're they're really begin to push it I think through the beginning of what we're going to start to see at many sites.

Around the country, but they are just starting to kind of get that I'd say a lot of the focus now for US has been on training because want to make sure. They do the procedure right and really well and get great results and then I think the marketing is going to start to come really probably six to 12 months from now once they get really comfortable at Cleveland clinic is comfortable with and now which is why they are willing to kind of go down to their further down.

That pathway and they are beginning to start to talk about the results are having with the patient's they've already had.

Okay, and well understood on the new site and that checks I had to try let me ask my follow ups and Angie Angie you mentioned you know working on building up production volumes curious you know if you can give us any more detail on supply chain, whether there's any specific products or components that we should sort of be uhm circling.

Or or that you think there might need to be some caution on the supply chain site and thanks again for your question.

Yeah. It's a good question I think the caution is just broad base you know we're hearing you've heard from our peers you've heard from others for hearing from suppliers. Some of the pressure at their Andrea I wouldn't say any one product get this concern it's more just the macro environment, which they're all working and and that that being said as we continue to look forward for stock you can we are.

Standing capacity here to be able to meet that demand continued to keep up with that and are mindful that we can't do that without strong relationship and partners on the supply chain side.

Thank you.

Thank you and we have a question from <unk> with Oppenheimer accompany your line is open.

Sure a good afternoon, everyone. Mike Angie can you hear me all right.

We can perfect hope, if we want a safe and healthy.

So.

[noise] questions wondering converge.

Discussion in the fields, all encompassing on persistent F or a you'll see stratification on longstanding persistent and I'm, especially curious how U S as viewing what's going on with converge.

Yeah, I mean, most of the conversation wherever and all the conversation we are having a field is around longstanding persistent that's the focus it's the differentiator piece of the data is what we got the label for US. Our team is really trained to focus on longstanding persistent a fib.

And that's really and quite frankly, that's with all the positive feedback is coming in from the <unk>. They see such a big differential there. They know that this works really well in these complex cases, they know that the catheter does not work and so it's a great way for us to have that conversation and that those the conversations we're having not around that persistent population.

From an O U S standpoint, it's similar because I think it's even though the label there is broader I'd.

I would say that the data is so strong and longstanding persistent and there's such a need there that everybody starts there anyway, so they're going to start with the most complicated to treat patients and that's really kind of what they're basically going after I mean, if you think about it a lot like how to have her started in the.

And that really kind of high risk patient population you start there and then over time maybe.

We will get more data on the persistent population, but right now that's not needed to get these programs up and running and it is not necessary and we're really focused on longstanding persistent.

Fair enough.

And my second question. Please forgive me I was juggling in between two calls if I got this wrong.

On the Atlas E. I thought I heard this trial is going to be in society is going to be structured as post surgery F stroke risk.

And I'm curious why go down this route and not de Novo.

I should say dinovo Standalone F patients on coumadin.

And also the specific the reason I ask is you just look at most of the major studies and post surgery stroke.

The cumulative incidence between the patients who have if an Audi F.

[noise] tight tight.

<unk>.

Close to each other.

I'm curious about the rationale for this trial because it'll be alone follow up long large sample size any additional color would be great. Thank you for taking my question. It's a great question Suraj. So give you some context to it.

When we've we've looked at the data been studying this for a long time, if you recall, we actually did a feasibility trial specifically for this and what it's for US. It's for patients that do not have atrial fibrillation that are undergoing cardiac surgery, which represents about two thirds of all the patients undergo cardiac surgery do not have a pin when they go in but almost all.

Of them are at a good chance of getting a fib within their lifetime and this is really a very patient centric trial. It's to say these patients you've got a shot you're looking at the appendage can you take advantage of it while you've got it open to really basically get complete closure of that appendage at the time of surgery. So that if they ever develop a fib in our lifetime, whether it's three years five years.

10 years, they've already got protection and so we're looking for looking at that now what we've seen in the Atlas feasibility trial is the trend is in that direction. It was not statistically significant it was 562 patients it's been published.

It's out there it basically shows that you've got a significant reduction at one year and yet even though larger production. When you look out over a three year period for those patients. We anticipated is a long trial to your point, but we think the patient population is so large the impact on patient care and stroke reduction is so great that it is worthwhile to look at this and.

To basically make this a standard of care within cardiac surgery and so that's why we're doing it we think that it's going to have a dramatic impact on patients for not just three years five years, but really for decades to come and that's the reason that we're doing the trial and we think it's a huge opportunity. The standalone idea that you talk about is one that we definitely can.

They are not mutually exclusive we've looked at doing that trial before.

The issue there is relative to enrollment can you enroll enough patients.

Just putting on a standalone clip in those patients that are high risk on that can you get enough.

When we tried to enroll in a trial many years ago. We did not we have looked at real world evidence that would demonstrate and show that in fact, yes. There is a significant reduction in that stroke, but we have not been able to.

Think through what the exact right trial would look like to improve enrollment on that but we're going to continue to look at it continue to consider it it's not off the table by any means so.

So it's a very good question, it's just not top priority right now in terms of we have got a great trial I think designed.

On these non-native patients undergoing cardiac surgery and we've got good data to basically build upon that we think that it's going to be a big success.

Thank you I'm showing no further questions at this time I'd like to turn the call back to my account for closing remarks.

Well great everyone really appreciate you joining the call today and all the questions and look forward to speaking again in the early part of next year have a great rest of the year. Thank you.

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

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