Q2 2022 Shockwave Medical Inc Earnings Call
Okay.
Good afternoon, and welcome to Shockwaves second quarter 2022 earnings conference 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 is being recorded for replay purposes, I would now like to turn the call over to Debbie Kaster, Vice President of Investor Relations at Shockwave for a few introductory comments.
Thank you all for participating in today's call joining me today from Shockwave medical or Doug Godshall, President and Chief Executive Officer, Patrick Ryan President and Chief Commercial Officer, Dan Puckett, Chief Financial Officer.
Earlier today Shockwave released financial results for the quarter ended June 30th 2022.
A copy of the press release is available on shockwaves website.
Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act at 1995.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements. All forward looking statements, including without limitation statements related to our sales and operating trends.
Any prospects.
National and revenue expectations and future product development and approval are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties, including the impact of the COVID-19 pandemic.
Cause actual results or events to materially differ materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our annual report on Form 10-K on file with the SEC and available on Edgar.
Other reports filed periodically with the SEC.
Shockwave disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as of the live broadcast today August eight 2022.
And with that I'll turn the call over to Doug.
Thanks, Debbie good afternoon, everyone and thank you for taking the time to join US to review shockwaves results for the second quarter of 2022.
We are pleased to share the results of another strong quarter delivered by our global team.
Our customers continue to witness.
Benefits of using IV also treat their patients, which helped mitigate the headwinds of the contrast supply and staffing challenges been topical across our peer group this quarter.
Yes in the second quarter of $127 million represented increases of 116% from the second quarter of 2021, and 29% from the first quarter of this year.
We witnessed growth across almost every sector this quarter U S. Peripheral once again demonstrated the right up 35% from the first quarter of 2022.
U S coronary and our international business grew sequentially at 25% and 26% respectively for the first quarter.
The solid performance and contribution from each of these areas the compelling testament to the strength of our business as a whole.
Perhaps the most meaningful statistic for our teams that we were able to help improve outcomes.
5000 patients across the globe last quarter.
Later in the call I'd like to provide additional details regarding market dynamics.
Ill begin with some commentary around the quarter.
Our footprint outside the U S continues to expand.
Our international revenue has more than tripled since our IPO in 2019.
We are now commercial in over 60 countries.
And then most of our international revenue comes from Europe . We are seeing early signs of our Asian expansion will be able to contribute meaningfully going forward.
On the heels of the approval of coronary ABL in Japan in March our Chinese JV was granted approval for both our peripheral and coronary products in China.
There are over $1 5 million CCI is in over 270000 peripheral procedures performed in China each year.
Of which have been growing double digits.
Despite the significant prevalence of calcium utilization rate of existing calcium modification devices is extremely low in China under 1% from Macquarie.
Thank you.
This represents a great opportunity for shock and for our physician partners in China to improve outcomes for their patients.
Hey, Robert already been multiple events promoting ICL, including initial virtual launch event that had an audience of 15th year positions.
The other highly impactful events was the China, interventional therapeutics or CIC conference in June .
CIC is the largest scientific Congress infusion dedicated individual cardiology.
And it was fortunate with the conference itself just as we are initiating our launch.
The team was able to engage in person with over 100, leading Chinese kols and over 10000 online participants who were able to observe live Shockwave cases demos symposia training workshops and in depth views.
As with so many things in China the scale is quite remarkable.
Moving to Japan, one of the largest interventional meetings of the year, Steve. It was held in Tokyo in July and IBM will carry the day.
And the meeting was 90% remote but the room for our symposium with tax.
The physicians are eager to have access to IV and we are now fairly certain the NHL W will be granting us reimbursement into December cycle.
Turning now to our near term pipeline, we have spoken briefly in the past about the optics catheter, which will offer even larger passengers.
Catheter with eight.
10, and 12 millimeter diameter sizes.
The goal is to create a tool that further enhances outcomes in complex calcified disease beyond even what the customer address such as the more severe COVID-19 Emerald lesions.
And the transition into the lease modification.
We are in discussion with FDA regarding the regulatory pathway and we will provide an update on the expected timing once we have a bit more visibility.
We also continue to generate and disseminate high quality clinical data supporting our products.
During the quarter, we had multiple applications and presentations and of particular note were the one and two year results of the disrupt pad III randomized clinical trial.
Which represented Sky conference in May.
These data confirm that <unk> unique mechanism of action delivers significantly more luminal gain with lower dilatation pressures.
The lower rate reductions versus PTA.
While we achieved statistical significance in both the predefined primary and secondary endpoints.
Additionally, intriguing aspects of results with the CV Kaplan Meier curves continue to diverge in two years.
Adjusting the benefits of IV, all may actually improve over time.
This certainly resonate very well with our customers and correlates with their actual observations.
Taken together the successful achievement of our primary and secondary endpoints confirms the ICL provides superior vessel prep versus PTA and.
An excellent long term outcomes in calcified vessels upper preserving future treatment options.
Our commercial efforts received most of the attention, but none of this would have been possible without key strategic decisions and the nearly flawless performance of the teams behind the scenes in operations and quality.
As a result of their great work, given unfortunately, not to avoid being impacted by supply chain issues.
Rather remarkable given the extraordinary growth and.
The current macroeconomic challenges around the world.
Continuing the approach of getting at we just broke ground in Costa Rica, and have signed agreements to build our own facility, which will substantially increase our capacity and will complement our current Santa Clara and contract manufacturing volumes.
We expect to be online sometime in 2024.
And what is up in line, we will use that locations manufacturer established mature products.
We believe this operation strategy will position us to continue to deliver new products to market faster and to more effectively manage our cost of goods will also facilitate our future growth and scale.
Given the results we have witnessed in the first half. This year, we now anticipate delivering top line revenue in the range of $465 million to $475 million for the full year of 2022.
Representing growth of 96% to 100% from 2021.
With that I will turn the call over to Isaac but before I do I want to take a brief moment to recognize what he has contributed since joining us over 40 years ago.
Anyone who has followed our story closely is likely aware of how instrumental he has been driving commercial execution.
Behind the scenes as it has been a tremendous strategic partner for me and the rest of our leadership team.
In acknowledgment of the significant I was pleased to be able to promote into president Chief commercial officer, a couple of months ago.
I look forward to continuing our partnership as we seek to improve outcomes for patients globally and to creating a compelling sustained growth business for years to come.
Following <unk> comments, Dan will share more details on the broader business and financial results.
Isaac.
Thank you for the kind words that a bit of color to doug's comment on the quarter.
We had a solid quarter across the board. Despite some of the challenges that our industry peers have mentioned, while COVID-19 seems to be pretty much under control as it relates to the impact on hospital procedures. The contrast shortage with a new challenge in Q2.
It can be by June the issue is pretty much behind us while we are still seeing staffing shortages impacted our vessels delayed procedures, we do not see it impacting total procedures more of a shift of a few weeks versus losing cases.
Our U S sales team continues to execute at the highest level.
Effectively worked through all the challenges that have been thrown in front of them in.
In terms of the new above the knee product <unk> plus our plan remains to phase out and five and replace it with Empire later this year or early next.
The launch continues to go very well and our customers are appreciating the upgrades that Empire offers in combination with the value proposition as they weigh the benefits of the excellent clinical performance and improved features of Empire plus.
We have been successful in obtaining approvals for our pipe.
And once customers use the product they don't want to use and five anymore.
It's been a really nice validation of the work our marketing and R&D teams have done to develop a next gen product that satisfies our customers' unmet needs.
As we pass the anniversary of the launch of coronary IPR in the U S that business continues to outperform expectations.
During the second quarter Reorders represented 95% of the <unk> revenue in the U S, indicating that the use of IPL continues to grow with existing customers.
This high reorder rate also reflects the fact that we have penetrated a significant portion of our target accounts.
And while we are still working to add new accounts, we are increasingly turning our attention to going deeper within existing accounts.
I am really pleased with the progress our team continues to make as they focus on getting broader position supporters within existing accounts.
We continued to add to our U S sales team in the first half of the year as.
As we said earlier most of the new hires our field clinical specialists and existing territories has helped with our efforts to teach more physicians and staff in the accounts about proper use of <unk>.
One advantage that having such a relatively simple and easy to use device confirm particularly during this time of staffing shortages, if that nurses and techs, who are new to the hospital are quickly able to learn the system and efficiently assess positions during the cases.
During the first half of 2022, 68% of our U S accounts purchased both coronary and peripheral products, 17% purchased on the coronary and 15% purchased helmet peripheral our goal continues to be to have all of our customers using both coronary and peripheral ABL.
Internationally, Doug hit at a lot of the highlights, but I will add a few more details.
We have had solid growth in our international business, we are especially pleased with the performance of our direct teams in the UK and France.
They have done an impressive job contributing to our growth after their transition from distributors.
As we go direct we generally see improved performance across the portfolio, but particularly in peripheral since that is a more complex sale than coronary and distributors are less likely to take the time required.
The UK is a Prime example, where we're seeing a market uplift in peripheral sales, resulting from both the greater attention by the field team as well as for multiple meetings courses and peer to peer selling.
Our JV in China is well prepared for the launch of peripheral and coronary IBM and the initial promotional events and cases have gone extremely well.
In terms of reimbursement in China <unk> be used the procedures that are already reimbursed in that country, namely PCI and peripheral vascular procedures.
The level of reimbursement for these procedures varies depending on the province.
Most procedures in China. There is also an out of pocket payment component that comes from the patient.
Over time, the JV will work to get Ibs specific codes in place that will have incremental reimbursement for procedures in which IV L issues.
This is a relatively complex process as there is variability across the country and it will take time.
What is important is that we do expect to have strong initial uptake of <unk> with the current reimbursement and we will seek to improve the reimbursement specific to IV out overtime.
In Japan, we continue to receive very positive feedback from the market. We have been conducting our initial free of charge cases with kols and they have gone very well.
Due to reimbursement we are limited to only a few cases per center at a limited number of centers.
We really look forward to being able to launch coronary IV <unk> in Japan in 2023 with that I will turn the call to Dan to review the financials.
Thank you Isaac good afternoon, everyone Shockwave Medical's revenue for the second quarter ended June 32022 was $127 million.
116% increase from $55 9 million in the second quarter of 2021.
U S revenue was $100 1 million in the second quarter of 2020 Q.
Growing a 133% from $42 $9 million in the second quarter of 2021.
Coronary products contributed $72 $1 million to U S revenue in the second quarter of 2020% to 174% increase from $26 $4 million in second quarter of 2021.
Referral products accounted for $27 $7 million of U S revenue of 68% increase from $16 4 million in second quarter of 2021.
Generators accounted for.
$2 million of U S revenue in the quarter.
The growth in U S revenue was driven by increased utilization at existing accounts, new account adoption of IVF and continued sales force expansion.
International revenue was $20 7 million in the second quarter 2022.
<unk> actually increased from $13 million in the second quarter of 2021.
International revenue for the quarter included $3 million of sales to our Chinese joint venture.
These sales represent a stocking order for the JV as they ramp up inventory for both peripheral and coronary products prior to launch.
International revenue from coronary products to $15 $7 million in the second quarter of 2022 a.
51% increase from $10 3 million in the second quarter of 2021.
International revenue from peripheral products was $4 2 million in the second quarter of 2022.
78% increase from $2 4 million.
In the year ago quarter.
Generators accounted for <unk> 8 million and national revenue in the second quarter of 2022.
The increase in international revenue over the prior year period reflects continued geographic expansion, including China growth in customer demand and the expansion of our direct sales force in Europe .
Because the contribution from China in the second quarter of 2022 is an initial stocking order we will share some revenue details that exclude China for this quarter <unk>.
Excluding the stocking order total international revenue was $17 7 million in the second quarter of 2022, which represents growth of 36% from the year ago period, excluding the JV stocking order international revenue from coronary products was $14 4 million in second quarter of 2022 of 39%.
The increase from the second quarter of 2021.
Excluding the JV stocking order international revenue from peripheral products was $3 million in the second quarter of 2022.
27% increase from the second quarter of 2021.
Looking at total revenue by product line, our coronary products accounted for $87 8 million of total revenue second quarter of 2022 compared to $36 7 million in the second quarter of 2021, representing a 139% increase our peripheral products accounted for $31 9 billion of total revs.
In the second quarter of 2022 compared to $18 $8 million in the second quarter of 2021, 7% increase.
In addition, the sales of generators contributed $1 million in revenue in the second quarter of 2020 compared to $2 4 million in the second quarter of 2021, 150% increase.
Total revenue excluding the JV initial stocking order was $117 $7 million for the second quarter of 2020% to 111% increasing $55 9 million.
Second quarter of 2021.
Gross profit for the second quarter of 2020 was $104 million compared to $46 million in the second quarter of 2021.
Gross margin for the second quarter of 2022, with 86% as compared to 82% in the second quarter 2021 improvement in gross margin was primarily driven by product mix as well as continued improvements in productivity and process efficiencies.
Total operating expenses for the second quarter of 2022 were $74 4 million.
$60, an increase of $46 $2 million in the second quarter of 2021.
Sales and marketing expenses for the second quarter of 2022 were $40 $5 million.
Compared with $25 7 million in the second quarter of 2021 Dean.
The increase was primarily driven by sales force expansion.
R&D expenses for the second quarter of 2022 or $28 million.
Compared to $11 $8 million in second quarter of 2021 increase.
The increase was primarily driven by head count growth.
General and administrative expenses for the second quarter of 2020 to $13 2 million.
Compared to $8 $6 million in the second quarter of 2021.
The increase was primarily driven by higher head count to support the growth of the business.
Net income for the second quarter of 2022 was $25 6 million.
Compared to a net loss of $4 million.
Second quarter of 2021.
Net income per share for the second quarter of 2022 or <unk> 71.
Diluted net income per share for the second quarter of 2022 was 68.
We ended the second quarter of 2020 to $224 9 million in cash cash equivalents and short term investments.
At this point I'd like to turn the call back to Doug for closing comments.
Thank you all for joining us for the call today and for your continued support in Shockwave.
We are proud of the progress we have made and are excited for the things that got pushed out.
Our customers and our investors.
With that we will open the call to questions.
Thank you to ask a question. Please press star one one on your telephone again Thats Star one one on your telephone to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of Travis Steed Bank.
Bank of America.
Steve Your line is open.
In the quarter I think I'll start with op margins of 24, 5%. This quarter, just curious like where do you see peak operating margins for this business in like why you can't be there by the end of this year and I don't know if there's anything you want to call out on an opex spending or how to think about that going forward or kind of what youre going to do with some of the extra cash.
That'd be great. Thank you.
Dan do you want to start sure I'll start.
So we've said long term.
Yes.
Full scale, we're going to be shooting for the upper twenty's, nor at Thirty's operating margin.
Definitely had a strong quarter.
In the near term, we're going to continue to invest in the business.
R&D sales and marketing so we're not looking to optimize we're looking to grow with that said, we're getting good leverage out of the business. So.
So we're pleased with the performance maybe Doug you can take it from there yes, no I agree.
Just this morning, we are discussing additional R&D hires so thats enabled with that too.
Continue to build out our R&D portfolio and as best we can.
Parallel process projects instead of working in series as we have traditionally.
Which will hopefully enable us to be at that sort of two plus product launches per year and de risk those product launches even more aggressively.
We are.
We look at opportunities outside the company, obviously, but but so far we don't find things that work more than the opportunities inside the company in terms of how we.
Okay.
We'd want to be using our cash so.
Sure.
It is helpful. Obviously to continue to build up cash reserves.
At this juncture and give us flexibility for how we want to <unk>.
Invest and build out the business into the future.
That's helpful. I think the follow up question would just be on the top line guidance.
$12 million beat this quarter.
Second quarter in a row.
Earlier, beating and raising guidance by more than the beat.
Think about how the confidence in the coronary versus peripheral business from here given you the confidence to raise the guidance. What do you think about like some of the quarter trends April May June July kind of love to see how the quarter kind of shook out and.
The company is calling out staffing doesn't seem as big of an issue on your end.
Yes.
I'll tag team with Isaac on this.
Obviously, we saw some.
Some contrast issues in late April or early May we think those largely flushed through this quarter this past quarter.
As we said several months ago, we think staffing is sort of the new norm.
And that hits, there sort of a baseline staffing challenge that that's going to live with us for the foreseeable future. So.
In January it was worse because you had.
Covid plus the staffing shortage.
And and now it's just sort of tight staffing across the economy.
I think maybe you want to touch on coronary peripheral.
Sure.
I think consistent with what Doug just said.
We feel good about what we're seeing on coronary trends both internationally and in the U S. I think the second quarter.
On international was was organically.
Really strong quarter for us.
And then made us feel good that things are on the right track in Europe .
And kind of are.
The older Asia businesses on the.
Peripheral side, we're really pleased with the way the <unk> plus launches going both internationally and in the U S.
The product performance.
Good and the features and benefits are really.
Well received by the customers. So I think we got.
Good continued strength in coronary nice product launch with <unk> plus internationally and then the last piece Travis is just as you know the kind of reimbursement tailwind we have from the uplift in the above the knee reimbursement in the U S. This year and that's that.
Not something that just turns on one quarter, we get the one quarter benefit, but I think our team is just you feel that that tailwind behind you as kind of a not every month.
Building as physicians understand and.
Hospitals I understand that this is not.
The above the knee Shockwave procedure now is not.
A procedure, where theyre going to lose money.
No thanks for that and congrats again on a great quarter.
Thank you. Our next question comes from the line of Larry <unk> of Wells Fargo.
<unk> Your line is open.
Good afternoon. Thanks for taking the question I'll Echo Travis congratulations on another strong quarter here, Doug Isaac and Dan.
Thanks again for taking the question so.
Doug you can hear me okay.
Yes, Sir.
Alright, so just to start out maybe a little bit of color on the Q3 Q4 cadence of what you're assuming is in.
2022 for China, and Doug I'd Love to hear some just high level thoughts from you on 2023 growth drivers.
Turning away from guidance, but I'm interested to hear what kind of contribution you think Japan and China could have next year.
Yes so.
We.
I'll, let isaac sort of wander to China, and build a bit more detail.
Where we are.
As we just clarified we are anticipating Japan.
Reimbursement in December we Werent sure, if we'd get lucky and get it in the September cycle NHL there'll be is really busy. So we didn't get lucky it'll be December but in a way that's fine because we're really the team in Japan is.
As building both at scale and momentum so there'll be fully staffed and ready for.
For reimbursement.
December so that it will be a full on 2023 launch.
We expect it'll be a methodical rollout in Japan, although the nice thing is we've got a lot of Kols engagement now everyone will have done there.
Cases that were allowed to do in the limited launch you have is a restriction on how many cases every physician can do during this limited launch phase III.
Free of charge basis.
So.
Will will will be well.
Well on our way with the China launch of our JV will be by the time, we start launching in Japan, So Japan will be.
A key growth driver in 'twenty three.
We will be.
Fully through our transition from five to 10, five plus so that will.
As we.
Build momentum and five plus we envision that being an important growth driver through 2023, as well as Isaac describe the sort of.
What we think will be a multi multiyear tailwind.
Uplift than above the knee.
Reimbursement.
And.
And then thirdly.
Fourthly, if you kept China, but.
The really transition that we're making on our U S sales team from.
Coronary account acquisition to acquire to coronary account penetration and Thats really the.
So the driver and our focus now is.
<unk> got one key user or is it at a site.
How do you bodes up increase their.
The utilization rate and.
Expand to.
More users at a site so that you've got everybody firing on all cylinders and as we look at.
That accounts that are using <unk> at the rate that we think is appropriate.
Well above 10%, which is a very very small number of accounts.
It's those that were.
Bodies on.
On sort of the IV Airbus and using it.
As a routine part of their.
Political practice.
On a broad spectrum of their patients.
And.
And so thats excuse me the real opportunity we have to have.
Coronary b.
The growth driver once again in 2023 as it has been in in 'twenty, one 'twenty two.
I'll, let you sort of add color, maybe even on the Q3 Q4 part of Larry's question.
Sure.
Hey, Larry So I think Doug Doug hit it.
Well on what the elements of the growth drivers are I think importantly, it's multifaceted and discount.
Continuing layering in and building building on what what we've started internationally on multiple fronts on.
This year's guidance Q3 Q4 Q.
Q3 seasonal.
Lowest procedure.
Quarter of the year for the procedures were involved in so we think we will see a step up Q3 versus Q2, and then Q4 is generally a very strong quarter.
For the industry and so we expect again to see a step up between Q4 and Q3.
That's helpful. Just one follow up you talked about looking at external opportunities, but I think you said something to the effect you havent seen something.
Thats attractive I can't remember the word you used but what kind of lens or are you looking through when you're evaluating external opportunities. Thanks for taking the questions.
Yes sure so.
What are the challenges.
Calendars that.
External opportunities have as we just any any dollar we spend externally has to be $1 better spent then.
The internal opportunities that.
That we are resourcing in the.
I think we're probably pushing about 25 internal projects right now some very.
<unk> is very different than ibs.
More iterative so we have a.
Very interesting internal blend of.
The important performance upgrade kind of projects like Empire plus.
That will refresh the product line enhanced performance and improve customer satisfaction.
And.
And make it a lot harder for somebody who might show up on the market and whatever a year from now.
To compete with us.
With new opportunities that are going to bring incremental patient populations into our into our fold.
So when we look at those opportunities and and could spend money on external acquisitions.
Acquisitions, most of the external acquisitions they cost more in there.
And so you don't always have the same uncertainty that some of our internal ones.
That all of our internal ones.
That said.
We.
Isaac.
And I both did M&A.
In our prior lives for multiple years, so were reasonably familiar with it.
And so what.
What.
What's really nice about our current situation as we as we look at our external opportunities as they were not.
We feel no pressure, we don't feel like we need to.
Two M&A.
Because of the strength of our portfolio.
It enables us to be very selective in.
And hopefully steer away from.
Really crowded.
Spaces that are stampeding towards Commoditization.
We like we like the <unk>.
What we've been able to accomplish here in terms of creating a new market with IBM.
And obviously.
This is a rare opportunity it would be hard to find another one of these but.
We are.
We're we're.
We are open minded, but we also recognize that M&A is a distraction in a lot of times deals don't work. So we want to make sure if we do something.
But it's got a really high likelihood of success.
And so we're.
We're being thoughtful and careful about.
Without doing anything externally that would in any way distract from the mission at hand.
I think I don't know if you want to color on that.
Alright, no Doug I think you said I think you said exactly what I would say no color.
Alright, thanks for taking the questions guys.
Thank you. Our next question comes from the line of Adam Mater of Piper Sandler.
<unk> Your line is open.
Questions guys and congrats on another really nice quarter and congrats Isaac on the promotion and very well deserved.
Maybe just to start with a couple of housekeeping questions.
First is just around pricing.
Curious, if you're able to kind of provide any color around pricing dynamics for our models in Q2.
<unk> plus <unk>.
<unk>.
Premium for for U S. ATK. So just any color there and then the second question is around.
The <unk> plus product, what's the latest update there can you remind us if you're in Europe or is that expected to lot. Shortly and then remind us on U S timelines for that.
Technology, and then I had one follow up thanks.
Yes, so youre correct.
<unk> plus is selling at a price premium two and five we anticipate.
Full.
Conversion November five two and five plus.
Certainly by this time next year, probably sooner than that.
And thus far.
All of our products are showing really encouraging strike price stability, both in the U S and internationally.
The.
<unk> plus is.
Still awaiting MTR approval for a limit to where after which we'll start a limited launch in Europe .
The.
I think the Europeans are trying to prove.
How efficient the FDA is because of the MTR process is.
Mind numbingly.
Obtuse.
Inexpensive so we are.
We keep thinking we're close and and if we're right now at this time, then we will be starting a limited launch a couple of months from now and assuming all goes well.
Then we'll start working through an FDA process, we want to make sure that we didn't miss anything.
No.
Changes, we'd want to make before we before we get into the U S.
And so that the FDA timeline is.
As yet undefined sort of make sure. We're we're thrilled with the product before we commit to a PMA supplement.
That's very helpful. Doug appreciate that and then for the follow up.
I wanted to ask about U S. Peripheral I think I heard up 35% sequentially quarter over quarter.
Can you guys, maybe just flesh that out a little bit more in terms of.
What you saw.
How much of that is <unk> plus how much of that is the reimbursement change, which I know it takes a couple of quarters.
Kind of fully digested by customers and then.
There was some talk about contrast die.
Staffing on the headwind side, but obviously you guys put up a really nice number but just love to hear was that more impactful to the peripheral business versus coronary just any additional color on that topic would be great. Thank you.
Sure you want to take.
Sure Yes.
We're very pleased with the peripheral business in the U S and the work the team is doing to continue growing growing at work on that.
On the second quarter.
We still have our below the knee product, which continues to grow sequentially and then wood and $5 five plus we saw both a.
Contribution of the ASP increase and the unit volume increasing.
I think the.
The overall kind of stability durability and growth of that business feels it feels intact to us.
And as we go as we keep moving forward I think having.
The story around what <unk> brings to the table.
How that is helping customers who had been using them five do more and then kind of satisfy some of the request they've had through our marketing and R&D teams.
And that coupled with the improving economic because you're just going to really help.
Help it feel like a business that's going to be a long term partner for peripheral procedures and so it's definitely a strong part of the portfolio.
Okay.
That's helpful and if I could just follow up quick on contrast, I mean.
Coronary versus peripheral just any yes, I mean, we saw.
I think you saw generally a flattening kind of as we went.
Sequentially April was good relative to March may which is usually a very strong month with sequentially in the U S kind of on.
On par with April and in June we saw.
Revenue kind of tick up again sequentially as expected. So I guess in this again, so I mean, it's hard to kind of parse this out but peripheral procedures were impacted more you can kind of look at the curves I think coronary procedures impacted less.
But that was generally I think behind our team in the hospitals have their kind of had surety to contrast supply for the ones that were using GE by early June and so it seems like something that was transient in the quarter, probably cost a little bit of peripheral revenue, maybe maybe coronary but less in peripheral.
But nothing that really punched a hole in the quarter at all.
Yes.
That's great to hear thanks for the color.
Thank you. Our next question comes from the line of William <unk>.
Canaccord Genuity.
Your line is open great. Thanks, Good evening can you hear me okay.
Yes.
Good thanks so.
First question is.
Just on the guidance.
Basically the guidance contemplates that.
Current numbers or consensus for the back half of the year is unchanged.
I know people have already asked but a little color on that.
I think you already gave us a little.
Directional.
Is it that Q3 would be up in Q4 from Q2, and then Q4 up further.
In terms of Q4 that would kind of guide to Q4.
Not really much different than where we are today is there something youre seeing that we should be thinking about it or should we view. This as conservatism and then I have a couple of follow up questions.
Yes, you want me to Doug.
I'm not I'm not reading it the same way.
I felt I follow what Youre, saying bill.
Yes.
I think the guidance new guidance contemplates not just the first half actuals, including the second quarter beat but.
Plus consensus, but we moved up above where consensus was in the second half I don't have your model.
In front of me right now, but we can definitely look at that.
With you offline.
Relative to consensus.
We expect Q3 to be above consensus and we expect Q4 to be above consensus and we expect.
Q3 to be above Q2, and for Q4 to be above Q3. So.
We're definitely feeling like in the second half that there is.
The tailwind from the first half will continue blowing through the second half and that's why we're above where where consensus was in the second half.
Okay, and then any stocking from China.
And the second how we think about.
That's done so with the JV in the second quarter and this is more of a June event.
Brought in enough coronary and peripheral products that they can feel good about their inventory that they're carrying and it pushed that into the sales channel. So we think any revenue we get from China in the second half will be organic revenue.
It won't be material kind of a 10% threshold for the business. So we won't call. It out, but we just wanted to be clear on the second quarter third quarter comp that we did define that the stocking revenue because it's relatively it's.
Quite large compared to any other small stocking order distributors typically do.
Okay, and then on coronary.
Just can you help us what a year and a half into the U S launch in.
Went out with our models and expectations, but any any.
Different than the usage and moderate or severe and a potential updated thoughts on potential tam increasing or decreasing given all the experience you have at this point, yes, basically what have you learned yet you think this is going to penetrate deeper than your original expectations and what usage look like today.
Yeah.
We can go back and forth on that.
Hey.
It certainly has been a.
Uptake and speed of uptake has been a real pleasant surprise from really from day, one and continues to be.
It.
It's almost impossible for us to know what patient is moderate what patient is severe ducks use it when.
Either there are certain they need it or when something else doesn't work and then they bring in shockwave to sort of.
Successfully finished the case.
Whether thats, a balloon or an atherectomy tool that didn't quite get the job done.
And and we see a fairly substantial range of of <unk>.
Realization rates.
The vast majority of our large large customers are using us.
Sort of less than 5% of the cases in some of our smaller accounts are using us north of 10%.
And so there is there is it.
Huge upside and in almost every account.
Certainly Eric on the matters.
To get anywhere close to what we.
Even though the original originally modeled in terms of the utilization.
Utilization rate in penetration.
And so we are.
We are I don't think we have meaningfully altered our view of what the.
What's the potential and the potential Tam is for the opportunity, it's really hard to know.
I'd say one thing is certain everybody we talked to you. It tells us they treat a lot more calcified patients needs too.
Used to meaning like a decade ago, not three decades ago.
And so.
Calcium prevalence is on the upswing, which is certainly timely for.
For the coronary launch.
Yeah, and maybe just a little a little bit more color on that we have as you know bill a sales model, where we have.
All of.
All of our sales team for <unk>.
Tori managers to the clinical specialist.
We have them all pushed focused on coronary and peripheral so last year. There was a more heavy focus on the coronary side of the business with <unk> plus and our sixth of this year.
Reasonably heavy focus on the peripheral side of the business.
I think the.
So as we go forward, it's important for us to balance all of the other legs of the stool with the sales force and if we targeted the Salesforce. It's something you said only work on that it would probably grow faster than we could we could we could make a product line go faster, but really our attention is to is to grow these things appropriately keeping balanced relatively balanced.
And kind of see the continued growth from increased penetration of <unk>.
Products can bring in each category and together over the next 345 years.
Okay, and then lastly, if I could squeeze this in just the Ama's CPT editorial.
Vittorio proposing coronary ABL codes for the agenda for the September meeting just any thoughts if you think that coronary specific codes would have higher or lower reimbursement and what is granted then what's granted under the add on payment today. Thanks for taking my questions.
Thanks Bill.
No.
As everyone knows the CPT panel process is confidential so whatever we know where we are now lets talk about other than that it is on the agenda.
The.
And the CPT code.
Hospital procedures, only pertains to physician payment.
So.
We would be thrilled if there were a level one CPT code, so physicians might get paid a little bit extra to do an IV outpatient procedure I mean, right now I think they get paid something like $60 extra to do atherectomy. So it's not a.
It's not a big number that's going to come through and certainly it is not a number that will or won't drive adoption of ABL.
It's unrelated to.
The transitional pass through and its unrelated unrelated to where we will land in terms of the APC level once the transitional pass through.
Sunsets in 2024.
And certainly throughout that period of time.
CMS will be collecting cost data on on Shockwave.
I'll use.
And we're confident based on the current APC levels.
The cost of the ABL device that will fall into.
Good good APC level once.
The other side of it.
The other side of it.
The transitional pass through.
And that's what will matter a lot more than whether we do or don't have a level one CPT code for physician payments.
Yes, thanks for the clarification.
Thank you. Our next question comes from the line of Cecilia furlong.
Morgan Stanley <unk>.
For long your line is open.
Great. Good afternoon, and thank you for taking the questions and congrats on another very strong quarter.
Wanted to ask on Empire.
Specifically utilization in the <unk> region, and really what you've seen early days.
Just the complementary nature to as far and as you look out just how youre thinking about as far as the relative growth versus overall peripheral once you really kind of get fully launched with <unk>.
Yes, so we are seeing in five plus utilization below the knee.
Yes.
It's slightly higher profile than S four, but it but for any of the proximal lesions.
Below the <unk>, it's a very attractive device because of the speed of the pulsing in the.
The longer treatment segment, then Thats warehouse.
And so.
We're tracking.
Smaller sizes.
The three five and four O that would get us below the below the knee and so.
So we're counting that as a below the knee device and we're assuming it's being used below the knee. Although we don't know with certainty where all of the cases are being done we have so many cases going on now.
In terms of Asps, where it's been.
Really impressive durable product I think the way.
Isaac and team.
Works through.
Sort of balancing.
The compensation that the commission plan last year to ensure that.
Everyone, who was selling <unk> five NC two to keep all three products.
Attended to.
It really paid off bye bye.
Now a key.
Continued strength of S. Four.
And continued presence in the below the knee segment, which which I think further facilitates the introduction of that plus below the knee because.
We stayed engaged with with below the knee didn't get totally swept into the coronary is.
And above the knee segments and we continue to.
Reinforce the below the knee above the knee coronary balance through our commission plan.
It's just that now anti plus and as for the smaller size of Empire, plus emmis for both sort of count as below the knee cases in terms of.
Of how folks are compensated.
And long term, we envision the portfolio below the knee products inclusive of export.
And our portfolio of above the knee products in the portfolio of coronary product or multiple products for each.
Each geography.
Great and then if I could follow up as well just on China and if you can speak to as you think about just the relative rate of rollout of coronary versus peripheral how you view the Chinese landscape just incentives in place versus what we've seen either in Europe or the U S. Either from a reimbursement standpoint other dynamics that.
Could really push one how does the other and thank you for taking the questions.
Pleasure and thank you for the kind words, Isaac I'll, let you touch on China.
Sure.
Yes, I think China, we went from a unit split between coronary and peripheral.
I think look.
Similar I think look similar to what we're seeing overall in Europe , and that's kind of you got 70%, 80% coronary and 20% 30% peripheral.
And depending on the country that kind of at that wobbles around a little bit.
It's early in China that I think we'll know a lot more.
Certainly by <unk>.
Next quarter, but certainly by the end of the year on what the adoption of the above the knee.
The coronary and peripheral products with quick but our Rguest guesstimate right now is it's probably not too different from the mix we see inter.
Internationally from a unit basis, which again kind of 20 to 30 versus.
70 to 80.
Okay. Thank you for taking the questions.
Thank you. Our next question comes from Michael Clarke.
Wolfe Research Michael Your line is open.
Hey, good afternoon can you hear me.
Yes.
Great. Thanks.
Cut out there for a second so I'm just curious I want to double click on.
Coronary in the U S again.
Transition to going deeper with existing accounts I'd love to better understand kind of what the what the major hook. There is is it just making sure you're touching all the users at that account.
<unk> been focused on one or two and theres, a handful of others that need the TLC.
Those key leaders have gotten so far or is there an element here, where you also need to focus on different case types different patient profiles, where theres been low hanging fruit picked so far but some more complicated cases around a common in your sales force can.
Can focus on driving adoption there.
More anecdote and color around.
What's going to.
What's going to move the needle on this effort over the next year or so.
Yes, yes.
I mentioned some of the things, we're looking at which is making sure that we're not.
Sort of unitary you will use user and driver at a center but.
Isaac and his team are really drilling in on this.
<unk>.
So better understand how we're going to continue to expand and whereas whereas it working and where do we have.
Which is almost everywhere, where do we have significant upside opportunity. So.
Maybe walk through how you guys are.
We're doing this work yeah sure. So I think it's.
Early for this type of type of work and the reason I say that is.
We anniversaried the launch in March.
And then had new payments put in for the hospital and tapping the TPP put in after that so I think it's the right time to start looking across our accounts and seeing what behavioral differences. There are in terms of utilization and then why those things occur.
We're doing that work now, but it's going to be some mixture of <unk>.
Going broader within the physician base at that account.
And including going broader with nurses and tax so that they understand.
How to use it and it is not at all a barrier when when the physician cost for Shockwave and I think we can do that work very well, but that also requires us to focus and decide when and where to focus our teams, particularly the field clinical specialists.
That effort is that in contrast to the effort that they would have launching them five plus and teaching that in the accounts for instance.
So thats part of it I think youre going to see as again, the reimbursement becomes more and more understood and tap and TPG are little.
It takes a little while to explain those things, especially when you don't start with them.
Accounts loosen up a little bit over time. So we're that is going to be part of it and continuing to educate on what the reimbursement situation looks like.
And then from a use case standpoint, I think you hit the nail on the head there.
Most obvious use cases, and those get talked about but as the clinical team and our investigators are going to be publishing what else. What can we see from for instance, the OTT data we have from CAD III cat four and wet lesions did it work on which lesions.
And how does that compare to what the gestalt is or where it works I think we're going to get some tailwind out of this.
You can see on the imaging intra vascular imaging in these cases that it's dean.
<unk> is working very well in cases, where.
A physician Didnt think it works so well it hasnt used it there and then we can go and reinforce that message.
Case in point there is.
Coming out of our initial launch in Europe . There was this.
Perception.
Which turned out to be a miss conception that debt.
I'll only worked in concentrate short lesions.
It didn't work in east centric lesions, so where the calcium is sort of bias towards one side of the artery.
And if you look at our OTT services, the more enhanced imaging data that we have.
We worked astonishingly well across almost every kind of calcium type.
Leisure morphology as long as Theres calcium.
We're really nice balloon if you don't have calcium but probably a little.
A little too much tech but.
We've ever since we got that OTT data last year, it's been.
One of our main education points is to drive on the understanding that.
We our outcomes are almost identical E centric.
Versus con centric and so getting preventing ourselves from being pigeonholed into well I'm just going to save IV.
For this one specific use case.
I think it was one of them one of the most important.
Undertakings will have going forward is to is to continue to build out the understanding that don't just use us for.
That con centric lesion or don't just use us for and under expanded stent, which is where you maybe use us the first time.
The broad array of use cases concentric acentric long.
<unk> et cetera.
I mean, the beauty of our devices sort of consistency safety ease of use.
Across the cross calcified lesion subsets.
I think just just one other color around that that will take some time to do and the reason is because we want to make sure that the data are there to support what we're what we're saying.
More importantly that physicians, who are who have done those cases believe the data because it.
It's consistent with their anecdotal experience and then the peer to peer aspect of that.
In conjunction with a company rep, saying something than having that peer to peer aspect, where physicians. They respect our saying that too that that takes time, but it's the right work to be doing and we're happy to be doing it.
Just to follow up on this and Doug you already asked this question I will just be a little more precise.
Good.
I have U S coronary procedures in the quarter about 15000, 60000, a year type of run rate.
Tam kind of work up here has been over the.
Mid term.
Potentially 100, 200, if not 300000 procedures available to IV al I mean are those still the right numbers to think about sitting here running at 60000, a year still have product in the U S that can be.
At least 100, if not a couple of hundred over the next say five years.
Yes.
I think we have to continue to think we have to continue to.
If we if we rest on our laurels and are still selling the currency to four years from now.
Then probably not.
To make it work better.
Add features.
Fresh it just like we do with them by plus come up with new versions and yes, I think it's.
It's not on.
I think most physicians would say.
At least 15% of their cases.
To be getting some sort of calcium modification. So that gives you about 150000 cases.
If.
Sure.
As I think about it they'll start drifting into maybe it's more like 20% 20 plus percent but.
But I think we've got a we've got to continue to.
Strive to make our products better.
With regularity so that they are.
They are eagerly.
Use it more often.
Current products really good I think we can make it even better.
Okay.
Latif.
Alright, well, ladies and gentlemen that does conclude today's program. Thank you for your participation.
And have a wonderful day you may disconnect at this time.
Everybody for your time.
The conference will begin shortly.
Raise your hand during Q&A, you can dial star one one.
[music].
Okay.
Okay.
[music].
Okay.
[music].
Okay.
[music].