Q1 2022 Penumbra Inc Earnings Call
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What are your conference operator today at this time I would like to welcome everyone to the Columbia, Inc. First quarter 2022 earnings Conference call.
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Investor Relations for Penumbra, you May begin your conference.
Thank you operator, and thank you all for joining us on today's call to discuss <unk> earnings release for the first quarter of 2022, a copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation can be viewed under the investors tab on our company website at Www Dot Penumbra, Inc. Dot com during the.
Of course of this conference call. The company will make forward looking statements that you went to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements regarding our financial performance commercialization clinical trials regulatory status quality compliance and business trends.
Results could differ materially from those stated or implied by our forward looking statements due to certain risks and uncertainties, including noise referenced in our 10-K for the year ended December 31, 2021 filed with the SEC.
As a result, we caution you against placing undue reliance on these sports skin statements. I mean encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock, including but not limited to the impact of the COVID-19 pandemic on our business.
Results of operations and financial condition.
<unk> disclaims any duty to update or revise our forward looking statements as a result of new information future events developments or otherwise.
On this call certain financial measures are presented on a non-GAAP basis, the corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted the press release, we anticipate the prepared comments on today's call will run approximately 25 minutes.
All set up in a as chairman and CEO will provide a business update.
Maggie Yuen, our Chief Financial Officer will then discuss our financial results for the first quarter and Jason Mills, Our executive Vice President of strategy will discuss our 2022 guidance with that I would like to turn over the call to Adam Elsesser.
Thank you good afternoon, everybody. Thank you for joining our numbers first quarter 2022 conference call.
Our total revenues for the first quarter were $203 $9 million a year over year increase of 25% as reported and 21, 8% in constant currency.
Our gross margin increased 100 basis points sequentially to 62, 5% and I expect important investments we have made in our people products and production over the past two years, we will continue to translate into both strong growth and gross margin.
And going forward.
Let me touch briefly on progress within our vascular and neuro and immersive healthcare business. During the first quarter, then I will offer some general observations about our business.
Details about our new product roadmap and growth opportunities that we see ahead and.
In our vascular business, we reported growth of 37, 7% year over year to $122 8 million in the first quarter.
We grew our vascular thrombectomy revenue 43, 2% year over year, and our vascular embolization revenue 28, 8% year over year.
Our vascular thrombectomy growth was driven by continued robust adoption of our lightning products in the United States, we saw sequential growth across all segments of our U S. Thrombotic thrombectomy business DVT P E arterial and coronary.
We delivered strong growth of 30% year over year in our U S vascular thrombectomy business we.
We also expanded into China with our partner Genesis. This expanded partnership which includes our older indigo vascular thrombectomy products, but not lightning seven or 12 yet.
A quarter earlier than expected and contributed an incremental $5 million to our first quarter revenue and.
In China overall, notwithstanding recent lockdowns, we have good visibility into our business and we expect solid growth in China in 2022.
We are excited to announce the launch of our computer aided mechanical aspiration technology into the European market. We recently secured the CE Mark for both Lightning seven enlightening 12, and the initial cases with both products have gone extremely well our dedicated vascular sales team in Europe , which we are.
Establishing during 2021 is well prepared to bring this important technology to European patients suffering from arterial and venous cloud, including pulmonary embolisms.
On the coronary side in late March a new study was published in the journal of Interventional cardiology. It can.
And firms the extraordinary data as shown in the Cheetah study for Cat Rx presented last November at the TCT Conference. This study called group boost is an independent dataset that shows the frontline use of cataracts to aspirate coronary cloud prior to angioplasty leads to less distal embolization and better.
Timmy three flow both are important predictors of long term good outcomes for these patients.
The study investigators said they quote strongly believed that the penumbra cat Rx device should be used before any balloon angioplasty and patients with high thrombus burden close quote.
Our work to reach more of these patients is making great progress and will continue.
In sum our vascular business is our largest business and the number of patients. We can help in our target market is large and underpenetrated.
We're expanding globally with our unique lightning products and the combination of our current product portfolio and new product roadmap, which I'll discuss more in a few minutes gives us a lot of confidence that we can deliver strong growth for a number of years.
Our neuro business grew to $81 $1 million in the first quarter or one 3% growth over the first quarter of 2021.
Globally, our stroke revenue grew 3%, which was in line with our expectations.
Our stroke revenue was sequentially lower than the fourth quarter due to a mix shift in our revenue in China, owing to our.
And in partnership with Genesis on the vascular side.
We expect the mix between neuro and vascular revenue in China will fluctuate quarter to quarter, but grow overall importantly, our U S stroke business delivered mid teens growth year over year.
Indeed, we believe we are at a very important moment in time in the ischemic stroke market.
Notwithstanding a preponderance of clinical evidence over past years.
Moving mechanical thrombectomy is unquestionably the best treatment modality for large vessel occlusions only one in four of these patients are being treated this way in the U S.
The current paradigm and stroke treatment has brought us to this point.
But we must do better for patients indeed based on all we have learned in stroke thrombectomy over the past 18 years, including many years of work on Thunderbolt.
I am very optimistic that we are at the precipice.
Of a new era and stroke treatment.
We are excited to prove out our confidence in the Thunderbolt trial.
Whereas the IV has not yet been issued we believe the trial will be a single arm trial with approximately 150 patients with typical short term endpoints.
We expect to start enrolling patients this summer.
Assuming thunderbolt performs as expected we hope to launch Thunderbolt in 2023.
Meanwhile, we'll be moving this field forward with new catheter technology that will serve as an important bridge two and critical component of the future Thunderbolt paradigm.
Thanks to the successful launches of Red 62, 68, and 72 in the United States. During 2021, we saw strong growth in our U S stroke business again this quarter I expect our U S stroke business to achieve record quarters as we move through 2022, driven by red and momentum around <unk>.
Thunderbolt trial in.
In addition, we plan to expand our Red family in the US Later, this year, which we think could have a positive impact on our U S stroke business late this year and beyond.
Outside the U S. We are launching the red catheter family into Japan This quarter.
Japan is an important market for us and one in which we see tremendous opportunity going forward.
Not just with our new neuro products, but also with our vascular thrombectomy products.
Further we plan to launch our Red catheters in Europe . During the second half of this year. This launch will mark the first new stroke products in the EMEA region for us and more than three years, and we think our growth in this region will increase as a result.
Some we have the most robust neuro portfolio in stroke, and we expect new red catheter launches around the world coupled with enrolment in the Thunderbolt trial will drive momentum in this business through 2022.
In 2023 and beyond.
We think the launch of Thunderbolt could accelerate our business.
Turning now to immersive healthcare.
We are making enormous progress and plan to communicate metrics are applicable to our progress. Beginning later this year around three important areas number one new product development and hardware software and content.
Number two the number of third party partnerships, which should drive scale to the content on our platform.
And three partnerships with key companies within several large healthcare channels, which will drive our real system installed base in the United States. We have now treated nearly 4000 patients since real system was launched in the U S. In the early days of the pandemic, we have increased our presence at important into.
<unk> trade shows, including the HIMSS meeting last month at which 40000 people attended.
Our conversations with hundreds of potential partners have validated our business model and approach to this new market.
We are pioneering the first full scale platform and immersive healthcare and we will continue to invest appropriately in this important area.
Now I'd like to spend a few minutes on general observations about our business and future growth drivers.
Overall, we are seeing benefits from the increasing scale of our business.
We are investing in our people and market development initiatives to reach more patients as we invest proportionate to the myriad growth opportunities in our target markets and geographies.
In sum, we will continue to innovate in both intervention and immersive healthcare, while we run a profitable business in 2022 and beyond.
We are quickly approaching the $1 billion level in global revenue, which we originally set as a goal before the pandemic at our Investor day in 2019, when our business was roughly half that size.
Our growth has come organically developing products that matter for patients across six large markets. We are still very early in each one of the five interventional markets.
And our immersive healthcare business, which could scale to be our largest business in five to six years is making the kind of progress I expected when I communicated our vision at the Investor Day last fall.
In past calls we are focused on where we have been and what we have done.
We are proud of both.
But we must communicate more about where we are positioned to go in the future.
Our core markets are obviously attractive.
Inevitably attracts competitors.
That said it is important to be clear.
About how we will continue to win.
Our focus on improving patient outcomes will drive our leadership in these markets and our growth is a direct product of our innovation culture.
Core principles of which are unique continuous and impactful innovation.
This culture not only keeps US ahead inpatient care, but it also gives us the opportunity to change paradigms to take patient care to another level.
For 18 years, we have worked purposely to protect taking clot blood clot out of the body.
First from the brain then the arterial system, the coronary vasculature and the venous system.
We have taken innovation in this field well beyond simply a catheter and an aspiration source.
We know what's critical in a thrombectomy system to do this work with the utmost safety and efficacy.
First technology to prevent taking too much blood out of the body is important.
Tracking the appropriately sized catheter tailored to the specific anatomy quickly and safely is important.
Taking all of the clot out is important.
Smart continuous power aspiration is important.
And finally doing all of this work inside the vasculature without causing trauma.
To the blood.
Vessel is important.
Tradeoffs.
A tween these core criteria and clot removal are no longer acceptable.
Because they are no longer necessary due to our innovation in two core areas integration of computer technology into the thrombectomy system and development of next generation catheter technology.
We will lean in aggressively to this paradigm to help our physician customers realize the differentiated benefits of using our technology to treat patients with Venus arterial coronary and neuro clot.
With that understanding let me give more details about the new products, we have coming on the interventional side of the business.
First we believe we have paradigm changing products launching over the next 18 months in both neuro and vascular. These include Thunderbolt in ischemic stroke, as we have discussed and significant innovative iterations of our lightning product portfolio.
For DVT, and PE and the new technology Lightning bolt for arterial clots, both of which combines and expands on our latest technology.
In addition to this game changing technology, we plan to launch several products that will augment and expand our unique portfolios in both neuro and vascular.
Throughout our history that combination of paradigm changing innovation.
And differentiated product expanding products has expanded our leadership positions in the markets on which we focus.
Importantly, our increasing scale and growth gives us the opportunity to attract additional leaders, who will expand our capacity grow well into the future IMAX.
Im excited to announce the addition of two new senior leaders.
<unk> has joined number as president of our interventional business and Joe Sandra has joined as senior Vice President of operations strategy.
Sandra has spent a career in the interventional space with our last two intervention jobs running structural heart and Endo venous respectively at Medtronic.
Joe has spent his career at Johnson <unk> Johnson, most recently as Vice President worldwide Engineering and technology.
In addition, we successfully transitioned to a neat new ERP system. In early April . This is an enormous amount of work and required collaboration across a broad cross section of our global team. This extraordinary work encompass two and a half years of careful planning and execution. It is paramount to our <unk>.
Creasing size and scale.
The ERP transition is one of a few notable investments we have made over the past two years to augment our supply chain and expand our manufacturing capacity and deepen our leadership team.
The gross margin improvement this quarter is a good start and we see additional productivity improvements ahead.
All of these investments are foundational to our commitment to continue to deliver strong durable growth.
Finally, I was back on the road during the first quarter visiting over 40 physicians across the country. It was great to be back in person with both existing and potential customers. We learned a lot about weather.
What they are dealing with on a daily basis, and how we can help them treat their patients more effectively within this new environment as they continue to deal with the staffing shortages nearly everyone with whom we spoke expects the staffing shortage challenge to continue for some time and this is making hospitals more.
Acutely aware of pricing and costs within their system.
We received many compliments about our pricing philosophy as a company as well as how our products are allowing them to successfully treat patients who suffer from significant clot burden.
Our pricing philosophy has been long standing and purposeful and has helped to create a sustainable and competitive advantage, both near and long term.
I'll now turn the call over to Maggie to go over our financial results for the quarter.
Thank you Adam good afternoon, everyone today, I will discuss the financial results for the first quarter of 2020 to financial results on this call for revenue and gross margin on a GAAP basis, while operating expenses and operating loss income on a non-GAAP basis.
The corresponding GAAP measures and our reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release.
For the first quarter ended March 31, 2022, our total revenues were $203 9 million, an increase of 25% reported and 21, 8% in constant currency compared to the first quarter of 2021.
Our geographic mix of sales in the quarter were 78% U S and 29, 2% International.
<unk> International reported growth of 22% and 21, 6%, respectively compared to the same period in 2021.
Moving to revenue by franchise revenue from our vascular business grew to $122 $8 million in the first quarter of 2022.
An increase of 37, 7% reported and 38, 8% in constant currency compared to the same period last year.
<unk> to the prior quarter revenue from our vascular business grew by eight 1%, which was driven by our strong performance in peripheral thrombectomy in the U S and expanded partnership in China as Adam described earlier.
Revenue from our neuro business was $81 $1 million in the first quarter of 2022, an increase of one 3% reported in two 9% in constant currency compared to the same period a year ago.
Compared to the first quarter of 2021, we saw double digit growth in U S. Neuro thrombectomy, partially offset by product mix shift from neuro to vascular in China during the quarter.
Moving to gross margin and operating expenses.
Gross margin in the first quarter was 62, 5% compared to 65, 8% in the same quarter last year, but increased sequentially from 61, 5% last quarter.
While we have seen some gross margin pressure.
Over the last 12 months due to accelerated investment in capacities and direct labor to support manufacturing transfer activities. We have made great progress with our productivity initiatives.
Gross margin improved 100 basis point from last quarter, despite inflation headwinds and higher omni crime related labor absenteeism in the beginning of the quarter.
Looking forward to the balance of this year, we expect to see gradual margin expansion to continue owing to the labor efficiency and productivity improvements.
Now onto our operating expenses in the quarter, we had amortization of acquired intangible assets of $1 $8 million in SG&A and in the prior quarter, we had onetime SG&A expenses associated with the <unk> acquisition and amortization of acquired intangible assets of $10 million as such.
The following financial metrics will represent non-GAAP financial results, which exclude the impact from these expenses.
Total operating expense for the quarter was $129 7 million or 64% of revenue compared to $97 9 million.
58% of revenue for the same quarter last year.
Search and development expenses for Q1, 2022 with $26 million compared to $18 1 million for Q1 2021.
SG&A expenses for Q1, 2020 to $109 1 million.
4% of revenue compared to $79 8 million from Q1, 2021, and $103 5 million compared to last quarter.
The increase in SG&A expense from last year reflected an increase in head count travel and other in person activities and investment in facilities and infrastructure.
Sequential increase in SG&A expenses include $5 million of seasonal first quarter spending such as our national sales meeting for both the neuro and vascular teams, which returned to in person this year as well as other variable expenditures.
While we continue to invest in new product development and commercial resources.
With completion of key facilities and infrastructure investments to enable scalability for future growth, we expect slower rate of sequential increases in operating expenses in 2022.
For the first quarter of 2022, we recorded operating loss of $2 3 million.
Our negative one 1% of revenue.
Here to an operating income of $13 $5 million for the same period last year.
We ended the first quarter with a cash cash equivalents and marketable security balance of $243 million as steady working capital level.
And now I'd like to turn the call over to Jason to discuss our guidance.
Thank you Maggie and good afternoon, everyone. We reiterate our 2022 revenue guidance range of $860 million to $875 million representing.
Representing 15% to 17% growth over 2021 revenue of $747 6 million.
After a slow start to 2022 caused in part by staffing shortages that affected hospital customers across our industry. Our team produced accelerating growth through the first quarter, namely in the United States. We also benefited from an earlier than expected expansion of our business in China pulling into Q1.
Lately over $5 million that we had originally expected to land in the second quarter.
Looking ahead, we also faced the most robust year over year comparison of the year this quarter owing to the successful launches of two major products during the second quarter, a year ago Lightning seven and <unk> 62 in sum, we expect a modest sequential increase to our second quarter revenue trends.
Leading into a year over year growth rate in the low teens in Q2, we expect our growth to accelerate in both the third and fourth quarters with Q4 growth expected to be at or slightly above the top end of our annual growth guidance range of 15% to 17% looking further out.
While we are not giving formal guidance yet for 2023, we are optimistic we could accelerate our revenue growth rate in 2023 compared to 2022 from our interventional business alone.
Just on our expectations for new products and geographic growth opportunities the potential for a material contribution from immersive healthcare is incremental to this expectation.
Finally, we expect additional gross margin expansion and operating profitability gains through the rest of 2022 and 2023, all while we continue to make meaningful investments in our business to drive long term growth I will now turn the call back to Adam for closing remarks.
Thank you, Jason Maggie and Chief I want to end, our prepared remarks today by clearly stating that.
The pin number is built to create and innovate the best technology to help patients in many different areas. We do this work in a thoughtful and disciplined manner, but with great urgency now and our 18th year Penumbra has proven we can do this work and succeed.
In any environment.
Operator, please open the call for questions.
Yes.
Okay, I would like to remind everyone in order to ask a question. Please star then the number one on your keypad, Yeah first question.
Churn comes from Larry Thanks, Allison <unk> with Wells Fargo.
Yes, hi, good afternoon, thanks for taking good.
Good afternoon, thanks for taking the questions Hi, Adam Maggie Hey, Jason.
Just one clarification question, Hey, guys. One clarification question one.
Good question.
Just Adam maybe just help us understand what happened in China, this quarter and how to think about that $5 million or is it one time stocking benefit.
And why did it go into vascular as opposed to neuro if I understood correctly, just maybe just a little clarification around that and I had one.
Follow up.
Sure. So as you know we have our deal with China as we've said many times includes.
Series of different things both.
Distribution licensing and royalties.
This was new.
The China deal in the past included only a number a small number of our <unk>.
All five of our old stroke.
Neuro products. If you will I think one of one of those was.
And access tool.
This was the first time we added.
The vascular side to it and we expect it to do this in the second quarter, and we were able to complete it earlier and do it in the first quarter. So that's why it came in.
Because of those.
Those revenue streams based on that coming in a quarter.
Just one follow up on that out of why would that have negatively impacted narrow this quarter and then let me just ask my my my second question.
You talked about significant iterations for DVT and PE.
Yes. The question is what kind of color can you provide us today what are the unmet need you are trying to address and lightning bolt obviously.
You would expect me to ask about that just kind of any color on that.
Color on that and can we see any of these new product launches in 2022 on the last call.
You said there would be some new vascular launches this year. So thanks for taking the question and then if you need me to repeat anything let me down sorry, Yes, I think no I think I got them.
Let me start.
The last question yes.
Our hope and expectation is you will see.
The two vascular products that you alluded to.
We talked about in the very end of 2022.
Certainly.
Very likely impossible that being said.
Let me walk through it.
As best I can without.
Going to the point of as you know, we have lots and lots of competitors here.
We have to be a little cognizant of sharing all the product detail, even though with these products. There is some really good patent protection.
And we're pretty excited about that.
Not at all the time.
But even with that I think you would agree and most investors would agree that there is.
Certain things we need to keep.
More confidential until the product launches, but go back to what I said earlier in the script what are how do you get clot out what are the things that are important and I went through a very clear list of things that are important.
So that you can get clot out safely without taking too much blood and without damaging the vessel.
As we move to the next phase.
We are at a point and we want to continue to expand on that where you don't have to make those tradeoffs anymore and you know because you've followed us for a long time, there's always been those tradeoffs being made between how do you get clot out and we're now at a point, where we don't think with this new technology that you will need to make any trey.
And that is really important because if we're going to get to the point, where this is being done all over it's a democratized procedure and no longer do you have to think about other means of dealing with blood clot in the body you can't be doing it with trade offs. So those are that's where we're headed.
And the reason, we laid that out that clearly as we have a lot of confidence that we are.
We're almost there now, but where we'll be there without any question.
Very soon and when I say, we're almost there now is on a comparative basis our products.
Really do that right now pretty darn well, we just want to get it to the point where it's.
Even easier and easier and and we're pretty excited about that.
The lightning bolt in the $5 million why did it Adam sorry, why did the $5 million kind of come from Neurovascular I didn't understand I can understand stocking for vascular, but I don't understand why it came from defense it sounded like it came at a neurovascular.
Yeah, Let me, let me Jason Jason can give you that specifics, yes. It didn't it didn't come at the expense of neuro.
Had been expecting solid growth in China with just.
The previous partnership with those by products, while we got was a quarter early adding vascular to that to that mix.
So overall, our China business.
A combination of multiple revenue streams, as Adam mentioned, and it will fluctuate quarter to quarter, Larry between neuro and vascular.
Overall, we expect a solid growth out of China, this year and for years to come but it didn't come at the expense of neuro. It added to the overall Chinese business, which ended up.
Being about $5 million more than we had anticipated for the first quarter.
Okay got it still under obviously 10, well under 10% of our total revenue or else, we would have broken it out.
Thanks, so much.
Yes, Thank you Larry.
Your next question comes from Robbie Marcus with Jpmorgan.
Your line is open.
Oh, great. Thanks for taking my question and congrats on a good quarter.
Thanks.
Maybe I can.
Ask about the guidance.
Maybe Maggie walk me through just the thought process here.
And on the beat.
Even if you back out the $5 million from China.
It was still a $4 million beat in the quarter reiterating guidance.
So just just walk me through the puts and takes there.
And why you decided to hold guidance.
Yes, Ravi I can take a shot at that first and then.
Others can chime in if that's okay.
Question. So if you look at sort of the first half of the year relative to where consensus was and where folks were heading into the quarter. I think we're tracking ahead of that.
That the first quarter was above our expectations, and obviously significantly above consensus expectations and.
In part because we had a stronger quarter overall and in part that $5 million that we had expected to land in the second quarter, but I think the important point is that the first half is tracking maybe a little bit better.
What we had anticipated when we originally gave that guidance and then the second piece of that to your coffee to your question about reiterating the guidance as opposed to doing something else.
Just wanted to take account at this early point in the year of the moving parts both from a macro perspective and also wanting to get just more clarity on timing of our own product launches.
We talked about on this call as well as product launches, we talked about internationally and just the pace of those so we thought it prudent at this point in the year to maintain that guidance, which we were obviously very happy about when we gave it a quarter ago.
Yeah.
Okay. So just chalk it up to conservatism early in the year and nothing nothing that we should read into beyond that.
Thank you got it.
Great and.
Maybe if I turn to the.
The neuro business.
The growth rates are impacted we don't know how much of the $5 million moved from from one to the other so.
Part a wondering if you could give us adjusted growth rates.
Excluding the China contract and B. This is a market.
Growth rates have slowed down there is a lot of competitors others are talking about increased competition and narrow so maybe you could just give us.
A quick state of the Union, what Youre seeing in terms of underlying growth geographic growth, if it's different and.
Any impacts from competitors. Thanks.
Yeah. So.
When you look at the international business, particularly this quarter.
It obviously.
Gets a little.
A little harder to look country by country and compare.
I think what you have to look at it is if you look at our.
Our U S stroke business, we still grew in the mid teens.
It was pretty good on a year over year basis, and we were pretty happy with that that that being said there.
There is no question and I think I was pretty direct in my prepared remarks to talk about the state of the stroke market, we've done an amazing job.
Not only our company, but the other industry partners as well as the physicians, particularly over the past seven years.
Growing this market from when the first the stroke trials were first announced it's extraordinary and we've gotten to about 25% of those patients being treated.
And my comments around this the next wave or the next era.
I think we need to reinvigorate. This field, we have to have the kind of paradigm shifts that brought us this far and I think thunderbolt is bringing that attention as we have started to sign up folks for the trial.
And demonstrated the product it's clear from.
Their reaction.
That this.
This is a different thing and that it will have the kind of impact that were hoping on patient care and probably.
Provide the energy that <unk>.
Needed to do the really really hard work to keep growing this market. So I think thats the state.
Of the of the universe of the field if you will.
It is a competitive market there is a ton of companies with catheters have all kinds of shapes and sizes at this point.
But that's not going to be what drives it that's not how the story ends.
And that's why we're particularly excited about it why we outlined the size and timing of the trial. So clearly as best we can.
Given that the idea is not issued.
And.
I think you can hear we are.
We're leaning in pretty heavily because we think this is.
Going to help not only.
Treat patients better but drive growth on top of the growth rate that we've seen over the past bunch of years.
Yes, Ravi this is Jason just if you had a.
A question in there about.
The vascular business ex China.
We included in our prepared remarks.
Comment too.
We anticipated that that would be a question that we grew over 30% and our vascular thrombectomy business in the United States. So hopefully that helps sort of.
Give you a sense for the.
The strength of our vascular business outside.
Excluding that Chinese piece.
Do you have the global numbers.
Are you able to share since we don't get the segment geographic breakdown.
Global numbers for what I'm, sorry, excluding that.
The mix shift in revenue.
Yes so.
You could do it very easily just if you wanted to exclude that $5 million from our vascular business.
You saw the growth in our vascular business writ large was over 40% so.
It wouldn't be too far off from that.
Great. Thanks, a lot.
Thank you Ravi.
Yeah.
Next question comes from Gregory Fraser with the umbrella.
Your line is open.
Hi, everyone. This is Brandon on for Margaret Thanks for taking my question I wanted to focus on the vascular side, Hey, guys. You've had you've had several years of really impressive growth here and as we move typically within medical devices. As you move further along in the adoption curve, maybe your growth is coming from different segments different channels or maybe.
Different functions, maybe new versus existing accounts things like that so I was curious if you guys could talk a little bit about where growth is coming from today, where that is going to come from in 2022, and contrast that a little bit to what you've seen in the earlier parts of the adoption curve and maybe what's the green space left out there for you guys because you're still pretty early within the.
Adoption of the broad market.
Yeah, It's a great question Brendan and.
In my prepared remarks.
It was very clear that we continue to see and I'd say, we saw sequential growth across all four focusing on the U S where the lightning products are available all four of those markets. So DVT.
E coronary.
And arterial all four of those we saw continued growth.
And we expect that it obviously is not going to be even quarter by quarter.
Our team out in the field is focused on individual accounts.
And in their case loads in there and what the specialty of those doctors are but all of those are seeing growth in <unk> and.
And really some serious real success with the products and it really comes back down to the point that I.
Made it in.
In the prepared remarks that that as people use these products as people talk to each other about these products. They are realizing that really for the first time, they don't have to make trade offs.
They are using appropriate sized catheters with smart technology lightning.
It deals with blood loss and also where you are in the vasculature.
Vis vis the clot.
They are having great success with it and it's proving to be.
Though the type of thing that they can see using on a regular basis and that's that's how we're going to see growth.
So we have a lot of optimism that where we are today with these products.
We will continue.
I didn't mention.
<unk> on the coronary side in this answer, but obviously, we are seeing that as well continue to succeed on the back of.
On the back of.
The <unk> study in <unk> and then the Roku study that followed up so.
All of them are pretty healthy and I think going forward, we'll see growth in all of them.
Okay. Thanks, and then internationally you guys have lightning starting the rollout there.
Do you believe your most impactful product launch that you've ever had I think I was afraid you used to use Adam in the U S. When it launched and clearly in the results. We're seeing it definitely has been one of the best products we've seen.
I guess, maybe can you talk a little bit about how big is the sales force organization you have internationally right now.
What's the opportunity that you are launching into this year. How many countries are you planning to go to and what other investments are you planning to bank internationally as you prepare for that product launch.
So the product launch in Europe is in the earliest earliest stages obviously.
We put out a release on that saying that we were doing the early.
The early cases, they've gone really well.
I didn't make the trip over to chartering cross but.
<unk>, our new President Interventional did and this is a field she knows really well met with a number of.
The key opinion leaders that were at the chartering Cross meeting in London.
And I will tell you the desire the interest in this product is really high.
The things that this product.
Both lightning seven enlightened 12 do in their respective areas.
Understood.
The only difference in Europe and this is just a reality not a caution in men's as a caution is.
A bit more of a patchwork quilt of reimbursement country by country.
We're on top of that and we will navigate that.
So that's a little different in the U S. Obviously, but.
I'm really really excited about it our size of our sales force.
We have been selling our.
Our peripheral coil over there already so we had built up.
A relatively robust salesforce, so I don't think we need to.
Add to that for a while and it's really just doing the work like we've done in the U S to get the product out there and get it used in.
And see the growth so again excited about the future with it as well.
Great. Thank you.
Thank you thanks Brandon.
Yeah.
Okay.
Okay.
Your next question comes from Jo Ann Ross.
Alright.
Thank you for taking the question and good evening to.
Two questions.
G&A was higher than I expected could you peel that apart. So I can figure out what is sort of I want to say I'm going by mail will be ongoing for the remainder of the year and what sort of onetime in nature that move that up.
Okay. Yeah. Thanks for the question Joanne.
If you look at the total SG&A SG&A expenses compared to last year, there's probably three major components.
The increases are one is just naturally a lot of the in person activities.
And marketing conference has come back I think last year, we even mentioned that that.
We got a 10% reduction on the overall SG&A expense as a result.
The second component is related to head count investment.
Ross.
And then the third component.
Is it related to some facilities and infrastructure investment so going forward, we talked about in Q1. There is some seasonality in life sales meeting and onetime expenses more seasonal in nature about $5 million and going ahead is probably going to be gradually lower <unk>.
Creases quarter over quarter.
Thanks.
Yeah, I just want to add.
Those who have followed us for a long time, we were pretty disciplined in our spending.
The control we have a lot of control here.
This is purposeful spending we we were very clear that particularly now as we sort of enter.
A slightly different environment, which we're obviously quite aware of.
We are not going to get over our skis, we know how to do that.
And that's the point, we were trying to make on it on on that side of the ledger.
Thank you my follow up question with just product related has to do with real it sounds like Youre, making progress.
On it and the word sound like more to come next year, but I'm sort of curious did I hear that correctly.
And we finally start talking a little bit about what the ramp might look like and they get a little bit more tangible than been less real.
[laughter].
We can.
What we wanted to be very clear about is to lay out the first round of of information and metrics that we're going to provide later this year I think that is the starting point for being able to start to talk about.
More specifics the business models as well as timing and the ramp I think that will be the right starting point otherwise.
It becomes a little more theoretical in so far.
Most people have waited to see the real tangible.
Excess and so those metrics that I've talked about will be the starting point of that success.
And I wanted to I wanted to sort of add a point to this when we started a number of many many years ago 18 years ago. There was.
The idea of treating stroke patients.
It was really.
Out there people the doctors didn't really all want to do the thing they're there wasn't reimbursement there wasn't anything patentable all kinds of hurdles, but we have built our.
Culture around this company, where we know how to go in and areas that no one has been.
And and carve out the at work we've done it in the peripheral side as well and we're now doing it in an immersive health care platform.
So.
It's never been done before and so.
Youre going to have to give us a little leeway to do the work necessary, what I am going to tell you and it's it's really heartening to see is we've had a lot of conversations with.
All sides of this both on on the developer side, but almost most importantly on the user side and there is a lot of interest there is a lot of knowledge. There is a lot of understanding about the benefit that immersive computing has on many many people's health care. So.
And Theres a lot of interest that we got the model right. There's a lot of acknowledgment that they need one source of platform, but they want all of the content that they can have so we feel really really good about where we're sitting right now and the next time, we really go into the details you'll start.
To hear some of that success.
And Joanne just just to add a little color to Adam's remarks, just to go back to one thing that I said in my prepared remarks.
We we do have the potential for material contribution for immersive healthcare.
And it would be incremental to that 20 that expectation next year in 2023.
Of accelerating growth, so if you're landing somewhere in our guidance range for this year, while we're seeing as we think we can accelerate next year just on our interventional business, but we did make a point to say there is potential for contribution from immersive healthcare, we'd like to get to a point as Adam mentioned with those three points to start to talk about.
That more granularly as we get towards the latter end of the year.
Thank you.
Thank you. Thank you.
Your next question comes from David Ross, Scott with Chile Securities.
Your line is open.
Hey, guys. Thank you David and the questions.
Congrats on the quarter and thanks for taking the questions.
I guess first on the vascular business.
And over the past couple of years or even prior to that compared to what the neuro conducting business you've always talked about.
Also launched in this space, so I'm not sure.
From 10 to 15 that you really outside of these larger archives competitors that have come in an attempt to kind of take share in the space, but really hasn't had much of a meaningful impact I guess on the company's market share and again. This is outside some of the larger players.
Think about some of the recent approvals in the vascular space.
How do you think about the differentiation with the product with the portfolio and then kind of.
No just opposed to I guess the experience on the Neurovascular segment really how do you think about the competitive positioning here going forward.
Yeah listen I think it's a really fair question.
And I think everyone who follows us.
No no I'm not going to use this call or something to be specific about any particular company and competitors.
I don't think that's appropriate I do think it is appropriate though to do what we've already done on this call which is to be very very clear.
About what is necessary to move to be at the forefront of removing clot and.
Putting something together real quick trying to get something done and out.
The field isn't going to move backwards.
It's going to move forward.
And the criteria that I outlined are really critical for patient care and for how this field advances and I think we know that physicians know that.
And it's it's not going to be the same as I can just come up with a catheter and aspiration source. So.
Something that scrapes the vessel wall those are no longer valid tools as.
As we move into the next more sophisticated phase so.
Again, we feel pretty darn comfortable and confident about the work we've done over the last 18 years to perfect. This.
And I think we'll be in pretty good shape to continue to show that we can.
Make the best products to take <unk>.
Yeah.
Okay that helps.
I guess my second question on Thunderbolt CE.
So you've got some insight so far as the goal here to really democratized stroke treatment, providing us broaden our lease the use of this type of therapy into a large number of <unk> jumped centers and so I guess my question should the data really hear Barrow and Thunderbolt does evolve into this type of technology that really opens the door towards broader use of thrombectomy.
In the U S.
I guess, how should we think about technology here being brought to a wider range of destiny stroke centers I mean.
Is that something that would take kind of a guideline change you would spend on cell therapy or is there some low hanging fruit, maybe more a pathway, perhaps towards primary care center or primary stroke care centers or maybe even acute stroke hospitals that.
That may not specifically have these designations for stroke, but as we know are already doing these types of procedures.
Yes, I think it's it's a really good question and one that I think.
Has a number of different aspects to it.
You know as hospitals have tried to deal with their own staffing issues theres been an increased use of locums.
And so on so there is there's a lot of of of work that is being done, but but I think it all comes down to if if you can get the clot out faster and easier and better.
By definition that will likely reignite the energy in this field.
The past couple of years of Covid has been really hard on.
And so I.
I think it's a pretty.
Fairly I guess easy thing to see.
As we.
Look at.
What's needed to sort of.
Re engage.
The doctors reengage the hospitals realize that this is something.
Like to do and want to do.
That's the place that I think Thunderbolt brings.
You know for us again to remind people.
Unlike catheter technology, which really wasn't able to be patented we have issued patents on this technology and I think that puts us in a different spot than we have been in the past so.
Again.
Pretty pretty exciting time, but look we.
We're getting up close to the time, where we're going to start treating patients, let's wait and see how that goes.
Optimistic about it but let's see how that goes and.
It will connect after we've treated our first few patients.
And David This is Jason just to add to that you ask a question on vascular you ask a question on neuro just kind of about.
The procedures and competition in and out of them towards the very end of the second question answer minutes mentioned, the technology and the innovation, which with the computer aided innovation is patentable.
It's important.
Just to remind you that that's the case with the <unk>.
Computer technology, we're bringing to bear on the vascular side as well and so that technology is not only one we can predict protect but it allows us to eliminate tradeoffs there.
On the other technologies might have as they're trying to optimize the core criteria of clot removal.
As a critical component that now exist both on the vascular and neuro side for us and is unique to penumbra.
All right very helpful. Thanks for taking the questions.
Yes. Thank you.
Okay.
Your next question comes from Ryan Zimmerman with B E.
Jim.
Hey, guys. Thanks for taking my questions.
Thank you Brian .
I'm going to squeeze three hopefully short questions in but I'm going to squeeze them in real Charlotte. So number one just on China I wanted to follow up on Larry's questions earlier.
Value based purchasing is wrapping up with recon devices, then they'll go into spine and then the last component that we at least know right now as neuro and I just wanted to see is there any impact that you're expecting because I don't think it's defined yet as to what that is encompassed within the neuro segment and so is there any impact that we need to consider.
For a value based purchasing program our impact in China and then the other two questions I'll just ask them upfront.
As you rollout into Japan in Red and you brought into Europe with some of the products what impact on margins is that expected to have in those markets relative to the rest of the business and with all of this emphasis and this is just the third question with all of this emphasis on margins that we heard in the hires that you've made.
Adam can we expect potentially some long term margin targets.
Complement the $1 billion target that you set out thanks for taking the questions guys.
Those are great questions Ryan.
We'll try to attack them, let me work backwards.
And then Jason and Meg you can jump in here.
I appreciate that the request for a margin target.
I don't know the answer that.
We haven't talked about it in internally and the idea that I would commit to that sitting in a room here with Maggie looking at me.
Not going to do that but it's a fair it's a fair request.
We'll take it under advisement.
I will tell you you know our goal has always been.
To have as high as an appropriate margin as we can we don't want to.
We again, we talked about our pricing structure, so that we price.
For long term sustainability so that.
That includes an appropriate margin, but we certainly can get back to over time.
Where we were historically before COVID-19.
So that's that Japan.
And.
<unk>.
Lightning and Thunderbolt, and so on and bread.
As we move into the computer aided.
Technology.
Those have slightly better margins and so I think we'll be fine going forward and then the final question was on China, I'm going to let Jason tackle that.
Yes.
Ryan on China, certainly we are studying in keeping ourselves abreast of the economic specifics you mentioned.
In China value based pricing et cetera.
And I'll just tell you that through the course of our our partnership work with Genesis and now this goes back multiple years as you know.
<unk>.
Discuss that both of us and we are back.
<unk> factored that into our discussions as we've developed the framework that is driving our revenue across those multiple channels that we've discussed in China with our with our partner Genesis. So certainly we are tracking it but we.
We purpose, we were purposeful in our words in our script, which.
Adam I think said, we have very good visibility into our business in China. We also said that we expect.
We had solid growth in China, we expect to grow our Chinese business overall, so hopefully those two things.
Just the commentary about us.
Keeping abreast of the the macroeconomic issues.
Answer that question and just to go back to one.
One of your questions that out or addressed in general neuro Thrombectomy thrombectomy.
Businesses are product specifically tend to carry higher margins.
Globally so.
In the United States as well as around the world. So that should give you I think a bit of an additional color on that side of it.
Thank you for answering all my questions.
Yes. Thank you no problem. Thank you Ryan.
Okay.
Your next question comes from Mike Matson with Needham and company.
Your line is open.
Yes, Thanks, Michael.
Hi.
Running a little over here, so I'll limit it to just one question.
I think youre vascular sales force in the U S. I think it's a single sales force of correct me, if that's wrong, but.
At what point would you decide maybe to split that up and have it.
Reps dedicated to some of the sub segments. There I mean do you think youre at a disadvantage at all but some of the other more focused smaller companies out there that are you focused only on the.
Venous side for example.
No I don't as you know there are three sub specialties of doctors.
The.
Ultimately all cover the four areas coronary arterial DVT and PE are not always in the same rotation, sometimes they all work together, sometimes they don't.
So I think the way we've done it allows us to cover a lot of ground.
To remind you you know it.
If were ever.
I don't think its a disadvantage I think that's actually an advantage, but the team is busy because in addition to the thrombectomy business, we have the coil business.
And.
And so they cover a lot of ground, we do have.
In addition to our sales team clinical specialists that are incredibly valuable and a huge Lee critical part of our team that works directly with them.
The sales reps in various territories.
So I think we're in pretty good shape and to be honest with you.
Hi.
If you'll indulge me I want to shout out to what I think is the best vascular team ever put together.
I couldnt be prouder of the work they've done and the dedication and integrity in which they sell it's kind of extraordinary so.
I think we're in pretty good shape.
Okay got it thank you.
Thanks, Mike.
Yeah.
Your next question comes from Peter <unk> with Deutsche Bank.
Your line is open.
Hey, good morning, guys.
Okay.
Peter.
So two quick product questions can you give us color on the coronary volumes in the quarter or post cheetah in terms of the penetration of new centers and.
New doctors and how the reorder rates are tracking for those and then on there on the neuro side any color on U S market share today with Red versus where you were in pre recall and how did the growth rates look at the end of the quarter versus the beginning of the quarter when you add to it.
The January Covid comps.
Yeah.
I'll start with the last question first and then we can work backwards.
<unk>.
Like everyone else, obviously March was.
A much stronger month in January that would be typical in any quarter.
I think everyone would agree.
But it was more so this quarter than not because obviously January .
Ah.
The at least the first part of January was particularly noticeable.
Everyone.
Being absent and staffing shortages. So I think we're in a pretty good track.
As we move through the quarter and we were very pleased to see the the way we finished obviously.
As for breaking out the each specific thing we havent done that.
It hasnt been.
Something we've done.
We may at some point do that in the future, but I doubt it as we think about the business and we actually talk about it to our to the sales reps. We're doing all of this at the same time it and that is really important we don't put buckets out there and targets for each thing.
Our goal is to continue across all of the patients that can benefit from our products to habit and it really defeats the purpose in the way we run the business and talk to our customers to be talking about it in those kind of specific things. So we're not going to do that for now but I. Appreciate the question very much.
Yes, Peter just to add a little bit of color to the other question.
Yes.
In terms of market share.
A few general observations that are certainly our market share in U S stroke thrombectomy has improved markedly since the jet seven Xtra flex recall early last year.
I think the broader point.
We're wanting to make are twofold one.
As we start to Thunderbolt trial.
Move through that and we gave some specific details about not only that trial, but also when we expect approval and obviously, what we think will happen after that approval to our neuro business. We did talk about expectations for continued gains through this year as we're launching other.
<unk> products and.
And I guess, the second point that I'd like.
To make is that.
I pointed out I made earlier, which is to say that.
The stroke field Penumbra included and others have brought the stroke feel to this far but we're just treating one out of four patients.
<unk> helped that could use help from these systems and I think the energy around this field will benefit significantly with technology that does it does it does a better job and that is allowing this.
This procedure to be done more ubiquitously and Thunderbolt is that paradigm. So that's what we're working forward in the meantime, we think we'll do fine.
With our business with the Red Catheters, and then you I think you also asked about coronary coronary was strong in the quarter. We had strong growth in all four segments of our vascular thrombectomy business, we're not going to break it out separately, but it was strong.
Great. Thanks, so much.
Thank you.
There are no further questions at this time Jee Hamlyn Harris.
Back over to you.
Thank you operator on behalf of our management team. Thank you all again for joining us today and for your interest in Penumbra, we look forward to updating you on our second quarter call.
Thank you. This concludes today's conference call you may now disconnect.
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