Q3 2022 Cardiovascular Systems Inc Earnings Call
Earlier. This morning, we issued a press release announcing third quarter results you may find a copy of this release on the Investor Relations section of our corporate website.
Here you May also find an earnings supplement that includes additional details on our performance and outlook. During today's call. We will make forward looking statements. These forward looking statements are covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 and include statements regarding Csi's future financial and operating results or other statements that are not historical facts.
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Actual results could differ materially from those stated or implied by our forward looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q.
In particular, the COVID-19 pandemic has created risks and uncertainties for our business results of operations financial condition and prospects, which we will discuss on this call.
CSI disclaims any duty to update or revise our forward looking statements as a result of new information future events developments or otherwise we will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's press release contains a reconciliation table to GAAP results I will now turn the call over to Scott Ward.
Thank you Jack good morning, everyone and thank you for joining the call.
As we get started I want to tell you how proud I am of our team here at CSI.
During Q3, we persevered through omicron in our field sales and clinical support teams continued to provide outstanding support for our customers and patients under difficult conditions.
In addition, our manufacturing and supply chain teams continue to deliver outstanding performance and we are largely unaffected by global supply chain challenges.
Today, we reported Q3 results that were in line with our expectations. Despite the.
Impacted omicron had on hospital capacity in procedure volumes in January and into February . Our Q3 sales were encouraging as we exited March with some momentum in the U S and our international sales remained strong throughout the quarter.
For the quarter worldwide revenue of $56 2 million represented a four 9% sequential decrease compared to Q2 and 11, 1% versus the prior year.
As we have noted previously the duration and severity of the Delta in Omicron outbreaks and the resulting decline in outpatient visits throughout capacity year have had an enduring impact on procedure volumes.
Although we only have limited visibility into the patient referral channel. We believe there is a small COVID-19 related backlog, but the capacity of hospitals and obl's to manage the inflow has been negatively impacted by staffing shortages and turnover.
We are seeing staffing slowly improve and we expect the backlog of cases to gradually flow through our accounts during the remainder of the calendar year.
We are encouraged that the key operating statistics in our business continued to demonstrate strong demand for our products.
Performance performance metrics like new customers trained and new contracts exceeded our expectations in the quarter.
In addition, our support devices continue to gain traction and drive incremental revenue. We are excited about the early demand for our score flex NCS, scoring balloon and we expect this device to emerge as an important growth driver in our coronary business in the quarters ahead.
Outside the U S. We continue to deliver robust growth as we expand our geographic footprint and open new accounts in areas like Japan and Europe .
This momentum is expected to continue as the adoption of coronary and peripheral atherectomy continues to gain traction in international markets.
In the third quarter, we had several notable achievements that support our strategy to enter new growth markets and transform CSI into a more formidable multi product multinational company.
We announced new initiatives to develop peripheral and coronary interventions lithotripsy balloons as well as a full line of aspiration and mechanical thrombectomy devices for the treatment of peripheral vascular disease and pulmonary embolism.
We also completed the first in human clinical experience of our new <unk> device for high risk PCI and the peripheral everolimus drug coated balloon.
These are just a few of the developments that give us a sense of optimism and excitement about the future. We believe that our new products will significantly enhance patient care and the growth potential for this portfolio is largely underappreciated.
As our product pipeline has rapidly progressed, we are now preparing to initiate several new clinical research programs.
To prepare for this increased clinical activity, we recently announced that Dr. Jeff Chambers has joined CSI as our new Chief Medical Officer.
Jeff is a practicing interventional cardiologist with extensive experience in patient care as well as the design and conduct of clinical research programs in.
In addition to medical affairs, and patient safety, Jeff will lead our clinical research organization and he will infused medical expertise into all areas of our business.
In a moment Rhonda will provide additional information regarding our commercial progress, but now Jeff points will provide you with additional details regarding our third quarter financial results Jeff.
Thank you Scott good morning, everyone.
Omicron had a large but transient impact on our performance in Q3, causing a significant reduction in procedures in January and February .
However in March we began to experience an improvement in sales.
<unk> results for Q3 were as follows.
Worldwide coronary revenue decreased nearly 7% sequentially to $18 9 million.
In the U S coronary revenue decreased 12%, 12% sequentially from Q2.
Outside the U S.
Coronary revenue increased 17% sequentially to $4 2 million as a result of continued strength in Japan and Europe .
Worldwide peripheral revenue.
Worldwide peripheral revenue decreased four 4% sequentially to $37 4 million.
Turning to expenses gross margin was 74% for the quarter.
Gross margins were impacted primarily by lower volumes and to a lesser extent revenue mix.
Yes.
We are positioned well on the supply of materials and components as Scott mentioned, we have no material supply chain issues at this time and we currently expect that any inflationary increases in material and labor costs will be offset by our continued focus on cost reduction programs.
Operating expenses totaled $51 1 million, which was about $3 $8 million lower than last year.
We continue to invest strategically in research and development.
In Q3, we invested $9 1 million or 16% of revenue and product development and clinical research.
Our balance sheet remains incredibly strong and gives us tremendous flexibility to execute our long term growth strategy.
We ended the quarter with $172 million in cash and marketable securities.
And no long term borrowings.
Turning to our outlook, assuming no new COVID-19 headwinds and a gradual improvement in U S Hospital staffing shortages, we are projecting Q4 sales to be between $61 million and $66 million, which represents sequential growth of 9% to 18% from the third quarter.
As a result, our guidance for the fiscal year ending June 32022 is updated as follows.
Revenues of 235 million to $240 million.
Margins of approximately 73%.
Net loss in the range of 15% to 16% of revenues.
And an adjusted EBITDA loss in a range of 4% to 5% of revenues.
While we anticipate the impact from Covid on procedure volumes will decline, we are continuing to provide a wider guidance range to account for the uncertainty related to the impact of staffing shortages on hospital capacity.
I will now turn the call over to Rhonda, who will provide our commercial update.
Thank you, Jeff and good morning, everyone Covid and related staffing shortages continue to be the primary factors influencing our business in Q3.
We are encouraged that the reduction in COVID-19 infection, and lower hospitalization rates and marks have now translated into improving procedure volume.
However, the labor shortage and turnover in the health care workforce continues to constrain our procedure volume and.
In support of our hospital and OBL, we are deploying resources to accelerate the training of new technical and nursing employees and in Q3. We trained 116 support staff. We are encouraged by the improving environment and we do expect to see continuous improvement in staffing over the course of calendar year 2022.
Improving COVID-19 environment, including including increased access to Cath labs, and then somewhat offset by the impact of competitive pressures and reimbursement reductions in the OBL setting.
In coronary we are seeing a modest improvement in coronary procedure volumes and we believe the competitive dynamics in this market have begun to stabilize.
We are now recovering OAS cases, as our customers value dual mode of action using orbital atherectomy.
Utility of OAS achieved favorable outcomes with all calcium morphologies heavy stenosis long in diffuse lesions and multi vessel disease.
And the demand for OAS training remains high as evidenced by our continued growth in our trained physician metrics in Q3 alone over 200 physicians Fellows and staff are trained and certified.
Our team.
In peripheral IV al has received reimbursement and ATK in the hospital setting, but it doesn't appear to have had an impact on our business in Q3.
Hospital volumes were flat with Q2, and we even had small increase in asps.
Finally, our mix of ATK PTK procedures was consistent with previous quarters confirming stability in case mix.
However, the reduction to the 2022 physician fee schedule had a small impact on our Q3 OBL volumes, we have observed sporadic disruption and some obl's several clinics, reducing their patient volumes and a few exiting the market.
That will be all procedure volumes are now stabilizing we do expect this segment of the market to remain under pressure near term.
In anticipation of these trends CSI has developed and launched the customized outpatient resources program to help our OBL customers mitigate reimbursement challenges.
<unk> enables CSI to support high volume sites that will continue treating complex patients where our technology is okay.
In total we forecast sequential growth in our domestic OE and Oes business in Q4.
Turning to <unk>, we continue to make progress in our strategy to drive incremental revenue growth with coronary and peripheral angioplasty balloons guide wires and support catheter.
During Q3, we generated won't generate $1 $3 million in revenue from the sale of peripheral support products and 11% sequential increase compared to Q2, representing $95 of incremental revenue.
<unk> OAS device Salt, which is ahead of our plan.
We're also pleased with the continued growth in coronary ISR.
In total sales of coronary support products were $2 9 million in the quarter.
We continue to experience strong demand for the Sapphire balloons and the teleport micro catheter. In addition, we are excited about the recent launch of the score flex and C, scoring balloon in the U S and I am pleased to share that the product is being very well received.
Outside the U S. Our business grew 19% to $4 4 million like the U S. We continue to serve strong demand for physician training and certification and our international markets and we launched coronary OAS in two more countries during Q3.
Shifting to Q4, we believe we are poised to resume sequential growth we are rapidly addressing the need for additional staff and technician training and we are excited to get back into Cath labs and support cases.
Our training pipeline has expanded significantly we expect that new accounts and new customers that we have trained will now have access to a product without complications from COVID-19.
New products like square Flex will add to our growth and we will continue to leverage the full launch of our peripheral balloons wires and catheters. We continue to believe that the specialty support products experienced strong adoption going forward. We expect our strong revenue growth to continue in international and we plan to launch OIS in several new countries, bringing us up to.
30 countries by our fiscal year end, we may on track to deliver approximately $16 million in international revenue in fiscal 2022.
I'll now turn the call back over to Scott.
Thank you Rhonda.
As we close out fiscal 'twenty two we believe the combination of procedure recovery in our base business combined with growing <unk> sales and international expansion will allow us to get back to sequential revenue growth.
Looking ahead. Many of these same drivers will contribute to our expected growth in fiscal 'twenty. Three we are anticipating growth from continued COVID-19 recovery in our core atherectomy business increased adoption of our support devices new.
<unk>, new product introductions and international expansion.
With respect to <unk>, we expect to benefit from the products, we recently launched including the peripheral balloons.
Balloons resilient wires and Viper Cross catheters, as we drive higher revenue per procedure.
In addition, the adoption of the score flex balloon will be an important growth driver in coronary.
Finally, we will launch the two point all Max for mixed plaque in the ATK market and we expect to launch our CTO catheter portfolio late in fiscal 'twenty three.
Our international franchise continues to gain traction we are on pace to open accounts in 15, new countries and trained over 300 physicians in fiscal 'twenty two.
We will enter fiscal 'twenty, three with sales and approximately 30 countries and over 1000 physicians trained to use OAS and international markets.
Beyond fiscal 'twenty, three we're making great progress to broaden and expand our value drivers.
We remain on track for commercial launches of our IV <unk> in thrombectomy products in fiscal 'twenty, four and 'twenty five as.
As well as the Everolimus D CBS and the propel <unk> launching in fiscal 2006, and 27% and.
In total these new products will expand our addressable markets by tenfold.
To $18 billion over the next five years.
Clearly, we have a tremendous number of initiatives in play both near term and long term to ensure that our investor community fully appreciates our pipeline I am pleased to announce that we will host a product fair and analyst briefing in early August at our headquarters here in Minnesota.
Details for the event will be available soon and we hope you will join us in person or virtually.
In closing I would like to thank our CSI employees for their continued resilience as we continue to deliver exceptional support to our customers and our patients.
I'd also like to thank all of you for your continued interest in CSI and we will now take your questions. Austin. If you would please repeat the instructions. Thank you.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you would like to remove that question. Please press star followed by two <unk>.
Again to ask a question press star one.
As a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question we.
We will pause here briefly ask questions the restroom.
Our first question is from Danielle <unk> from <unk> Securities.
Your line is open.
Hey, good morning, everyone. Thanks, so much for taking the question.
Scott and team I appreciate that color.
<unk> continued to have an impact in the quarter. You also there are a lot of headwinds going on but I guess, specifically in the coronary on the competitive side of thing.
Last quarter, you guys methods that Trialing was coming to an end from a competitive perspective.
That.
Does that not continue into the quarter anything you can comment on the competitive landscape in coronary would be helpful.
Danielle Thanks for the question, we do think that.
The competitive dynamics in our coronary market segment have stabilized.
<unk> Trialing has obviously drawn to a close we have now annualized.
And.
We are beginning to get our cases back and were seeing a rebound in our coronary business. So.
At this point, we are encouraged by the results we're seeing in coronary.
Okay got it and then.
I think some other companies that have reported so far this quarter and granted they are more diversified company. So maybe that has something to do with it but it feels like the omicron impact was limited to early in the quarter. The rebound happen in the back half of the quarter and a lot of results are coming in better than expected I'm just curious Scott.
Is there something different about CSI business that makes it more susceptible or makes that not the case here just trying to get a sense of exactly how OMA crime impacted in the quarter with it more prolonged was it just the rebound didn't happen as quickly.
There.
Yes, I think because in particular in peripheral the acuity of our cases is deemed to be lower by the hospital administrators and chief medical officers and many of these hospitals. So the trough that we experienced in January and February was perhaps deeper.
And our recovery really began probably about early to mid March So we did not have.
We didn't we didn't have that month of February and we didn't have an extended amount of time for that recovery I will say that we exited the month of March with real momentum, but as we've said has continued so we're encouraged by that.
And I think as.
Hospitals to get back to.
More normal operation as we see these staffing shortages ameliorate and some.
Some of these labor issues get back to normal we are.
We're seeing cath labs, returning to more normal.
Case loads and as a result, they are beginning to perform the cases for some of these lower acuity procedures like qualification and peripheral arterial disease.
And that we think will.
Really enable a continued market environment for our company.
Okay and thank you for that one more quick one on the peripheral and the impact to the OBL are you seeing those procedures shift to the hospital.
Or are they just not getting done like what type of patients presumably are still there I mean, there's a lot of moving parts because of course on the crime, but the patients still need to get treated to what's happening to them. If they are not getting treated that the OBL. Thanks. So much.
I think that the patients will ultimately return to the OBL for treatment.
We look at our Q3 results we did see.
<unk> some shift to the hospital.
But we don't think that that's really sustainable.
The size of this epidemic and peripheral arterial disease.
Is too great to be simply managed by the hospital environment and it will ultimately require.
Continued.
Adoption in the office based labs. So we expect to see office based labs continue to be an important site of care.
Yes.
But as Ron pointed out there we have seen some turbulence in that segment due to these reimbursement changes, we think that that turbulence will settle down and in fact, we are beginning to see that stabilize so we think that that will happen over the course of our Q4, which is the next couple of months and then I think we will see.
<unk>.
<unk> get back to a more normal.
Pace.
Thank you.
Thanks.
Our next question is from David Saxon of Needham <unk> co.
David Your line is open.
Yes, good morning, and thanks for taking the questions.
I had a question.
On on something you said in the prepared remarks, Scott I think you said there was a small COVID-19 related backlog just wondering if you could help us kind of think about the size of that.
The mix is it more exposed to peripheral or coronary.
Yes, thank you for that question.
I think as we look at that.
What we consider to be a small backlog that really is in our peripheral segment of our business and generally that is in that quarter can patient population that I referred to in our in the previous question.
That is also the segment of our business that is most affected by staffing shortages and turnover. So as cath labs begin to return to a more normal pace, we do expect them to begin addressing some of this backlog.
But we don't expect that to be a rapid recovery, rather we expect that that backlog will flow through our centers probably over the remainder of this calendar year.
So it will be a more gradual and steady recovery and somewhat constrained by by the staffing shortages that are out there and these are very real.
<unk>.
We're seeing this really across the country.
Hopefully, we'll see that continue to improve as some.
Some of this temporary labor the use of temporary labor really declines.
And like I said hospitals get back to more standard operating procedures.
Okay. That's helpful. And then just looking into fiscal 'twenty three.
I mean consensus is kind of a wide range, but it hasnt growing kind of low teens off the midpoint of fiscal 'twenty two.
The guidance range at least so just kind of wanted to hear your your initial reaction to where consensus sits.
<unk>.
It sounds like some of these headwinds are easing, but theres still around so.
Should we think about fiscal 'twenty three growing off of.
Either fiscal 'twenty, two or going back to fiscal 'twenty one.
Yeah. Thanks, I think we're excited about fiscal 'twenty three.
Clearly as you indicated some of the environmental factors are beginning to ease as we look at Covid recovery.
And staffing easing our near term product pipeline and the products that we've launched.
We will contribute to our growth we think.
Our isd pipeline with with.
Jade and Zillions and Viper Cross launched in peripheral.
<unk> will help us really drive our growth next year, the score flex and see catheter is going to be a very important product for us.
And we do expect to launch our CTO portfolio as well as our two point on Max orbital atherectomy system, which will be used in the above the knee segment of the peripheral market.
That combined with the coronary rebound and our continued international growth.
Means that we believe we can achieve strong growth probably consistent with where the consensus is that and I think in that low double digit range should be achievable for us.
Okay. That's super helpful. And then just last question for me.
Over the last couple of quarters, you've announced.
Key products that are in development as well as partnerships. So just wanted to see what you guys get most excited excited about.
And maybe on the front running the product. There later this year, but would love to hear your thoughts on that.
Yes, thanks for that I think it's hard it is.
Kind of like speaking about your children you know obviously, it's hard to pick your favorite, but I would say as we look at.
The near future, we're probably most excited about our thrombectomy pipeline and in particular the use of.
Our thrombectomy devices for peripheral.
Vascular indications, we intend to launch.
R R.
Caught retriever as well as our aspiration device about a year from now maybe a little bit longer than that.
And that has the potential to really drive significant growth as we start looking at FY 'twenty four so we think we have a.
<unk> product pipeline, there with our Malibu aspiration device in our Laguna Retriever and we're excited to have the chance to launch that through our peripheral channel, where we have about 150 sales reps that focus on the sale of products to peripheral customers. So we already have a lot of commercial strength in that segment, we're going to bring out.
<unk>, two very competitive and exciting products and I think that has.
Probably great potential for us in the near term the rest of our pipeline as we look at our <unk>, our drug coated balloons and our mechanical circulatory support devices I think have tremendous potential to really improve the quality of care and also to really drive our growth over time, so that is a pretty important.
<unk> of pipeline I think that's unrivaled really amongst our competition and.
Well positioned CSI for great success going forward in the future.
Great. Thanks, so much.
Our next question is from Matthew Blackman from Stifel. Matthew Your line is open.
Good morning, everybody. Thanks for taking my question.
Maybe just start Scott just a bigger picture question and Jeff certainly chime in as well.
Curious, how youre thinking about the balance sheet today, obviously in a great position, but just whether your appetite for for larger revenue contributing M&A or buybacks has increased just curious what your thoughts on strategically with the balance sheet from here and just have a couple of quick follow ups.
Thanks for that question, Matt I think we feel very good about our balance sheet about our position. We think we have a very very healthy company with a strong cash position no.
Long term debt and no borrowings.
We also we also have a <unk>.
Access to an extensive line of credit we don't anticipate needing it we do think that based on the commitments that we've made thus far looking at this pipeline and the investments that we've made we have the cash we need to execute this.
<unk> plan and two <unk>.
Basically extend the company through the course of the next year or two as we as we drive towards the launch of these new products.
Jeff do you have anything you want to add no nothing to add I think Scott covered that well.
Alright, I appreciate that and then Rhonda.
Maybe a couple of questions for you on the.
The Isd the peripheral Isd portfolio, I think and I apologize if you updated this quarter, but I think in prior quarters. You had said something like it had been rolled out to 25% of your accounts just any update on where that metric is now and what the gating factors are to ramp that higher and then the follow on there is just as we think about.
Isd portfolio peripheral specifically is there any way to tease out how much of the growth. We're seeing is expanding account access so more customers versus increasing utilization at existing accounts is it skewed one way or the other or is it balanced just any color on that would be helpful. Thanks.
Thanks, Matt for the question, Yes, we think we've continued to roll out our PD Isps and really kind of the big most recent focus has been the.
Yes, Jay balloons.
Been received exceptionally well.
The big focus that we've been placing is really on access to new contracts in the United States, which has opened up just a considerable number of new accounts that we can access both in terms of OAS existing accounts and accounts, where OAS may not exist today, and so that's really been where our focus is and.
We're really pleased with the rollout the results and the customer reception.
Alright. Thank you very much that's all I had.
Our next question is from Travis Steed of bank.
Bank of America Securities.
Travis Your line is open.
Hi, good morning.
A lot of as I mentioned on the hospital staffing shortages and it seems like that's probably the biggest impact on your business right now.
Just get a sense for it.
If it wasn't for these hospital staffing shortages could you have done 1 million more this quarter 5 million I don't know if you have a general sense of how much the lapping impact of the business to some degree.
Any way to quantify the IV all trailing impact in the quarter as well would love to hear those numbers.
Thank you Travis I think for sure Covid and the staffing shortages.
Had the greatest impact on our business in Q3.
Difficult for us at this point to really put a number on it but I think as is.
We have said and Rhonda indicated in the prepared remarks, we did see an impact from Covid. We did see some impact from competition and also some from OBL reimbursement as I said COVID-19 was far and away the largest impacter.
The competitive impact.
Some continuing competitive impact in coronary although as we're annualizing that now as we said we think that's stabilizing and we will we will see continuous improvement in our coronary business over the course of the coming year.
The the OBL reimbursement did have some impact as we even indicated in Q2, we expected that when we would see this reduction in the physician fee schedule that that would cause some turbulence in the market and in fact that has occurred.
Once again, we think that that market will shake out we may see.
For a short period of time, a lower amount of of utilization, we may see some obl's at exit the market, but overall.
Tell you our OBL customers, while they're not happy.
They are driving efficiencies are increasing their volume and I think we will see them rebound and come back fairly strongly.
So.
For now I think that it would probably be those I would identify those three categories, but I would also say that as we look to the Q4 and the remainder of this calendar year.
We do think that this macro environment.
Is going to continue to improve and we believe that our competitive position will also improve and particular in coronary where we are seeing that we are beginning to regain our cases, where there's a high degree of intimacy calcium where there's heavy stenosis, where theres multi vessel disease. These.
Are there circumstances, where we are seeing coronary cath labs coming back in and returning to their more normal utilization of orbital atherectomy for the care of their patients. So overall I think we're optimistic about the future and.
Most of these headwinds at this point, we think are beginning to abate.
No.
On the OBL reimbursement I think you used the word turbulence quite a bit on that.
I guess, it's on the ground is that you mentioned some some are exiting the market like as any pricing impact just kind of curious just to get a little more color on exactly what's happening after the reimbursement changes I don't think you expected that.
And talk to you as much you know three months ago.
Making sure we have the confidence that some of that comes back later into next year.
Well Travis I don't want to overemphasize the impact of this it's not it really hasnt impacted our business to that degree. It is it is a headwind that we've seen and certainly we did experience it but we did indicate.
In Q2 that we anticipated.
To see some impacts from this OBL change in our business.
I really don't think that this is.
Going to lead to a fundamental change in.
In where patients are treated I think we'll continue to see growth in our OBL segment and I think as we work through this now.
In particular during the course of the coming quarter.
Yes.
<unk> will continue to to stay.
Stabilize out and get back to more normal growth.
Alright, great that's fair thanks.
Thanks for taking the question.
Thank you Travis.
Our next question is from Jason Bedford of Raymond James.
Your line is open.
Good morning, just a few questions.
Mentioned that you exited March with momentum I'm, just wondering did you see growth.
It was good business growing year over year, because I'm, just trying to reconcile the momentum comment with the implied fourth quarter guidance, which.
The comp is tough, but the fourth quarter is still down year over year. So if you could just comment maybe a little bit more detail on the strength in March.
Thank you Jason the.
The reference there is really to the improvement in our average daily sales.
In March versus what we had seen in January and February .
So we're not we're not comparing year over year there.
I would say that we experienced as I said earlier, a rather pronounced trough in our business that we really saw in January .
And into February but the recovery from that was fairly quick and we did have like I said fairly strong momentum as we exited March.
Okay.
And just you mentioned on the peripheral side.
Reimbursement and it didn't have an impact this quarter are you expecting a greater impact either in the fourth quarter or into 'twenty three.
We won't have data on that until.
Next quarter as we've said before market share data is always lags by Jim.
About just a little bit over a quarter. So we will be able to give more visibility to.
How that market share is shaking out, but we don't really expect to see a large impact there in any case I mean recall that.
The.
Our mix is right now roughly.
37% and 40% of our revenue comes from the above the knee segment about half of that comes from the OBL. So when you really look at the amount of our business that is exposed to risk related to let's say the ATK IPL segment, it's less than 20%.
These products have been launched since 2016.
So they've been out there for a while we don't really anticipate trialing or things like that that we might have seen elsewhere, because the products had been trialled.
So at this stage, we will continue to monitor it we think that we will see some increased utilization in the hospitals, but it may be in hospitals that are outside the traditional atherectomy market. It may be in the care of patients that are that are less complex cases.
Let's wait and we'll see what happens when we actually see the real market share data and about a quarter.
Okay.
Last one for me on the P&L.
Net loss was a bit better than we expected.
A lot of pipeline initiatives globalizing the business when you look at spending levels in fiscal 'twenty three.
Anything you'd point out specifically on the R&D line.
Jason I would just comment that I would expect R&D to continue to kind of be 15% to 16% of revenues as we move forward.
That will be true for FY <unk>.
'twenty, two and FY 'twenty three.
Okay. Thank you.
Thanks.
Our next question is from Brandon <unk> from William Blair Brandon Your line is open.
Hi, everyone. Thanks for taking the question I wanted to circle back on kind of the OBL environment. I know you guys talked a little bit about rolling a new support program out to kind of help with deal with some of those reimbursement headwinds.
Curious if you guys could talk about that a little bit it seems like it's a little bit of a differentiated factor may be for you guys. What can you do to help these accounts get through these headwinds and then to what extent does that help you kind of just kind of remain within those accounts and maybe keep growing volume there.
Yes, I'll take that question. Thank you Brandon.
Yes, it's called our core program and it is differentiated and it's something that.
CSI can uniquely do.
Really given our laser focus in.
In the peripheral market and in particular on the OBL and what we're finding is that they really value the expertise that our clinical and sales team can bring in terms of increasing procedure efficiency.
We obviously have talked about our volume based contracting before and that's becoming increasingly important.
We're offering educational resources again to help with staffing and turnover.
We're offering inventory management services and so it's really just.
A collection of programs that we tailor to the needs of the specific OBL that we're dealing with and this is going to be very focused on a segment of large obl's treat complex patient in particular, our customers and they treat our patients and so that's really what it is we're going to continue to grow and expand.
And further define that program as we learn more about how this market is evolving.
Got it. Thank you and then on the thrombectomy devices within peripheral those that are in the pipeline coming out maybe in the next 12 to 18 months can you maybe were too early but if not can you talk a little bit about where you think you can add some value into what's out there already so when you come into.
The market, where do you what would be the competitive positioning of these products given that.
Meaningful opportunity and you guys already have a strong presence there. So what can you offer from a product side to kind of drive some adoption.
Yes, thank you for that question.
Or we're developing our thrombectomy products in partnership with <unk> medical and the product that we're developing is really uses a low profile delivery system.
<unk>.
<unk>.
Quite retrievers as novel in the sense that it uses a laser cut design has a very large cell size in comparison to some of the other products out there and really provides more enhanced radial force. So this really enables the retriever to really grab clot retain it and remove it.
So those those features we think will present some competitive advantage in the market.
We also of course have very strong commercial strength in the peripheral segment that's already present.
And.
In many cases, our sales reps are already in some of these cases and are also certainly in these hospitals and the care settings, where these patients are being treated so we're very well positioned to move rapidly.
Into this market and to really take advantage of the products that we're developing and bringing to market. So we're we are excited about the opportunity and thrombectomy.
Great and then if I could sneak one last modeling question and just any color you can give us in coronary and peripheral diamondback gave season quarter. Thanks for taking the questions.
Thank you the question is regarding <unk>.
Asps in the quarter, Oh, Yes, asps were actually very.
Very steady both in peripheral and coronary I would say the we saw some ASP erosion.
In the OBL space, but that was pretty consistent with what we've seen historically and again very stable asps in both coronary and peripheral hospital.
Our final question is from Suraj Kalia from Oppenheimer.
<unk> Your line is open.
Good morning, everyone.
Hey, Scott so the softness in U S coronary or for that matter even peripherals.
Whats more geographically.
Concentrated or for that matter account concentrated.
Suraj.
Sorry, but your.
Quite muted I think that you had asked the question.
For coronary was the impact on the business concentrated geographically.
Yes, what is it more related to certain again I hope you can hear me all right. What's it more account specific softness or was it more geographic related softness.
No I think it was actually that.
Impacting our coronary business was really in January and early February .
<unk> was really a completely impacted by omicron.
Our coronary business rebounded as I've indicated along with the rest of the business, but actually did quite well in March and we were continuing to see strength in that coronary segments. So.
I don't think that it had any there were any unique characteristics in terms of our centers or our.
Geographic areas I think it was it was more generally the impact from omicron that influenced the performance of our business in Q3.
Got it and Scott one final from my side, Scott You mentioned multiple times on the call in terms of the environment stabilizing in terms of competitive trialing.
If I could ask a little differently, Scott and pushing on this how do you reconcile the implied outlook for.
For example for IBM with your comments about stabilizing environment for four.
Orbital atherectomy any additional color I guess, what I'm trying to understand is is it just a function of the breath of competitive IV all usage.
Yours is more related to a concentrated relatively.
Concentrated use any industrial color would be greatly appreciated. Thank you for taking my questions.
Yes. Thank you Suraj, so I think what we're what we're really seeing in.
Are the coronary segment of our business and the competitive dynamic there is that <unk>.
Physicians in these cath labs as they have completed their trialing of the device are really beginning to return to the use of orbital atherectomy.
For the cases that they encounter where they're challenged with a high degree of integral calcium.
There's heavy stenosis.
Where theres nodular lesions, if theyre performing imaging.
Some of these diffuse and long lesions and also where they are encountering multi vessel disease and I think a lot of that is just due to the fact that the physicians really value the performance of our device the versatility of our device they know that when they use our device they'll be able to.
Treat these patients quickly efficiently and effectively.
As our sales reps are able to get back into Cath labs now.
Can work to address some of the staffing shortages train and educate the staff deal with the turnover that was there.
And really enable these sites just to get back to let's say theyre more normal standard procedures and caring for these patients.
And I think that's really what we're seeing is it's a combination of.
The.
<unk> of the impact of Covid as.
As well as let's say the return to more normal procedures in the Cath lab.
Two things combined with our presence is what's enabling us to really get that coronary business back on track and we feel good about where it's at our team is doing a great job.
And supporting our customers and we expect to see continued progress in coronary now going forward.
Thank you.
Okay. Thank you everyone.
Okay. Thanks.
Thanks, Austin, Thank you everyone and thanks for joining today's call.
We do look forward to updating many of you at the upcoming Bank of America Conference then.
Also updating you on our call again next quarter. So thanks very much everyone.
That concludes the cardiovascular systems, Inc. Fiscal 2022 third quarter earnings call. Thank you for your participation you may now disconnect your line.