Q1 2022 Inari Medical Inc Earnings Call
Good day, and thank you Cristina by welcome to the <unk> Medical first quarter 2022 earnings call.
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I'd now like to hand, the conference over to your speaker today, Caroline corner with Investor Relations. Please go ahead.
Thank you operator welcome to <unk> first quarter 2022 earnings call. Joining me on today's call are Bill Hoffmann, President and Chief Executive Officer, Michel Chief Financial Officer.
This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.
Statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding the markets in which NRT operates trends and expectations for products and technology trends and demands Bernard products and are as expected financial performance expenses and position in the market.
Fact of COVID-19 on <unk> operations and in our customers' operations. These statements are neither promises no guarantees and involve known and unknown risks and uncertainties that could cause actual results performance or achievements to differ materially from any results performance or achievements expressed or implied by the forward looking statements.
Please review and <unk>, most recent filings with SEC, particularly the risk factors described in <unk> annual report on Form 10-K for the year ended December 31, 2021 for additional information.
Any forward looking statements provided during this call, including projections for future performance are based on management's expectations as of today.
Already undertakes no obligation to update these statements except as required by applicable law.
In our press release, the first quarter of 2020 results is available on <unk> website, www dot and already medical Dot com under the investors section and includes additional details about our financial results.
<unk> website also with the latest SEC filings, which you're encouraged to review.
A recording of today's call will be available on our website by five PM Pacific time today.
Now I would like to turn the call over to Bill for his comments on first quarter 2020 to business highlights.
Thank you Caroline and thank you everyone for joining us today, our first quarter was again productive and successful we treated a record number of patients and executed crisply across all of our growth drivers.
And you May have seen also that we successfully raised additional capital to support our increasingly aggressive mission to address unmet patient needs.
Here's some detail about all of this shortly but we'd like to start now as we always do with a patient story.
Early this year Amanda in his mid <unk> presented to a vascular surgeon, who runs a vein clinic in Arizona and treat chronic DVT.
The patient previously a very active man in his mid <unk>.
With nearly a mobilized and using strong narcotics control pain.
Caused by a large open wound on his leg from which you have been suffering for more than a year.
The patient was struggling with post thrombotic syndrome, or Pts from a DVT that was treated only with anti coagulation.
Ive been told by multiple physicians there is nothing that can be done for chronic DVT.
And yet the physician was able to use caught fever bowl to extract a large volume of chronic caught in a very short procedure.
After suffering for over a year with an open wound the cloud schriever bolt procedure resulted in his wound healing completely in just two months, he's walking now without pain and without pain medication.
Pts's caused by persistently high pressure in the legs as a result of deep venous scarring due to clot that remains after ineffective DVT treatment about 50% of all patients, whose DVT was treated with conservative medical management will develop pts either.
It is a progressive disease with early symptoms, ranging from heaviness swelling and pain, leading them to pigment changes and scaly dry skin with scab and finally davina ulcers.
Time's necessitate amputation is horrendous.
Quality of life scores for these patients suffering from Pts are similar to or lower than those.
Those are patients burden with cancer and heart failure.
We believe removing even some chronic cost increases the lumen inside the vein, which decreases the pressure that is the cause of the symptoms bold is important because it is purpose built to remove chronic cloud. It is the first tool and a broader toolbox, we are committed to develop and introduce targeting this terrible disease over the coming several.
Quarters, we're steadfast in our mission to transform the lives of our patients in the most extraordinary ways, we increasingly sense responsibility not merely opportunity as we develop new solutions for complex disease states and unmet patient needs.
This work and we appreciate your continued support.
I'd like now to turn our attention.
Q1 financial performance.
Revenue in Q1 was $86 8 million up $29 4 million or 51% from the same quarter last year and up $3 6 million or 4% from Q4 of 2021 procedure growth was robust.
<unk> customers performed approximately 8800 procedures, including an increased but still modest number of cases from Europe .
Procedure count was up from 7700 cases or about 14% from Q4.
The difference in growth rates between procedures and revenue is based largely on the timing of new product introductions and the associated stocking orders.
Average selling prices were unchanged.
Please note that we are no longer providing information about COVID-19 associated procedures as we no longer believe this metric is useful COVID-19 has infected so much of the general population that at current or previous diagnosis is now is often incidental as positive to any given procedure.
Going forward, we also intend to discontinue our historical practice of sharing procedure volume of any kind. There are two reasons for this change first we intend to introduce multiple new products. This year. Many will have different average selling prices launch strategies stocking plans.
And so there will no longer be simple link between revenue and procedures as we've seen historically.
Second we believe sharing procedure information in an increasingly competitive space is counterproductive. We note that none of our competitors provide such information perhaps for similar reasons.
I would now like to share with you recent progress we have made on all of our growth drivers are first growth driver is the expansion of our sales organization.
The size of our core Tam is large and our penetration remains under 5%, we're going to need a lot more sales professionals.
We committed to at least 275 territories by the end of 2022, and we are on pace to achieve this goal.
These increasingly smaller territories positioned us to execute our second growth driver, which is driving deeper adoption at existing hospital customers. Most pte patients continue to be treated with anti coagulation alone and in fact, many of these patients never even see a physician who is of ETE expert.
Our goal is to establish patient pathways that are similar to those seen for heart attack and stroke. So that patients are consistently triage <unk> experts, we refer to the various parts of our approach collectively as ETE excellence the more constructive postal Macron hospital operating environment has been conducive to these efforts.
As we have more consistently able to access and educate non interventional physicians and administrators, who are critical to the development of these programs and increasing number of hospitals have now installed <unk> coordinators as a direct result of our <unk> excellence efforts, we have begun training VT coordinators via a full day programs delivered regionally throughout the country.
We are committing significant resources to <unk> excellence, and we will have a lot more to share with you as we make further progress.
Our third growth driver is to build upon our base of clinical evidence, we have exciting and timely news here.
We recently announced at the annual meeting of the American Venous Forum. The results of a sub analysis of the cloud registry focusing on clot age.
This study conducted on the first 250 patients enrolled shows that the clot in one third of patients treated with chronic. This fact alone is remarkable is this patient population has historically been excluded from all thrombectomy trials, because other thrombectomy devices cannot remove chronic clot.
Conversely, the data on our patients looks fantastic.
Trevor showed complete or near complete clot removal and 84% of these patients more important six month follow up data.
Shows that fewer than 10% of these patients suffering from moderate to severe post robotic syndrome down from 52% at baseline.
<unk> is the first thrombectomy device shown to be effective in treating chronic DVT. We believe bold, which is now in full market release will be even more effective for patients with older Clos and more severe symptoms as per the patient anecdote, we shared a bit earlier.
Our fourth growth driver is to expand our product portfolio with several developments to share here as well.
First we recently received FDA clearance of our entry 24 sheets. In fact, we have already completed the successful limited market release and have entered full market release, the entry as Ashish used to introduce our flow through for devices is purpose built.
For use within our devices and it increases their effectiveness, especially in the most challenging cases.
It eliminates the need for third party sheets and the ongoing back orders that have challenged our customers and our field team for years.
We believe it will be used in nearly every flow trigger procedure and <unk>.
Does it is included in our purpose need your pricing it removes cost from the procedure for our customers increases the value of the energy solution and further separates us from competition.
Next perhaps you saw that we recently obtained FDA clearance for Arctic in March this product is a peripheral thrombectomy device designed to address unmet needs in a new patient population. It is the first component of our broader toolbox. We are developing we look forward to sharing more after we've completed our limited market release.
These new products are a result of the robust R&D engine that we have developed you can expect multiple additional product introductions. This year, we have committed to even more aggressive investments moving forward.
Our last growth driver is expansion into international markets, we saw steady progress in our European business in Q1 with case volumes up more than 40% sequentially.
We expect continued momentum.
As hospitals in Germany, our largest European market begin to benefit from enhanced reimbursement beyond Europe , and we are pleased with our progress all over the world with continued growth in Canada, Latin America, and the Asia Pacific region.
As we've noted previously international will not be a material component of our overall overall revenue mix in 2022.
Finally, I appreciate always the opportunity to remind you that we remain committed to our mission and to impact to human life and the most beautiful ways. Our markets are large patient needs are significant and we are serious about our responsibility to do better for these patients.
I'll close by saying thank you so much for your support of our recent capital raise.
We intend to continue to invest wisely responsibly and even more aggressively.
All of our growth drivers, we believe we can and will grow sustainably for many quarters to come with that I'd like to turn things over to Mitch.
Thank you Bill and good afternoon, everyone and <unk> revenues for the first quarter of 2022 were $86 8 million, representing a 4% sequential growth compared to $83 2 million for Q4 of 'twenty, one and $29 4 million or 51% from $57 four.
For the same periods of the prior year.
Compared to Q1 of 2021, we've expanded our sales force.
And new customer accounts successfully introduced multiple new products and achieve deeper penetration of our products into existing accounts.
Revenue was split between the two products as follows 32% of our revenue is derived through the sale of cloud cheaper products. During the first quarter of 2022 compared with 35% in the first quarter of 2021 and.
68% was derived from the sale of float fever during the first quarter of 2022 compared to 65% in the first quarter of 2021.
During Q1, the vast majority of our revenues came from procedures are stocking revenue related to the opening of new accounts was consistent with prior performance. We did experience some fluctuation in stocking revenue due to the timing of our new product introductions and this resulted in a decrease in stocking revenue during Q1 compared to the prior quarter.
<unk>.
Gross margin was 88, 5% for the first quarter of 2022, compared with 91, 9% in the first quarter of 2021 the.
The decline was primarily due to a decrease in our operating leverage as we completed our move into a much larger manufacturing facility in the fourth quarter of 2021.
Coupled with the addition of new products to our flow Cheever per procedure pricing model.
Operating expenses were $79 9 million in the first quarter of 2022, compared with $45 1 million for the same periods of the prior year.
R&D expense was $16 1 million in the first quarter compared with $8 2 million for the same period of 2021.
The $7 $9 million increase in R&D expense was primarily driven by an increase in head count as well as product development and clinical evidence development costs.
SG&A expense was $63 7 million in the first quarter of 2022, compared with $36 9 million for the same period of the prior year.
The $26 8 million increase was primarily due to personnel related expenses because of increased head count across our organization higher travel expenses compared to unusually low levels of travel in Q1 of 'twenty, one higher facility related costs and higher marketing costs.
You'll note that operating expenses in the quarter nearly doubled compared to Q1 of 2021, we.
We believe the company's progress in all five of our growth drivers as a direct result of these investments as.
As we've shared in prior quarters, we intend to continue investing aggressively in productively going forward.
Net loss for the first quarter of 2022 was $3 1 million compared to net income of seven 5 million for the same period of the prior year.
The basic and fully diluted net loss per share for the first quarter of 2022 was <unk> <unk> based on the weighted average basic and fully diluted share count of $51 million.
These compared with a basic and fully diluted net income per share of 15.
And 13.
Based on a weighted average basic and diluted share count of $49 3 million and $55 7 million respectively for the same period of the prior year.
Moving onto the balance sheet, our cash and investments at the end of Q1 totaled $338 7 million consisting of $186 6 million of cash and $152 1 million in short term investments.
Cash and investments.
As of the end of Q4 of 2021 were $180 1 million.
Follow on offering of $174 4 million is the primary reason for the sequential increase.
With respect to the follow on we issued $2 3 million shares of common stock at an offering price of $81 a share.
Our cash flows used in operating activities were $9 1 million for the first quarter of 2022 compared to cash flows generated by operating activities of $8 8 million in the first quarter of 2021.
I'll close my comments by addressing <unk> financial guidance.
For the full year 2022, we are increasing our guidance by $10 million from the original guidance of $350 million to $360 million in revenue up now to $360 million to $370 million in revenue.
With that I'd like to turn the call back to the moderator for questions for the Q&A segment, Bill and I will be joined by do hikes, Chief operating officer and Dr. Tom to Chief Medical Officer.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
Sorry, Your question press the pound key please standby, while we compile the Q&A roster.
Okay.
Our first question is from Travis Steed with Bank of America. Your line is open.
Hi, everybody. Thanks for taking my question and congrats on a good quarter.
I know you guys don't really want to talk a lot about <unk>, but I'd love to see if you can get a little more color on the when the product will launch when you have a full bag put together is that something youre going to go to market with and compete with better outcomes or unpriced, if any any strategic color on how you're going to compete with that.
So thats going to require a new sales force.
Okay, Yes, there's a few things wrapped up there Travis.
Got a bit of ADT.
If I Miss any of this you can remind me.
So we probably won't provide a whole lot more commentary on the nature of the device.
And.
As for the timing.
It's a little tricky, we always want to make sure that we don't.
Over promise and under deliver.
We've learned from previous experience.
That you really need to be thoughtful about the limited market release.
These products may or may not be 100% ready for prime time at the time they get.
FDA cleared that's why we do limited market release this product is.
He is a combination product theres more than one product in the bag you've seen this sort of a toolbox approach for the products. We have on the market already and so we want to make sure both.
Ponant in the early going here that'd be more components later, but both of the.
Early components here are ready for Prime time. So we think later on this year I think it'd be.
Is it to offer much more guidance than that but we are really excited about this.
I think you asked about pricing, we're not going to share.
Specifics on pricing, but.
It's not our.
We don't we don't think of things in terms of.
Pricing advantages, it's either provides value and it addresses unmet needs or it doesn't so this will not be priced we won't be trying to win a pricing war here.
<unk>.
Assess market opportunities not based on whether we can get in and compete but whether there is an unmet need that seems like something we can kind of address so we believe there is an unmet need here that we can address in them.
Pretty successful way and devices will be priced.
Priced appropriately.
Okay.
Okay.
In all likelihood this.
Our early assessment suggests this is probably is not a second sales organization it probably.
It's relatively nicely into the bag of the sales organization that we've already developed.
Okay, all right that's fair.
We're going to wait till the analyst day, and get a little more color on that.
Yes Mitch.
I know you're not going to.
Talking about Covid.
The impact of the business anymore, but.
Love to see it.
Assuming a headwind year over year in the guide.
For for Covid, and any other assumptions and kind of how the build the year out on quarterly progression just anything you'd like to talk about in terms of the guidance that you guys sure happy to.
We are obviously pleased that we're able to have a nice speed and increase by more than our beat so that feels good for us as we think about the rest of the year.
We are continuing to sort of work through the hopefully the latter stages that sometimes we wonder where we are in the whole COVID-19 disruption thing and some of the staffing shortages and other things that has impacted the business.
So we'd probably be looking at a more kind of a flattish Q2 may be up a bit and then we would see some acceleration in the growth of the business as we look at Q3 and Q4 of 2022, so hopefully that's a little bit of additional color that would help in terms of how we're thinking about.
Had the business would track.
Towards that guidance, we provided of the $3 60 to $3 70.
Total revenue.
Thanks, Travis if I may.
Just add one additional thing there so.
I would.
Reiterate what Mitch says, but we're coming off of two quarters in a row of 15% growth in procedures and 14% growth in procedures and so the comparables are just high and the base is getting bigger as well, but I think we've been able to.
We've been able to perform pretty well through COVID-19 surges and troughs, we like the post COVID-19 operating environment here. The post pandemic, perhaps we are in a post pandemic phase, but certainly the operating environment has been much more conducive to the sorts of things that we wanted to do.
All along which is develop these programs stemming stroke like programs that will more successfully consistently.
Identifying triage patients that you simply are not they're not even seen the right patient right.
<unk> for a console, but at the moment so.
We like what we're seeing but I think.
<unk> point, maybe maybe a little bit up here in Q2, but not that we don't want get over the tips of our skis and then we have new products coming down the line in the back half of the year that likely will.
It'd be a little more little bit more heavily weighted towards the back half of the year for that that guidance number.
Okay, Great all right congrats again.
Thank you Ed.
Yes.
Thank you. Our next question comes from Cecilia furlong.
<unk> with Morgan Stanley Your line is open.
Great. Good afternoon, and thank you for taking the questions I wanted to start with.
Two questions, but you talked about.
Can you just frame the economic benefit as you think about it for centers.
Including in the per procedure pricing and then just kind of tied in with that as well as the impact on your gross margin going forward is that adopted across the greater portion of the procedures.
Yeah, Hey, so yes, it's true I would be happy to tackle the first part of that and I think Mitch you might want to comment on the gross margin impact.
First of all this product not only offers economic benefit, but it's really been purpose built to be optimized for our procedure particular RPE procedures using the <unk> system.
It uses the same hemodynamic.
Valve that we use on our other products and it's really been designed from the ground up to fit into our overall procedural approach we have.
Now just started the SLR, we got really good feedback during the limited market release of that product and we're now rolling it out broadly across the entire account base.
From an economic standpoint it.
It will be a component of our per procedure price system.
We will have some revenue associated with it as we initially stock that product and hospitals gain access to that product for the first time, but on a go forward basis. It will be part of the PPP.
Certainly.
<unk> offsets cost that they're currently using.
For other sheets that they've had to pay for other vendors.
That standpoint, it represents a savings to them and I think underscores the value.
That per procedure price model that we've rolled out now across the entire account base.
So hopefully that answers your question and I don't know Mitch if you want to comment on.
The gross margin impact and how that ties in.
As Joe just mentioned facility, it's a really attractive opportunity for the hospitals because they index.
They are to the good essentially by adopting the <unk> hundred 24 from our point of view the product has a cost of goods sold is sort of in the low hundreds of dollars.
If you look at our gross margin and you think about the fact that the <unk> PPP is typically sort of in that $10000 price range. You can see that it just has a very small impact on our our blended gross margin as a company.
So again I think it hopefully underscores the theme that you hear from US time and time again that we want to do what's best for the patients and what's best for the treating physicians and we want to package the product offering in a manner that.
Offers the best possible clinical outcomes.
That's the right way for us to basically compete on the value of the product offering.
Okay. Thank you and if I could follow up a bit of a multipart question just on your clinical pipeline right now clinical trials, but could you just provide an update on those.
For Peerless as long as claim on enrollment.
Specifically in <unk> and then just the sub analysis that you mentioned to how youre thinking about really leveraging the takeaways from that the data certainly push.
And change perspective around Easter time back to me in more kind of client and thank you.
It's Tom here. Thank you so much for the question about our clinical efforts. So maybe in reverse order speaking about clouds I think of the cloud sub analysis presented at an American venous Forum.
Highlights the utility of our devices broad spectrum of clot age historically only acute thrombus has been a candidate for mechanical thrombectomy and I think we have excellent data suggesting.
Excellent utility across acute sub acute and chronic.
Chronic DVT in addition to that we've completed 500 patients in the cloud registry Youll see an additional data release later on this year regarding that we have completed 800 patients in our flash registry for pulmonary embolism.
Which will be presented later on this year as well and then to answer your question, specifically about flame and Peerless.
Flame doesn't get the attention that I think it deserves its really groundbreaking trial the largest contemporary investigation of patients with massive p/e. These are the most critically ill patients enrollment has been excellent and we anticipate completion of this study later on this year hopefully with the data release.
Concurrently and then Peerless of course is our first in a series of randomized studies.
Enrollment in this study has been quite brisk I think.
This is a head to head study of catheter directed thrombolysis versus mechanical thrombectomy with flow Trevor and I think these are serious important questions that our physicians want answers to and therefore enrollment has.
As reflected that so we're very excited about that as well.
Thank you for taking my questions.
Yes. Thanks.
Our next question from Larry <unk> with Wells Fargo. Your line is open.
Hey, good afternoon, guys and congrats on a nice quarter here.
A couple from me Bill just if you could talk about the recent raise you did the timing and how you plan to use the proceeds and last year, you mentioned transforming just related to that transforming the company how is that process going and when is that going to become more visible to investors and I had a follow up.
Yes, so thanks, Larry I think we shared quite a bit.
This concept during the fund raising and probably I'll reiterate some of those same same theme so.
We have been very pleased with the growth that we've seen.
In not just in revenue, but in terms of.
The number of patients.
Number of patients being treated and I think that goes for not only.
Any gains we might make against.
Other.
Types of advanced therapies from Lititz, two other thrombectomy devices, but maybe more importantly, expanding the market putting more patients into the queue here so that they actually see the right the right physicians and so.
We.
We like the idea of just.
Much much more aggressive investments if you take a look at the.
The R&D spend which of course includes product development and clinical trials, we more than doubled that from you.
Year over year, we nearly doubled our entire spend.
On a year over year and I think that's.
That's yielded real results for patients and for hopefully for.
Value for our shareholders as well.
I think there is.
A lot of conviction here at the company that we want to be even more aggressive and that's what we've communicated during the fund raise and we continue to communicate that to anybody who will listen.
And I think the transformation Larry's.
It's already underway if you take a look at the total number of sales professionals, we are going to be more than 200. So at least 275 by the end of this year.
The investments we've made in our VT excellence, our second growth driver have been really.
There's a lot we're committing to health.
The health economics and market analysis access team field based embedded in the field, what we call our <unk> solutions group. Another group of non quota carrying non sales carrying commercial sales professionals designed to help implement and install these VT coordinator systems and then our national accounts.
Team.
The thing to communicate this the story from a value and economics perspective, you've seen what we're doing with <unk>.
With our clinical trials will be running perhaps by the end of this year or even multiple randomized controlled trials with absolutely no regulatory purpose whatsoever.
Because it's the right thing to do right, there's a basic responsibility our position should know they.
They should know what kind of outcomes, they can expect and who they should be treating when you use our devices and we're committed to that and you take a look at the total number of products. We've hinted at some of the things you've seen some things already but theres a very very robust.
Our product pipeline.
In the Q and that extends well beyond 2022, so we'll have more to say about that but we're investing very very aggressively and I think that transformation is already beginning to emerge here.
Just on the total number of products Youre seeing and then of course, we've made heavy investments in our.
In our European.
And the rest of the world.
Some of our international efforts and I think that's going to materialize here at some point, we have we continue to.
Communicate that the the revenue.
In 2022 will not be material, but.
We expect it will be at some point here and we're investing as.
As aggressively as we can there as well so I really believe the transformation is underway and hopefully youre beginning to see that.
<unk>.
Again, 15% procedure growth of 14% procedure growth in two consecutive quarters on a base that we have I think is suggestive that were maybe on the right track.
That's helpful and for my follow up and I'm sure. Tom is pleased to hear that youre going to be you're going to get the funding for doing multiple randomized controlled trials.
But for my follow up here on clock tree for bold you highlighted.
Pts patient at the beginning of this call.
You've given those numbers, it's a big market opportunity, but my understanding is and correct me if I'm wrong that it's not typically it's not that it's.
Undertreated. So my question is what are you doing to develop that market. Thanks for taking the questions.
Thanks, Larry.
We're probably a little bit early in this.
In this discussion we are definitely seeing some of these patients are being treated right now we're very very encouraged because.
These patients are not included in the Tam as we have to.
Defined our DVT Tam currently.
These patients are not included in that these are not acute patients. These are patients who suffered from DVT in the past and this is a very large market as you can imagine not just from in terms of the incidents but in terms of the prevalence of the patients who were not treated last year and the year before and so forth. So it's a very very large number of these patients.
Their quality of life scores are as I suggested quite.
Horrendous trends, it's a terrible unmet need we are developing a tool box. It's not just one product that we were bold is the first but certainly not the last and we believe there'll be.
Kind of.
These products will work in conjunction with each other and Youll start to see those products later on this year and into next year, but we're committing very very aggressively.
I think what Youre getting at also very there is a there is a commercial component to this.
These are not patients who are stumbling through the emergency department because they have a wound on their leg. For example, these are patients who've been told over and over there is nothing you can do so there is a patient pathway component to this that we are committing very aggressively again part of the fund raise part of where we believe we should be committing resource aggressively.
Identification of these patients it's a fundamentally different patient pathway. Despite the fact that the procedures themselves are similar in some ways to the procedures that are done on a more acute patients. So again, a lot of things going on here, it's a little bit early to give any detail, but we're really excited about this because.
If ever there was a responsibility that's one there's just not much been done for these poor patients.
Thanks, So much bill.
Thanks, Larry.
Our next question comes from Dell Dilettante with Canaccord Genuity. Your line is open.
Hi, It's John for Delta X for taking a question I just wanted to first off.
On International can you talk about the infrastructure that's in place so far what progress.
Is that here to set up for 'twenty, three and should we expect material revenues in 2000 and in case also taught about that update.
I touched on in the call commentary in Germany.
Sure. John This is drew I can get started on those.
So maybe just to talk about it by market that maybe one way to organize.
The response here so in terms of Europe at this point, we've established an initial commercial footprint.
<unk> the entire European market.
That includes direct sales professionals that includes training.
People that include some back office infrastructure includes.
Some markets people that are working alongside third party distributors. So we feel like over the last year and a half we've made the investments to have that initial commercial footprint establish across.
The European market, we are seeing sequential growth quarter after quarter, we certainly saw that in the first quarter here in Europe .
One of the things that's driving that progress in Europe specific in Germany, which is our largest largest market in Europe is the awarding of another earlier this year and that provides hospitals with a pathway to enhanced reimbursement for flow Trevor procedures. So that's still in.
The process of being established but already accounts have.
Our line of sight to that reimbursement.
And as such it's beginning to pay dividends in terms of uptake and traction in the market.
So that is the.
The current status in Europe looking ahead in Europe , we still got some work to do on reimbursement and some of the other markets.
To establish broad based market based reimbursement.
Some of that will require us to do some clinical work and some of those markets.
We now and then we will have and continue to have access to those markets with regional level reimbursement and hospital level budgets, but we do have some more work to do over the coming quarters and some of the markets to get to broad based.
Our reimbursement based on some clinical evidence that we're going to generate.
So that's the overview in Europe .
<unk> to the other international markets in Asia Pacific. We've described we've got work underway over the last year and a half in both Japan and China those markets will be longer pathways to get approval in but we are making steady progress in both of those large markets relative to the appeal.
Rubles and are actually beginning at least relative to China, beginning to think more deliberately and intentionally about what the go to market strategy will look like in China, and what some potential partnership.
Dynamics might look like in that market.
And then relative to Latin America, the last of our major international geographies, we've begun to do cases, and some of those markets Chile for instance.
Gradually building out primarily in that market a network of third party distributors that will establish so that we can continue as we move through the rest of this year opening up new markets and accessing new new patients.
Taken all of that together as you heard bill here, just a moment ago, we clearly do not anticipate that.
The international business will be a material contributor in 2022 to answer the last part of your question relative to whether or not it achieves that hurdle in 2023 hard to say, it's obviously kind of a race between how quickly the international franchise grows relative to.
The U S based franchise, so hard to predict exactly when that happens and obviously the auditors and the SEC regulations play a factor in that determination. So we'll keep you guys posted as we move towards that but clearly we like what we're seeing and we think longer term, there's a huge potential there for us to impact patients internationally, just like we have.
Done here in the U S.
Yes.
I appreciate that color. Thanks Thats helpful.
Then just as my follow up I know in the past these details.
The three steps I believe of the <unk>.
In terms of excellence can you talk about how many accounts to date you have gone through those three steps and what youre seeing in terms of utilization from those accounts versus.
Yes, it's a complete that center of excellence program.
Yes, so I can I can.
Help.
Whilst we saw that in other others may want to jump in as well.
But I think the way.
To start thinking about that is that all of our accounts. We believe are in some stage of working towards becoming eventually a center of excellence. That's our ultimate goal across all of our accounts, we believe each and every one of our accounts can emerge down the road as a center of excellence systematically trade.
And caring for these patients just like <unk> seen take place with stroke and the <unk>.
Vast majority of our accounts are still in the very early stages of that evolution in the first phase that we call the engage phase.
Thats really focused on establishing the foundation during the initial training and in servicing completed making sure the account understands the appropriate billing and coding and reimbursement dynamics and really establishing a solid foundation of clinical outcomes.
As a result, the penetration the Tam penetration in that first phase of <unk>.
<unk> excellence is in the low single digits and most of those accounts and again, that's where the majority of our accounts are the second phase we began focus much more on spreading awareness.
Across not only the interventional lists at the account, but also the non-intervention lists that are cared that care for these patients.
The pulmonologists the emergency room physicians, the Hospitalists and we spent a lot of time in that second phase ensuring that the administration understands the economic value proposition of our technologies, but it's really about beginning to raise awareness and drive deeper penetration in a very.
Specific and intentional way.
The Tam penetration in that middle group in that middle phase.
Probably in the double digits in most of our accounts, we call that the empower phase.
And then the final phase.
A group of accounts that are emerging as centers of excellence or at least beginning.
To have many of the attributes that you would expect in a center of excellence, that's still a very small number of our accounts call. It a dozen maybe two dozen of our accounts and those are accounts that have identified.
VT patients as a specific patient population that they want to invest in very specifically their marketing.
Eternally and externally.
<unk> based bi and across not only the intervention lists but the noninterest <unk> theres active investment by administration into the program and Theres a intentional.
Programmatic approach to ensuring that the care pathway is organized in such a way that every one of those patients is identified and risk assessed and presented for care to a group of patients and physicians that really understand that.
The disease in a deep way so the Tam penetration that final account, we have some accounts that are up north of 50% penetration of the Tam So still plenty of runway even in that third and final group.
But it does give us some.
Some some confidence here, we're moving in the right direction and that the significant investment that we're making in this overall DTE excellence programmatic approach is beginning to pay dividends and we're on the right path.
I would add only one thing.
I just had one on one other thing. This is there is not one single activity.
We engage in in the field that is not related to this everything that we do as part of this DT excellence is very it's very purposeful.
In the intent to move people toward.
This excel phase last phases centers of excellence as drew described and we don't see really any there.
There is no plan B. This is it. This is this is this is the way forward and we could wait.
10, or 20 years until all of the randomized controlled trials are finished and the guidelines are changed.
New England Journal of Medicine has published CMS.
CMS weighs in.
Gets bonuses for people, who do things right and.
Penalties for those who don't or we can dive in now and try to figure out what are the challenges that we need to overcome for these patients much sooner.
And we've decided we're committing 100% to this.
Concept, so everything that we do is with the intent to move patients I'm, sorry move our customers toward.
<unk> centres of excellence, some get there more quickly others will be more slow.
Which is kind of natural but that's our intent.
Thanks, Ken.
Our next question comes from Marie Thibault.
Your line is open.
Hi, good afternoon, thanks for taking the questions and congrats on a strong first quarter.
We're not going to get a whole lot more on procedure metrics going forward, but I hope that we can get some qualitative commentary.
On how staffing shortages and other headwinds like that affected. The Q1 result, obviously, a very strong result, so just curious to get kind of cadence throughout the quarter for both fever and pain.
Great.
Yes, so a few things wrapped up in there or anything else. Thanks for the question.
So I think.
We.
<unk> communicated in the past that our.
Procedures.
We're the beneficiary of some good fortune here, and we've been able to execute as well but.
The disease States that we're targeting are generally high acuity disease States. These aren't patients who really can wait.
And so there's a prioritization there. These procedures also require very limited resources right. These are simple procedures relatively simple procedures.
One one.
One physician one nurse one tech that sort of thing about an hour both for cloud schriever inflow chamber procedures and so they consume very limited amount of resource and in the economic profile is favorable and that's the sort of story that will play very well anytime, but I think on a relative basis when their staff shortage.
<unk>.
Some patients and procedures are going to be prioritized I think it's really benefited it's really benefited us in the in this.
Covid era in this post Covid era, sorry.
This post pandemic era, where we're still trying to recover from the staff shortages and that sort of thing. So I think we're seeing exactly the same sorts of things that every other company has had.
Any other med Tech company has endured and again, we've been able to execute crisply for a number of reasons, including some of the ones I just mentioned just as characteristics of these procedures and disease states.
I think we.
We've executed consistently in both on Covid.
Wanes, and Colby trough, the waxing and waning of toll but over time.
Hopefully we're in a in a post.
Post pandemic phase, but we will see.
We kind of deal with the <unk>.
The cards retail so to speak.
I don't know that Theres any real trends that we would want to highlight here, but we are very encouraged that the operating environment is conducive to <unk> excellence now in ways that it never was in all of 2021 and that's that's really encouraging so we'll see what that what that might mean as we as we get further along with our with our efforts there.
Okay very good very good to hear.
I'll ask my follow up here on.
The sales team expansion.
We know that.
A large area of investment going to 275 at least by the end of the year.
<unk> threat.
Coming on board are you able to find the type of talent you like.
Are they ramping at the pace, we would like.
Sort of a status update on the hiring front.
Sure I can help with that where it's drew.
So we just brought on board the first group of new hires that we'll have this quarter.
And we saw very strong group, probably the strongest group we've had to date.
Candidate pools themselves are getting both broader and deeper I think primarily because of the success and the impact that we're having are kind of patient impact.
And that I think is becoming more and more.
Well well known.
I think the other thing that is helping with that.
Expansion of the candidate pool.
Is that our own training and education program has now become much more sophisticated and robust to the point that we're able to bring on.
As we see fit.
Candidates that don't necessarily have deep prior vascular experienced folks that have orthopedics or spine or robotics or emt and.
Because of our training program at this point, we're able to get those folks up to speed.
With our technologies and our procedures.
And I think that has also helped broaden the candidate pool. So we feel really good about the path. We're on we're going to continue to add aggressively as we move through the rest of this year each and every quarter as is our.
As our cadence.
And we as you heard Bill talk about are on pace and feel comfortable with that goal of at least 275 sales territories by the end of this year.
Okay very nice thank you and congrats again thanks.
Thanks Marie.
As a reminder to ask a question.
Please press Star then one our next question comes from Danielle <unk> with SBB Securities. Your line is open.
Hi, guys. This is <unk> on for Danielle. Thanks for taking the question congrats on the strong start to the year.
I guess my first one.
Also on the sales force expansion as you target. The 275 sales territories could you talk to some of the growth trends recently, and if youre seeing growth driven primarily from new centers coming online increased adoption at existing centers and as it relate to continued opex spend throughout the year, where do you expect to see the <unk>.
<unk> priority in terms of incremental spend is it R&D pipeline expansion related or Salesforce expansion and then one follow up if I can.
Sure. So I can get started on the first several of those questions I think.
Bill can chime in on the broader Opex part of your question.
Historically, we've pointed to about two thirds of our growth coming from taking share within the existing modest intervention or segment of the market.
The remaining third of our growth coming from expanding the market and putting new patients on the table.
As a result of our purpose built solutions I think clearly.
As time progresses, we are seeing.
More and more of our growth be driven out of that first bucket I'm sorry out of the second bucket out of the market expansion bucket and out of our ability to.
<unk> really change the standard of care over time.
All of our new sales professionals at this point in time are coming into some type of territory splits.
And the reason we're splitting those territories is to position both the new rep in the legacy rep into smaller and smaller territories. So that they can do the kind of work associated with our VT excellence that is designed at its core to drive penetration and adoption and I think we're beginning to see that play out and we are beginning to see more and more of our grew.
<unk>.
Be contributed by market expansion as opposed to just taking share.
Maybe I'll pass things over to bill on the broader Opex.
Side of the question yes.
So thank you for you.
So this this question.
Most like Youre, asking us to choose our favorite child and as you know there is no favorite children.
Yes.
I think we're investing.
Pretty aggressively and.
We're not limiting our investments based on some sort of.
Seeds quota.
Growth driver gets X amount this one gets y amount.
We are investing as aggressively as we think we can execute.
Responsibly and successfully so we've been pretty aggressive as you pointed out with with regard to.
New territory.
The total commitment in terms of sales territories, we've already talked about the investments we're making in multiple.
Non sales type roles on the commercial side to execute our VT Excellence program, we've talked quite a bit about.
Clinical trials and product development I think we again, we've shown an ability to execute across all of these growth drivers and at this point, where we continue to ask ourselves why would we not be more aggressive we're sitting at 5% penetration in a very very.
Large tam already theres multiple new <unk>.
And Thats the business turn the turn that most patients would use is suffering patients right. There's a lot of unmet needs of patients really really suffering from disease states that had been poorly addressed because they are complex disease states are hard to tackle but we've been we've been pretty good at that and I think we want to continue to be really really.
<unk> with that so again our.
Determination as to how much we invest across those four drew has already talked about international investment. It's not really we're not really rationing those those investments. So much its just determining where we think we can we can execute on that sort of spend in these aggressive plans effectively and we don't want to be.
Ansible with this so we try to be wise and thoughtful in the way that we go about this but we are being aggressive across all five growth drivers.
Pre and maybe I can just add the as you know the the actual spend for SG&A in Q1 was just over $63 million compared to the $16 million of total spend for R&D.
The absolute dollar growth if you look at Q2 three four.
In 2022 associated with the SG&A spend is quite a bit larger than it is in the R&D area as Bill mentioned, both areas are going to grow very aggressively.
But from an absolute dollar point of view, just because youre starting out with a much larger number.
SG&A spend is increasing.
Greater rate.
Okay understood that was super helpful and if I could just squeeze one more and I just had a higher level. How are you guys thinking about the competitive outlook evolving over the next few years with recent acquisition by larger players and how do you guys view the competitive moat that Youre building. Thanks again for your question.
Yes. Thanks.
It had a competition question for a while so thank you for that.
Again I think.
Sitting in a market that is so underpenetrated I think that the.
The entry of high quality rivals people that really know what theyre doing in half.
Excellent sales and marketing capacity.
Is really useful for driving awareness and hopefully putting more patients into the Q right, putting more patients into the line of sight for console for physicians, putting aside whose device gets used and who should get treated who shouldnt get treated that sort of thing. That's a really useful thing right just just the.
<unk> and the ability to get these patients to.
Physician, who really understands VT.
Is important and so that's I think is highly highly positive. We've had these questions now we used to get them a little bit more frequently I think and you can see that the market continues to expand even while competition because competition is entering that said I think.
No.
Again, this DT excellence concept.
Is valuable to hospitals, we're having discussions at the highest.
At the highest levels of the hospital.
And with the CEO CMO Chief operating officers Vp's of service lines that sort of thing in these program developed as growth initiatives are important to the hospital.
Think.
The data that we're accumulating we will be releasing later on this year 800 patients the largest prospective dataset ever in pulmonary embolism.
The largest dataset 500 patients in our cloud registry will be.
Communicated or presented later on this year and we don't do these things to create moats, but I think there's no question they do create moats.
The increase represents the ninth it's the ninth product.
In the per procedure pricing.
P P toolbox.
Because we just want to add more steps to reduce our gross margins because these tools really manner, they really matter and I think someone bringing a new widget into that sort of environment, where we've had these sorts of relationships at the administration level, we have the sort of data that's emerging now in really compelling ways, we have a toolbox it's filled with.
<unk> to all sorts of.
Unique presentations of these diseases I think it gets more and more difficult for someone just selling a widget.
Brand new widget to two two.
To be really successful so we'll see but the bottom line is I think.
Anyone trying to get into this space at this moment the more the merrier because it really does help to expand the <unk>.
Expand the awareness and hopefully expand the market.
Thank you and I'm currently showing further questions at this time.
This concludes today's conference call. Thank you for participating you may now disconnect.
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