Q3 2022 AtriCure Inc Earnings Call
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Yeah.
Good afternoon, and welcome to the age of cures Cure Q3, 2022 earnings conference call. My name is Stacey and I'll be your coordinator for the call today at this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the.
The end of today's call as a reminder, this call is being recorded for replay purposes.
I'd like to turn the call over to Marisa Beach from the Gilmartin group for a few introductory comments.
Thank you.
Oh, you should have received a copy of the earnings press release.
You have not received a copy please call 513444484 to have one emailed to you.
Before we begin today, let me remind you that the company's remarks include forward looking statements.
Looking statements are subject to numerous risks and uncertainties many of which are beyond our control, including risks and uncertainties described from time to time and age or cure of the SEC filings.
These statements include but are not limited to financial expectations and guidance.
Our expectations regarding the potential market opportunity for each of threats franchises in growth initiatives, including the adoption of hybrid out therapy and future product approval clearances.
Members now in clinical trial outcomes.
If your children adult may differ materially from those projected it took your undertakes no obligation to publicly update any forward looking statements.
They refer to non-GAAP financial measures.
Typically revenue reported on a constant currency basis, adjusted EBITDA and adjusted loss per share.
Reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measure is included in our press release, which is available on our website.
With that I would like to turn the call over to Mike Carrel, President and Chief Executive Officer, Mike.
Thank you Marisa good afternoon, and thank you for everyone for joining us we hope you're well I am pleased to share another outstanding quarter for <unk> as we drive adoption across our therapies to improve patient lives and capture the substantial opportunities in front of us.
We ended the third quarter was $83 $2 million in revenue, reflecting growth of approximately 18% over a strong third quarter of 2021.
Highlights for the quarter included continued expansion of our pain management franchise and rising commercial traction from our recently launched encompass clamp as well as mounting adoption of <unk> devices globally.
Turning to third quarter <unk> product revenue in the U S, which increased 12% year over year and 3% on a sequential basis.
Hybrid app therapy courses experienced record attendance in this quarter as we trained many cardiac teams.
On the overall benefits to patients and best practices for setting up a program and working through protocols and logistics.
We are seeing growth in both the average number of accounts and procedure volume per account each quarter as we continue to focus on establishing hybrid <unk> therapy as the standard of care for <unk>.
Long standing persistent atrial fibrillation patients.
Additionally, we are seeing increased adoption at top tier sites with 14 of the top 25 cardiac programs in the U S building programs.
To that end in September we highlighted the experiences of Dr. <unk> Bush and Dr. Ziad El data implementing hybrid <unk> therapy in their respective practices.
<unk> emphasize the excellent clinical outcomes for their patients as.
As well as plans to substantially increase adoption.
We believe the commentary from both physicians underscores the efficacy of hybrid <unk> therapy, an immense opportunity for <unk> to address this unmet need for millions of patients.
Shifting to our pain management franchise cryo nerve block continues to be our fastest growing therapy.
In the third quarter, we saw sequential revenue increased 3% and are gaining traction with a broad base of accounts with well over 500 accounts year to date.
We believe strong adoption of <unk> therapy is due to physician seeing immediate results from providing temporary pain relief for patients after thoracic surgery.
While we are working to impact more patients in this space. We're also exploring new opportunities, including the application of power in a blockbuster anatomy, we look forward to sharing our progress on future calls.
Now onto our open ablation franchise earlier.
Earlier this year, we announced full scale commercial launch of the encompass clamp in the United States.
The encompass clamp leverages the proven technology of our skinnier synergy ablation system.
To provide a simpler and faster approach to ablation and open heart procedures.
Strong momentum from our initial launch carried into the third quarter driving nearly 21% growth in the U S. Open ablation revenue year over year, reflecting a mix of new adoption and additional revenue per procedure upon conversion to the encompass claim.
We are pleased to share that encompass contributed nearly 25% of our U S. Open ablation revenue in the third quarter and we are continuing to expand accounts and surgeon feedback.
Feedback from our customers has been exceptional and we remain confident in our ability to further penetrate the cardiac surgery market for many years to come.
Yes.
Finally, our <unk> product line continues to see consistent growth worldwide with 18% year over year growth this quarter.
We are advancing our efforts to innovate theatrical platform focusing on less invasive and easier to use devices. We.
We see many opportunities for growth in our appendage management franchise as we increased demand in both our open and minimally invasive businesses.
In addition to our existing opportunities we are actively investigating and an expanded application for the <unk> platform to the Leafs clinical trial.
This landmark trial examines the prophylactic use of <unk> devices for stroke reduction in cardiac surgery patients without a preoperative afib diagnosis.
Over two thirds of the nearly 1 million cardiac surgery patients worldwide do not have preoperative afib diagnosis, yet have an increased risk in their lifetime.
We believe this trial will demonstrate the benefits of excluding the L. A with DHS, providing a substantial extension of our markets.
[noise] trial initiation is underway with patient enrollment expected in the coming months.
While the trial will take a number of years to complete we anticipate awareness for appendage management and all cardiac surgery procedures to increase in the interim.
Okay.
In addition to our efforts at market expansion through Leafs clinical trial, we are cultivating new markets by building upon existing technology and leveraging the unique position relationships we have developed.
Earlier this year, we announced the first patient was treated in the heel ISG clinical trial.
<unk> will study the treatment of patients with inappropriate sinus tachycardia or ISP using hybrid ablation procedures.
ISG is characterized by an elevated heart rate and distressing symptoms of heart palpitations contributing to the inability to sleep or exercise.
It affects millions of people around the world and currently there are no approved treatments for this debilitating condition.
We continue to make progress with the trial and remain excited for the potential of this new therapy to unlock another significant market opportunity and provide a solution to the many patients with IFC.
In addition, we are advancing product development efforts on a dedicated device for this therapy and we'll share more as we continue our efforts to build the market.
Across our business, we are seeing growing interest in our differentiated solutions and are proud to work with all 50 of the U S News and World Report's best hospitals for Cardiology and heart surgery. The investments we've made in innovation clinical science and education physician Asia care for accelerated and durable growth for years to.
Tom.
I will now turn the call over to Andrew <unk>, Our Chief financial officer to ask more detail about the quarter.
Thank you, Mike our third quarter 2022 worldwide revenue of $83 $2 million increased 18, 1% on a reported basis and 19, 8% on a constant currency basis, when compared to the third quarter of 2021.
Revenue was driven by solid growth across key product lines and geographies bolstered by outstanding results in pain management appendage management and open ablation.
On a sequential basis, we experienced a one 5% decline in revenue from the second quarter attributed to normal seasonal variation in underlying procedures.
In the third quarter 2020, Q U S revenue was $69 8 million, a 21, 3% increase from the third quarter of 2021.
Open ablation product sales, which exclude pain management were $21 6 million compared to $17 $9 million up 25% over 2021, showing building strength from the encompass launch with a combination of new adoption and incremental revenue per procedure.
We estimate open concomitant procedure growth was roughly half of the growth for the quarter consistent with our expectations of sustained and steady penetration at the cardiac surgery market.
Yes.
Minimally invasive ablation sales were $10 $1 million up <unk>, 9% from 2021.
As Mike noted earlier within U S minimally invasive.
Invasive ablation sales at <unk> revenues increased approximately 12% year over year, and 3% on a sequential quarter basis.
However, <unk> revenue growth was offset by approximately 21% decline in the legacy Mis ablation revenue year over year.
We exited the third quarter with 75% of U S. Ms revenues attributed to the episodes system and continue to believe in the significant long term growth potential for hybrid <unk> therapy.
Rounding out U S revenue pain management sales were $10 $5 million compared to $6 $3 million up 68, 1% over the third quarter of 2021.
Sales of appendage management products in the U S were $27 $6 million up 18% over the third quarter of 2021.
International revenue was $13 4 million up four 2% on a reported basis and 13, 5% on a constant currency basis as compared to the third quarter of 2021.
European sales accounted for $7 $3 million driven by increased activity in the United Kingdom, and broader markets offset by unfavorable exchange rates as well as slowed activity in the Netherlands and Germany.
Asia and other international markets accounted for $6 $1 million in international sales on strength in most markets, but note, but notably Australia, and Japan, partially offset by prior year actively activity in China.
Overall international markets were fueled by growing adoption of HFF devices.
<unk> and an increase in appendage management revenue of 19, 5% from the third quarter of 2021.
Now turning to another key metric for the third quarter of 2022 gross margin was 74, 1% flat to the third quarter of 2021.
While we are seeing benefits from increasing scale of our operations more recently, they have been offset by rising costs and supply chain pressure as well as the shift to lower gross margin products.
Moving to detail on operating expenses for the quarter as a reminder, operating expenses for the third quarter of 2021 included a $189 9 million credit to operating expenses for the change in fair value of contingent consideration offset partially by an $82 $3 million intangible asset impairment.
Charge for the IP R&D asset associated with the amaze trial.
Excluding these items operating expenses increased $11 $3 million or 18, 4% from $61 $2 million in the third quarter of 2021 to $72 $4 million in the third quarter of 2022.
The increase was primarily driven by research and development activities, which grew approximately 30%, 34% year over year, while selling general and administrative expenses increased 15%.
Our adjusted EBITDA was negative $735000 compared to a positive adjusted EBITDA of $691000 for the third quarter of 2021.
Our basic and diluted net loss per share was <unk> 27 in the third quarter of 2022 compared to basic and diluted net income per share of $2 15, and $2 11 in the third quarter of 2021.
The adjusted loss per share in the third quarter 2022, and 2021 was 27 and 23, respectively.
Our balance sheet is very strong and we ended the third quarter with $174 million in cash and investments a modest cash burn shown this quarter largely reflects capital expenditures associated with the expansion of our manufacturing operations as well as an increase in inventory.
Turning to our outlook for 2022, given the ongoing momentum across our business. We now expect to achieve approximately $328 million to $333 million in annual revenue, reflecting full year growth of approximately 20% to 21%.
As we think about fourth quarter expectations by geography and franchise. We believe the encompass launch will continue to positively impact U S open ablation revenue.
Within U S. Mis ablation throughout this year, we have seen more pronounced impact of procedures and our legacy Ms business as we operate within a much smaller base of customers. Therefore, while fourth quarter of 2021 included $3 $7 million of contribution from legacy MAA.
Devices.
We are trending at approximately $2 $5 million currently.
And finally like many other companies, we faced increasing headwinds from unfavorable exchange rates in the third quarter and expect this pressure again in the fourth quarter.
We continue to expect 2022 gross margin to be comparable to the full year 2021, with the potential for varying impacts from increasing costs and mix.
Largely on the strength of our pain management franchise and the encompass launch.
We are maintaining our level of investment in research and development activities with spending in product development and clinical science initiatives across our platforms.
Additionally, our plans anticipate the thoughtful investments in our commercial team along with market development activities in training and awareness programs.
We expect the full year 2022, adjusted EBITDA to be a loss of approximately $4 million.
Corresponding to an adjusted loss per share for 2022 of approximately $1 10 to $1 12.
Therefore fourth quarter results are expected to be approximately $4 million in positive adjusted EBITDA.
As we navigate the remainder of this year.
Our employees across the globe, we remain focused on our patient first mission.
Whether that means clinical trial, our product development activities market awareness and education administrative support for the production and fulfillment of our products. The <unk> team has shown immense collaboration and dedication despite a tough backdrop for various uncertainties in the world economy.
You all for making our company truly a special place and breathing life into our mission and values each day now.
Now I will turn the call back to Mike for closing comments.
Thank you Angie and in addition to being proud of our team for a great financial quarter in which we grew the business in advance many long term growth catalysts I am truly in the wide ranging talent.
All of our employees I'd like to highlight a program developed by our team the womens cardiac health awareness initiative in early October <unk> sponsored an all-star physician panel discussion and the unique needs of women and prevention screening and treatment of atrial fibrillation.
Live online event brought together leaders in the fields of cardiac surgery, electrophysiology and thoracic surgery to educate peers about the importance of improving the heart health of women.
The program was a tremendous success in a huge step in our effort to encourage a heart team approach to address gaps in health care.
Additionally, I monitor to share that <unk> has been selected as one of only two finalists in the nation for the 2020 to diversity equity and inclusion awards by the National Association of corporate directors or an ACD.
This prestigious recognition is a testament of our intentional action around Eni beginning with the composition of our board of directors and continuing with training practices and objectives.
Measurable impact across our employee base the commitment to fostering a workplace that rejects discrimination celebrates differences and promote equality is fundamental to our organization and how we operate.
Today's secure our future is bright and we're thankful for support for all of you on this call today with that I'll turn it over the operator.
As a reminder to ask a question you will need to press star one one on your telephone please limit questions to one question and one follow up at a time and then return to the queue for additional questions. Please standby, while we compile the Q&A roster.
Okay.
Our first question comes from Robert Marcus of JP Morgan Robert Go ahead with your question.
Great. Thanks for taking the questions and congrats on a good quarter.
Okay.
Maybe to start off.
The focus is on the mis business and I appreciate that it looks like converge did grow in the quarter. It was the legacy business that there was something like a $2 million headwind or so.
It was really helpful to have that online event.
Last month, how do we think about when we might start to see some more tangible improvements in sequential growth there.
Now with one month under your belt do you think it might be fourth quarter or do you think we're going to have to wait till 2023 to start to see a tick up.
Yes, it's a great question, a fair question and obviously one that we've had on this call and one that we're expecting Ravi. So I appreciate you, bringing it up right away from.
From our perspective, as we look at very specific with the epicentre part of our business and kind of what we see as the growth we're making good traction as I mentioned were 14 sites now.
The top 25 programs in the country. Many of those sites are just beginning their program. So I don't think youre going to see tremendous impact in the fourth quarter, but I do think that as we look at next year and the year. After youre starting to see really some traction the increase the number of accounts in more depth within those accounts as well.
But the hockey stick I can't give a specific time necessarily on when thats going to hit but we feel really good that the momentum is beginning to build in these programs are beginning to expand when you think about what we tried to do at that show when we looked at Dr. Bush industrial data. The goal of that was to show you really two outstanding programs that were at different places so Dr. <unk> data.
One they've been around for a long time and what the data did for them is it allowed them to expand and look outside of just Dr. <unk> data during the referrals to the other 12 to 14 EPC hasn't this practice and the other hospitals that they contract with and so that really kind of begun to explore that and actually today. They just announced they did there.
$350 case today. So they are really beginning to see that momentum build within that program as well and we wanted to show that once the programs established it even has more expansion opportunities within it Dr. Bush is a little.
Because he was really about that early stage, which is they just got going right. When the data came out they really got going when we got the label and that enabled them to kind of move on the labels on a year and a half ago, they're now up to almost $35 40 cases, or so this year and we anticipate that those that were starting now will begin to really kind of contribute in a bigger way probably.
The end of next year and into the year after but even a little bit the beginning of next year. So you can see these programs are beginning to build this is going to be strong durable revenue for a long time and these accounts and we've got lots of people coming to the training programs that we have and so it's not about kind of if it's really about when for us in terms of the timing of this because I think the data is there.
And it's compelling and the market is really really big.
Yes.
Great.
Maybe as we look to 2023.
And I think it's important the fourth quarter is going to be the first in a while it's not the first ever.
I didn't look all the way back just EBITDA profitable quarter.
Is this a trend you think you should be carrying forward into 2023 and its profitability from here on out or there might the first half of the year turned back negative before turning profitable again.
Yes.
It's a good question Ravi what we typically see in the first few quarters of the year, it's typically a higher loss and the balance for the full year typically comes down Thats. If you were to look back at <unk> P&L for many many years.
Where we're sitting at today, it's $8 million last year to date, we are expecting positive $4 million for the fourth quarter.
The full year two the guide of about a $4 million loss I think as we enter next year without giving a specific date of achieving full year profitability I think pretty naturally this happens in the near term you know historically, we've been able to make good improvements to the bottom line.
Lower growth rates in the history of <unk> and would expect despite a lot of the great investments that we're making in the big opportunities that are in front of us that we would turn to profitability in the near term.
It's definitely a focus of us and our team and I think without having to sacrifice a lot of the great initiatives, particularly when you think about our R&D spending.
Great. Thanks for taking my questions.
Thank you.
Please standby for our next question.
Our next question comes from Rick Wise with Stifel. Rick Go ahead with your question.
Yes.
Hi, Mike Hi, Angie.
Maybe.
With gross margin.
You called out.
Obviously, it was flat year.
Year over year.
A little surprising given the higher sales volume.
Maybe you could expand on the inflationary supply.
Chain cost pressures.
Okay.
Getting worse.
<unk>.
Yes.
What's happening where are we.
In <unk> you are feeling those pressures and I was a little surprised that the language about shift to product mix and lower margin project I wasn't sure.
I understood that fully.
And just help us think about just at a high level can gross margins should we expect gross margins to improve in 'twenty three.
Thank you, yes sure sure Rick So with regards to the cost of some of the supply pressures I'd say this was the first quarter, where we started to see maybe a bit of an increase in some of the costs that may be the timeline of different contracts that we're working under but the other pressure that we saw with maybe not be optimized production volumes, we would've liked to see.
During the quarter. So maybe some limitation there that being said exceptionally proud of the team given the backdrop that we're operating in that we haven't had any backstop and being able to fulfill orders. So with regard to the second part of the commentary the shift in product mix.
Really is focused on two products. So the cryo sphere device is a lower gross margin product and as that becomes a bigger component of our overall revenue. It is having an impact on the gross margin great growth rate, it's a phenomenal therapy, but it does come at a slightly lower <unk>.
Margin, then you see out of our other RF and cryo products.
The other big driver this quarter in particular was we had a nice uptick in the encompass clamp revenue and that is another one. This is just first year out of development and first year into production and it will take some time for us to lean the cost, but the team has identified some great areas that they are focusing on for 2023, so that being said I feel comfortable on the balanced I think our guy.
In general is for the balance of the year to be around what we did in the full year 2021, which is right about 75%.
Big impacts here really being product shift in next in that geography mixes as well.
Thanks.
One on cryo nerve block I mean, it continues to grow sequentially.
Very impressive 500 accounts.
We've done some checks recently with thoracic surgeons, who are using it.
Their reactions have been incredibly positive.
Yes.
Talk about the physician reaction you touched on a little bit Mike.
Maybe help us understand.
Whats next for the technology.
Your thoughts are evolving about the opportunity and can this growth.
Thank you.
Great question, and you're right I think the incident response, you get from physicians and not just physicians, but also the people that care for the patients. After they go out of surgery in the ICU for the nurses.
<unk> and others.
Instant gratification, because they see the patients recovering more quickly they can breathe more easily and they can kind of get up and walk around that's really really important towards the recovery, especially in many of these different thoracic cases, so I think thats a common theme that we hear from people all the time, which is just the dramatic and immediate impact.
As it relates to the overall market.
The overall market in the U S is about 140 to 150000 thoracic procedures every year that number is growing.
We will do about 16 to 18000 or so of those cases. This year. So as you can tell we're really not even there were just over 10% or so penetrated into the space. We think that number can obviously grow quite dramatically because of the impact that we could have and so one is yes. We've got a lot of room for growth just within the thoracic part of our business.
Both going deeper into the accounts one in 500 accounts. There are more accounts that we can get into a lot of this is getting even deeper within the accounts that we have today as well.
And then kind of sharing it across more thoracic surgeons that might be in an area number two is I kind of briefly mentioned that as we think about how do we expand it we're already thinking about new markets for the technology in particular sternotomy.
And we anticipate that sometime probably mid to late next year that you might be it will be able to kind of maybe roll something out a little bit more aggressively into that area that probably wont have much impact on 2023 revenue, but we do anticipate that that will expand the market quite dramatically 24 and beyond.
Think about Sternotomy as it's about 250, or so 1000 of them in the U S alone.
600000, plus on a global basis. So when you start to do the math on the benefits that could be there is a very large market opportunity for us.
We're just at the beginning stages of kind of learning a little bit more about it and hopefully middle part of next year, we'll be able to roll something out more officially.
Thank you so much <unk>.
Thank you standby for our next question.
Our next question.
Will come from Marie Thibault from BT AIG Marine go ahead with your question.
Hi, Thanks for taking the questions Hi, Mike Angie.
I wanted to ask a question here first on converge and maybe you can give us some more detailed thoughts on how you're thinking about the ramp going forward. It certainly sounds like youre feeling optimistic about the momentum you're seeing.
As we look into 2023 or are there ways to sort of characterize the ramp in terms of the cadence you would expect into the next year and as a second part of that same question on the legacy Miss declines is that $2 $5 million is that a number we should think about going forward or do you expect that eventually.
Thank you.
Yes, I'll start with the first in the legacy <unk> business. The $2 five is kind of where we anticipated being for the time being and Thats kind of where we are it's obviously at a much lower number than it had been historically I would say that just a little bit more color on to that that was the part that when it got hit the most by Covid and those programs are just more difficult to get back up in <unk>.
And going and get consistent again find the staffing during the hospital for a longer period of time and so while we had some really good sites. It was in a much smaller base of customers. So that impacted a broader impact on that basis, it's kind of been consistent and we think in that kind of a $2 $5 million range or so as it relates to the kind of cadence for next year, we do see next year, obviously being better than this year.
We anticipate that we're going to see momentum build into the next year and throughout as we're adding more of these accounts I'm not ready to give like real specific cadence throughout next year, yet just because I think we want to learn more as we're getting more consistency coming out of Covid and getting these sites to have more consistent streams of patients that are coming in before Mary to kind of give a specific cadence by quarter.
Or anything like that for next year. So I don't think were ready to kind of give that kind of cadence, but we do anticipate growth to really pick up next year quite a bit.
We're confident that that's going to happen.
Okay I appreciate that Mike and then my follow up here on the strength you had in the open ablation market.
This quarter. It certainly we've heard positive commentary on on cardiac surgery. This quarter. So far from some of your peers do you expect some of that to be sustainable or are we working through backlog. How do you sort of see the open ablation franchise moving forward here over the very near term. Thank you.
Yes, I think from an open ablation standpoint, I think from a cardiac surgery standpoint, maybe I'll start with that because that's where you started the question.
We definitely see that that is a very durable base of business I mean, it's not growing super fast in terms of the case level.
But you are definitely starting to see that come back to a more normalized place before COVID-19 and we feel very good about the overall kind of cardiac surgery market in general I think many many years ago people were a little bit worried about it and now I think there is a lot of confidence that that's a robust area, especially with kind of the baby boomers getting older people living longer.
Cardiac surgery is a very good outlet and they get great results and so as a result, I think thats going to be kind of it'll be a solid solid base. The good news for us and the message. We've always said, it's about penetration is about <unk>.
Even today, we're still only in about 27% of all the cases that are patients that have atrial fibrillation.
That's up from 10%, maybe 12 years ago, but 27% is not 75% and all the guidelines are there and we've now eliminated things to enable it to kind of grow and to continue to grow and get that penetration up number. One is that we just we just added a new technology to make it simpler and easier for someone to ablate the heart without having to open up the heart.
Encompass does that and that was one of the big push backs that basically was in kind of limiting that that piece of the business. So really we believe we can grow that penetration for 27%.
That's really what we're focused on how do we get after the surgeons that are non treaters today, they're not doing the ablation today and number two is that the recent reimbursement changes that happened in October of 2021, where they added significantly to this.
It doesn't have an immediate impact, but it definitely has an impact that over time. They start realizing that wait a second this actually is profitable for us in addition to being really good for the patient and so you kind of have the combination of that happening again that doesn't have an overnight impact you really number one is to focus on the patient and what's right. There, but then it's always nice when you've got the additional reimbursement is.
Has been recognized by CMS to treating these patients makes sense for the patient and for the system overall and I think those two things over the course of the next many years to come or enable us to grow that penetration of 27% and I mean, much much north of that.
Very good thank you.
Okay.
Standby for our next question.
Okay.
Our next question comes from William <unk> from Canaccord Genuity. William go ahead with your question.
Hi, Andrew John I'm, Sorry, Bill Tonight, Thanks for taking our questions.
Could you start with just talking about the quarter over quarter Chinese and the U S appendage.
Management business once the equipment mix.
Thats different this quarter.
No John mix was relatively similar quarter to quarter.
Okay. Thanks, and then backfill cryo, Sir I mean, youre seeing really great growth in the pain management business can you talk about your thoughts on label expansion possible clinical work to show an opioid reduction label.
Maybe improvements in length of stay.
Yes, it's a great question when we have a lot of conversation about internally all the time John around what can we do to expand or get more data out there. So we have invested in many different trials.
Already a lot of single center, and maybe small multicenter trials to try to show different length of stay impact.
Youre not going to see as much length of stay in some of the robotic thoracic cases, just because they're only in the hospital for a couple of days and so really what you have to have there is you've just got they've got to see the benefit of actually seeing significant reduction in pain and that patient for not just their time in the hospital, but over the longer time and so we're looking at different economic studies to show that.
How do you actually benefit the system overall within that four to six month or four to six week period.
For that patient population and those are the kinds of studies that we're looking to study so not necessary a label expansion. It's really looking at the economic analysis for being able to justify spending the money because they see the impact right away on a patient then it's about can we get some economic analysis thats beyond just that length of stay component as it relates to the opioid side of it.
It is one that we're looking at the Big thing. We're looking at right. Now is how do you get a consistent piece there which is not every site uses opioids in the same way and there's really no standard of care for these patients. So we've run a lot of different advisory boards to trying to figure out how do we hone in on the exact right. One that's going to be applicable. After we do the study so I would say that sometimes.
Probably next year or late next year, hopefully, we'll have a study in mind it doesn't necessarily have to be a label expansion study. It could just be studies that are done in a multicenter basis and thats kind of the work we're doing right now to look at that.
Thank you.
And please standby for our next question.
Yeah.
Our next question comes from Matthew O'brien with Piper Sandler Matthew. Please go ahead with your question.
Great. Thanks for taking the question. So Mike can we talk a little bit more about convergent in the quarter.
Pretty sure Q3 tends to be a seasonally slower quarter, but I think you said that you were actually up 2% sequentially first of all is that right where did that growth come from I know its existing centers, but what did you see as far as adoption.
And then again kind of from <unk> question about next year.
It feels like Youre trying to guide us to be a little bit more conservative with our view on convergent for early next year may be building more so towards the end of next year and then maybe more of an inflection in 'twenty four am I characterizing that right.
And Matt I'll take the first part we did see sequential growth in <unk>, a 3% quarter over quarter and most of that was driven by a higher number of accounts that were ordering so we hit kind of a high watermark in terms of number of accounts ordering in the quarter in Q3 of this year. So that was it was a mix it was new accounts as well as going deeper.
Within existing accounts.
And then as it relates to the cadence of kind of the trend again, I think you're kind of characterizing it reasonably accurately around kind of what we're thinking about but we don't want to get too far ahead of ourselves. After one quarter. We've had a couple of quarters in a row here. We've seen some nice sequential growth. We do feel like this is going to be a long term durable strategy for us our business.
But we don't want to get ahead and kind of give number specifically yet for the early part of next year.
Got it and then as the follow up and I appreciate that feedback.
There was a on the PFS side I hear a lot like El PFA.
Over the whole industry and that's why convergence that we are going to take off but there was a.
Safety notice.
Recently about PFA, and Hey people are using it off label stay in your lane. So I'm just curious I know it's early.
Warning letter, our notification will really keep people.
Using PFA for paroxysmal versus long standing persistent and it really keeps people a little bit more more driven to use.
The conversion approach in the future for a long standing persistent and then just real quick on the ISP side is that a difficult to identify a patient population that mix would that be.
Challenging as far as your.
Trying to get that indication out there enrolling going forward I know again, it's super early.
Yes first of all on the PFS side, my our thoughts really haven't changed much I think it's a potentially complementary products.
Product because I think there's a lot to learn I think what youre seeing in some of the data that's coming out from some of the early studies.
Demonstrating that there is a lot for us to learn but it's still an exciting technology and has a lot of promise most of the studies are being done in paroxysmal patients at this time and I think that I think will kind of wait for that I think what we do is we actually add a lot of value and if you watched the Dr.
Dr. <unk> Datta, he actually I thought explained it very well on our call where he was talking about the fact that the epic cardio portion combined with any kind of endocardial portion of where the PFA RF and cryo is going to benefit the patient from that standpoint, you really want to have it sandwiched in getting purely truly durable transmitter lesions, we believe whether it's PFA RF for cryo that theres going to be a.
To the <unk> approach enhancing that durability long term and there's a lot to learn about what can happen with BFA. So when I have conversations with a lot of EPS I.
I think that we're going to once we get through kind of the super excitement upfront when you really get down to brass tacks of thinking through how they're going to implement this I think converge is a really big role to play even in PSA accounts, if and when that that does take off at some point in time from an IFC standpoint, there are a lot of patients that have Isd I think youre right that a lot of work.
It has to be done to.
Begin to kind of develop the care pathway for those patients finding them that referral basis, it's going to happen.
We saw a lot of activity in Belgium, where they actually got a lot of patients once they announced they had a solution for it I think once we have a solution and then this is prime for kind of a direct to consumer type of activity at some point because it's the patients that are going to be out there, they're going to come and want to get treated theyre going to want to fund treatment. Because there is no treatment today that is many years off we've obviously.
Got to get the label first so there's a ways to go on that but I would anticipate thats, probably how is it going to reach a lot of this patient population.
Got it thank you.
The standby Sir our next question.
Yeah.
Our next question is coming from Mike Matson of Needham <unk> Company. Mike Go ahead with your question.
Thanks.
Just one on cryo sphere, so to expand into the Sternotomy opportunity.
What do you have to do from a product and regulatory standpoint, you have to redesign the product yet.
Get another five 10-K et cetera.
Yes, it's a really good question, Mike right now we've got to go through some internal testing just to make sure.
We kind of understand how it works on the <unk>. We do have cases that are actually happening there today.
So from that standpoint, the biggest thing we've got to do is just make sure that they can apply it safely, but the product itself doesn't have to change the product actually.
It works very well.
I'm guessing many of them are going to want maybe a little shorter shaft or maybe a little abandoned. It. So they can kind of get a little bit different access to it as opposed to the report.
But otherwise the actual way that we deliver the cryo energy to the ball at the end how that comes delivering the exact right amount. It's the same intercostal nerve to air Blading, when youre dealing with our economy. So it's very consistent from that standpoint, and so from that standpoint, we don't think we need to make much on the regulatory or the.
Or the product standpoint side.
Okay. Thanks, and then you gave us your latest.
Penetration numbers for open heart ablation and I was wondering if you could do the same with Asia clip I mean, continuing to see really strong growth here, but.
Just wondering what you think the penetration is U S and worldwide for each eclipse and Thats, assuming you don't obviously have the stroke indication that they are running with <unk>.
Yes, we believe that we're probably closer into the mid <unk> or so on the overall <unk>.
Clip on open cardiac cases today, so there's still a lot of room for growth even in open cardiac cases, obviously, we're expanding the market with the <unk> trial and feel very confident in moving forward on that.
And so from our standpoint, where we feel like we're in a good position to not only just expand penetration, but also on the new market.
Okay. Thanks, and then it sounds like you've got some new versions of the <unk> clip coming in.
Part of the growth story, there has been that <unk> gotten some nice price premiums on these launches in the past. So how do you think you can continue to.
Do that with new versions.
Other words priced at a premium.
I think to be told on the pricing side of things, but the biggest thing right now as it were.
We're always innovating to make the product easier to use for them to be able to put on all anatomies to make it simple, leaving less behind those are the kinds of things that we're looking for it. So it is making a smaller making more mobile and really continuing to innovate to show people, we're making major investments in the platform long term that they can apply it on every one of their cases.
Okay got it thank you.
Yes.
Standby for our next question.
Our next question comes from Suraj Kalia of Oppenheimer go ahead with your question.
Just as you monitor versus go ahead suraj with your question.
Trying to understand Suraj with Oppenheimer.
Some of these assumptions and.
At the same time, maybe Doug or someone else if I could just throw the destroyed.
Suraj.
Speaking on this call it it's a little tough to hear you. Thank you for taking my question.
Right.
Suraj.
And I guess Suraj it was really difficult to hear the question Suraj you want to come back in and we can Mike.
Oh now we can thank you good okay that we lost you there sorry about that Hey, Mike I know.
People have asked a lot about converge.
If I could just Mike when you look at the Pie chart for the quarter right just the growth Pie chart.
If I could.
If I could split it sure.
The growth ex person from converged versus cries fare versus <unk>.
Versus others.
Just give us a relative framework of how we should think about the different components of growth.
And the reason I ask is.
We are seeing the number of the embedded numbers and converts right.
But it seems most of the growth seems to be coming from cries for year end and.
Maybe you could parse it to the next layer would be great.
Yes, so suraj when you break down the U S business I think the numbers go like this the pain management business or the cryo sphere probe grew a little over 68% year over year that was followed then by our open ablation business, which again my commentary included that about half of that half of the two.
The percent growth or so for the quarter is really procedure growth. The other half is from an uptick in pricing that we're seeing on the encompass plant.
You followed by the appendage management business, which reported about 18% growth in the U S year over year than Etsy sense. The epicentre tool was 12% and then offset by a decline in the legacy Miss tools year over year.
Fair enough and LG did you talk about new stores same store sales specifically for converge. Thank you for taking my questions.
The prepared comments included that this was one of our record quarters from a number of centers that were ordering so we've cautioned investors to take a look at the kind of number of centers that are ordering some some centers may be ordering but it's at one or two by during the quarter, which is why we have been hesitant to give kind of the total population until we get accounts that are really.
Going in fully have adopted driving significant volume might say number of centers to us is an encouraging sign of an adoption, but maybe not the best time relative to overall revenue.
Thank you.
And with that I'm showing no further questions at this time I would now like to turn the conference back to Mike Carrel for closing remarks.
Great again, everyone. Thank you for joining US Tonight as you can probably tell from our tone and tenor on the call Tonight. We are really excited about our future about the diverse platform. We have across all of the parts of our business momentum in each and every area that we've got there. Thanks again for supporting US and we look forward to hearing or talking to you early next year have a great one.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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