Q4 2022 Penumbra Inc Earnings Call
Good afternoon. My name is Cathy and I will be your conference operator today at this time I would like to welcome everyone to the pin number of fourth quarter and year end 2022 conference call.
All lines have been placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time simply press. The star followed by the number one on your telephone keypad, if you'd like to withdraw your question from the queue simply press Star one again on your keypad.
I would now like to introduce MS Jee Hamlyn Harris Investor Relations for Penumbra.
MS Hamlyn Harris you May begin your conference.
Thank you operator, and thank you all for joining us on today's call to discuss <unk> earnings release for the fourth quarter and full year 2022.
The press release and financial tables, which includes a GAAP to non-GAAP reconciliation can be viewed under the investors tab on our company website at Www Dot Penumbra, Inc. Dot com during the course of this conference call. The company will make forward looking statements pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements regarding our financial performance commercialization clinical trials regulatory status quality compliance and business trends.
Actual results could differ materially from those stated or implied by our forward looking statements due to certain risks and uncertainties, including noise referenced in our 10-K for the year ended December 31, 2022, which is scheduled to be filed with the SEC on February 23 2023.
As a result, we caution you against placing undue reliance on these forward looking statements and we encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned for a more complete discussion of these factors and other risks that may affect our future results or the market price of desktop.
<unk> disclaims any duty to update or revise our forward looking statements as a result of new information future events developments or otherwise.
This call certain financial measures are presented on a non-GAAP basis, the corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release.
Adam.
Penumbra is chairman and CEO will provide a business update.
Thank you and our Chief Financial Officer will then discuss our financial results for the fourth quarter and full year 2022, and Jason Mills, Alexander Vice President of strategy will discuss our 2023 guidance center with them for a president of interventional will join the team for questions with that I would like to turn over the call to Adam Elsesser.
Thank you Jean good afternoon. Thank you for joining the numbers fourth quarter and year end 2022 conference call.
Our total revenues for the fourth quarter were $221 2 million.
Year over year increase of eight 4% as reported and 10, 5% on a constant currency basis.
Our fourth quarter revenue increased three 5% sequentially, our fastest sequential growth of the year and a trend we expect to continue into 2023.
Gross margin increased to 110 basis points compared to the fourth quarter of 2021 and was consistent with our near term expectations. We saw continued improvement in productivity, which was offset in the near term by inflationary pressures, we increased our non-GAAP GP non.
non-GAAP operating income to $7 2 million, representing three 3% of revenue in the fourth quarter, increasing nearly three fold year over year.
We generated positive operating cash flow in the fourth quarter and continue to expect increasing profitability and operating cash flow in 2023.
I will discuss in a few minutes for.
For the full year of 2022, our total annual revenues were 840, $847 $1 million representing growth of 13, 3% over full year 2021 on a reported basis.
On a constant currency basis total revenue grew 15, 5% over 2021, which met our original guidance given this time a year ago.
We are now embarking on a new era and thrombectomy.
And our team is focused on doing the purposeful work necessary to help the significant number of patients who can benefit from our proprietary computer orchestrated thrombectomy products.
Our journey to develop the most optimal solution for safe effective fast and powerful removal of blood clot wherever it resides in the body.
Nearly two decades in the making.
And the early results from the use of lightning flash in venous and P patients and Thunderbolt in our stroke trial is giving us even more confidence that the computer orchestrated aspiration is changing the treatment paradigm and profoundly positive ways for patients and physicians.
Looking into 2023, we reiterate our expectations for our business, we expect to achieve at least $1 billion in total revenue expand our gross margins, making progress toward our objective of 70% plus margins within a couple of years and increase our <unk>.
Profitability and operating cash flow.
We will realize these goals by helping more patients with our proprietary products and if we look beyond 2023, we believe we are still.
Closer to the beginning of our journey to help all patients who had blood clot in their body rather than the end of the journey. There are over 1.25 million patients with clinically significant clot in their bodies in the United States alone across the five vascular beds, we target and the number of patients around the world.
Similar needs two to three times larger.
The rate of treatment with mechanical thrombectomy in the United States ranges from under 10% to about 25%. So we have in front of us in 2023 and beyond a significant opportunity to help the vast majority of these patients with our computer orchestrated thrombectomy.
During the fourth quarter of 2022, our vascular business achieved record revenue of 129.7.
$7 million.
Salaries sequentially to over 5% growth compared to the third quarter.
Our vascular business was driven by growth in our thrombectomy franchise, which grew over 20% year over year and also accelerated sequentially growing 5%. We continued to gain share in the fourth quarter in venous and arterial and coronary where theyre lightning 12 lightning seven in Cat Rx products.
Looking into the first quarter, our vascular team is launching full speed into the lightning flash era in the United States.
Lightning flashes performing just as we had expected.
And is being used successfully in both pulmonary embolism and DVT procedures.
We are also proud to announce that we are embarking on a new era in arterial thrombectomy last week Lightning bolt was cleared by the FDA, we have talked in the past about both the promise and the propriety of our modulating aspiration algorithms, which are built into both lightning bolt and our thunderbolt stroke product.
We're excited about the potential of this technology for arterial patient.
Initial evaluation cases, using lightning bolt or plan for the next few weeks and we are on track to initiate a full launch of this product just before the end of March.
Moving to Thunderbolt, we are seeing solid progress enrolling patients in our Thunder trial and importantly, the product continues to perform.
Just as we had anticipated.
Notwithstanding the slowing in the growth of the stroke market that has been discussed during the past year, the red catheters, which will be part of the Thunderbolt system and our other neuro products continue to gain share in the United States and globally, which led to another quarter of sequential growth.
The recent launch of Red forty-three, coupled with the launch of an access products should help us grow our neurovascular neurovascular business in 2023, leading up to the introduction of Thunderbolt. We continue to believe Thunderbolt has the potential to fundamentally change intervention treatment of ischemic stroke.
And we believe this product in conjunction with the work of our extraordinary commercial team in partnership with physicians could create an environment in the stroke care system in the U S and which many more patients who suffer an ischemic stroke will get treated successfully and quickly.
And some we still have a long way to go to reach all of these patients and we believe Thunderbolt will help the field get there just as we expect our proprietary computer orchestrated products to do across all five vascular beds.
And while we think these products will initially have the biggest impact on our thrombectomy business in the United States. We plan to bring these products to physicians and patients in Europe , China, Japan, Asia Pacific and Latin America, where our businesses are already strong and growing but still just as nascent in the U S relative.
So the number of patients we can ultimately help.
Let me briefly discuss our immersive healthcare business before handing the call to Maggie.
As we've stated in the past we have restructured our work in this field to better fit with the current market. This has allowed us to focus on the two most important aspects of immersive healthcare first ensuring that patients who are using the real immersive system are responding positively to the technology and <unk>.
That we are working with large health care providers, both public and private.
To figure out how to properly introduce a real immersive system into the therapeutic workflow for patients who need rehabilitation as well as patients struggling with aging and many other conditions, including mental health issues.
We remain very optimistic about these efforts.
I'll now turn the call over to Maggie to go over our financial results for the fourth quarter and the full year 2022.
Thank you Adam good afternoon, everyone today, I will discuss the financial results for the fourth quarter and full year of 2022 finance financial results on this call for revenue and gross margin on a GAAP basis, while operating expenses and operating income on a non-GAAP basis.
Corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release.
For the first quarter ended December 31, 2022, our total revenues were $221 2 million an increase of eight 4% reported and 10, 5% in constant currency compared to the fourth quarter of 2021.
Our geographic mix of sales in the quarter was 71% U S and 29% international.
<unk> reported growth of eight 8% and our international regions increased seven 7% reported and 14, 9% in constant currency.
We see strong sequential growth in U S and Europe direct channels upfront by timing and international distributor orders.
Moving to revenue by franchise revenue from our vascular business grew to $129 7 million in the fourth quarter of 2022, an increase of 14, 2% reported and 15, 4% in constant currency compared to the same period last year driven by growth in the U S.
Yes.
Revenue from our neuro business was $91 5 million in the fourth quarter of 2022, an increase of one 2% reported and four 4% in constant currency compared to the same period, a year ago, driven by the rash catheter launch in Europe .
Moving to gross margin gross margin in the fourth quarter was slightly improved at 62, 6% compared to 61, 5% in the same quarter last year.
While we have made great progress in labor inefficiency at our Roseville manufacturing site short term disruptions from supply chain inconsistency have had an impact on steady margin improvement.
Looking forward to 2023, we target to achieve 100 to 200 basis point improvement driven by product mix and productivity offsetting inflation headwinds.
Now onto our non-GAAP operating expenses, which exclude the amortization of acquired intangible assets of $2 4 million for this quarter and last quarter, respectively, and as well as nonrecurring research and development milestone one time expenses associated with the <unk> acquisition and <unk>.
This station of acquired intangible assets of $42 6 million for the same quarter last year.
Total operating expense for the quarter was $131 2 million or 59, 3% of revenue compared to $123 million or 60% of revenue for the same quarter last year.
In the fourth quarter of 2022, we had $1 $5 million due to one time costs for reorganization obsolete a continuation on future savings, we previously discussed last quarter.
Our research and development expenses for Q4, 2022 or $18 million compared to $19 4 million for Q4 2021.
SG&A expenses for Q4 2020 to 100.
$113 3 million or 51, 2% of revenue compared to $103 5 million a 15, 7% of revenue for Q4, 2021, and $106 $2 million of 49, 7% of revenue last quarter.
We are investing in resources to support our growth target, while maintaining discipline in discretionary spend.
In 2023, we expect high investment in clinical trials, while leveraging our infrastructure investment made in 2022 to deliver operating margin expansion.
We recorded operating income of $7 2 million or three 3% of revenue in fourth quarter 2022 <unk>.
Excluding the amortization of acquired intangible assets compared to an operating income of $2 $5 million during the same period last year.
I will now summarize our full year performance.
For the full year 2022, our total revenue was $847 1 million.
Which represents an increase of 13, 3% reported and 15, 5% in constant currency compared to full year 2021 hour.
Our geographic mix of sales in the year or 69, 8% in U S and 32% International.
<unk> reported growth of 12, 1% and our international regions increased 16, 2% reported and 23, 5% in constant currency compared to a year ago.
Revenue from our vascular business for the full year of 2022 was $499 4 million an increase of 22, 1% reported and 23, 6% in constant currency.
Revenue from our neuro business for the full year of 2022 was $347 7 million an increase of three 7% reported and five 6% in constant currency.
Our gross margin for the year was 63, 2% of revenue compared to 63, 6% of revenue for full year 2021.
Excluding the amortization of acquired intangible assets of $8 $3 million by 2022, and non recurring research and development milestones onetime expenses associated with <unk> acquisition.
Amortization of acquired intangible assets of $42 6 million in 2021 in 2022, we have non-GAAP operating income for the full year of $14 4 million compared.
Compared to a non-GAAP operating income of $35 million by 2021.
Turning to cash flow and balance sheet.
The fourth quarter with a cash cash equivalence and marketable security balances of $188 million, we expect positive operating cash flow trends to continue in 2020.
And now I'd like to turn the call over to Jason.
To discuss our guidance. Thank you Maggie and good afternoon, everyone.
We reiterate our guidance for total revenue in 2023 to be $1 billion or more representing year over year growth of at least 18%, which is an acceleration from 2022 total revenue of $847 million. Moreover, we expect our quarterly revenue growth rates to ask.
Salary as the year progresses.
Further we expect to expand gross margins in 2023 toward our 70% plus objective within a few years with margins increasing from current levels in the first half of the year towards the mid 60% range in the second half.
Lastly, we expect our operating margins to expand sequentially during 2023 approaching double digits as we exit the year I will now turn the call back to Adam for closing remarks.
Thank you, Jason Maggie and cheap.
Brief in my closing remarks.
This is the dawning of the age of computer orchestrated aspiration.
With this technology, we can see to the point, where removing blood clots from any part of the body becomes routine.
It is very important to give special recognition to the entire team at penumbra, who over the course of almost 20 years stayed focused on this arc of innovation.
I admire you all so much you'd never gave up.
Kept working and working sometimes against all odds to deliver this extraordinary technology to the field.
Also it is important to give a special acknowledgment to Dr. Corrie Teigen and Scott pagan for their critical role in making this technology.
<unk>. Thank.
You to them and the entire penumbra team.
Thank you operator, we can now open the call to questions.
At this time I would like to remind everyone in order to ask a question. Please press. The star then the number one on your telephone keypad and we will pause for a moment so everyone the opportunity to signal.
And our first question will come from.
Okay.
<unk> chickering of Deutsche Bank.
Hey, good morning, guys. Thanks for taking my questions.
You talked about sequential revenue growth.
Thank you <unk> and into <unk> is there any color that you can give us as we should.
Thinking about that growth or with lighting flash in the first quarter.
Coupled with $151 of revenue some lighting flash in 2023.
Yeah, So as you.
You know, we don't guide quarterly, but we do expect the quarterly growth rate in the first quarter two.
To be slightly higher than the sequential growth you saw fourth quarter over third quarter.
As you move beyond the first quarter, the second quarter likely accelerates quite a bit with the launch of lightning and flash still fresh and lightning bolt at the end of this quarter and then the <unk>.
Half of the year, we expect strong sequential growth rates as well probably better than the first quarter sequentially.
And sort of in line with where we'd expect to see second quarter.
Okay and then.
Go ahead.
I would like to add to that is that sort of the when you have a launch not just one but two.
Like we have with flash and lightning bolt, that's just sort of the normal sequence of.
What happens with getting into all these labs and making sure that you go through the value analysis Committee and everyone has it it just had that sequence to it.
And as you know we're knee deep in.
Sort of responding to doctors asking for it as opposed to us asking them to buy it.
Which is a really really nice.
As the band.
That's why you're going to see that kind of growth going.
Okay, and then sticking on lighting flash can you give any details on what the reorder rate is from the physicians that are using it.
Any early color on either market penetration gains from shifting from medical to mechanical thrombectomy or market share shifts. Thanks, so much.
Yes.
We're a month into the launch so let's take that into account.
To give you guys some sense needless to say.
I think it's fairly I'm fairly confident in saying that.
This is lightning flashes without it out with the best launch we've ever had.
They have said that one other time and it turned out to be true.
There is the use of this product the excitement around it.
The speed and efficacy the safety profile have made this really just an extraordinary product.
Obviously as we were.
We're in the middle of the quarter, and we will give a lot more color.
At the end of the quarter on the next call.
But this is a great great launch.
Great. Thanks, so much.
Okay.
And our next question will.
Robbie Marcus of Jpmorgan.
Hi, everyone. This is a real hands on for Ravi.
Congrats on a nice quarter I guess I just wanted to touch on pricing and how we should think about better mix and how that reflects in gross margin and profitability. This year and beyond can you comment a little bit about how much of gross margin expansion. This year is due to kind of the general productivity.
Improvements that you brought up versus the mix benefit that we should see from new products.
Yes, well Megan why don't you take a shot at that same sort of question now just come in on the <unk>.
<unk> margin impact first as we mentioned Thats, where we.
We are on track to Al let me convey progress and on track to our 70% gross margin target. It is going to come from productivity improvement.
The remaining transferring them into red cell product makes sense <unk> impact as well as longer term lean initiatives, all three factors that going to.
Has an impact throughout 2023 gross margin target.
It's going to continue to improve beyond 2023.
In 2023, we expect to see a little bit bigger contribution from product mix.
Okay.
Great No that's super helpful. Thank you.
I guess another one in just more focused on near term trends and can you kind of touched on this but I just wanted to get now that we're almost done with February basically and just wanted to see how or if you had any more detail on how the launch so lightning flashes shaping up and the contributions you can expect from both flash as well as lightning bolt.
In the near term, but as well as over the balance of the year and I guess, maybe kind of missed.
The specifics and split between those that you can provide any color there that'd be really helpful.
It's a great question and obviously in the middle of a quarter where were talking about last quarter's numbers.
It's a little tricky to.
Sure.
To start talking about that in the kind of detail, maybe you want that being said.
As I've already said today.
The launch of flash is going extremely well.
We're a month plus into it and.
The level of interest the level of success. We have seen is obviously driving people to want to order the product and continue to drive. So we're we're just named APE in getting through that process and getting the product through all the various value analysis committees and responding as fast as we can.
To that interest.
We obviously haven't even launched lightning bolt yet so, let's let us do some cases in.
And we will be able to report that next quarter.
But needless to say.
It's a.
A great time.
Exciting it's fun to see.
The level of interest in reaction to.
The success, we're seeing with this.
There is.
It's just one of those things that you get to do very very rarely in a career in med Tech and we're pretty excited about it.
Yes, Brian .
This is Jason just to add on to that.
We believe and maybe this sort of goes to the heart of your question with respect to our guidance.
We believe we have very strong visibility into the lower limit of our guidance range.
At that $1 billion level, but as Alan mentioned this is really early in the launch of two very important products with respect so with respect to the upper end of guidance. This year. We don't have yet have the same visibility to put an upper limit on it so just give us a quarter.
No that's really helpful. Thank you so much.
We will take a question from Michael.
Jeffrey.
And Michael.
Hello, and thanks for taking my questions.
So just wanted to follow up on Maggie's comments around short term disruptions in the supply chain in four Q and.
Just wanted to get a little more color there and just can you talk about if any of those are continuing into 'twenty three and how they may impact gross margin through the year.
Yeah. Thanks for the question I did mention that the supply chain.
Inconsistency disruption is just short term.
In fact, only in terms of slowing down our gross margin improvement that it likely will not affect their ability to meet demand and longer term margin improvement opportunities.
Okay. Thanks, and then do you think you could comment a little more just on how you're thinking about operating expense cadence through the year.
Yeah.
I think this year, we are going to.
We continue to invest but we're going to start seeing more leverage on that G&A infrastructure investment that we had last year.
Gradually seen sequential operating margin improvement and I think in Jason's guidance come in.
We'll continue to see improvement throughout the end of the year, Yeah, and the only thing I would add to that Michael is.
First we expect to be profitable in every single quarter and the first quarter as with every first quarter, we have two.
Two important national sales meetings as well as payroll taxes.
We're obviously germane to that quarter.
We move through the year.
We expect to by the end of the year be approaching double digit operating margins.
Okay. Thank you.
Thank you.
And next week.
At this time of change.
Hi, David Hey, guys, Hey, Jason Thanks for taking the questions first so in the past you've talked about market share gains market growth and then pricing as being contributors to growth for flash not necessarily in that order, but just wondering when you think about bold and then ultimately thunderbolt, if you'd be able to kind of characterize.
Where do you see the biggest amount of growth within each of those segments coming from whether it's market share growth price that'd be helpful.
You are talking about as it relates to lightning bolt or both.
All of those products slightly both like Lightning bolt and then some people okay. So lightning bolt.
Is sort of similar to what we've said about flash where price will be the smallest of those three and.
And as it relates to market growth versus.
Share gain.
With that product, it's sort of.
There are almost the same thing depending on how you define it.
As you know we're you know.
From a mechanical product.
We have the vast majority of share in the arterial already.
But the biggest sort of opportunity comes from both people physicians, who are using tpa drip catheter directed lysis or <unk>.
Open surgery and so.
If those are classified as market growth type thing then that will by far be the biggest gain if you were to classify those as using another.
Tool. If you will then that would be share gains from those two that's the biggest pool right now all of those patients are still with our customers.
If they're already getting catheter directed laces or theyre getting surgery, there with our customers or potential customers already and so that will be the first goal is to go there and for those of you who in January saw the video of Lightning bolt.
It's pretty extraordinary.
And.
We have a fairly high level of confidence.
Around that product in the clinic, because obviously, we've been doing stroke cases with similar technology.
So we so its not starting from a <unk>.
Thank slate.
And I think we will see a lot of excitement from patients that are printed from physicians, who are using one of those two modalities switch the soonest.
Depending on your terminology.
It's either one of those but it's from those two sources.
Okay. That's helpful. And then maybe stepping back kind of from a higher level on the neuro side I think at the international stroke Conference.
There was some positive data just around use of thrombectomy or the benefit of thrombectomy into some type of patients that are currently excluded and the guideline recommendations being dosed with essentially larger infarct volumes right. So when we think longer term about the potential market expansion opportunity from that indication. Just wondering initially one what your view is on that and then when do you think.
About the new launch maybe market expansion, just regaining share of some of the grassroots efforts have been going on in the local kind of state and local levels to reaccelerate potentially.
Underlying urethral Acme growth rates.
How would you just kind of think about the three or four of those.
In your view as it relates to Reaccelerate your kind of your restaurants are back to the growth rates. Thank you.
Yeah I think.
In the stroke market specifically.
We've been successful in the last couple of years because of share gain.
The Red series.
Back a decent amount of share.
And that's continuing.
We mentioned in the prepared remarks that we have read at.
43, and an access tool I think that will continue to drive.
Share gain as it relates to the market growth.
Hum.
We're going to always remain not just hopeful and optimistic but I think it is grounded in a good sense of reality that.
As you see data that that comes out like you alluded to ISC, which is I think a lot of the physicians in this field.
So leave that but it really really is nice to see that kind of rigorous data that supports it.
As well as products, just getting easier and easier not just with the Red series and the additions that I talked about but then ultimately with Thunderbolt.
You are really set up for all of the things that.
Could potentially limit people getting successfully treated to sort of make those excuses go away, if you will and drive growth again.
It's hard to predict them, we've never been that good at predicting over the.
Seven or eight years now that we've been talking about stroke growth.
That growth in an exact way, but I think youre seeing everything lined up.
In a positive way for.
A number of years now of sort of re engagement and growth.
And.
It's hard to put an exact number on that but it feels like that's happening in the field now.
Thank you.
Yes.
And now we'll take a question from Ryan Zimmerman of <unk>.
<unk>.
Hey, good.
Good evening and thanks for taking the questions very exciting to see all the products that are coming out.
I wanted to ask.
First on the guidance and and and.
The 1 billion plus kind of leaves a lot of room you know.
To go higher and I'm wondering.
If you can elaborate on kind of how you think about what's implied in the guidance.
From a market share gain perspective.
Because if I understand correctly, you're not assuming market share gains.
From Lightning flash or lightning bolt at present.
No. We are so let me let me walk you through it.
Just a little bit Ryan, but first thing, let's start with the guidance itself. So the lower limit of $1 billion.
As I've mentioned in the prepared remarks and acceleration in growth to 18% and I think you can appreciate.
Company.
Gail comparing against nearing nearly $850 million in 2022.
Significant projection in and of itself as I mentioned, given the profoundly important.
<unk>.
Aspects of these two technologies in a large number of patients that both of these new technologies lightning flashing lightning bolt can help.
We don't have the kind of visibility.
Right now that we do on the lower limit we belief.
So as we move into the next give us another quarter, we think we'll have more visibility, but as it relates to share as Adam mentioned, there are three components to our growth profile. The least catalytic is the price the two most catalytic will be.
Share gain and market growth.
Okay understood and then Adam I was reviewing the transcripts and I may have missed this but.
I didn't hear timing on Thunderbolt enrollment completion and submission and then subsequent approval and so I was wondering if you could maybe clarify maybe I missed it but I don't think I heard it.
No I didn't give a specific end.
Our prediction and as you know.
Predicting the enrollment of emergent disease like stroke is not.
Not something that.
Anyone if anyone's as they can do that.
Discount that predictions. So so we're not going to do that what we have said.
As we're doing fine it's on track.
And we're feeling good about that that being said, we also said that.
There is no.
Thunderbolt in our projections for 2023 from a from a revenue standpoint. So so we're we're not saying don't read data is in fact going well. It is but we're also being cautious in our prediction the Thunderbolt is.
We will do fine and do all the things we said, we're going to do without Thunderbolt.
In that in the numbers for this year.
Okay.
Appreciate it thanks for taking my questions.
And next we have Mike Matson of Needham.
Hey, Mike Good afternoon, guys. Thanks for taking my questions I.
I guess I'll start with the just the red catheter so.
It looked like the growth maybe improved a little on the neuro side can you just comment on.
How those are doing in Europe , I think you've launched some kind of late in the third quarter of since the first full quarter. They were out there and then I had a follow up on Red 43 can you, maybe just talk about sort of where that fits in the lineup.
And how it's different from the other other catheters.
Sure.
Let me, let me start backwards.
I will start with <unk> 43, and then we will answer the larger question about the Red series in Europe , and I can broaden that question due to the U S. As well Greg 43 early early days as you know in terms of getting it out there and getting it through the various.
The people who have done a really really liked it.
<unk> sort of coaxial catheter plus the ability to have a catheter that size that.
That can go digital.
As Ben.
Look just really really responded to.
Particularly proud of.
The design work that has gone into that catheter and I think it's a clear need in the market.
As it relates to the general franchise that Red is broad.
Both in Europe and in the U S.
Ah.
Been a great launch.
You really saw it.
Start.
The fourth quarter of 2021.
As a bolus of that.
Which actually kind of.
So you know.
The golf right now because there was a great launch, but that being said it has continued really strongly and taking share. So even in a market that isn't now growing that franchise has continued to do well because more and more people are using it.
And Thats.
That's what you want you want a product that's good that is that good that word of mouth travels and people try it and they stick with it and that's what's happening with the <unk> and obviously that's critically important to the success of Thunderbolt because those catheters are paired with Thunderbolt and so if those catheters are getting.
The the reaction that theyre getting there that trackable.
Catheters people want to use.
Obviously, moving on and adding Thunderbolt, two that becomes that much easier.
Okay. Thanks, and then just on the Thunder trial.
May have asked this on a prior call I can't remember to be honest, but.
Will we see that data before you submit the FDA or after you submit it at some point before the product actually launched.
Yeah.
It's it's hard to tell and it will depend on when that data is ready if it happens to be ready and there is a big meeting that it can be presented on.
Before it's made otherwise public sure then you would see it if the timing of that doesn't work, we're obviously not going to work.
Wheat to submitted to the FDA.
In order to to presented under meeting so it's really just depends on the timing and at this point that's hard to predict.
Got it thank you.
Thanks, Mike.
And next we have Kevin.
RBC.
Thank you so much for taking my questions and looking forward to it.
Into 2023.
So just with respect to the questions I was just wondering if you could elaborate on any apparent clinical advantages of flash and early cases with.
With respect to maybe talk some over time, you did mentioned speed efficacy and safety.
Any way to quantify that.
And are you seeing greater uptake in PPE or DVD cases, and then with respect to my second question. I was just wondering if you can give us a little bit of an update on clinical trial activity and then on Thunder I, specifically just wanted to get a sense of the enrollment I think as I understand it.
Patients have to be treated in a certain timeframe is that limiting.
And Goldman did any in any way or is it on track. Thank you for taking the questions alright.
Ill try to remember all either try to write it down.
I might need a prompt.
The first.
<unk>.
The question about.
Safety and speed and all of that.
And then the answer is yes, all of those things are good.
And flash has all of those things.
And again, it's one of those rare things.
In our at least our experience in 20, some odd years in this field that.
<unk> product is that good and has the kind of word of mouth. That's following it.
So it's it's noticeable once you use it.
And we're particularly happy about that because again it goes to how well patients can be treated.
<unk>.
The next question was still flashing.
I tried to write fast and then we went into Thunderbolt, So remind me of the <unk>.
The next question.
Yes, well actually just a follow up if you can quantify like you know in terms of speed or anything if you can quantify it and then the question was really about if you're seeing greater uptake CEO DBT cases.
That's right so.
How do you quantify it.
Every case is different obviously DVT and PE are different.
And you can have easy or basic P cases in more challenging ones and vice versa, and DVT, so hard to quantify that.
In terms of numbers, if thats, what youre looking forward the answer is the impression.
The reality is people who are using it are reacting to that very positively like wow that that was amazing that was so easy so fast.
And powerful and it just got the job done.
So it's hard to quantify that.
We don't we're not running a trial on it now so there is no.
Number that I can share with you that have.
Any kind of <unk> it sounds like.
A collection of all self reported stuff.
So I think it just it is notably performing better than what they're used to.
So thats that between <unk> I think we're seeing a real mix.
Thank for.
People, who are using it I mean, many of them are using it in both.
Yeah.
The doctors are reacting equally good or equally favorably in both of those there is not at all clear difference between Oh, well I liked it but only for this versus that.
You are responding to it and again the vast vast majority are.
Who are using it.
For both DVT and PE.
On the Thunderbolt question.
Really hard as I have said a couple of times to quantify.
Enrollment for you stroke enrollment and I've done lots and lots of stroke trials have been involved with them over the years.
It goes in fits and starts you might go to four days without a case and then you'll have five cases in two days that kind of thing thats the nature of a stroke trial.
That's not different than the stroke trial, but as I've said it.
And in good shape on track.
And again cautiously.
Make sure we aren't counting on this product.
And which we don't control the timing of the trial.
For any revenue in 2023, so from that standpoint, I think everyone congrats to assure that.
We're in pretty good shape and arent out on a limb on that topic.
Thank you so much.
Of course, thank you good questions. Thanks.
<unk>.
And now we'll take a question from Matt O'brien with Piper Sandler.
Hey, Matt.
Okay.
Thanks for taking my question.
I guess first I was wondering if you could provide any more information or any color on surgeon training for lightning flashing any feedback you've gotten from physicians.
Sure.
Sure surgeon training.
Interventional and training whichever the specialty is.
Physician training.
Is it slightly different depending on if the physician has used one of our lightning as in the past.
If they have the.
Setup is very similar.
If they haven't we just have to do in in service and get.
Their lab squared away, but but again, we've been doing that for a while so it's relatively straightforward.
The only real difference.
For people, who abuse lightning.
Either 712 or light versus lightning flashes, there as the algorithms different.
The feedback is different and so there is.
And it's a lot more powerful suite. So there is.
So just basic.
Training around how to think about that and how to read what the visual cues on the lights in the sounds.
Again, not different than anything we've done in the past and certainly not providing.
Providing any form of sort of barrier for adoption and it can be done pretty simply.
Our field team.
Yeah.
Great. Thank you I guess, just a little finer point on that would you be able to tell us.
Many previously.
Previously lightning and how many have not previously.
Okay.
Really hard to know that number.
We don't certainly look at that and track that I can tell you. We certainly have had a number of our current customers want to switchover, obviously that shouldn't surprise anyone but what has been really nice to see us.
Folks that for years and years of said I need a bigger catheter.
Our now very very much.
Responding to flash.
And as we all know what they want it as a.
Much more powerful system, then maybe lightning 12 provided.
Now they have it and it's.
So for people, who haven't been using us.
The reaction and the response has been really really heartening to see that what we did is we made and gave the product did everyone wanted what what everyone has been asking for.
We really given up and.
That's.
Is that sort of what we're supposed to be doing so we're pretty well.
We're pretty excited about that.
Thanks, so much.
Thank you. Thank you.
And now we will go to.
Wells Fargo.
Hey, Mike.
Hi, I'm, calling in for Larry.
Yes.
Hi, Thanks for taking my question.
I wanted to go back to your gross margin you talked about gross margin expansion of one.
One to 200 basis points next year.
Sounds like most of that is coming in second half of the year can you just give a little more color in terms of what gets better between first half and second half.
To drive that margin expansion and as part of that can you talk about how youre thinking about China, Edp and how that's reflected in that outlook and then I have a follow up.
Okay, Yeah, no. Thanks for the questions.
Two factors here.
We continue to increase.
Proportionally from back to me volume versus decentralization.
And I see continued product mix impact on gross margin. So that is one factor why second half will be stronger than the first half.
And also in the first half where with our outpatient team is mainly focusing on.
Meeting demand for these new product launches.
Our priority focus right now is not on achieving optimal level of performance in labor efficiencies and we can continue to see those improvements.
Continue on in the second half of the year.
Yeah I'll take the question on China.
<unk>.
We've been really really happy with the.
Bounce back really from the broader health care perspective in China as you know in the latter part of 2022, namely in November and December .
Many hospitals were shut down or doing relatively lower levels of procedures relative to.
What they typically do just because of the pandemic.
The doctors and China seem to be really bouncing back working overtime trying to help their patients.
And that is a very positive thing as you know we have a very strong partnership with Genesis.
Really in the early stages of that from a long term perspective, so we feel good about China writ large.
<unk>, what we have in our forecast with respect to the volume based pricing that you mentioned.
Got it and then my second question just bigger picture.
The number is now four.
Technology improvement iterations over the years.
You think about your U E Orchestrator technology, how does that change the way you approach device iteration going forward and your competitor.
Thanks again for the questions.
Well.
There is two parts.
One is how does it change our innovation or ability to do things. The answer is it doesn't it doesn't.
We're going to keep working on this what we have now with flash is amazing.
Can we make it better I don't know, we havent done enough cases in a month and a half to really say, where the improvement is that hasnt been obvious which is a positive for us, but I'm sure. There will be things that we can continue to tweak we will always do that.
And our R&D team over the years has proven.
Yeah.
They're so good at doing that.
I said on the call and I really mean this week, we now for the first time really can see.
Into that moment, we're getting cloud out is so routine we're not there yet, but we can see it.
And the innovation will take us from where we are to that point, which is a much shorter journey than the journey that took us all these years to get to this point.
And that's very heartening, having spent a long time doing this.
The competitive moat part.
I hate to sort of talk about our products that way because what we do is focused obviously on innovation in the patients it's not about other companies and what they do but obviously, we have IP around this whole.
<unk> mechanism and the way it works and obviously we.
Expect people will honor that IP and if they don't we will.
Have a conversation about it we're not.
That's a different type of dynamic than we've ever had before.
Where people can copy and do things in half.
But I don't think it will.
Low down our our drive to get these products tuned perfectly.
That being said, it's as I said it.
It's Dani with great New era, it's fun.
Yeah.
Yes.
Thanks, Thank you.
Yeah.
And now we'll take a question from that now.
Bill <unk> of Canaccord.
Great. Thanks, Good evening, thanks for taking my questions.
Our first question is unlikely flash rollout I was wondering if you could just help us understand.
When did you transitioned from LMR to full market launch.
When you do that go into full market launch do you initially start with your own customers or do you make it more broad based and how do we think about that scale up over time, and then with the vac process.
Does the timing look like to get through the back at the hospitals. These days to where you're really you're getting them youre getting them trial, but how long does it take to get through and kind of get on the shelves into daily use.
Yes.
Let me try to attack all of those questions. The first is.
We are.
We went through our evaluation phase.
Relatively quickly.
Given the performance of this product and I think.
The large conference in early January we announced that we were already through that so.
We have been in sort of the launch mode.
For about a month and a couple of weeks now.
That being said.
What does that look like every launch can be different you can different companies two different things on this launch we are basically.
Just trying to get through all the order process anyone and once it.
Starting the process in their hospitals to buy it.
Some of those can be very quick and we can satisfy some of those orders.
For whatever reason.
Hospital.
Wanted or the physician.
Is able to push it through within a matter of a week or two or three others take much much longer and some can take several months to go through that process.
So there's a wide range.
Anyone again, who wants it as did starting that process with us.
And some are being satisfied.
Okay.
Pretty quickly and others will take.
More time, we're not.
We can't really quantify that obviously, but needless to say.
That is what the team is doing.
In addition to.
Obviously being there for their first cases in getting the folks Rio.
Reoriented the algorithms of this particular product so again, we're in really good shape.
As I said this has been one of them. The most exciting time that I've ever had.
This will be our most successful launch.
Hey that with lightning bolt coming right behind it.
So yeah.
I hope I hope I get to say it again soon.
But it's a lot of fun. So thanks for the question Bill.
And then when you launched you launched your existing customers for ultra.
Yes, no. We don't we don't discriminate we're happy to have all customers.
And what I've said.
Which is kind of a really unique aspect of this is we're getting.
Approached by people, who typically arent using lightning.
At a pretty.
Large scale to try to use it and buy it and again they have to go through the process and go through value analysis committees, and so on but but but thats that is the level of sort of discussion and interest around this has made that a lot more fun. Obviously, so so it's just a matter of <unk>.
Moving through the process and doing it all right so that.
We're following all hospitals rules and getting it in the right way.
And then on lightning bolt if I could.
You are in the LMR or the email right now I think the comments were that Youll go into kind of full market launch exiting March.
Do you given that you've already kind of put flashed through which is that similar technology does that allow you to kind of accelerate the vac process.
Order process or is it the same kind of steps you got a roll through when that goes.
<unk> full market aircraft.
Questions really.
Really actually great question I don't think you get any.
Bonus if you will for saying Hey, now we want to do it again, thanks for doing all this work and now we want to do it again I don't think that helps us.
I do think there will be obviously once that launch happens the ability to potentially combine them, but we won't see that until.
In the April timeframe and beyond so for the next month, it's really going to be still flash as I've said, and we will sort of make sure lightning bolt goes through their early cases.
All of that stuff, but yes, once we get into.
The second quarter.
I think you can combine these as one.
One process through the value analysis committee might make it more efficient.
Yeah.
Thank you.
Yes. Thank you.
Yes.
And with that that does conclude todays question and answer session. Ms. Hamlyn Harris I would like to turn the call back to you for additional or closing comments.
Yes.
Thank you also very tough on behalf of our management team. Thank you all again for joining us today and feel interest in penumbra, we look forward to updating you on our first quarter call.
And this does conclude today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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