Q2 2023 Inari Medical Inc Earnings Call
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Yeah.
Good day, ladies and gentlemen, and welcome to <unk> Medical's second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. As a reminder, this call is being.
Recorded and will be available on the company's website for replay shortly if you require operator assistance. Please press Star then zero.
And now I will turn the call over to John Chu.
Vice President of Investor Relations. Please go ahead.
Thank you operator, welcome to <unk> second quarter 2023 earnings call.
Joining me on today's call are drew hikes, President and Chief Executive Officer of Mitchell Chief Financial Officer.
This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.
All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including statements regarding the markets in which <unk> operates trends and expectations for <unk> products and technology trends and demand for <unk> products in our as expected financial performance expenses and positions in the market.
The impact of COVID-19 on near our <unk> operations and <unk> customer operations.
These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results performance or achievements to differ materially from any results performance or achievements expressed or implied by the forward looking statements.
Please review and <unk>, most recent filings with the SEC, particularly the risk factors described in <unk> annual report on Form 10-K for the year ended December 31, 2022 for additional information.
Any forward looking statements provided during this call, including projections for future performance are based on management's expectations as of today.
<unk> undertakes no obligation to update these statements except as required by applicable law.
In our press release with second quarter 2023 results is available on <unk> website in our medical Dot com under the investors section and includes additional details about our financial results in.
<unk> website also has our latest SEC filings, which you're encouraged to review.
A recording of today's call will be available on <unk> website by five PM Pacific time today.
Now I would like to turn the call over to drew for his comments and second quarter 2023 business highlights.
Thank you John and thank you everyone for joining us today, our second quarter was successful and highly productive we generated record revenue driven by crisp commercial execution with meaningful contributions from new products and our international business.
Profitability perspective, we continue to make steady progress towards our goals.
Recording essentially neutral operating income and positive net income during the quarter we.
We announced our commitment to peerless to Ah study enrolling up to 200 patients and our third randomized controlled trial.
Underlying market growth remains healthy and there is a growing awareness of and interest in our therapies as frontline treatment for <unk> patients.
Most importantly, our commitment to patients our people and solving big problems is unwavering and I could not be more enthusiastic about the health of our business and believe we can and will grow sustainably for many years to come.
I will share more details about these developments shortly but wed like to start with a patient story that highlights how one of our new products is addressing a large unmet need and a new patient population. In addition.
The breadth of an Ari tools used in the procedure showcases our ability to effectively treat a broad spectrum of patient presentations indeed.
Indeed, we have worked hard to build a VT portfolio that positions us as the first choice in routine cases, and the only choice and complex ones.
A 60 year old man in Connecticut suffered as first deep venous thrombosis in 2009 and was treated with conservative therapy, including anti coagulation.
For the ensuing 14 years, he continued to have bouts of recurrent DVT, causing progressive debility. Despite.
Despite multiple failed treatments, including thrombolysis in stenting or iliac veins through to the ABC key progressed, the poster and biotic syndrome assistance became occluded overtime.
This patient developed chronic swelling with open weeping ulcers and was mostly confined to a wheelchair.
As an intervention is condition would have resulted in continued suffering and could eventually lead to limb amputation.
Encouraged by the release of our Revolutionary Rev core system. The first mechanical thrombectomy device for venous stent thrombosis is referring physician center for interventional therapy.
And the ensuing procedure multiple elements of the <unk> DVT toolkit were used in concert.
<unk> successfully removed the venous stent thrombosis, while <unk> aspiration catheters were used to effectively aspirate deliberated thrombus approaches.
<unk> kept the procedure safe by preventing embolization and flow saver allowed minimal blood loss. The procedure was a resounding success. The patient lost 25 pounds of fluid from his legs and is chronic leg ulcers are completely healed within a month.
The quote from the referring physician summarized incredible outcome.
I want to send every DVT patient for intervention from now on the result was a miracle the patient and I are thrilled with the outcome, particularly in light of many failed interventions in the past.
This profound clinical outcome reflects the power of a purpose built tool kit to address unmet patient needs across our 3500 person team. This is what fuels our work and drives our mission forward.
Shifting gears I'd like to provide a summary of our Q2 financial performance.
Revenue in Q2 was $119 million up 28% year over year, our international business generated revenue of $5 2 million in Q2 up 187% year over year and 20% sequentially.
In addition to our top line performance. We also made steady progress during the quarter on our bottom line, our operating loss narrowed to just $1 5 million and we recorded positive net income for the first time since 2021.
As a management team, we remain committed to our journey to not only invest strategically in our business, but also drive operating leverage as we continue to grow and already over time, we believe the business has significant profit potential.
We are pleased with how our business performed in Q2, and we are encouraged by the steady progress, we're making across all five of our growth drivers. Our end markets are large and remain highly underpenetrated and we continue to see strong momentum in underlying core VT market dynamics.
Despite some ongoing trailing we remain confident in our ability to protect and extend our position as the clear market leader in <unk>, while also broadening our capability to address significant new market opportunities.
Most importantly, we remain laser focused on the work of developing the VT market for the benefit of patients and continue to view other entrants as potentially additive to those efforts.
With that I will turn now to our growth drivers.
Our first growth driver is expanding our U S. Commercial footprint, we continue to add head count in Q2 and remain on track to meeting our year end goal.
We're pleased with the operating leverage and productivity gains we are starting to recognize from a more measured pace of territory development.
Continued expansion of our sales organization also results in more focused areas of coverage.
Issuing as well to introduce new products to the market and to execute on our second growth driver increasing penetration of existing accounts.
<unk> excellence as a highly differentiated comprehensive and repeatable approach to help hospitals establish VT programs and drive deeper penetration of our therapies.
The goal of these programs similar to ones in stroke and MRI is a systematic approach that ensures patients are consistently identified screened and evaluated by VT expert.
We continue to make progress with VTS Excellence importantly, we are successfully moving customers along the <unk> excellence continuum to more advanced phases of program development, where Tam penetration is three to four times higher than in earlier phases.
Our initiatives are building momentum with increasing top down traction across several IGN and GPS which is quite encouraging.
We believe <unk> excellence is a critical initiative for us to further develop the VT market and change the standard of care. We also view our approach is a clear differentiator in the market.
Our third growth drivers to increase adoption by building on our base of clinical evidence.
In the second quarter, we continued to advance both the quality and quantity of our clinical data furthering our leadership position in this regard.
Over recent months, we've continued to communicate the results of the flame study as a reminder, this study of high risk patients demonstrated a 90% reduction in mortality when flow trigger was used compared to historical controls.
We're pleased to see physicians, taking notice of the flame data, which is already beginning to change practice patterns. We.
We envision a day when mechanical intervention with flow trigger on high risk patients as first line therapy.
Importantly, we also believe the highly positive results of flame and extremely sick patients will be powerful enough to build physician confidence for intervening on less sick intermediate risk patients a patient population that is five times larger.
Turning to an update on our rct's enrollment in our Peerless, one RCT comparing <unk> to catheter directed lytic therapy remains strong last quarter, we passed the halfway Mark we believe that Peerless, one mill and the use of <unk> in intermediate risk P/e.
We continue to ramp up enrollment in the defiance RCT confirm cloud <unk> to anticoagulation alone.
It will take some time to fully enroll this cohort of patients, but we are pleased with the progress to date.
<unk> is designed to establish <unk> as the gold standard for DVT treatment.
We've also recently launched peerless to an RCT for intermediate risk <unk> patients randomized treatment with float river to anticoagulation alone.
This trial will enroll up to 200 patients easily more than double the enrollment of the next largest PE study.
In fact with over 700 patients across Peerless one in Peerless too we are set to enroll more patients than all other industry and non industry Rct's combined.
Conducting three simultaneous rct's reflects our commitment to generate high quality clinical data.
Each trial aims to study meaningful patient centric clinical endpoints.
Although our efforts are designed to change the standard of care in DTE, while not the goal. They also serve to reinforce <unk> leadership.
We're doing the hard work and we believe each of these studies will succeed.
Our fourth growth driver is to expand our product portfolio we.
We have several exciting updates to share here as well starting with <unk>.
As you heard in the patient story. This new product is addressing an important unmet need for a large pool of patients.
<unk> is the first mechanical thrombectomy device to treat venous stent thrombosis pace.
Patients with this condition represent a subset of the broader chronic venous disease patient population, which is the largest of our new markets.
We are thrilled with the initial success and enthusiastic clinical feedback for Revpar is.
It is the latest example of our commitment to addressing unmet needs within the CBD patient population.
The <unk> launch is supported by several pilots we have underway designed to inform our longer term CBD market development strategy.
In terms of the market opportunity for <unk>. In addition to a significant annual incidents. There is also a large prevalent pool of patients with venous stent thrombosis.
Taken together, we believe the addressable market totals nearly 50000 patients.
<unk> is used in tandem with <unk> and other and our tools.
Barring a procedural revenue approximately $10000.
We recently also entered full market release with the <unk> 16 curve.
This product is an enhancement to our existing 16, French aspiration platform.
Sure and I appreciate the curve and improved track ability that allows for targeted clot removal in both PE and DVT cases.
<unk> curve generates a significantly greater flow rate than similar sized catheters in conjunction with continuous aspiration.
Next approach we've continues to perform well in full market release.
As a reminder, <unk> has achieved design a trap clock during complex DVT or ABC thrombectomy procedures.
In these cases, there's cloud extending all the way up into the ITC, creating a much higher risk of cloud embolization.
<unk> is used in conjunction with other elements of our product toolkit that represents an incremental revenue stream at a $4000 ASP.
And is generally sold outside of our per procedure pricing.
<unk> is also progressing well in full market release, it as a thrombectomy system designed for small vessels, including 80, fistulas and veins in the upper extremities and below the knee.
A recent indication expansion to include the specific treatment of Avi fistula in 80 craft thrombosis has helped to build momentum.
At an ASP of $4000 and throw also offers a significant opportunity to generate additional revenue.
Finally, we have two products in the cloud <unk> family that have initiated limited market release in Q2.
Both address unmet needs and we will share more about each as we move into <unk>.
Taken together, we expect to have six new products fully launched in the second half of 2023, which is a testament to our robust pipeline and commitment to addressing unmet needs with purpose built tools.
Our last growth driver is expansion into international markets.
Q2 marked another quarter of record case in revenue production outside of the U S.
Our international business generated revenue of $5 2 million in Q2 up nearly 200% year on year and 20% sequentially.
Our performance was primarily driven by continued adoption in Europe .
Beyond Europe during the quarter. We also saw solid case growth in our existing markets in Latin America, Canada and Asia Pacific.
We also conducted our first cases in Brazil during Q2.
And China, and Japan, we're making continued progress in our pursuit of regulatory approvals, while also refining our go to market strategies.
We continue to make outsized investments to build out our international operations.
Given the spectacular unmet need internationally, we expect this business could represent greater than 20% of total revenue over time.
And now I'll turn it over to Mitch to discuss our Q2 financial performance in greater detail.
Thank you drew and good afternoon, everyone and noise revenues for the second quarter of 2023 were $119 million up $26 3 million or 28% from $92 7 million for the same period of the prior year compared to Q2 of 2022, our revenue growth was due to our continued efforts to.
Open new customer accounts expand our sales force and deepen our relationships with existing customers.
We also significantly expanded both the fluid treatment CT tube product lines by continuing to commercialize the <unk> and <unk> products, while launching <unk> 16 curve.
The revenue split between product lines with similar year over year with 66% of our revenue derived from the sale of <unk> systems compared to 67% in 2022, and 34% from the sale of cloud <unk> and other systems compared to 33% in 2022.
Turning to the P&L gross margin was 88, 4% for the second quarter of 2023, compared with 88, 8% in the second quarter of 2022.
Operating expenses were $106 7 million in the second quarter of 2023, compared with $91 7 million for the same period of the prior year.
R&D expense of $21 1 million in the second quarter of 2023, compared with $18 6 million in the same period of 2022.
$2 $5 million increase in R&D expenses, primarily driven by an increase in head count.
SG&A expense was $85 6 million in the second quarter of 2023, compared with $73 2 million for the same period of the prior year. The $12 4 million increase was primarily due to personnel related expenses as we increased our head count and secondarily due to higher travel expenses.
Net income for the second quarter of 2023 was $2 1 million compared to net loss of $10 2 million for the same period of the prior year, the basic and fully diluted net income per share for the second quarter of 2023 with <unk> and <unk> based on the weighted average basic and fully.
Diluted share count of $57 2 million and $58 5 million respectively. These.
These compared with a basic and fully diluted net loss per share of <unk> 19.
Based on a weighted average basic and fully diluted share count of $53 2 million for the same period of the prior year.
Before I move on to the balance sheet updates I'd like to comment briefly on our Q2 P&L performance.
We're pleased with our essentially neutral operating income and positive net income.
This result reflects our team's commitment to disciplined spending controls while still funding our commercial clinical and innovation growth drivers for the second half of 2023 and in early 2024, we may see profitability fluctuations quarter to quarter as we move through the first half of 2024.
We remain committed to achieving sustained operating profitability on a going forward basis.
Moving onto the balance sheet, our cash and investments at the end of Q2 totaled $337 5 million consisting of $57 $8 million of cash and $279 7 million of short term investments for.
For reference our cash and investments as of the end of Q4 of 2022 were $326 4 million.
Our cash flows provided by operating activities were $7 7 million for the second quarter of 2023 compared to cash flows used in operating activities of $12 2 million in the second quarter 2022.
Lastly, I'd like to address the noise financial guidance for the full year 2023, I'd like to announce that we are increasing our revenue guidance to $482 million to $492 million.
$4 million raise relative to our prior range.
Now I'd like to turn the call back to do for final remarks.
Thanks, Mitch in closing, we're pleased with how the business performed in Q2, we generated record revenue and strong growth of nearly 30% driven by crisp execution across all of our growth drivers our field team continued to drive patients toward frontline treatment with our therapies, while working to support the development of VT programs.
Telephone keypad, if you're using a speaker phone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then too we ask that you limit yourself to one question and one follow up one moment for our.
Questions.
Our first question comes from Travis Steed, a bank of America. Please go ahead.
Alright, good afternoon, everybody and congrats on a great quarter, maybe we could start just give a little more color on how Q2 shaped up how the competitive environment played out over the course of the quarter the market growth over the course of the quarter and the core market how much new products played out versus expectations in the core business versus expectations kind of curious what parts of the business kind of drug.
Drove the beat here in Q2, and what you saw as the quarter shaped up.
Sure Thanks for that Travis.
On that and mentioned time, they want to pile on as well. So look we are really pleased with how the business performed in the quarter.
Did see competitive trialling.
Throughout the quarter as we anticipated.
Just as we did in Q1 as well.
But I think the 28% growth reflects strength and lots of different areas first and foremost.
Strength in the core franchise of flow tremor in cloud fever here in the U S. We were pleased with the excitement and enthusiasm around the new products.
Still a relatively modest contribution of the overall revenue mix in the quarter from new products, but lots of really good excitement and enthusiasm we.
We saw some stocking revenue as we do each quarter and international also had a very strong quarter record quarter outside the U S. As well so I think all of those elements contributed to.
The quarter I think they gave us a lot of confidence looking ahead to the second half of the year in terms of how we are positioned.
And each of our growth drivers with continued expansion of.
Field organization more work underway with program development.
Certainly more data that we're going to be able to leverage and continued to expand and.
And a steady came to new products with ultimately six new products in the mix and the second half. So we like how the business performed in the first half of the year and we're really confident in how we are positioned here looking ahead to the second half.
But that's helpful. Maybe do a follow up question would be more on on Q3 Q.
Q3 modeling any color on July basically how much of the the raise you once going in Q3 versus Q4 any other color you can provide on on stocking and pricing when you what year over year sequentially. Thanks, a lot.
Yeah. Thanks, Travis So we saw good momentum throughout the quarter and I think that has continued pointing ahead here into the second half of the year stable pricing throughout the quarter you can see that reflected in the gross margin, which was stable in the 88% range.
So I think lots of positives here as we began the second half of the year I don't know if Mitch wants to anything beyond that in terms of the the cadence from here and I think <unk>.
<unk> with respect to I think the key three Q for a portion of your question, we'd see probably a more modest pick up in Q3, and then acceleration in the fourth quarter of the year, that's kind of been our pattern for the past few years and I think that there's a variety of reasons for that I'm not the least of which has to do with kind of December .
<unk> you know the way, we expected business and some of their productivity pickups will accelerate as we lose through the year.
Great. Thanks, a lot and congrats again.
Thank you.
The next question comes from <unk>.
Marsh with Morgan.
Morgan Stanley . Please go ahead.
Hey, guys I appreciate you taking the question, obviously, a little focus on competition largely one name a particular, but I'm interested whether you'll anticipating any additional players on.
The market in the minutes I think Boston's wall system might be on the horizon for launch of the Kinks get your thoughts on the market outlook here another thing you'll hearing on the ground.
Pretty strong space to ban.
Yeah, Thanks for that.
So look this is a 6 billion dollar market that is maybe 6% penetrated with our technologies and I think we've shown what a huge unmet need exists in this market. We have acknowledged for some time that there are likely going to be new competitive entrance to this market.
We really like how we are positioned head to head with any and all entrance.
We have got hands down the best team in the market our products do an amazing job of removing not only a Q clot, but the chronic clot as well with minimal blood loss and we have got a mountain of clinical evidence in a commanding lead.
And evidence generation and we've got a steady cadence and pipeline of new products coming to address new I met needs. So we like how we're position against any new entrants that may come into the market.
And I think in the same token new entrants can be additives and constructive.
Terms of the market development effort, which is really where the real value is in a real opportunity to impact you know the vast number of patients here is by changing the standard of care towards a new approach to helping these patients so to the extent new entrants can be helpful. On those lines I think that's going to be constructed for for everybody.
Particular thanks.
The next question comes from Larry Eagleson with Wells Fargo. Please go ahead.
Oh good afternoon. Thanks for taking the question adult coat my congratulations on a nice print here.
Drew you you've talked about having six new products in full Margaret released in the second half of this year could you just remind us of those.
Those sticks products and how many of those are outside the per procedure bundle. It how should we think about the revenue contribution from non per procedure products in Q2 2023.
Yes, I'm happy to do that learn in time, they want to pile on here as well I think it's and it's a good sign when you get confused by how many new products. We have that's that's a nice problem to have let me let me walk through the sixth so the first two we've talked about before that's pro trees and and thrill.
<unk> is a sheaf designed to trap ambalaj during complex ABC procedures.
That product is priced outside of our PPP price at $4000 and represents an incremental revenue stream like.
Likewise in thrill.
Completely different system, a brand new patient population designed to treat small vessel thrombosis in particular patients with thrombosis related to their ABF fistula as an avs graphs for hemodialysis access a completely new patient population a completely new pricing and revenue stream also priced.
That $4000. So those are the first to the.
The next two we just began full market release during queue to Rev. Core you've heard us talk about that quite a bit in the prepared remarks.
Is out in full market release generally speaking that's used in conjunction with other products and.
And on a procedure basis generates about $10000 in revenue when it's used in conjunction particularly with pro tree for instance.
And then the 216 curve also just launching now in full market release is a an enhancement to our existing 16, French retriever platform and that would be priced within the.
The PPP bundle. The next two products the fifth and sixth are just moving through their limited market release, now and we anticipate transitioning into full market released soon those are both within the clot tree where family.
<unk> X L. You can probably infer what that product is designed to do and then the sixth and final is a new enhancement to our classroom bold platform with some ease of use enhancements that go along along with that product. So those are the six and a quick overview of pricing and <unk>.
Avenue, and where they are and the launch process.
That's helpful. Just to follow up on Rev core it sounds like you're you're excited about it the feedback we've gotten as positive.
I couldn't tell us at $10000 true is inside or outside of that the P. P P and and maybe just how many cases have you done it how big of an opportunity do you think this is I know you gave us the Tam, but what do you think the ramp could look like you know any any color. It would be helpful. Thank you.
Thanks for the question, Larry I'll I'll tackle this one.
So the $10000 for a typical Rev Court case that true referred to.
As in reference to both the price of the Rev core device as well as other ancillary and already products that might be used most specifically pro tree, but also some of the P. P. P. Aspiration products like was referred to in the patient case. So that's the the typical.
Revenue derived for a Rep Court case.
I can't.
B any more excited about the opportunity to treat this really.
Underserved group of patients Venus Spencer, commonly placed for dinner.
Gnosis and when those fence caught up there's really no effective therapy.
Prior to Rev core and now this offers hope for patients who've been long suffering remember, there's a prevalence pool of these patients as well as the annual incidence of sense that occlude. So I think we've given some metrics around the size of the market, but I can tell you because there is no other effect.
Therapy patients are lining up for this Ah getting access to this kind of technology.
Alright, thanks, so much guys. Thanks.
Thanks, Larry.
The next question comes from Bill <unk> with Ken Accord. Please go ahead.
Great. Thanks, Good evening and thanks for taking my questions.
First off Mcs circle back on the competitive.
As you kind of look at what's going on out there just any color or thoughts or what you're seeing in terms of.
The the doctor's it may have competitively trialled are they sticking are they keeping some of it.
You know with a competitor or are they coming back to you and you know some of the comments we've received and I mean this is the 800 pound gorilla is they were saying that you know there's a thousand cases are accounts in the queue that are working through process you could see trialling I'm. Just wondering if you have any commentary related to what you are.
Seeing in the market competitively, how you're thinking about that plays out through the back half of the year and that kind of when we.
He would likely see that fully wash through thanks.
Yeah. Thanks, Bill so.
Look I think in our opinion and our experience the most impactful phase of a competitive launches in the first six months.
I think that's when you go to your best targets.
And I think the lift gets more difficult from there I think everyone understands that.
We certainly saw trialling throughout Q too.
Trailing Q out throughout Q1, and yet if you look at the first six months of the year. We grew 31% in that same period of time, So we feel really confident.
About our ability to continue to compete and lead in this market and I think that confidence stems first and foremost from the performance of our products our ability to remove all the clot with minimal blood loss and safe efficient procedures I think our confidence comes from our team. Our data are pipeline I think all of that is reflected in our.
Performance over the last six months I think it gives us a lot of confidence in how we are going to be able to continue to compete and lead in the second half of the year and I think that's reflected.
And the two consecutive beating raises that we're now guiding to 27% growth for the year.
Excellent and then if I could just follow up with Tom you know I think you addressed as some of this and you're prepared comments, but the plane data was.
Pretty differentiated concede at least just curious you know you you said that you were seeing the doctors take notice of this do you think it <unk>. It. This time that this will drive adoption b on the high risk or intermediate.
Intermediate risk or do you need that specific you'll purely speed and intermediate risk really to drive it. Thanks for taking my questions.
Thanks for the question Bill So I think the flame data is incredibly compelling as you have stated a 90% mortality reduction in this very dire disease state compared to historical controls and so I think that begs the question is it time.
To change guidelines is it time for flow tree Vertu B V.
First line therapy for high risk <unk>, and I think Thats discussion that's being had currently amongst.
Folks who think about this.
At an academic level.
As far as the practicality is concerned if you see these kinds of results in the sickest of the sick. The most challenging patients doesn't it stand to reason that you can also apply these therapies in a much.
Much lower risk patient population and expect similar safety results and great efficacy and I think that argument bolsters a lot of the practice patterns that we're already seeing even before definitive randomized data is available now remember we are committed to generate.
<unk> that high level randomize data as was discussed in the prepared comments. So we're doing the hard work, but you're going to see practice patterns shift even before that data is available.
Great. Thank you.
The next question comes from Murray T Bo would be T. I G. Please go ahead.
[noise] hi, Thank you for taking my question. Thank congrats on a on a got quite a particularly uhm turning a profit corner.
I wanted to ask my first here on market penetration and what you think the market has been gang in more recent corners, I think about a year ago, you talked about intervention therapies, having a penetration and B T E about 15% to 20% have we seen that start to accelerate isn't steady as she goes I I'd love to hear the latest on market crowds Nick fan.
Yeah. Thanks for that Marie So I think on the highest level.
The patient population itself continues to grow.
Single digit range of generally along with population growth. If you looked at the two times and the penetration rate of any kind of intervention treatment, both lytic and mechanical we still think that 15% range is likely where we're at today within that interventions segment I think we are.
Viewing to see a shift away from lytic based interventions to mechanical thrombectomy as frontline therapy, and obviously that.
That is driving some of our growth. We're also continuing to convert patients that would have been treated with conservative medical management over to frontline therapy with mechanical turned back to me. So I think all those same growth drivers are a play.
But keep in mind. This is such a massive patient population that despite our continued growth in traction.
There's still so much runaway out ahead in so much work still to be done to continue to move those numbers are in the right direction.
Okay. That's really helpful. As my follow up here I I heard mention of the chronic venous disease C V D market and some development work that you're getting there if I recall from investigating last year that was an area of your pioneering and there was some development and education to be done there. So what's the latest what what are you doing what's actually happening on the.
<unk>. Thank you.
Happy to put some more context around that so CVD is the largest of our new target addressable markets. When you take into account the million patient prevalent pool. This is a 10 billion dollar target addressable market for us and these patients have spectacular unmet needs.
We are building out a purpose built toolkit to.
To help these patients.
Clepsydra bold and Rev. Core are two examples of that tool kit and there's more to come in parallel to that we've also begun some work.
Designed to inform our longer term market development strategy for these patients. These are patients that don't necessarily come in.
Through the door of the E. R. Like R. P. Ian DVT patients. So give you a couple of examples of what that what that work looks like.
One of the things we've done early on here.
Is invest in various third party data sources to try and identify and some target regions high volume providers that are caring for these patients via it won't care centers podiatry, even you know general practitioners and really trying to understand better where these patients are out in the commute.
The second thing we've done is hire a small group of market development specialists.
Team of folks deployed into some target geography's across the country.
Whose sole focus is on engaging with those high volume providers and really beginning to raise awareness and educate on new treatment options and some new ways that we can help these patients with Rev. Core for instance for those with chronic venous occlusions and their stance.
Last thing we've done in.
And these targets Geography's is develop a list of chronic venous operators of Interventionalists, who have designated themselves as ready willing and able and interested in trying to help these patients. So that once we identify those patients. We can provide that list and hopefully that patient will make their way to the interventionalists with a consult.
For potential intervention treatment, so along the way we're learning a lot, we're refining and Iterating and I think it is going to inform the longer term strategy and help us really begin to unlock.
The opportunity we see to help that massive group of patients. The same kind of work. We've done early on in the V. T E market and now we're applying some of those same competencies to this new patient population.
Okay interesting thanks, so much.
Thanks Marie.
The next question comes from Adam <unk> with Harper Sandler. Please go ahead.
Hi, good afternoon. Thank you for taking the questions and congrats on the nice quarter I wanted to start by asking about the international business I think he did $5 million and change in queue to international revenue.
Is it reasonable to assume that this continues to step up going forward any color on how you guys are thinking about the full year and then drew I think in the prepared remarks, you said something along the lines that international can be about 20 per cent or greater of total revenue over time and you're at four per cent here in Q2, So maybe just help us bridge that gap.
Over the years and how quickly you can get there. Thank you.
Yeah, Thanks to Adam I can put a little more context in which may want to chime in as well. So we had a record quarter internationally. We're.
We're continuing to see really nice attraction and growth we built the foundation now, particularly in Europe and are beginning to see some really nice growth and momentum.
Still a relatively small part of the business.
But we're seeing a really nice sequential growth and certainly spectacular year on year growth.
We anticipate continued growth from international through the back half of this year certainly that will continue to be led by Europe , but I think we're also beginning to see some meaningful contributions from some of the other markets, where we've established an initial footprint b at Canada different parts of Latin America, we're up and running now.
In Australia, New Zealand.
Just began treating patients in Brazil, I think collectively some of these other markets will also begin to have.
Have a meaningful impact on that growth trajectory as well so we like.
The direction, we're headed and we think there's plenty of opportunity. There. That's why we continue to point longer term to the kind of revenue contribution. We described in the prepared remarks, that's the kind of unmet need certainly that exists internationally and we think.
We're going to continue to to go after that over time.
Adam just to build on Bruce answer I think the specific timing of the jump from let's say the four five per cent range up to the 20% range is obviously continued on.
Or it's based on our continued progress in the markets that you just mentioned as well as on the regulatory approval and opening for commercial activities essentially of the China market and the Japan market those are.
Both very significant market opportunities. We're excited about those as we get closer to that and ultimately achieve regulatory approval I think we'll have a more specific kind of outlook on the ultimate is sort of revenue build internationally, how we'll get to that level of per cent of revenue that you mentioned.
That's a great color guys. Thank you and just quickly on a follow up just wanted to ask for an update on <unk> and some of the redesign work, they're not sure if I heard anything that prepared remarks.
Any update on the status there are you still targeting 2024.
Approval. Thank you.
Yeah. Thanks for the question and the lack of mention of artists in the prepared commentary was by no means any intent to.
Convey are.
Any lack of interest in this very compelling patient population as we've said before.
<unk> or.
Arterial <unk> remains a huge challenge to treat with great unmet needs with current therapies and we believe we have a differentiated solution.
Our approved products to dates work and we've seen incredible safety and good efficacy in this disease states, but we can make them better and we've committed to Ah refining.
This product to improve efficiency elegance ease of use and when it is ready we will release it we remain committed to the 2024 timeframe.
The next question comes from Michael <unk> Coney with Jeffries. Please go ahead.
Okay.
Thanks, Good afternoon, and thanks for taking my questions.
Just had a follow up on Marie's question about credit the chronic venous disease market understanding you know you're still pushing out the strategy there, but you mentioned wound care centers and possibly Podiatrists do you think this will require a separate sales force bill to really tap the CVD opportunity.
Yeah. Thanks for that Michael So I think that question.
Is a question we're seeking to answer with some of the pilot work that you heard me describe.
Stablish this small group of market development specialists to begin engaging.
With that group of providers and really beginning to help us understand where these patients are and how we can help.
Get them in front of an Interventionalists, that's aware of our tools and can potentially help within interventions treatment for those patients. So that's exactly the kind of question we're seeking to answer.
What we do know for sure at this point that these patients have a different care pathway than what we see with a traditional VT patient that you know the <unk>.
<unk> majority of them present through the E R or they're in the hospital already these patients are out in the community suffering with chronic venous disease, but being cared for in.
In a different cat care pathway. So that's what we're trying to understand and as we learn more of that will inform the broader go to market strategy that will adopt for those patients.
Okay. Thanks, and my follow up is just not the cloud schriever bold platform was this hoping to get an update on how utilization for that product has been you know cause that tracking to your expectations and then maybe you talked about a new enhancement to the bold platform do.
I think that would accelerate uptake from from where it stands today.
Yeah. So just a level set everybody on bowl that was an enhancement to the class River platform really features a.
Stronger radio for surround the coring element.
Designed to do an even better job of removing chronic wallet here clot.
Sure bold over time has Ah Ah Ah achieve the number one position it's.
It's used in the majority of our cases, it's essentially over time supplanting.
They use a cloth schrieber and we're seeing that trend.
Month after month and quarter after quarter and already it's used in the majority of our cases.
The new enhancements that you heard me discuss.
Is really a <unk>.
<unk> of use improvement and efficiency improvement on the cloud server bold platform.
It reflects continued iteration refinement of the platform.
Beyond that I think will leave additional commentary.
Four when we move into full market release with that that enhancement will describe it more at that point, but suffice it to say for now it's designed to improve the ease of use and efficiency of the existing clot superbowl product.
Great. Thank you.
The next question comes from Richard <unk> with Truest. Please go ahead.
Hi, Thanks for taking the questions I was wondering if you could directionally Sierra on you know.
The new product contribution.
As a percentage of U S revenue or sale.
Would you say that that snapped up meaningfully.
In <unk> once you I think I think we're we're modeling amid single digit million dollar amount for a $5 million and then we look if we look out into the back half should we think of that you know stepping up meaningfully on a on a quarterly run rate basis. Since you have six new products launching their.
Same question are stocking with stocking revenue flat up sequentially.
Yeah, let me try that when Richard.
So is drew mentioned earlier in the Q&A, we saw nice growth from the core business and also from the new products and as you can tell from the international business.
We went from Q1 Q2.
And the growth and essentially and the contribution in the new products is still relatively modest I won't comment specifically on the number you mentioned that's captured in that club treatment. Another category in terms of how we classify the revenue to the company.
We're thinking about that sort of contribution to Q3 and Q4, it's largely dependent on sort of our success and continuing to roll out the products across our base of active hospital accounts and that's probably over 1600 accounts at present I think you are familiar with the vast approval process and everything that goes on.
They're in order to kind of make those products available and we're seeing nice progress certainly there's a lot of excitement about the new products as you heard both from drew and Tom but we will.
Kind of declined to comment specifically on where we expect will end up at the end of the year. Some of that is in our control and some of it's not.
From a stocking revenue.
Point of view, we did see an increase in stocking revenue in queue too I won't comment specifically on what it is I think as we've talked about that in the past, we see fluctuations in stock in revenue quarter to quarter based on the cadence of the new product introductions and again, that's kind of typical for the business I think as we.
Thought about stocking revenue over the long term for the business, we see it steadily and kind of in the the low to high single digits for the company. So that's kind of an expectation for where this will be as it continues the company continues to.
Mature.
Okay. Thank you and then just on the Trialling comments.
Kind of two quarters in junior competitor, where where is the trialling been more pronounced or less pronounced between DVT M. P E and I'm curious if one is it.
Moving to be stickier or transient than any other.
Yeah sure I think the short answer is we've seen relatively consistent and balanced trailing across DVT and <unk> and we saw it.
Unfold and Q2, and we saw it unfolding Q1.
Despite some of the competitive noise in a swirl in the claims you know again, we grew 31% and that six month period. So we've seen it relatively consistently and relatively balanced I'm not sure we'd characterize.
What we've seen in DVT versus P E any differently.
Okay. Thank you.
Sure. Thank you.
The next question comes from David <unk> with Bird. Please go ahead.
Oh, Hey, guys congrats on the quarter and thanks for taking the questions I just want to clarify that you just made on stock.
Stocking revenue I think you said it was up.
Just want to clarify that was up year over year up sequentially.
And then my first question actually just more lighting to the guide.
I think again you you bumped up the for your outlook, you know somewhat higher than than what the beep was in the quarter versus <unk> estimates.
It's a small dollar am I think it should be a 2 million dollar delta or so, but I'm I'm, just wondering whether or not that incremental bump up in and pull your outlook is more related to the underlying confidence you have in the V. G E business versus maybe if there's anything new that you've seen at least on the new product or international side.
Yeah, So I'll, let Mitch maybe clarify the stock and comment and then I can maybe talk about the guidance related question sure David on the stock in question and I think when we go back to the Q1 earnings announced that we talked about stocking being the lowest that it's ever been to the company.
Is sort of in our existence as a public company. So my comment relative to Q2 was sort of related to Q1.
And then David on the guidance race, we have now B and raised two consecutive quarters. This quarter was a 2 million dollar B 4 million dollar raise I think the confidence you are seeing is related to how we feel all the different parts of the business are positioning us here at the front.
Half of the the the as we entered the back half of the year, we feel very confident in our ability could paint compete and lead with the core VT franchise.
We like the enthusiasm and excitement around the new products.
We're seeing good traction internationally I think all of those considerations are reflected in the.
The rays and guidance.
It's a 27% a year on year growth at the mid point, we started the guidance at the beginning of the year two.
24% growth.
So hopefully you are clearly seeing our confidence here and how we are positioned relative to back half of the year.
Alright, great. That's that's helpful.
I guess on gross margins they've been pretty strong Q2, Q1 first time for this year.
And compared to last year too.
I think you mentioned that you you've seen stable pricing in the business. My gas is maybe that is new products rollout international is a bigger portion of the business with those theoretically could be margin deluding from a gross margin standpoint, and so when you consider that with the comments on just stable pricing in the business I'm wondering where it maybe some of the options.
They're coming from they're allowing you do at least in a sequential based on the end of year over year basis maintain this pretty strong gross margin profile. Thank you.
Yeah, and I guess I'll get started on that one David So affirming gross margin performance point of view, we're very pleased with it.
With the company, we have added cost historically to sort of our product offering through this P. P. P approach that we have for our pricing our products.
The pricing and stable as you mentioned during his comments and we really focus is accompanied to price based on value you know as opposed to you know priced based on cost or anything like that and we're able to by offering the P. P. P and these toolkits that have kind of become larger over time. The two could approach has been very effective to us.
In terms of maintaining price in some cases, taking price.
Additionally, I would say you know you mentioned a couple of the factors that will change the gross margin over time, the let's say internationalization of the business and that's something that I think will kind of play out over the course of the next few years, we've been really.
Fortunate to have some nice productivity gains in our manufacturing operations.
Even though we face some headwinds both in terms of raw materials costs and also labor costs, we're seeing some nice offsets there and I think as we talked about the gross margin sort of longer term for the company. We historically sort of message that in terms of kind of a low to mid eighties gross margin profile for the company and I think we're feeling.
More and more comfortable with the idea that it could kind of settle in the mid eighties as opposed to something in the low eighties, and that's something obviously that gives us a terrific.
Ability to self fund our own growth.
When we look at the cash position to the business you know compared to where we were posted IPO and post follow on these essentially internally funded the growth of the company, which I think is maybe puts us in a class of one of one of the med techs out there and we've also been free cash flow positive for the past three quarters, which is.
I think a really nice signal going along with the profitability sort of journey, we've been on and I think all that positions is really well for for further investment into some of these opportunities that we've discussed during this call.
The next question comes from Chris Pasquale with my phone research. Please go ahead.
Thanks for taking my questions I'm curious what with all the new products you guys are juggling at the moment, how you incentivize into sales force.
Around the portfolio to prevent the excitement of from how about the new stuff from distracting from the core.
Yeah. Thanks, Chris.
A good question and one we've spent a lot of time thinking about ourselves. The last thing we want to do is distract the team with any of the new products or new patient populations distract them from the work underway and the core VT franchise. So we've been really deliberate.
About our go to market strategy really deliberate about how we've designed our compensation program to ensure that we've got the right focus.
And the right.
<unk> across the entire portfolio I think the other thing we've done very deliberately as you know.
Has continued to expand the field organization and to split territories.
The result of that of course is smaller and smaller territories smaller and smaller number of accounts, which provides the ref bandwidth then to not only drive penetration under VT excellence, but also have bandwidth to take on a work associated with some of these new product launches. So we're trying to.
Deliberate and thoughtful but all of that we like what we're seeing so far.
But we're keeping a close eye on all of those considerations and we'll adjust the strategy on a go forward basis of.
If we see those trends are beginning to emerge.
Makes sense. Thanks, and then just how should we think about timing for entering into some of the Big Asian markets, Japan, China.
And do you think you're gonna have to do any local clinical trials to get where you'd like to be from a regulatory perspective.
Yeah, we've been working close to two years in both China and Japan.
To put ourselves in a position to help treat patients and those two respective markets.
We'll probably stop short of putting a definitive timeline on it today, but rest assured we have been working diligently.
[noise] direction for some time now I think even maybe later this year will have some more definitive updates to provide.
In terms of whether or not we're going to need clinical studies I think that's an open question still across both China and Japan, We've got thankfully a mountain of clinical data that we can leverage generate here in the U S. Starting with of course flash and clout.
So we are certainly going to leverage the data that we do have.
And if we do need to do.
Market specific clinical work in either of those markets hopefully it will be more modest in scope given the investment we've already made in high quality data.
And flashing cloud.
That's helpful. Thanks.
Thanks, Chris.
And that was our last question. This concludes our conference call. Thank you for attending today's presentation. You may now disconnect.
Yeah.
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