Q3 2023 Inari Medical Inc Earnings Call
Good day and welcome to the Ari Medical incorporated third quarter 2023 earnings 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.
Now I will turn the call over to John <unk>, Vice President of Investor Relations. Please go ahead.
Thank you operator, welcome to <unk> conference call to discuss our third quarter 2023 financial performance and the acquisition of <unk>. Joining me on today's call are drew hikes, President and Chief Executive Officer, Michel Chief Financial Officer, and Dr. Tom Two <unk> Chief Medical Officer.
This call includes forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including statements related to our estimated full year 2023 revenue anticipated closing of the Lincoln acquisition potential strategy.
The benefits of the lymphoma acquisition expectations regarding our proposed acquisition of inflow and potential operating performance of windfall and are based on <unk> current expectations forecasts and assumptions, which are subject to inherent uncertainties risks and assumptions that are difficult to predict.
Actual outcomes and results could differ materially from any results performance or achievements expressed or implied by the forward looking statements due to a number of factors.
Please review our most recent filings with the SEC, particularly the risk factors described in our annual report on Form 10-K for the year ended December 31, 2022, and subsequent quarterly reports on Form 10-Q 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.
The press releases and slides to accompany this call are available on our website and in our medical Dot com.
A recording of today's call will be available on our website by five P. M Pacific time today.
With that I'll turn the call over to Joe.
Thank you John and thank you everyone for joining US today, we're pleased with our third quarter performance, we generated record revenue and executed crisply across all of our growth drivers first and foremost growth was driven by continued strength in our core <unk> business, along with meaningful contributions from our international business and new products.
Indeed, our end markets are large and remain highly underpenetrated and we continue to see healthy procedure volume underlying the beauty market.
From a profitability perspective, we continued to make steady progress returning to positive operating income for the first time since Q4 of 2021. We also generated positive net income for the second consecutive quarter we.
We continue to build on our significant base of clinical evidence.
Progress across our three RC Ts, while publishing the flame study results.
As our Q3 results demonstrate we remain the clear market leader in D E and our future growth prospects have never been more compelling.
Building on this strength, we are opportunistically broadening our capabilities to address significant new market opportunities via the limb flow acquisition, which we will discuss later in the call.
Most importantly, let them flow was aligned with our patient first philosophy. This will be reflected in the story highlighting the impact on Vulcan has on the significant unmet need of no option patients with chronic limb threatening ischemia or C. L. T I.
Back to the quarter.
I'd like to start with a summary of our Q3 financial performance revenue in Q3 was $126 4 million up 31% year over year.
Our international business generated revenue of $6 5 million in Q3 up 151% year over year and 26% sequentially from Q2.
In addition to our top line performance. We also made steady progress during the quarter on our bottom line and returned to operating profitability for the first time since 2021.
This achievement underscores our commitment to invest strategically in the business, while also driving operating leverage with revenue growing at double the rate of Opex in the quarter.
During Q3, we also made progress across our five growth drivers.
Our first growth driver is expanding our U S commercial footprint.
We added more head count in Q3 and remain on track to meet our year end goal.
We continue to generate operating leverage and productivity gains from a more measured pace of territory development.
Our broad commercial footprint and methodical approach to expansion results and focused areas of coverage positioning us well to introduce new products to the market and to execute on our second growth driver increasing penetration of existing accounts.
DTE excellent as a highly differentiated comprehensive and repeatable approach to help hospitals establish V T programs and drive deeper penetration of our therapies.
We remain in the very early innings of market penetration and we continue to see tremendous value and a programmatic approach to ensure patients are consistently identified screened and evaluated by V. T expert.
We continue to make progress and are successfully moving customers along the VT excellent continuum to more advanced phases of program development, where Tam penetration is three to four times higher than in earlier phases.
Our third growth driver is to increase awareness and adoption for <unk> products by building on our broad base of clinical evidence.
In the third quarter, we continued advancing both the quality and quantity of our clinical data.
First off as we anticipated the flame study was published on October 17th in the journal circulation cardiovascular interventions.
With the recent publication, we expect to see further awareness of this important study and physicians taking notice of the flame data, which is already beginning to change practice patterns.
We believe the highly positive results with flame and extremely sick patients is powerful enough to build physician confidence for intervening on less sick intermediate risk patients spilling over into a patient population that is five times larger.
Turning to an update on our Rct's.
Patient enrollment in our Peerless, one RCT comparing flow triggered a catheter directed lytic therapy remains strong and has eclipsed the three quarter market during Q3.
We anticipate a data readout in 2020 for.
For Peerless to the RCT for intermediate risk patients randomized and create more flow traverse Ratchet Gratulation alone. We remained focused on site activations and expect patient enrollment to commence in early 2024.
Lastly, we continue to ramp up enrollment in defiance, the RCT comparing clock tree Virtu anticoagulation alone.
Executing three simultaneous rct's, which will collectively enroll up to 1700 patients.
It really reflects our commitment to generating high quality clinical data.
We will leverage these data to change the standard of care for V. T E. Our fourth growth driver is to expand our product portfolio. We continue to make progress across the six products that are in full market release in the second half of 2023.
Three of these products reservoir, and thrill and trop trees.
Add direct incremental revenue opportunities.
We've gained good initial traction and are receiving excellent clinical feedback across all three products and we still see tremendous opportunity to keep building awareness and usage across our customer base.
The other three products, which are now in FMR enhance our existing purpose build toolkits demonstrating continued innovation in our core of ETE portfolios.
Those products, our <unk> curve and the two products that are most recently entered FMR clot Schrieber XL and the generation two version of clot Trooper bold.
It's not true for XL extends the treatment range of the classroom platform, which together can now target a range of clot chronicity from the vena cava to the popliteal vein.
The Gen two cloud Sugar Bowl delivers the same stellar performance for clot clearance with greater ease of use and procedural efficiency.
Six products and FMR, 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.
Q3 marked another quarter of record case in revenue production outside of the U S. Our performance was driven primarily by increased adoption in western Europe complemented by solid case growth in our early stage markets in Latin America, Canada and Asia Pacific.
We continue to make good progress in both China, and Japan, and anticipate beginning to treat patients in both of these markets in 2024.
We will have more to share on our go to market strategies in these two important markets over the coming quarters.
Given the spectacular unmet need we expect our international business could represent greater than 20% of total revenue over time and now I'll turn it over to Mitch to discuss our Q3 financial performance in greater detail.
Thank you drew and good afternoon, everyone.
<unk> revenues for the third quarter of 2023 were $126 4 million up 31% over the same period the prior year.
The revenue split between product lines and similar year over year with 68% of our revenue derived from the sale of blood fever systems compared to 69% in 2022 and 32.
<unk> from the sale of the Clos Schriever and other systems compared to 31% in 2022. In addition to our strong commercial execution in the quarter. We recently signed a lease to expand our operations footprint with a facility in Costa Rica, although it will take some time to develop the location we expect this investment.
To provide additional manufacturing capacity, while also supporting our premium gross margin profile.
Turning to the P&L gross margin remained flat at 88, 5% for the third quarter of 2023, and the third quarter of 2022 operating expenses were 198 million in the third quarter of 2023, compared with $94 9 million for the same period of the prior year.
R&D expense was $21 5 million in the third quarter of 2023, compared with $19 1 million for the same period of 2022 and $2 4 million increase in R&D expense was primarily driven by an increase in materials and supplies expenses and secondarily due to higher personnel related expenses as we.
<unk> increased our head count.
SG&A expense was $88 3 million in the third quarter of 2023, compared with $75 8 million for the same period at the prior year.
$12 5 million increase was primarily due to personnel related expenses as we increased our head count and secondarily due to higher expenses related to professional fees.
Operating income was $2 1 million in the third quarter of 2023, compared with a $9 $8 million operating loss for the same period in the prior year. This performance reflects our team's commitment to disciplined spending controls while fully funding our commercial clinical and innovation growth drivers.
Net income for the third quarter of 2023 was $3 2 million compared to a net loss of $10 2 million for the same period in the prior year.
The basic and fully diluted net income per share for the third quarter of 2023 was six cents and <unk> based on weighted average basic and fully diluted share count of $57 4 million and $58 6 million respectively.
This compared with a basic and fully diluted net loss per share of 19.
Based on a weighted average basic and fully diluted share count of $53 5 million for the same period of the prior year.
Moving on to the balance sheet, our cash and investments at the end of Q3 totaled 351, 3 million consisting of $89 2 million of cash and $262 1 million short term investments.
This compares with cash and investments as of the end of the Q4 of 2022 of $326 4 million.
Our cash flow provided by operating activities were $15 9 million for the third quarter of 2023 compared to cash flows used in operating activities of $13 1 million in the third quarter of 2020 to.
Lastly, I'd like to address the nice financial guidance for the full year 2023, I'd like to note that we are increasing our revenue guidance to $490 million to $493 million, an increase of $4 $5 million at the midpoint relative to our prior range.
Now I'd like to turn it back to do to discuss our acquisition of Linzess.
Thanks, Mitch we are thrilled to discuss <unk> acquisition of <unk>, a pioneer in limb salvage for patients with C. L. T I, which is one of the most significant unmet needs in all of vascular medicine.
We made a minority investment in limb flow and became a board observer in early 2022.
We have long respected the limb flow team and their progress in transforming the treatment paradigm of C. L. T. I, we're looking forward to welcoming lend flow to the <unk> family.
Most importantly, the acquisition aligns with ours, Michigan are addressing large unmet patient needs.
<unk> novel purpose built technology is full FDA approval is supported by high quality clinical data and if commencing launch into a significant incremental Tam.
We're confident we can leverage the core competencies, we have developed and V. T. He can make limb flow of success and can do so without distracting ourselves from our ongoing work in PE and DVT.
For all these reasons, we view the acquisition as a great strategic fit for our business, we will discuss each of these elements in greater detail.
Executing this transaction is a significant milestone for NRT.
It reflects the rock solid performance of the core business, which has enabled us to capitalize on this compelling opportunity from a position of strength.
Our business is thriving and our relentless focus on execution allowed us to deliver robust revenue growth in Q3 alongside disciplined Opex control.
Further we are announcing this transaction on the foundation of a robust balance sheet.
Since our IPO, we've been focused on maintaining a strong cash position, while being good stewards of capital.
That discipline has put us in a position to pursue this acquisition. Despite the exciting opportunity to enter the <unk> market. I also want to emphasize that we remain fully committed to our mission to improve outcomes of ETE patients and firmly believe we can continue our work in V. T E. While also taking on this acquisition.
Our team's tireless efforts and dedication to this mission have positioned us to pursue this acquisition with a partner that is equally committed to creating innovative solutions to address unmet patient needs.
Before diving into more detailed look at them flow I'd like to share as we always do but patient story that underscores the dramatic improvement that this technology delivers.
In 2019, a 78 year old man had to have his right leg amputated due to see LTI because there were no other options available to him.
Short time later, he also developed rest pain and gangrene of his left foot.
Operator: Good day and welcome to the Inari Medical Incorporated 3rd Quarter 2023 earnings 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.
And geography demonstrated highly included in calcified peripheral arteries with no suitable anatomy for bypass or intervention facing.
Facing a second amputation, he was desperate for a better option.
Operator: As a reminder, this call is being recorded and will be available on the company's website for replay shortly.
This patient's interventional has provided him with a new treatment option performing a novel Transcatheter Artur elevation of the deep veins or <unk> with the <unk> system.
John Hsu: And now I will turn the call over to John Hsu, Vice President of Investor Relations. Please go ahead. Thank you operator.
The simple percutaneous procedure rerouted arterial blood to the patient's intact venous system, restoring healthy perfusion to its foot.
John Hsu: Welcome to Inari's Conference call to discuss our 3rd quarter 2023 financial performance and the acquisition of Lim Plo. Joining me on today's call are Drew Hykes, President and Chief Executive Officer, Mitch Hill, Chief Financial Officer, and Dr. Tom Tu, Inari's Chief Medical Officer. This call includes forward looking statements within the meaning of the Private Security's litigation reform act of 1995 statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements related to Inari's estimated full year 2023 revenue, anticipated closing of the Lim Plo acquisition, potential strategic benefits of the Lim Plo acquisition, expectations regarding our proposed acquisition of Lim Plo, and potential operating performance of Lim Plo.
Post procedure is ischemic pain result, and overtime as foot healed completely.
Thanks to limb flow he was able to keep his leg and avoid the extremely dire prognosis associated with being a little chair bound.
John Hsu: And are based on Inari's current expectations, forecasts and assumptions, which are subject to inherent uncertainties, risks and assumptions that are difficult to predict. Actual outcomes and results could differ materially from any results, performance or achievements, expressed or implied by the forward looking statements due to a number of factors. Please review Inari's most recent filings with the SEC, particularly the risk factors described in Inari's annual report on form 10K for the year ended December 31st, 2022, and subsequent quarterly reports on form 10Q for additional generations. Any forward looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Inari's undertakes, no obligation to update these statements, except is required by applicable law.
Lindsay will quite possibly save this patient's life.
The profound clinical impact from one of the first patients treated with this novel technology underscores the ability of a purpose built tool kit to address a tremendous unmet patient need.
Destroy also highlights common themes with a nars core VT platforms, a differentiated solution utilized by our same physician call point, but delivers an effective and life changing improvement for the patients being treated.
As I, just outlined and the patient story living with C. L. T is quite challenging and the most advanced stages of disease carry significant morbidity and mortality burden.
John Hsu: The press releases and slides to accompany this call are available on our website in InariMedical.com. Our recording of today's call will be available on Inari's website by 5pm Pacific time today.
Drew Hykes: With that, I'll turn the call over to Drew. Thank you, John. And thank you, everyone, for joining us today. We're pleased with our third quarter performance, which generated record revenue and executed crisply across all our growth drivers. First and foremost, growth was driven by continued strength in our core VT business, along with meaningful contributions from our international business and new products. Indeed, our end markets are large and remain highly under penetrated, and we continue to see healthy procedure volume underlying the BT market.
Mr Target U S patients with less severe disease, which we believe would expand the town by about $500 million.
Drew Hykes: From a profitability perspective, we continue to make steady progress, returning to positive operating income for the first time since Q4 of 2021. We also generated positive net income for the second consecutive quarter. We continue to build on our significant base of clinical evidence, making progress across our three RCTs, while publishing the flame study results. As our Q3 results demonstrate, we remain the clear market leader in DTE, and our future growth prospects have never been more compelling.
We also agree there is a significant opportunity to commercialize limb flows device internationally, which we believe would further expand the town by $2 billion.
By pursuing these additional growth avenues longer term, we see a path to upside expansion of inflows global town to over $4 billion.
Next I would like to provide an overview of the purpose built technology that is enabling this game changing cadby procedure, let them flow system consists of multiple purpose built components, including specialized catheters to enable the below the knee artery to vain crossing a.
Drew Hykes: Building on this strength, we're opportunistically broadening our capabilities to address significant new market opportunities via the Limflow acquisition. Foundation, which we will discuss later in the call. Most importantly, Lynn Flow is aligned with our patient first philosophy. This will be reflected in the story highlighting the impact Lynn Fokken has on the significant unmet need of no option patients with chronic, limb threatening ischemia or CLTI.
Differentiated push valvulotome and covered stance.
And the tabby procedure the tool kit is used to reroute arterial blood into the healthy Venus system to deliver oxygenated blood back into the foot.
The technology has been proven to save lands by healing wounds and preventing amputation.
Glen flow has already generated compelling clinical evidence across multiple trials to demonstrate the safety and effectiveness of its treatment.
Drew Hykes: Back to the quarter. I'd like to start with a summary of our Q3 financial performance. Revenue in Q3 was 126.4 million, up 31 percent year over year. Our international business generated revenue of 6.5 million in Q3, up 151 percent year over year, and 26 percent sequentially from Q2. In addition to our top line performance, we also made steady progress during the quarter on our bottom line and returned to operating profitability for the first time since 2021.
Of note. The landmark promised to study was published in the New England Journal of Medicine in March of 2023.
This trial demonstrated 76% of no option C. L. T I patients were able to keep their leg inexperience progressive wound healing.
With many having significant pain relief during the time following them flow treatment.
Now I'd like to go over the compelling strategic rationale underpinning this transaction.
R. E. So sudden mission are focused on addressing significant unmet needs and thinking big.
Drew Hykes: This achievement underscores our commitment to invest strategically in the business while also driving operating leverage, with revenue growing at double the rate of op-ex in the quarter. During Q3, we also made progress across our five growth drivers. Our first growth drivers are expanding our U.S, commercial footprint. We added more headcounting Q3 and remain on track to meet our year and goal. We continue to generate operating leverage and productivity gains from a more measured pace of territory development.
Lynn flow is equally committed to the same important ideals in perfect alignment within the hour mission.
Limbaugh has several attractive attribute from a regulatory I P and reimbursement standpoint.
The system is fully PMA approved and the only on level device for no option C. L T I.
As the first mover in the market, let them flow has a robust IP portfolio and there are significant burst the entry for new entrants.
Key elements of reimbursement are in place with an established path to enhanced payment in multiple sites of service.
Drew Hykes: Our broad commercial footprint and methodical approach to expansion results in focused areas of coverage, positioning us well to introduce new products to the market and to execute on our second growth driver, increasing penetration of existing accounts. VTE excellence is a highly differentiated, comprehensive, and repeatable approach to help hospitals establish VTE programs and drive deeper penetration of our therapies. We remain in the very early endings of market penetration and we continue to see tremendous value and a programmatic approach to ensure patients are consistently identified, screened, and evaluated by a VTE expert.
Transaction expands our total addressable market into an area with significant revenue and profit potential.
Building on this foundation, let them flow is a natural fit with our specific commercial expertise clinical capabilities market development playbook and ability to iterate new products.
We believe that leveraging in our core competencies will make a meaningful impact on inflows trajectory and ultimately allow us to treat more patients faster.
Importantly, we're confident we can integrate and execute on the lymph low opportunity, while maintaining the same momentum and focus on V. T E.
Drew Hykes: We continue to make progress and are successfully moving customers along the VTE excellence continuum to more advanced phases of program development, where tan penetration is three to four times higher than in earlier phases. Our third growth driver is to increase awareness and adoption for NARS products by building on our broad base of clinical evidence. In the third quarter, we continue advancing both the quality and quantity of our clinical data. First off, as we anticipated, the Flame Study was published on October 17th in the journal Circulation Cardiovascular Interventions.
Limp level will be commercialized using independent sales organization completely separate from V. T E.
This team will pursue a narrow and deep commercial strategy focused on a relatively small number of high volume C. L. T I centers.
Following F D. A approval in September we believe limp flow became a must add technology for all of them salvage centres of excellence capable of differentiating and growing these programs.
Despite the largely independent sales effort. We believe there are significant similarities between limb flow and the market development work an hour does every day in the chronic venous disease space.
Drew Hykes: With the recent publication, we expect to see further awareness of this important study and physicians taking notice of the Flame Data, which is already beginning to change practice patterns. We believe the highly positive results of Flame and extremely sick patients is powerful enough to build physician confidence for intervening on less sick, intermediate risk patients, spilling over into a patient population that is five times larger. Turning to an update on our RCTs, patient enrollment, and our peerless one RCT, comparing flow-tree-verted calcium-directed lytic therapy, remain strong, and as it clips the 3-quarter mark during Q3.
We also anticipate synergies when we re entered the acute lemme scheming a market with artists next year.
Taken together when flow will offer compelling additional growth opportunity for an already and has the potential to be an important component of our overall revenue mix.
Framing the opportunity one could use our commercial ramp and V T E as in analogue.
After seven years of commercial effort. We have currently reached approximately 7% penetration and our 6 billion dollar U S. B T E market.
No option C. L. T. I has a similarly large underpenetrated 1.5 billion dollar U S tan with equally compelling unmet needs.
Drew Hykes: We anticipate a data readout in 2024. For Pure List 2, the RCT for intermediate risk PE patients, randomizing treatment with flow treatments or anti-craculation alone, we remain focused on side activations and expect patient enrollment to commence in early 2024. Lastly, we continue to ramp up enrollment in defiance, the RCT comparing clock treatment to any regulation alone. Executing three simultaneous RCTs, which will collectively enroll up to 1700 patients, clearly reflects our commitment to generating high quality clinical data.
We believe over the medium term, we can achieve similar penetration and C. L. T I as to what we have accomplished in V T E.
In fact, we are optimistic that we may be able to ramp faster than C. L. T I given the more concentrated customer base.
No option nature of these patients and the high quality published evidence, we will be able to leverage right from the start of the launch.
When flow commencing it's U S commercial ramp sales.
Sales reps are higher fully trained and beginning to sell <unk>.
I'm close tabby toolkit offers a clear first mover advantage as a fully F. D. A approved product and the only on level device for no option C. L. T I.
Drew Hykes: We will leverage these data to change the standard of care for VTE. Our fourth growth drivers to expand our product portfolio. We continue to make progress across the six products that are in full market release in the second half of 2023. Three of these products, rev core, in thrill and pro-trees, add direct incremental revenue opportunities. We've gained good initial traction and are receiving excellent clinical feedback across all three products, and we still see tremendous opportunity to keep building awareness and usage across our customer base.
<unk> will be able to efficiently drive adoption given the concentration of procedures among a relatively small number of C. LTI centres of excellence.
In conclusion, we are excited to bring lymph lowest clinically differentiated technology in house.
The acquisition of lines with our mission to address on that patient needs.
Offers an additional growth driver and a significant incremental tan and leverages. The core competencies, we homed in our successful commercial ramp and the VT market.
We believe lymph low will make an incredibly positive impact not only on patients, but also our business.
Drew Hykes: The other three products, which are now an FMR, enhance our existing purpose-built toolkits, demonstrating continued innovation in our core VTE portfolios. Both products are T16 curve and the two products that have most recently entered FMR, clock-treiber XL, and the generation two version of clock-treiber bold, clock-treiber XL extends the treatment range of the clock-treiber platform, which together can now target a range of clock-treiber bold delivers the same stellar performance for clock clearance, with greater ease of use and procedural efficiency.
I will now I'll turn it back over to match to discuss the deal terms and financial considerations.
Thank you drew starting with the deal turns our agreement too acquirements low includes a payment of 250 million paid in cash at clubs, which is expected to occur in the fourth quarter of 2023, plus additional contingent consideration of up to $165 million cash based on the achievement of certain reimbursement in commercial.
[noise] milestones.
With the potential to be paid over the next three years the earliest potential milestone payment under the agreement is due in 2025.
Drew Hykes: These six products and FMR are a testament to a robust pipeline and commitment to addressing unmet needs with purpose-built tools. Our last growth drivers are expansion into international markets. Q3 marked another quarter of record case and revenue production outside of the U.S. Our performance was driven primarily by increased adoption in Western Europe, complemented by solid case growth in our early-stage markets in Latin America, Canada, and Asia Pacific. We continue to make good progress in both China and Japan, and anticipate beginning to treat patients in both of these markets in 2024.
<unk> closed Q3, with just over 350 million of cash and cash equivalents and currently has access to $75 million liquidity from an asset based credit facility are strong cash position has allowed us to be nimble as it relates to various strategic opportunities and will enable us to fund our acquisition that windfall.
As you mentioned earlier, what are the core elements of our strategy since the IPO hasn't been to operate with a strong balance sheet and we will continue to evaluate opportunities to further strengthen it.
Turning to the financial highlights of the transaction.
Describe we believe Windflaw had significant revenue growth potential.
Drew Hykes: We will have more to share on our go-to-market strategies and these two important markets over the coming quarters. Given the spectacular unmet need, we expect our international business could represent greater than 20 percent of total revenue over time.
We anticipate initial operating support for a land flows commercial launch of approximately $2 million to $3 million per month.
When thoughts revenue began surround throughout 2024 I need to 2025, we believe it will increasingly coverage expenses, reducing the impact on our operating income.
Mitch Hill: And now, I'll turn it over to Mitch to discuss our Q3 financial performance in greater detail.
Mitch Hill: Thank you, Drew, and good afternoon, everyone. And now, as revenues for the third quarter of 2023 were 126.4 million, up 31 percent of the same period as prior year, the revenue split between product liars and similar year-to-year, with 68 percent of our revenue derived from the sale of flow-tree river systems compared to 69 percent in 2022, and 32 percent from the sale of quad-treiber and other systems compared to 31 percent in 2022.
Regarding profitability, we will continue to invest in our growth drivers in the discipline manner, while leveraging our commercial infrastructure as.
As a reminder, at our September 2022 analyst day, we committed to achieving sustained operating income by the first half of 2024, we continued to take this commitment seriously and based on our Q3 results. We are a bit ahead of schedule on.
On a pro forma basis with the acquisition of Winslow, We now expect to reach sustained operating profitability in the second half of 2025.
Mitch Hill: In addition to our strong commercial execution in the quarter, we recently signed a lease to expand our operations footprint with a facility in Costa Rica. Although it will take some time to develop the location, we expect this investment to provide additional manufacturing capacity, while also supporting our premium gross margin profile. Now, turning to the P&L, Rose Margin remains flat at 88.5% for the third quarter of 2023 and the third quarter of 2022.
In summary, we are pleased that annoying isn't as strong financial position to move forward with the acquisition of this important technology and with that I'll hand to call over to the moderator for Q&A.
Thank you we will now begin the question and answer session.
That's a question you May press Star then one on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys withdraw.
Withdraw your question. Please press Star then too.
Mitch Hill: Operating expenses were $109.8 million in the third quarter of 2023, compared with $94.9 million for the same period of the prior year. R&D expense was $21.5 million in the third quarter of 2023, compared with $19.1 million to the same period of 2022. The 2.4 million increase in R&D expense was primarily driven by an increase in material and supply expenses, and secondarily due to higher personnel-related expenses as we increased our head count.
The interest of time, please limit yourself to one question and one follow up at this time will pose momentarily to assembler roster.
[noise] and our first question comes from.
Callum Titchmarsh from Morgan Stanley. Please go ahead.
Yep. Thanks for taking my question could you maybe help us if you can understand how much of the growth seen in the quarter came from high utilization levels Inexistent accounts versus new account auditions and then any color on how you think these two drivers could shape up into 2020 full asked the competitive precious relax I guess when I brought it to places like the mall.
Mitch Hill: SGNA expense was $88.3 million in the third quarter of 2023, compared with $75.8 million for the same period of the prior year. The $12.5 million increase was primarily due to personnel-related expenses as we increased our head count, and secondarily due to higher expenses related to professional fees. Operating income was $2.1 million in the third quarter of 2023, compared with a $9.8 million operating loss for the same period of the prior year.
Yeah, Thanks for that account.
Most of the growth almost entirely comes from existing accounts at this point. We're in 1500 1600 active accounts, we continue to open some new accounts each corner, but that's certainly plateaued compared to years ago. As a result, the growth the case vol.
Mitch Hill: This performance reflects our team's commitment to discipline spending controls while fully funding our commercial, clinical, and innovation growth drivers. Yet income for the third quarter of 2023 was $3.2 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 third quarter of 2023 was $6.5 million based on weighted average basic and fully diluted share count of $57.4 million and $58.6 million respectively.
M as coming from existing accounts and that trend will only continue to tilt in that direction going forward that by the way is exactly what our VT Excellence program is designed to to focus on his driving penetration.
An adoption of existing accounts.
At developing a programmatic systematic approach to these patients. So we feel well positioned to continue to drive that trend even faster than what you've seen up to this point.
Great and then just one follow up if I may I know a competitor in the field really some data already last week illustrating the Ah such an CDT platform could potentially off of a superior safety profile compared to flow to rebuild M. P patients and I was wondering whether maybe tell them you can provide some of your thoughts on this dataset and then any don't feedback you've had if any thanks a lot.
Mitch Hill: These compare with a basic and fully diluted net loss per share of 19 cents based on a weighted average basic and fully diluted share count of $53.5 million for the same period of the prior year. Moving on to the balance sheet, our cash and investments at the end of Q3 total $351.3 million consisting of $89.2 million of cash and $262.1 million of short-term investments. This compares with cash and investments as of the end of Q4 of 2022 of $326.4 million. Our cash flow provided by operating activities were $15.9 million for the third quarter of 2023 compared to cash flows used in operating activities of $13.1 million in the third quarter of 2022.
Thanks for the question Callum I think firstly, if you look at C. D T utilization rates over time, they've done nothing but decrease quarter after quarter for the past several years, that's because the market has already decided that it's time to move on from lytic based therapies too mechanical for.
Back to me the data sets that was provided really wasn't a trial. It was a retrospective analysis a lot of questions about a selection bias even supporters of that technology asked a lot of very challenging questions of the validity of that dataset.
Mitch Hill: Lastly, I'd like to address the noise financial guidance. For the full year 2023, I'd like to note that we are increasing our revenue guidance to $490 to $493 million and increase the $4.5 million that the midpoint relative to our prior range.
Mostly because the conclusion with something that's completely unlike our clinical experience and no. Other technology does a lytic based <unk> platform provide less bleeding than a non lytic based platform. So I think we've seen incredible skepticism from our customers so far.
Drew Hykes: Now I'd like to turn it back to you to discuss our acquisition of LIMSLO. Thanks, Mitch. We're thrilled to discuss an ours acquisition of LIMSLO, a pioneer in LIMSLO which for patients with CLTI, which is one of the most significant unmet needs in all the vascular medicine.
Great. Thanks for the call.
The next question comes from Larry <unk> from Wells Fargo. Please go ahead.
Good afternoon. Thanks for taking the question congrats on the acquisition [noise].
Drew Hykes: We made a minority investment in LIMSLO and became a board observer in early 2022. We have long respected the LIMSLO team and their progress in transforming the treatment paradigm of CLTI. We're looking forward to welcoming LIMSLO to the NRS family. Most importantly, the acquisition aligns with Inari's mission of addressing large unmet patient needs. Lymphlow's novel purpose-built technology has full FDA approval, is supported by high quality clinical data, and is commencing launch into a significant incremental term.
You know we the critical data prelim flow is quite quite impressive.
Alright, so a lot lot to ask here drew I can't just I just Wanna confirm here the penetration of 7% that's by year seven So 15 million 100 million call up in your 750 million per year, including 2024, maybe just help level of setups and make sure I heard everything.
Please.
Yeah. So what we were trying to point out Larry in the prepared remarks, there where the frame what we see is the medium term revenue potential for a limb flow and we were using the penetration that we've achieved over the last six or seven years and V. T E, which now stands at 7% as a proxy.
Drew Hykes: We're confident we can leverage the core competencies we've developed in VTE to make Lymphlow a success and can do so without distracting ourselves from our ongoing work in PE and DVT. For all these reasons, we view the acquisition as a great strategic set for our business.
Drew Hykes: We'll discuss each of these elements in greater detail. That's secuting this transaction as a significant milestone for Inari. They reflect the rock solid performance of the core business, which has enabled us to capitalize on this compelling opportunity from a position of strength. Our business is thriving, and our relentless focus on execution allowed us to deliver robust revenue growth in 2-3 alongside disciplined op-x control. Further, we're announcing this transaction on the foundation of a robust balance sheet.
For what we believe will be able to achieve as we began launching into the C. L. T. I a town of 1.5 billion in.
In some ways, we think we're gonna be able to casually go faster than we've been able to drive penetration B T. E. R. That's because after all these patients are no option. They literally have no option other than amputation.
It's a much more concentrated account base of high volume centers, then what we faced and V T E.
Of that we're gonna have a high quality clinical evidence that we did not have available to us in VT right out of the gate published in the New England Journal of Medicine. So.
Drew Hykes: Since our IPO, we've been focused on maintaining a strong cash position while being good stewards of capital. That discipline has put us in a position to pursue this acquisition. Despite the exciting opportunity to enter the CLTI market, I also want to emphasize that we remain fully committed to our mission to improve outcomes of VTE patients, and firmly believe we can continue our work in VTE while also taking on this acquisition. Our team's tireless efforts and dedication to this mission have positioned us to pursue this acquisition with a partner that is equally committed to creating innovative solutions to address on metpatient needs.
So we think that's a good proxy for the kind of revenue potential that we see with Lynn flow.
And over the medium term, we think we're gonna be able to drive the penetration if not the same levels, we've achieved in VT north of that.
With $15 million and 24 is that the right way to think about it.
Yeah, No I don't think that's the right way to think about it. So we're just commencing the U S launch right now the lymph flow team is.
I think in many ways 2024 will be a year of foundation building it'll be a year of training a year of establishing a back approvals of.
Drew Hykes: Before diving into a more detailed look at Lymphlow, I'd like to share, as we always do, a patient story that underscores the traumatic improvement that this technology delivers. In 2019, a 78-year-old man had to have his right leg amputated due to CLTI because there were no other options available to him. A short time later, he also developed rest pain and gangrene of his left foot. Angeography demonstrated highly occluded and calcified peripheral arteries with no suitable anatomy for bypass or intervention.
Of getting the foundation established for the broader launch we have not put a revenue number freeland flow in 2024.
As we roll out our Formula 2024 guidance, presumably early next year, we'll try and put some more context around where we see let them float contributing but I think it'll be a relatively modest contribution here in this first year of of their full commercial launch.
And then Tom just one follow up on lymph, though for you.
Drew Hykes: Facing a second amputation, he was desperate for a better option. This patient's interventionalist provided him with a new treatment option, performing a novel trans-casseter arterialization of the deep veins or CAD-V with the Lymphlow system. The simple percutaneous procedure rerouted arterial blood to the patient's intact venous system, restoring healthy perfusion to his foot. Post procedure, his ischemic pain resolved and over time his foot healed completely. Thanks to Lymphlow, he was able to keep his leg and avoid the extremely dire prognosis associated with being a little chair bound. Lymphlow quite possibly saved this patient's life.
So you know what we've heard is that it's a relatively long procedure <unk> two hours and it really took a long recovery time. So my question for you is you know do you guys see would you agree and and do you see opportunities to improve that over time, thanks for taking the questions.
Thanks for the question Larry Absolutely I think one other statistic about the procedural aspects worth mentioning is the 99% technical success. That's achieved in early users hands. So although procedure time, it's something that will definitely come down with training education more experienced as well as perhaps technical.
Improvements.
Drew Hykes: The profound clinical impact from one of the first patients treated with this novel technology underscores the ability of a purpose-built toolkit to address a tremendous unmet patient need. The story also highlights common themes with the NARS core VT platforms. A differentiated solution utilized by our same physician call point that delivers an effective and life-changing improvement for the patient, who's being treated. As I just outlined in the patient story, living with CLTI is quite challenging and the most advanced stages of disease carry a significant morbidity and mortality burden.
Very pleased to see right out of the gate early users can achieve the kind of fantastic results over demonstrated in the New England Journal article.
Alright, thanks, guys.
Thanks, sorry.
The next question comes from Bill <unk> from Canaccord. Please go ahead.
Great. Thanks, good evening and congratulations on the corner and the deal.
Terms of the core business.
Yeah. The question. We're all asking is you know and it seems like the quarters, telling us is.
He is trailing over what are you seeing in the field from Trialling today.
Drew Hykes: CLTI is a global healthcare crisis, impacting more than 1.5 million patients each year globally, approximately 560,000 of which are in the U.S. There are approximately 150,000 non-traumatic, the scheme-related amputations annually in the U.S., which lead to high mortality rates, repeated hospitalizations, and significant medical costs. With no other options currently available, Lymphlow was designed to provide a solution for these patients. In terms of sizing the opportunity for an Ari, on the 560,000 patients suffering from CLTI in the U.S, each year, we estimate approximately 55,000 patients had disease that has progressed to the point where they have no treatment options other than amputation. These 55,000 patients have approximately 70,000 limbs that are immediately addressable with the TADV system. Applying our target ASP against this figure results in a 1.5 billion dollar TAM.
Kind of our we pass that from that competitive standpoint, and then just under more granular level is.
You gave us the international but was the core business up sequentially or was that all driven by new products in international.
Yeah. Thanks for the question Bill.
So we did see some trialling kind of.
Spill over into Q3, but as we had anticipated I think much of that activity is behind us at this point in the business performed really well we saw strength across the business. We saw a strong procedural growth in both P. E N D B T and the U S that obviously continues to make up the bulk of the growth in the bulk of the.
Revenue, we saw strong growth in that area. We saw continued contribution from new products and new towns in thrill and poetry, even rub core all contributing to the quarter, but certainly much more modest compared to the core VT and then another strong quarter of growth internationally.
Drew Hykes: Beyond this immediate no option U.S, addressable market, we believe there are two opportunities that offer the potential for significant expansion. First, we see opportunities to target U.S, patients with less severe disease, which we believe would expand the TAM by about 500 million. We also agree there is a significant opportunity to commercialize Lymphlow's device internationally, which we believe would further expand the TAM by $2 billion.
Drew Hykes: By pursuing these additional growth avenues, longer term, we see a path to upside expansion of Lymphlow's global TAM to over $4 billion.
Across the board again led by Western Europe. So we saw strength across the board, but all contributed to a really nice solid Q3 31 per cent growth on the top line and next to that some really nice continued progress on our path to profitability and are disciplined approach to opex and.
<unk>.
<unk> and then on the guidance is fourthquarter guidance is flushing out at about 22% year over year, you've been running hot at 30% for the year roughly.
Drew Hykes: Next, I'd like to provide an overview of the purpose-built technology that is enabling this game-changing CADD procedure. The Lymphlow system consists of multiple purpose-built components, including specialized catheters to enable the below-the-me artery to vein-crossing, a differentiated push-value atome, and covered stents. In the TADD procedure, the toolkit is used to reroute arterial blood into the healthy venous system to deliver oxygenated blood back into the foot. The technology has been proven to save Lymphs by healing wounds and preventing application.
If you all three quarters, combined and you know up and down but right around there.
Why.
What's the reasoning or thought process behind that deceleration as we headed to the fourth quarter.
Yeah, I think bill we just wanted to make sure that we're very.
Confident the guidance that we provide for Q4 and you know there's obviously some fluctuations here as we reached the end of the year and there's some holiday time and some of the things that factor into our thinking about that.
Primarily is just one of wanting to feel comfortable with the numbers, we provide to the street.
Drew Hykes: Lymphlow has already generated compelling clinical evidence across multiple trials to demonstrate the safety and effectiveness of its treatment. Of note, the landmark promise to study was published in the New England Journal of Medicine in March of 2023. This trial demonstrated 76% of no-option CLTI patients were able to keep their leg and experience progressive wound healing, with many having significant pain relief during the time following Lymphlow treatment.
And I'd be last question I promise remiss not to ask and let them flow just I think a couple of times, you've you've <unk> you've mentioned the reimbursement what's the what's the would need need to chop on the reimbursement site to kind of get that all settled out and thanks for taking my questions. Thank you yeah. Thanks, Bill so little float.
Does have established reimbursement both inpatient as well as outpatient so that's in place today, there's deer G codes inpatient where we believe the.
Drew Hykes: Now I'd like to go over the compelling strategic rationale underpinning this transaction. Our ethos and mission are focused on addressing significant unmet needs and thinking big. Lymphlow is equally committed to the same important ideals in perfect alignment with an Ari's mission. Lymphlow has several attractive attributes from a regulatory, IP, and reimbursement standpoint. The system is fully PMA-approved, and the only on-label device for no-option CLTI. As the first mover in the market, Limfflow has a robust IP portfolio and there are significant barriers to entry for new entrants.
Majority of procedures will occur here that was certainly the case for instance in their promise to study here in the U S. So that's in place and will allow a foundation for us to build on we do have a line of sight to enhanced reimbursement inpatient via the potential for and and tap which would take effect late next year.
<unk> as well as line of sight to enhance reimbursement in an outpatient via the potential for a new tech ATC. So both of those would be additive on top of the existing reimbursement that's already established in those two respective sides of service.
Drew Hykes: The key elements of reimbursement are in place with an established path to enhanced payment in multiple sites of service. The transaction expands our total addressable market in to an area with significant revenue and profit potential. Building on this foundation, Limfflow is a natural fit with our specific commercial expertise, clinical capabilities, market development playbook, and ability to iterate new products. We believe that leveraging an Ari's core competencies will make a meaningful impact on the Limfflow's trajectory and ultimately allow us to treat more patients faster.
The next question comes from <unk> Typo from B T. I G. Please go ahead.
Good evening, congrats on a great quarter and congrats on the limits ideal as well.
I wanted to ask here, a little bit more on the <unk>.
Mentioned operating support two to 3 million per month do you expect that to ramp throughout 2024. So is that just sort of a starting point and can you remind us of the margin profile on that device based on you know existing sort of asked peas in reimbursements assumptions.
Drew Hykes: Importantly, we are confident we can integrate and execute on the Limfflow opportunity while maintaining the same momentum and focus on VTE. Limfflow will be commercialized using an independent sales organization completely separate from VTE. This team will pursue a narrow and deep commercial strategy focused on a relatively small number of high-volume CLTI centers. Following FDA approval in September, we believe Limfflow became a must-add technology for all Limfflow's centers of excellence, capable of differentiating and growing these programs.
Marie I appreciate the question the $2 million to $3 million a month that we mentioned is actually a number that we expect would decline as we move throughout 2024, the exact pace of that drop you know we're not quite sure. As you mentioned earlier were still putting together and working on the revenue sort of plan for 2024.
Drew Hykes: Despite the largely independent sales effort, we believe there are significant similarities between Limfflow and the market development work in Ari does every day in the chronic mean of disease space. We also anticipate synergies when we re-enter the acute Lemuschemia market with Artics next year.
That's a number that we would expect ultimately they'll begin to kind of cover some of their own costs and then that number would decline in 2024 and into 2025.
From a margin profile point of view I think it's best to kind of think about that in terms of the Oprah blended gross margin of <unk>. So this would be inclusive of the lymph love product and that's the one they were can tell you. We're still comfortable kind of guide into that mid mid sort of eighties percent gross margin.
Drew Hykes: Taken together, Limfflow will offer a compelling additional growth opportunity for Ari and has the potential to be an important component of our overall revenue mix. Framing the opportunity, one could use our commercial ramp and VTE as an analog. After seven years of commercial effort, we have currently reached approximately 7% penetration in our $6 billion USVTE market. No option CLTI is a similarly large under-penetrated $1.5 billion US cam with equally compelling unmet needs.
For the company. So you know as we did 88 and a half and the current quarter. We expected gross margin of a and R. As a consolidated entity will declined to bid over time, primarily due to the international go through the business. So the the new product kind of additions to it have some effect, but not as significant.
Fact.
Okay. That's really helpful niche. Thank you and then a second question here on sort of the.
Core business and and the Opex outlook, you've done a very nice job of controlling spend mm. There. How are you thinking about salesforce on the corner market you you've got a lot going on with both D. V. T N P E and some of the new products are you nearing sort of what your view is peak salesforce levels is there a lot more expansion to do uhm cutting up with territory, how how do you.
Drew Hykes: We believe over the medium term, we can achieve similar penetration in CLTI as to what we have accomplished in VTE. In fact, we're optimistic that we may be able to ramp faster in CLTI, given the more concentrated customer base, the no option nature of these patients, and the high-quality published evidence, we will be able to leverage right from the start of the launch.
Think about that <unk>.
Yeah Maria I think we continue to see runway out ahead of us to continue to add.
Drew Hykes: Limfflow is commencing its US commercial ramp. Sales reps are hired, fully trained, and beginning to sell. Limfflow's Tadby Toolkit offers a clear first-mover advantage as a fully FDA-approved product and the only on-label device for no option CLTI. The team will be able to efficiently drive adoption given the concentration of procedures among a relatively small number of CLTI centers of excellence.
To that team, we've certainly added each and a recorder in 2023, and I think we would anticipate adding as we move through 24 as well I do think the pace of those ads are.
Are beginning to slow at least relative to some of the huge classes. We've added historically so I do think we're we're modulating the pace of those ads.
Drew Hykes: In conclusion, we are excited to bring Limfflow's clinically differentiated technology in-house. The acquisition aligns with our mission to address unmet patient needs, offers an additional growth driver in a significant incremental time, and leverages the core competencies we honed in our successful commercial ramp in the VTE market. We believe Limfflow will make an incredibly positive impact, not only on patients but also our patients. Edness.
But given the the penetration we're currently at in the runway out ahead and the need to not only focus on V. T E. But also begin doing work around some of these other new towns b it within thrill and <unk> for the work we've begun doing a chronic venous disease with Rev core look.
Over the horizon. The next year re entering the arterial market with artists all of that I think also points to the need for continued adds to the field team.
Mitch Hill: I'll now turn it back over to Mitch to discuss the deal terms and financial considerations. Thank you, Drew. Starting with the deal terms, our agreement to acquire Lindblow includes the payment of 250 million paid in cash at close, which is expected to occur in the fourth quarter of 2023, plus additional contingent consideration of up to 165 million cash based on the achievement of certain reimbursement and commercial milestones, with the potential to be paid over the next three years.
Mitch Hill: The earliest potential milestone payment under the agreement is due in 2025. And now you close Q3 with just over 350 million of cash and cash equivalents, and currently has access to 75 million in liquidity from the asset-based credit facility. Our strong cash position has allowed us to be nimble as it relates to various strategic opportunities and will enable us to fund our acquisition of Lindblow.
Sure sounds like you'll be very busy. Thank you so much. Thank.
Thank you.
The next question comes from add a meter from Piper Sandler. Please go ahead.
Hi, guys. Good afternoon, and thank you for taking the questions here congrats on the corner and the deal I wanted to start out in inflow and was actually hoping to get some more detail on the sales force that you're bringing over how many reps are I guess coming on board.
How much overlap is there with your existing customer base. It feels like it's a good fit with the existing 12 point, but was hoping you could expand on that and then lastly, why not.
Why not let the the core sales.
Team also offer the <unk> lymph flow product and then add a follow up or too. Thanks.
Mitch Hill: As Drew mentioned earlier, one of the core elements of our strategy since the IPO has been to operate with a strong balance sheet, and we will continue to evaluate opportunities to further strengthen it. Turning to the financial highlights of the transaction, as you heard Greed describe, we believe Lindblow has significant revenue growth potential. We anticipate initial operating support for Lindblow's commercial launch of approximately two to three million per month. As Lindblow's revenue begins to ramp throughout 2024 and into 2025, we believe it will increasingly cover its expenses, reducing the impact on our operating income. Regarding profitability, we will continue to invest in our growth drivers in a disciplined manner while leveraging our commercial infrastructure.
Yeah, Thanks for that.
So to start <unk>, just got F. D. A approval PMA approval back in September they've got an initial team that has been recruited and trained in onboarded fully trained and they are commencing the U S launch as we speak that number is something in the neighborhood of a dozen sales professionals.
Right now on the team, we obviously would anticipate adding to.
To that group as we go forward the overlap with the call point I think you're absolutely right. There is a significant amount of overlap across the folks we anticipate performing the lymph flow procedure with our historical call points in DVT in P. E. It's a combination of the Astro surgeons and I are as an iced tea.
Mitch Hill: As a reminder, at our September 2022 analyst day, we committed to achieving sustained operating income by the first half of 2024. We continue to take this commitment seriously, and based on our Q3 results, we are a bit ahead of schedule. On a pro-former basis, with the acquisition of Lindblow, we now expect to reach sustained operating profitability in the second half of 2025.
<unk> the exact same group we've been focused on historically so there is some nice overlap there to answer the last part of your question. We believe out of the gate here that this technology deserves the kind of focus and dedication of a of a dedicated field organization.
It's a non emergent procedure and it's also a fairly concentrated group of high volume.
Operator: In summary, we're pleased that Anir is in a strong financial position to move forward with the acquisition of this important technology, and with that, I'll hand a call over to the moderator for Q&A. Thank you.
C. L T I limb salvage centres of excellence. So I think a dedicated a sales organization. We can have it be a pretty manageable and scope and still get the job done. So I I think for now we're anticipating this will say a separate sales organization focused on <unk> I will keep the the mother ship sail.
Operator: We will now begin the question and answer session. To ask a question, you may press star-than-one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. Withdraw your question, please press star-than-two. In the interest of time, please limit yourself to one question and one follow-up.
Organization focused on D. T E. I do think there are some really interesting potential synergies and efficiencies with some of the work we've begun doing it from a market development standpoint relative to chronic venous disease, you've heard us talk in the past about the market development specialist team that we've deployed to begin.
Operator: At this time, we'll pause momentarily to similar roster.
Kallum Titchmarsh: In our first question, comes from Callum, Titch Marsh from Morgan Stanley. Please go ahead. Thanks, guys, for taking the question.
To understand how do identify chronic venous disease patients who are out of being cared for in wound care centers in some cases primary care podiatry. Those are the same places where we believe many of these no option C. L. T. I patients are also being care for so you can imagine some obvious synergies in some of that work.
Drew Hykes: Could you maybe help us if you can understand how much of the growth seen in the quarter came from high utilization levels in existing accounts, versus new account additions, and then any color on how you think these two drivers could shape up into 2024 as the compessive precious relax, I guess, on a relative basis. Thanks a lot. Yeah, thanks for that, Callum. Most of the growth almost entirely comes from existing accounts at this point.
Which I do think will crossover between the two sales organizations.
That's a great color drew thank you for that and I guess for my second question I'm Gonna actually sneaking a third here just one one clarification that the T B T and the and tap that came up I guess I wanted to clarify that have you or the lymph flow team submitted for those and you think there's a good likelihood of those beam.
Drew Hykes: We're in 1,500, 1,600 active accounts. We continue to open some new accounts each quarter, but that's certainly plateaued compared to years ago. As a result, the growth, the case volume is coming from existing accounts, and that trend will only continue to tilt in that direction going forward. That, by the way, is exactly what our VTX balance program is designed to focus on. His driving penetration and adoption of existing accounts at developing a programmatic, systematic approach to these patients. So we feel well positioned to continue to drive that trend even faster than what you've seen up to this point.
You know accepted and going into effect next year I just wanted to clarify that and then for the follow up question just any kind of early thoughts on the the B T E market. As we look ahead to 2024 M and potential pace of growth for the category. Thanks again.
Yeah. So on your first question is on T. P. T S. The lymph flow team has submitted for both new Tech.
Kallum Titchmarsh: Great, and just one follow-up if I may, I know a competitor in the field released some data already last week illustrating that a certain CDT platform could potentially offer a superior safety profile compared to slow-treater in PE patients.
A P C as well as N tap so those submissions are underway they would take effect here most likely next year in 2024.
We're confident are optimistic that those'll come through but until you actually get the approvals. There is some uncertainty there keep in mind. They do have established reimbursement already and those would be additive or incremental on top of that.
Thomas Tu: I was wondering whether maybe Tom, you could provide some of your thoughts on this data set and then any dog feedback you've had if any. Thanks a lot. Thanks for the question, Kallum. I think, firstly, if you look at CDT utilization rates over time, they've done nothing but decreased quarter after quarter for the past several years. That's because the market has already decided that it's time to move on from lidic-based therapies to mechanical thrombectomy.
Or your second question on the the underlying growth rate.
I think the the market is as healthy as we have seen it really robust growth increased awareness lots of really good traction momentum.
From overall market standpoint, and obviously.
Thomas Tu: The data set that was provided really wasn't to trial. It was a retrospective analysis, a lot of questions about selection bias, even supporters of that technology asked a lot of very challenging questions of the validity of that data set. Mostly because the conclusion was something that's completely unlike our clinical experience. In no other technology does a lidic-based platform provide less leading than a non-lidic-based platform. I think we've seen incredible skepticism from our customers so far.
We thank our efforts on VT excellence and clinical data are driving some of that market growth.
Kallum Titchmarsh: Great. Thanks, Kallum.
No reason for us to expect any change in that as we look out from here as we roll out our formal 2024 guidance will certainly put some context around the market, but as we exited Q3 here really nice healthy market backdrop.
Thanks <unk>.
Okay.
The next question comes from like Sarcone from Jeffries. Please go ahead.
Hey, good afternoon, and thanks for taking my question.
I've got some to follow up on the <unk> acquisition no. The the 12 reps to start you mentioned you know you anticipate adding to the group going forward was just wondering you know what is a severe sufficient amount of reps to address that initial one and a half billion dollar U S opportunity and and does that two to 3 million.
Larry Biegelsen: The next question comes from Larry Beegelson from Wells Fargo. Please go ahead. Good afternoon.
Drew Hykes: Dr. Take in the question. Congrats on the acquisition. The clinical data for Limflow is quite impressive. A lot to ask here. I just want to confirm here that penetration of 7%, that's by year 7, so 15 million, 100 million, in year 7, 15 million per year, including 2024, maybe just help the level of incentives and make sure I heard everything correctly, please. Yeah, so what we were trying to point out Larry and the prepared remarks there were to frame what we see as the medium-term revenue potential for Limflow.
Of costly you expect a decline over time does that incorporate the expectation for additional reps for <unk>.
Yeah, the $2 million to $3 million certainly incorporates are anticipated investment in the field organization.
Like I said, we're someplace in the neighborhood or limb flow is someplace in the neighborhood of 12 rubs today keep in mind. This is a much more concentrated market landscape than what we've faced in VT. He we think there's maybe a couple hundred high volume.
Drew Hykes: And we were using the penetration that we've achieved over the last six or seven years in VTE, which now stands at 7%, as a proxy for what we believe will be able to achieve as we begin launching into the CLTI TAM of 1.5 billion. In some ways, we think we're going to be able to potentially go faster than we've been able to drive penetration VTE. That's because after all, these patients are no option.
Limb salvage C. L T I centers of excellence in the U S. And these are non emergency cases, so as a result, I don't think we would anticipate needing to build anywhere near the size of the channel that we have established in V. T E.
Hard to put a number on it this early in the process, but I think some of those dynamics are certainly worth considering and I think it will it will certainly be a much smaller in scope to what we've established and built on the <unk> business.
Drew Hykes: They literally have no option other than amputation. It's a much more concentrated account base of high-volume centers than what we've faced in VTE. On the top of that, we're going to have high-quality clinical evidence that we did not have available to us in VTE right out of the gate published in the New England Journal of Medicine. So we think that's a good proxy for the kind of revenue potential that we see with Limflow, and over the medium term, we think we're going to be able to drive the penetration if not to the same levels we've achieved in VTE north of that.
Got it thank you and just to follow up on you know not to get ahead of ourselves here, but the incremental opportunities for less severe C. L. T I patience and Neal U S opportunity you know <unk>.
What do you think about timing on those efforts and when could we we hear more starting to see contributions on that front.
Yeah, I think those are both likely longer term opportunities for us the expansion to less sick less severe C. L. T. I would likely involve a study and likely another PMA path regulatory approval and to Rutherford for a patient.
Drew Hykes: 15 million or 24, is that the right way to think about it? Yeah, no, I don't think that's the right one to think about it. So we're just commencing the US launch right now, the Lymphlow team is. I think in many ways 2024 will be a year of foundation building. It'll be a year of training, a year of establishing back approvals of getting the foundation established for the broader launch. We have not put a revenue number for Lymphlow in 2024.
<unk> some of that may happen on its own off label, but for us to get in on label indication for for that would require some additional clinical work and navigating back through a regulatory path.
Likewise international certainly a spectacular unmet need with the same population as we look internationally, but work to do there certainly from a reimbursement standpoint first and foremost so we will assess and begin work likely in both of those areas, but I think pragmatically speaking of both of them are likely a longer term opt.
Drew Hykes: I think as we roll out our formal 2024 guidance, presumably early next year, we'll try and put some more context around where we see Lymphlow contributing. But I think it'll be a relatively modest contribution here in this first year of their full commercial launch.
24 us overtime.
Thomas Tu: Thanks, and then Tom, just one follow up on Lymphlow for you. So, you know, what we've heard is that it's a relatively long procedure called two hours and a relatively long recovery time. So my question for you is, you know, do you guys see would you agree? And do you see opportunities to improve that over time? Thanks for taking the questions. Thanks for the question, Larry. Absolutely. I think one other statistic about the procedural aspects worth mentioning is the 99% technical success that's achieved in early users' hands.
Okay. Thank you.
Thank you.
The next question comes from Richard New Winter from Truth Securities. Please go ahead.
Hi, Thanks for taking the questions guys. A couple for me, maybe just starting with <unk>. Congrats on the deal I may have missed the juggling calls did you mention anything about how this will impact the profit profile dilution and you know a modest revenue I think I heard not describing a cough.
Thomas Tu: So although procedure time is something that will definitely come down with training, education, more experience as well as perhaps technical improvements, we're very pleased to see right out of the gate early users can achieve the kind of fantastic results that were demonstrated in the New England Journal. All right. Thanks, guys. Thanks, Larry.
<unk> 23, but but what about on the <unk> on the profitability.
Sure Richard It's Mitchell I. Appreciate the question. We previously as you know talk to that operating profitability in the first half of 2024. This is for <unk> and I'm not sure. If you caught it but we actually reported an operating profit here in Q3. So we feel like we were a little bit ahead of schedule.
William Plovanic: The next question comes from Bill Plovanec from Canacord. Please go ahead. Great. Thanks.
Have some fluctuations in Q4 and Q1 of of upcoming.
Drew Hykes: Good evening, and congratulations on the quarter and the deal. In terms of the core business, you know, I think the question we're all asking is, you know, it seems like the quarter is telling us is, you know, is trialing over. What are you seeing in the field from trialing today? You know, kind of are we past that from that competitive standpoint? And then just on a more granular level is, you know, you gave us the international but was the core business up sequentially or was that all driven by new products in international?
That's kind of been the game plan for the core business when we layer. The the lintel acquisition on top because of this $2 million to $3 million a month or cash support that you've heard about a couple of times. During this call we need to move the sort of the operating profit target for the combined business out into the second half of 2000.
25, that's are sort of the current outlook for us. So hopefully that's helpful to your question.
Okay, Yeah, no that that's very helpful and then just.
I think there's been some confusion out there with how the pricing models work with what's in your bundle what's not as you you know started to add a number of new products to the portfolio. I was just wondering if you could maybe help clarify for investors. How you know what what the different pricing models are and.
Drew Hykes: Yeah. Thanks for the question, Bill. So we did see some trialing, kind of spill over into Q3, but as we had anticipated, you know, I think much of that activity is behind us at this point. And the business performed really well. We saw strength across the business. We saw strong procedural growth in both PE and DBT in the US that obviously continues to make up the bulk of the growth and the bulk of the revenue.
Which of the new you know the newer more recently launched products are factoring into the bundle better outside of the bundle I I, just think that that could benefit the investment community here in hearing a little bit more about the the mechanism of pricing and and those new products fitting into the procedure pricing model. Thanks.
Drew Hykes: We saw strong growth in that area. We saw continued contribution from new products and new tabs in thrill and pro-tree even rev core, all contributing to the quarter, but certainly much more modest compared to the core VT and then another strong quarter of growth internationally across the board. Again, led by Western Europe. So we saw strength across the board that all contributed to a really nice solid Q3, 31% growth on the top line.
Sure Richard So I think you like we understand and the <unk> part of our business that has always been under historically a per procedure price model.
That covers essentially the entire float driever toolkit on the clock Riverside the majority of our cloud Schriever accounts are still on a skew based.
Drew Hykes: And next to that some really nice continued progress on our path to profitability and our disciplined approach to affects investments. And then on the guidance is, you know, fourth quarter guidance is is flushing out at about 22% year over year. You've been running hot at 30%. You know, for the year roughly, if you all three quarters combined and, you know, up and down, but right around there, why, you know, what's the reasoning or thought process behind that deceleration as we handed into the fourth quarter?
Approach, where we're pricing of the controversies in the clock your catheter Ah separately.
Some of the new products I think this is where some of the confusion or questions come from some of our new products straddle. Both so Rev. Core for instance can be a skew based account from pricing standpoint, and some other accounts that can be included in one of our P. P. P's.
So ah appropriate would be the same kind of example, where it can be in some accounts of the skew based pricing and and others as part of a P. P. P bundle.
So I think some of the questions come from the fact that these new products are straddling both of the two pricing strategies.
Drew Hykes: I think Bill, we just want to make sure that we're very confident in the guidance that we provide for Q4. And, you know, there's obviously some fluctuations here as we reach the end of the year. And there's some holiday time and some of the things that factor into our thinking about that. But primarily it's just one of wanting to feel comfortable with the numbers we provide to the street. And I'd be last question.
Okay, and then they'll.
Oh go ahead, yeah, sorry.
Just to quickly follow up on that that's really a customer accommodation or convenience that we've developed VT PPP. We've had we have a lot of cases, probably 15 per cent or more of our D. V. D cases, which are complex, meaning there can be clawed up around the Ivy C part and will sometimes use the clutch river.
Drew Hykes: I promise to remiss not to ask, kind of, Limfflow, just, I think a couple of times you've, you've, you've mentioned the reimbursement. What's the, what's the wood need to chop on the reimbursement side to kind of get that all settled out? Thanks for taking my questions. Thank you. Yeah, thanks Bill. So Limfflow does have established reimbursement, both inpatient as well as outpatient. So that's in place today. There's DRG codes inpatient where we believe the majority of procedures will occur here.
To remove the kind of the DVT portion of the clot and then the upload schriever to remove the cloud up around the IPC and rather than charged the hospital basically for a clot tree running a skew basis and then for the floor tree for PPP. We have developed the idea that V. T E. P. P P.
Which is at a much lower price than the two would be separately and that's something that we really did in response to customer feedback and it's been very well received and accepted.
Drew Hykes: That was certainly the case, for instance, in their promise to study here in the US. So that's in place and we'll allow a foundation for us to build on. We do have a line of sight to enhance reimbursement inpatient via the potential for an end tap, which would take effect late next year, as well as line of sight to enhance reimbursement and outpatient via the potential for a new tech APC. So both of those would be additive on top of the existing reimbursement that's already established in those two respective sites of service.
And yeah, and it sounds like you're doing the same thing for some of the recently launched products I'm just curious on those combo DVT M. P E procedure, what what percentage of the <unk> is that is that 15% 10% 20%.
Yeah, it's a pretty modest part of the overall patient presentation. I think 10, 15% is a pretty good ballpark estimate.
Okay. Thanks, a lot guys.
<unk>.
The next question comes from David <unk> Rescue from Bear. Please go ahead.
Marie Thibault: Next question comes from Marie Taibo from BTIG. Please go ahead.
Hey, guys. Thanks for taking the questions. Congrats on the the acquisition in the quarter here first question from US just on some of the comments around you know the the the midterm or medium term expectations for you know for the contribution from limb flow as well as at 2025 or mid point in a second.
Mitch Hill: Good evening, congrats on a great quarter and congrats on the Limfflow deal as well. I wanted to ask here a little bit more on the Limfflow side. You know, you mentioned operating support two to three million per month. Do you expect that to ramp throughout 2024? So is that just sort of a starting point? And can you remind us of the margin profile on that device based on, you know, existing sort of ASPs and reimbursement assumptions?
25 margin profitability.
Those assume you know that there are any either revenue kind of cross selling synergies associated with the acquisition or a lot of these more of the kind of bare bones.
Mitch Hill: Hey, Marie, I appreciate the question. The two to three million a month that we mentioned is actually a number that we expect would decline as we move throughout 2024. The exact pace of that drop, you know, we're not quite sure. As Drew mentioned earlier, we're still putting together and working on the revenue sort of plan for 2024. That that's a number that we would expect, ultimately, they'll begin to kind of cover some of their own costs and then that number would decline in 2024 and into 2025.
<unk> based on maybe what the maybe prior even <unk> expectations could've been or are there any type of synergies that your accounting for when you're you're calling out this midterm contribution and 2025 profit.
David Let me get that started and drew me want a pylon, but essentially are thinking about the revenue that for example, we've yet to really crafty 2024, you know kind of revenue guidance for <unk> and then how that will kind of be layered with the lymph will acquisition drew mentioned.
Mitch Hill: From a margin profile point of view, I think it's best to kind of think about that in terms of the overall blended gross margin of an array. So this would be inclusive of the Limfflow product and that's the one that we can tell you we're still comfortable kind of guiding to that mid, mid sort of 80s percent gross margin for the company. So, you know, as we did 88 and a half in the current quarter, you know, we expected gross margin of an array as a consolidated entity will decline a bit over time, primarily due to the international growth of the business. So the new product kind of additions to it have some effects, but not a significant effect.
We are extremely excited about the opportunities for the business and.
You've got a sense for how we feel that can grow over kind of an intermediate term period of time.
From my commentary about the cashless support and also the profitability goal in terms of shifting out by ear. Those are really under the kind of the construct of having the the NRA core business continue to grow and develop as is essentially having the limb for business with it's a separate <unk>.
<unk> and then what kind of look for a lot of opportunities and other support services in terms of you know opportunities to provide support for lymph low obviously, there's a lot of G&A and you know other type capabilities that we already have as a part of the in our company that we can provide the lymph flow.
Mitch Hill: Okay, that's really helpful, Mitch, thank you.
Marie Thibault: And then a second question here on sort of the core business and the OPEX outlook. You've done a very nice job of controlling spend there. How are you thinking about Salesforce on the core market? You've got a lot going on with both DVT and Pee and some of the new products. Are you nearing sort of what you view as peak Salesforce levels? Is there a lot more expansion to do? Cutting up of territories.
So there are opportunities there to be efficient, but those businesses are essentially intended to be very focused and and.
Kind of grow at their own pace essentially based on the market opportunities, which were able to develop in the market development efforts that we make.
Marie Thibault: How do you think about that holistically? Yeah, Marie, I think we continue to see runway out ahead of us to continue to add to that team. We've certainly added each and every quarter in 2023. And I think we would anticipate adding as we moved through 24 as well. I do think the pace of those ads are beginning to slow, at least relative to some of the huge classes we've added historically. So I do think we're we're modulating the pace of those ads.
Okay. That's that's helpful. And then you know I know you guys have talked in the past about you know your confidence at this underlying b B E marketer throwback to the marketing B G. E has been great. Thank 20th 20 per cent or so and I've talked about is the market leader expecting to grow above that level. So just wondering if if that.
Still is your belief interest the acquisition here signals any you know hesitancy in either that or new product growth expectations that you have and I just didn't want to make sure that I heard the arch X 2024 comments appropriately. Thank you.
Marie Thibault: But given that, the penetration we're currently at and the runway out ahead and the need to not only focus on VTE, but also begin doing work around some of these other new tabs, be it within thrill and AVF or the work we've begun doing in chronic venous disease with rev core, looking over the horizon. The next year, reentering the arterial market with Artex, all that I think also points to the need for continued ads to the field team. Sure, sounds like you'll be very busy.
Yeah, you did hear the <unk> re entry in 2024 correctly.
The first part of your question.
I think we've never been more confident in the strength of the core V. T franchise, we saw great momentum here in the first nine months of this year. We're seeing strong case grows across both P. E N D. B T. We like what we're seeing in the V. T E. Mark development work that we're doing.
Marie Thibault: Thank you so much. Thank you.
Adam Maeder: The next question comes from Adam Mater from Piper Sandler. Please go ahead. Hi, guys. Good afternoon and thank you for taking the questions here. Congrats on the quarter and the deal. I want to start on them flow and was actually hoping to get some more detail on the Salesforce that you're bringing over. How many reps are I guess coming on board? How much overlap is there with your existing customer base that feels like it's a good fit with the existing call point, but was hoping you could expand on that. And then lastly, why not? You know, why not let the core sales team also offer the lymph lymph flow product in the night of follow up or two. Thanks. Thanks for that.
We are leveraging the clinical data and looking ahead that'll be in the form of RCT data, we're seeing nice traction and pick up from some of our new products and some of our new tabs and international is continuing to show some nice traction and strong sequential growth.
So taken together, we feel really confident and how the core franchise is performing and all of that of course is against the backdrop of a really healthy market Ah set up as well. So I think all that is is reflected in our confidence to undertake an acquisition an AD lib flow into the portal.
I think that reflects the strength and the confidence we have in the core franchise.
Drew Hykes: So to start, you know, lymph flow just got FDA approval, PMA approval back in September that got an initial team that has been recruited and trained and onboarded fully trained. And they are commencing the U.S, launch as we speak. That number is something the neighborhood of a dozen sales professionals. Right now on the team, we obviously would anticipate adding to that group as we go forward. The overlap with the call point, I think you're absolutely right.
Alright, great Thanks, and congrats again.
Okay.
And as a reminder, if you have a question. Please press Star then one.
The next question comes from <unk> from <unk> Research. Please go ahead.
Thanks, Congrats on the deal seems like a great fit I had one question I'm going slow and then one on the existing business.
<unk> and do you think about the potential to move up the courage to other food for patients what's happening with that population today or just basically getting surgery or other endovascular therapy, just trying to understand what you'd be looking to displace in that population.
Drew Hykes: There is a significant amount of overlap across the folks we anticipate performing the lymph flow procedure with our historical call points in in DVT and PE. It's a combination of astro surgeons and IRs and ICs, the exact same group we've been focused on historically. So there is some nice overlap there. Chancellor, last part of your question, we believe out of the gate here that this technology deserves the kind of focus and dedication of a dedicated field organization.
Thanks for your question, Chris So just to be clear lymph flow is a technology, that's really appropriate for what we call no option patients. These are patients who don't have any option for traditional revascularization angioplasty surgery or anything like that the Rutherford class is the <unk>.
Level of current symptomatology of the patient so.
<unk> added opportunity and rather for for our patients who are somewhat less symptomatic, but still or no option in terms of their revascularization. So.
Drew Hykes: It's a non-emergent procedure and it's also a fairly concentrated group of high volume CLTI lymph salvage centers of excellence. So I think a dedicated sales organization we can have it be a pretty manageable in scope and still get the job done. So I think for now we're anticipating this will stay a separate sales organization focused on lymph flow. I will keep the mothership sales organization focused on VTE. I do think there's some really interesting potential synergies and efficiencies with some of the work we've begun doing from a market development standpoint.
What we would be displacing is simply conservative therapy watchful waiting an amputation.
That's helpful. Thanks for clarifying that and then on the existing business <unk>. It seems like it's off to a strong start.
Curious, whether you think you're picking up cases, there that you would not otherwise be involved in or if it's just providing a better solution and procedures that you would've been an already trying to understand how incremental that product really is.
Yeah, So I'll I'll tackle that one as well I think the Rev. Core product is completely incremental two hour V. T. E business. These are patients who have included Venus fence. There is currently no approved option for treatment of those patients other than for <unk> I think what those patients might be getting it.
Drew Hykes: Relative to a chronic venous disease. You've heard us talk in the past about the market development specialist team that we've deployed to begin to understand how to identify chronic venous disease patients who are out being cared for in wound care centers and in some cases primary care podiatry. Those are the same places where we believe many of these no option CLTI patients are also being cared for. So you can imagine some obvious synergies and some of that work which I do think will cross over between the two sales organizations. Williams, that's a great color Drew, thank you for that.
And off label fashion prior to Rev. Core is conservative therapy, or angioplasty and re lining with sent which we know is a terrible solution from a lot of other disease states. So I think all of the Rev core business that we're doing is incremental.
Great. Thank you.
There are no more questions in the queue.
It concludes our question and answer session and the conference has now concluded.
Drew Hykes: And I guess for my second question, I'm going to actually sneak in a third here, just one clarification, the TPP and the NTAF that came up, I guess I wanted to clarify that, have you or the lymphlo-team submitted for those and you think there's a good likelihood of those being, you know, accepted and going into a fact next year, I just wanted to clarify that. And then for the follow-up question, just any kind of early thoughts on the VTE market as we look ahead to 2024 and potential pace of growth for the category.
Thank you for attending today's presentation you may now disconnect.
[music].
Drew Hykes: Thanks again. Yeah, so on your first questions on TPP, yes, the lymphlo-team has submitted for both New Tech, APC, as well as NTAPS. So those submissions are underway. They would take effect here most likely next year in 2024. We're confident or optimistic that those will come through, but until you actually get the approvals, you know, there is some uncertainty there. Keep in mind, they do have established reimbursement already and those would be additive or incremental on top of that.
Drew Hykes: In terms of your second question on the underlying growth rate, you know, I think the market is as healthy as we have seen it. Really robust growth, increased awareness, lots of really good traction momentum from an overall market standpoint. And obviously, you know, we think our efforts on VTE excellence and clinical data are driving some of that market growth. No reason for us to expect any change in that as we look out from here. As we roll out our formal 2024 guidance, we'll certainly put some context around the market. But as we exit a Q3 here, really nice, healthy market backdrop. Thanks, Drew. Thanks, Adam.
Mike Sarcone: The next question comes from Mike Sarkone from Jeffries. Please go ahead. Hey, good afternoon, and thanks for taking my question.
Mitch Hill: But I've got some to follow up on the limpo acquisition. You know, the 12 reps to start. You mentioned, you know, you anticipate adding to the group going forward was just wondering, you know, what is the sufficient amount of reps to address that, you know, initial one and a $2.5 billion US opportunity. And is that $2 to $3 million of cost that you expected decline over time? Does that incorporate, you know, the expectation for additional reps for limpo?
Mitch Hill: Yeah, the 2 to 3 million certainly incorporates our anticipated investment in the field organization. Like I said, we're someplace in the neighborhood or limpo is someplace in the neighborhood of 12 reps today. Keep in mind, this is a much more concentrated market landscape than what we've faced in VTE. We think there's maybe a couple hundred high volume. Lim Sal would see LTI centers of excellence in the US. And these are non-emergent cases.
Mitch Hill: So as a result, I don't think we would anticipate needing to build anywhere near the size of the channel that we have established in VTE. It would be hard to put up, you know, number on it this early in the process, but I think some of those dynamics are certainly worth considering. And I think it will certainly be much smaller in scope to what we've established and built on the VTE business.
Drew Hykes: Dennis, thank you, and just to follow up on not to get ahead of ourselves here, but the incremental opportunities for less severe CLTI patients and the U.S, opportunity. What do you think about timing on those efforts and when could we hear more start to see contributions on that front? Yeah, I think those are both likely longer term opportunities for us. The expansion to less sick, less severe CLTI, would likely involve a study and likely another PMA path, regulatory approval into Rutherford for patients.
Drew Hykes: Some of that may happen on its own off label, but for us to get an on label indication for that would require some additional clinical work and navigating back through a regulatory path. Likewise, in our national certainly a spectacular unmet need with the same population as we look internationally, but work to do there certainly from a reimbursement standpoint first and foremost. So, you know, we will assess and begin work likely in both of those areas, but I think pragmatically speaking, both of them are likely a longer term opportunity for us over time. Okay, thank you. Thank you.
Richard Newitter: The next question comes from Richard Neweter from Truist Securities. Please go ahead. Hi, thanks for taking the questions, guys. A couple for me, maybe just starting with Limfflow Cringress on the deal. I may have missed the juggling calls. Did you mention anything about how this will impact the profit profile delusion and modest revenue, I think. I heard not just revenue contribution in 23, but, but what about on the on the profitability?
Richard Newitter: Sure, Richard, it's Mitch. Appreciate the question. We previously, as you know, talked about operating profitability in the first half of 2024. This is for Anari. And I'm not sure if you caught it, but we actually reported an operating profit here in Q3. So we feel like we're a little bit ahead of schedule. We may have some fluctuations in Q4 and Q1 of upcoming, but that's kind of been the game plan for the core business.
Richard Newitter: When we layer the Limfflow acquisition on top, you know, because of this two to three million a month, the cash support that you've heard about a couple times during this call, we need to move the sort of the operating profit target for the combined business out into the second half of 2025. That's sort of the current outlook for us. So hopefully that's helpful to your question. Okay, yeah, no, that's very helpful.
Richard Newitter: And then just, you know, I think there's been some confusion out there with, you know, how the pricing models work with what's in your bundle, what's not as you, you know, started to add a number of new products to the portfolio. I was just wondering if you could maybe help clarify for investors how, you know, what the different pricing models are and which of the new, you know, the newer more recently launched products are factoring into the bundle that are outside of the bundle.
Richard Newitter: I just think that could benefit the investment community hearing a little bit more about the mechanism of pricing and those new products fitting into the procedure pricing model. Sure, Richard. So I think you likely understand in the flow-triever part of our business that has always been under historically a per procedure price model that covers essentially the entire flow-triever toolkit. On the clock-triever side, the majority of our clock-triever accounts are still on a skew-based approach where we're pricing the clock-triever sheets and the clock-triever catheter separately.
Richard Newitter: Some of the new products, I think this is where some of the confusion or questions come from. Some of our new products straddle both. So RevCore, for instance, can be a skew-based account from a pricing standpoint and some other accounts that can be included in one of our PPPs. So a pro-trieve would be the same kind of example where it can be in some accounts as a skew-based pricing and in others as part of a PPP bundle.
Richard Newitter: So I think some of the questions come from the fact that these new products are straddling both of the two pricing strategies. Okay, and then go ahead, yes, sorry. Just to quickly follow up on that, that's really a customer accommodation or convenience that we've developed the VTE PPP. We've had, we have a lot of cases, probably 15% or more of our DVT cases which are complex, meaning there can be caught up around the IVC.
Richard Newitter: And we'll sometimes use the clock-triever to remove the kind of the DVT portion of the clot and then the flow-triever to remove the clot up around the IVC. And rather than charge the hospital basically for a clock-triever on a skew basis and then for the flow-triever PPP, we have developed the idea of a VTE PPP which is that a much lower price than the two would be separately. And that's something that we really did in response to customer feedback and has been very well received and accepted.
Richard Newitter: And yeah, and it sounds like you're doing the same thing for some of the recently launched products. I'm just curious, on those combo DVT and PEP procedures, what percentage of the mix is that? Is that 15%, 10%, 20%. Yeah, that's a pretty modest part of the overall patient presentation. I think 10%, 15% is a pretty good ballpark estimate. Okay, thanks a lot guys. Thank you.
David Prescott: The next question comes from David Prescott from Baird. Please go ahead. Hey, guys, thanks for taking the questions and regrets on the acquisition in the quarter here.
David Prescott: First question from us just on some of the comments around the midterm or medium-term expectations for the contribution from Limflow as well as that 2025 or midpoint. There's like 225 margin profitability. Do those assume that there are any either revenue kind of cross-selling synergies associated with the acquisition or a lot of these more of the kind of bare bones assessment based on maybe what the maybe prior even Limflow expectations could have been or are there any type of synergies that you're accounting for when you're calling out this midterm contribution and 2025 profit.
David Prescott: David, let me get that started and Drew me want to pile on, but essentially are thinking about the revenue event, for example, we've yet to really craft the 2024 kind of revenue guidance for Inari and then how that will kind of be layered with the lymph law acquisition. Drew mentioned we are extremely excited about the opportunities for the business and you've got a sense for how we feel that can grow over kind of an intermediate term period of time.
David Prescott: From my commentary about the cash flow support and also the profitability goal in terms of shifting out by a year, those are really under the kind of the construct of having the Inari core business continue to grow and develop as is, and essentially having the lymph law business with its separate sales force. And then we'll kind of look for a lot of opportunities in other support services in terms of opportunities to provide support for lymph law.
David Prescott: Obviously there's a lot of GNA and other type capabilities that we already have as a part of the Inari company that we can provide to lymph law. So there are opportunities there to be efficient, but those businesses are essentially intended to be very focused and kind of grow at their own pace essentially based on the market opportunities which we're able to develop and the market development efforts that we make.
Drew Hykes: Okay, that's helpful. And then I know you guys have talked in the past about your confidence that this underlying VTE market or from actually market and VTE has been growing I think 20% or so. And I've talked about as the market leader expecting to grow above that level. So just wondering if that still is your belief and or if the acquisition here signals any hesitancy and either that or new product growth expectations that you have.
Drew Hykes: And I just did want to make sure that I heard the RTX 2024 comments appropriately. Thank you. Yeah, you did hear the RTX reentry in 2024 correctly. Chancellor, first part of your question. I think we've never been more confident in the strength of the core VTE franchise. We saw a great momentum here in the first nine months of this year. We're seeing strong case growth across both PE and DBT. We like what we're seeing in the VTE market development work that we're doing.
Drew Hykes: We are leveraging the clinical data and looking ahead that'll be in the form of RCT data. We're seeing nice traction and pickup from some of our new products and some of our new tabs. And international is continuing to show us some nice traction and strong sequential growth. So taking together we feel really confident in how the core franchise is performing and all that. Of course, it's against the backdrop of a really healthy market set up as well. So I think all that is reflected in our confidence to undertake an acquisition and add Limflow into the portfolio. I think that reflects the strength and the confidence we have in the core franchise.
David Prescott: Our great thanks and congratulations on.
Operator: Thank you.
Operator: That's a reminder.
Operator: If you have a question, please press star, then one.
Christopher Pasquale: The next question comes from Chris Pasquale from Neffron Research. Please go ahead. Thanks.
Drew Hykes: Congrats, my deal seems like a great fit. I had one question on lymphone and one on the existing business. On lymphlobe, as you think about the potential to move up the curve to rather food for patients, what's happening with that population today? Are these patients getting surgery or other end of asker therapies to try to understand what you'd be looking to displace in that population? Thanks for the question, Chris. So just to be clear, lymphlobe is a technology that's really appropriate for what we call no-option patients.
Drew Hykes: These are patients who don't have any option for traditional revascularization, angioplasty, surgery, anything like that. The Rutherford class is the level of current symptomatology of the patient. So the added opportunity in Rutherford 4 are patients who are somewhat less symptomatic, but still are no option in terms of their revascularization. So what we would be displacing is simply conservative therapy, watchful waiting, and amputation. That's helpful. Thanks for clarifying that.
Drew Hykes: And then on the existing business, RevCore seems like it's off to a strong start. I'm curious whether you think you're picking up cases there that you would not otherwise be involved in, or if it's just providing a better solution in procedures that you would have been in already trying to understand how incremental that product really is. Yeah, so I'll tackle that one as well. I think the RevCore product is completely incremental to our VTE business.
Drew Hykes: These are patients who have occluded venous stents. There is currently no approved option for treatment of those patients other than for RevCore. I think what those patients might be getting in an off-label fashion prior to RevCore is conservative therapy, or angioplasty and relining with stent, which we know is a terrible solution from a lot of other disease states. So I think all of the RevCore business that we're doing is incremental. Great, thank you. There are no more questions in the queue.
Operator: This concludes our question and answer session, and the conference is now concluded.
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