Q4 2023 ShockWave Medical Inc Earnings Call
Good afternoon, and welcome to Shockwaves fourth quarter and full year 2023 earnings conference call.
At this time all participants are in a listen only mode.
We will be facilitating a question and answer session towards the end of today's call.
As a reminder, this call is being recorded for replay purposes.
I would now like to turn the call over to Debbie Kaster, Vice President of Investor Relations.
At Shockwave for a few introductory comments.
Thank you all for participating in today's call. Joining me today is from chocolate medical I got Godshall, President and Chief Executive Officer, Isaac Zacharias, President and Chief commercial officer, and Rene data.
Financial Officer early.
Earlier today Shockwave released financial results for the quarter and year ended December 31, 2023, a copy of the press release is available on chocolate website.
Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 95.
Any statements contained in this call other than statements of historical fact are forward looking statements.
All forward looking statements, including without limitation statements relating to our sales and operating trends business and hiring prospect names.
In Nashville, and revenue expectations clinical trials reimbursement proposal and future product development approvals are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties, including the impact of global business political and macroeconomic conditions that could cause actual results or events materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our annual report on Form 10-K on file with the SEC and available on Edgar and in our other reports filed periodically with the SEC.
On today's call, we will refer to both GAAP financial measures and adjusted EBITDA, a non-GAAP financial measure. Please refer to today's press release for a reconciliation of net income to adjusted EBITDA and additional disclosures regarding this non-GAAP financial measure.
Chocolate disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as of the live Broadcasting day February 15th 2024.
With that I'll turn the call over to Doug.
Thanks, Debbie good afternoon, everyone and thank you for taking the time to join US to review shockwaves results for the fourth quarter and the full year of 2023, which proved to be another banner one for the company.
During the year, we launched <unk> in Japan, we converted to direct sales forces in Spain, Portugal, Italy and Canada.
We launched two new products.
All six for peripheral vessels in situ plus for the coronary we were granted DRG codes specific to coronary IV L. In the inpatient hospital, setting, which pay on average about $9000 more than and then codes for PCI is without IV L. We acquired and integrated Neovasc reducer product, which is the first device that addresses refractory and.
Uh huh.
And often debilitating condition that impacts a large patient population that has no good treatment options and we raised $750 million in a convertible debt offering.
We achieved record revenue of $203 million in the fourth quarter, which was 41% which was a 41% increase from a year ago.
And a 9% sequential increase from the third quarter of 2023.
Our revenue for the full year of 2023 was $732 million at 49% increase from 2022 revenue.
We witnessed excellent performance in all areas of the business with U S peripheral and coronary businesses growing 47% and 41% respectively.
Our international IV business growing 75% compared to 2022.
Really stellar performance.
The team continues to execute at a high level and we now have over 500 global employees.
Our products are approved in 70 countries and we are pleased that we now have U M. D. Our certification for <unk> plus S for in situ plus catheters and our generator.
The MTR process was a long journey and required a major effort by the team.
Our U S coronary business continues to shine and we have a couple of meaningful reimbursement tailwind that will support continued adoption.
The new hospital inpatient DRG for coronary went into effect in the fourth quarter of last year and Additionally, physicians are now being paid when they use coronary coronary IV all thanks to the CPT code that became effective on January one of this year.
As we have witnessed in the past reimbursement takes time to influence customer behavior, but we anticipate that the combination of these new payments will have a positive impact on our U S coronary business.
And we will help lower the economic friction that has historically been the biggest constraint on increased utilization of IV L.
We anticipate that physicians will increasingly use you see two plus whenever they feel it is clinically appropriate.
First is feeling pressure pressured to only use it selectively or after exhausting all of their options.
We believe in the IV I'll first strategy is optimal for patients and is now even better economically for customers.
Also in the coronary topic, we're continuing to launch of C to plus which has 50% more pulses than its predecessor <unk>.
Patrick will talk a bit more about this later in the call, but early reception from our customers has been very positive.
Yeah.
On the U S peripheral side the prior authorization issue appears to have stabilized as our customers are learning how to navigate aetna's increased scrutiny on peripheral procedures.
And we have not seen any other payers follow aetna's practices.
Meanwhile, <unk>.
There also has been considerable attention paid to Medicare advantage recently at the federal level, CMS recently announced new rules, which will make it harder to pursue prolonged prior authorization practices.
There also has been some productive recent movement among commercial payers specific to Shockwave as Humana. The second largest Medicare advantage payer issued a positive coverage decision for IPL for their Medicare advantage plans effective January one 2024.
Staying on the topic of U S. Peripheral reimbursement, we were pleased to see that CMS improved hospital reimbursement by assigning peripheral IV Elton new M. S. DRG is these new drg's increased inpatient hospital payment by $4000 to $10000 over previous levels.
Most peripheral interventions are performed in an outpatient setting.
This reimbursement uplift nicely complement the upcoming advances in our below the knee product offering that starts later this year.
While on the topic of new products.
We will be focusing back on peripheral in the second half of this year with two launches first we will introduce an upgraded version of <unk> six which will go from one pulse per second to two.
We witnessed a very positive response from our customers. When we made the same upgrade going from five to 10 five plus.
Shortly after the El six rollout we plan to launch the eight peripheral catheter.
Iain has an eight centimeter long treatment zone, which is twice as long as our current S. Four offering and is specifically designed to treat longer diffuse lesions that are common in below the knee cases.
We look forward to seeing our customers response to be eight we think theyre going to love it.
Rounding out our future PTK offering we anticipate the approval of our javelin peripheral catheter in the latter part of the year and look forward to starting the limited market release of that product prior to an expected full market release in early 2025.
That makes three significant new peripheral launches within the next year.
And finally on the operations front.
Our facility in Costa Rica has gone from first shovel in the ground in June of 2022 to a validated clean room and see two plus line in December of 2023.
Amazing progress frankly.
We'll be hosting regulatory audits, starting this month and anticipate shipping finished product into inventory in the third quarter of this year.
223 was a great year for Shockwave and we are even more excited about what lies ahead in 2024.
We expect revenue between $910 million to $930 million for the full year of 2024, representing growth of 25% to 27% over 2023.
Yeah.
Before I turn the call over to Isaac to provide more color on the commercial front I want to take a minute to thank our outgoing CFO Dan Puckett for the tremendous job. He has done it has eight years of chocolate.
During his time here he was instrumental in our growth from a small pre revenue private company to a public company with over $700 million in revenue.
Dan is not only if that's fantastic CFO, but he is a joy to work with he's been the biggest cheerleader for all of us always supportive and inspiring to everyone around him and he will be sorely missed.
We wish him well in his retirement and are pleased to introduce our new CFO Renee Gaeta who's jumping right in today, and we will present the financials a bit later in the call.
And if you've got anything wrong, it's all dance fault.
With that I'll turn the call over to Isaac.
Thank you Doug.
Our record results in both the fourth quarter and the full year of 2023 reflect outstanding contributions from our businesses and teams around the globe.
Q4, 2023 was strong for our U S. Coronary business revenue grew 40% compared to Q4 of 2022, 11% sequentially from Q3 of 2023 and 15% sequentially on an average daily sales basis C to plus launch is proceeding well we lost over 1000 accounts and the product has been very well received what is.
Really appreciate it if the utility of more pulses and longer diffuse lesions eccentric lesions calcified nodules we.
We expect continued momentum in the coronary business as our sales team focuses on the CPU plus launch and on communicating both a favorable reimbursement changes and additional physician fees for using coronary I B L.
Revenue from our U S peripheral business in Q4, 2023 was up 19% from a year ago flat sequentially compared to Q3 and up 3% sequentially on an average daily sales basis as Doug mentioned, we are seeing a stabilization of the prior authorization dynamic as providers are getting better at navigating the additional steps required for some patients.
We continue to expect modest growth in the U S peripheral business in the first half of 2024 as we maintain a strong focus on the U S coronary business we.
We didn't anticipate accelerated U S peripheral growth in the second half of 2024 with the L Pics and eat a product launches.
Turning to our international business, we had another record quarter of IV ourselves as revenue was up 67% from a year ago and 14% sequentially compared to Q3. We are now direct in all five major European markets, Germany, The U K, Spain, Italy and France.
Sales in Germany double during 2023 due to the improved coronary reimbursement, we're starting to see increased usage in some of the smaller German accounts, which can now afford ideal.
Germany is the largest market in Europe, and we think there is tremendous upside for coronary penetration from the current level of just over 2%.
We had our first full quarter of direct sales in Italy and are very pleased with the execution by that team. It feels good to see such strong and seamless execution from the direct selling teams in Europe, we continue to drive penetration with the focus of the Shockwave sales team and the support of our marketing and physician education programs.
In Japan, we completed our first year coronary sales.
We exceeded our goals for the number of accounts launched the penetration and the lost accounts and revenue we.
We have initiated efforts to develop clinical data that will support using IV out in conjunction with atherectomy and drug coated balloons.
We are working closely with the interventional Cardiology society in Japan to ensure the IV L is available and appropriately used throughout Japan.
In China, we are still experiencing experiencing the impact of the ongoing anti corruption campaign, which is slowing ideal adoption at new centers.
On the positive side adoption within centers that had I'd be out on the pricing with before the anti corruption campaign started is growing nicely that said, we expect very little revenue from China in the first half of 2024.
Finally, the European Reducer keen posted a very nice quarter the teams in Germany, and France are being rebuilt and along with the established UK team continued to generate revenue while testing different market development strategies and sales models. We are very pleased with the integration of Neovasc and are starting 2024 with strong teams in place to both accelerate enrollment in the <unk> two trial.
And build the international Reducer business.
With that I will turn the call to Renee to review the financials.
Renee: Thank you Isaac and good afternoon, everyone I'm thrilled to have joined the Shockwave team and look forward to working with all of you.
Barclays Medical's revenue for the fourth quarter ended December 31, 2023, with $203 million at 41% increase from 144 million in the fourth quarter of 2022.
U S revenue was $158 1 million in the fourth quarter of 2023 an.
An increase of 34% from $118 3 million in the fourth quarter of 2022.
Coronary products contributed $115 2 million to U S revenue in the fourth quarter of 2023, an increase of 40% from $82 1 million in the fourth quarter of 2022.
U S revenue from our peripheral products was $42 8 million in the fourth quarter of 2023, an increase of 19% from 36 million in the fourth quarter as 2022.
Growth in U S revenue during the quarter was driven primarily by increased utilization at existing accounts supported by our continued sales force expansion.
International revenue was $44 8 million in the fourth quarter of 2023, representing a 74% increase from $25 7 million in the fourth quarter of 2022.
Coronary products contributed $37 7 million to international revenue in the fourth quarter of 2023.
And 83% increase from $20 6 million in the fourth quarter of 2022.
International revenue from our peripheral products was $5 3 million in the fourth quarter of 2023, an increase of 19% from $4 5 million in the fourth quarter of 2022.
Our reducer product contributed 1.8 million to international revenue in the fourth quarter of 2023.
The increase in international revenue.
Over the prior year period was driven by continued geographic expansion, particularly in Japan.
The increased productivity of our direct selling teams in Europe, and the momentum from our C to plus launch.
Looking at product lines, our peripheral products Shockwave and five Shockwave and five plus Shockwave S. Four and Shockwave L. Six accounted for $48 1 million of total revenue in the fourth quarter of 2020 three.
Compared to $48 5 million in the fourth quarter 2022.
A 19% increase.
Our coronary products Shockwave situ and Shockwave C to plus accounted for $152 9 million of total revenue in the fourth quarter of 2023.
$102 7 million in the fourth quarter of 2022, representing a 49% increase.
Revenue from our reducer product accounted for $1 8 million of total revenue in the fourth quarter of 2023.
Gross profit for the fourth quarter of 2023 was 177.7 million compared to $126 5 million in the fourth quarter of 2022 gross margin was 88% for the fourth quarter of 2023, consistent with gross margin of 88% for the fourth quarter F. 2022.
Total operating expenses for the fourth quarter of 2023.
$134 4 million or <unk>.
60% increase from $84 1 million in the fourth quarter of 2022.
Sales and marketing expenses for the fourth quarter of 2023 were $67 2 million.
Compared to $43 4 million in the fourth quarter of 2022.
The increase was primarily driven by sales force expansion.
R&D expenses in the fourth quarter of 2023 or $42 3 million.
Compared to $23 7 million in the fourth quarter of 2022.
The increase was primarily driven by head count growth higher clinical related expenses, including reduced error and the facility expansion to support R&D.
General and administrative expenses for the fourth quarter of 2023 were $24 9 million compared to $17 million in the fourth quarter of 2022 the increase.
It was primarily driven by higher head count to support the growth of the business.
Operating margin was 21% for the fourth quarter of 2023.
Renee: Net income in the fourth quarter of 2023 was $44 3 million compared to net income of $140 9 million in the fourth quarter of 2022.
In the fourth quarter of 2022, where you we released a valuation allowance, which resulted in a tax benefit of $99 million in that quarter.
Basic net income per share for the period was $1 20 diluted net income per share for the period was $1.16.
A 20% increase compared to adjusted EBITDA of $56 6 million in the fourth quarter of 2022.
Finally, I'd like to briefly recap some highlights from our full year 2023 results.
Total revenue for the full year 2023 was $730 2 million, an increase of 49% compared to full year 2022 revenue.
$489 7 million.
U S revenue for the full year 2023 was 581.5 million, representing a 43% increase over 2022 revenue of $407 4 million.
International revenue was $148 7 million for the full year of 2023 compared to $82 3 million in 2022, representing an 81% increase.
Margin for the full year 2023 was 87% consistent with 87% for the full year 2022.
Total operating expenses were $475 7 million in 2023, an increase of 58% compared to operating expenses of $306 million in 2022.
Operating margin was 22% for the full year 2023.
Total net income for the full year 2023 was $147 3 million compared to $216 million for the full year 2022.
Renee: Net income in 2022 included the $99 million tax benefit from the aforementioned release of our valuation allowance.
Basic net income per share was $4.01 for the full year 2023 diluted net income per share was $3.85 for the full year 2023.
Adjusted EBITDA was $242 7 million for the full year 2023, and a 40% increase from adjusted EBITDA of $173 9 million for the full year 2022.
Looking forward to 2020 four we expect to continue to make significant investments to support and sustain our growth and anticipate full year 2024 operating margin expansion of up to 100 basis points from the full year 2023.
Similar to the pattern. We saw in 2023, we do expect a step down in Q1 operating margin from the prior Q4, reflecting compensation and benefits cost, which reset at the beginning of the year as well as the timing and increased costs related to our global sales meeting held in March.
We ended the fourth quarter of 2023 with $990 6 million in cash cash equivalents and short term investment.
At this point I'd like to turn the call back over to Doug for closing comments. Thank you Renee and thank you all for joining us today.
2023 was another great year of Shockwave. The team continues to execute at the highest level as we achieve our mission to help treat underserved patient populations around the globe with our innovative solutions.
And we're excited to continue this work in 2024.
With that I'd like to open the call to questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
If you'd like to ask a question you May press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
Our first question comes from the line of Adam metre with Piper Sandler. Please proceed with your question.
Hi, good afternoon, nice quarter and congrats on.
A fantastic year and welcome Rene on the new role.
I wanted to start on the guidance construction that the top line $910 million to $930 million.
Maybe just talk about what's embedded for some of the different pieces of the business.
Coronary versus peripheral versus reducer, and if I heard correctly, you said modest U S peripheral growth in the first half of 'twenty, Florida and accelerated in the back half with new product launches.
Hoping you could flush that out some.
Im assuming.
That's assuming some continued headwinds from now but wanted to I guess kind of understand what's baked in the guide for Aetna prior offs as well as China anti corruption.
Any potential impact from the step.
Stepped down in outpatient reimbursement on the coronary side in the back half of the year and sorry for the long winded question.
Yeah. So.
And we'll probably tag team on this.
We are anticipating a modest growth on peripheral pretty good enough in the first couple of quarters.
While we while we concentrate on coronary.
And and then as we start launching them.
L six any aid and turn our focus back to peripheral we'll start seeing a.
A step up in AR and peripheral growth.
The year will be.
Another really strong year, we anticipate for U S coronary contribution.
As a percent of the business, we anticipate U S coronary will be actually a larger percent of the total business than it was end of end of throughout the 2023.
Where are we we obviously had a very strong international.
Performance last year, we anticipate another strong year although.
So we have the China deficit, so ex China International is going to do very well, but but we will be losing over.
Over $10 million in.
Theyre very low single digit revenue out of China, So ex China, another strong contribution here from.
From the international business and I was like I don't know if you I think for the last the last point Adam you asked about was on the outpatient.
For coronary U S. In the second half the outpatient payment. We we don't anticipate I mean, we're aware of the situation obviously.
We still expect baseline is that the T. P. T will will is set to expire in July 1st thing that will expire in July 1st.
Renee: We still anticipate the.
Up leveling to 50, 194 will occur Jan one or 2025.
But what we've seen typically with reimbursement in the U S is.
It takes some time then to move behavior and change behavior patterns and what so we've not been on this this is kind of.
Good good run in coronary and and we haven't really strong coronary business and momentum right now with the in patient reimbursement continuing to be a tailwind. The physician fee continues to be a tailwind to see two plus launches a tailwind and we just don't anticipate that I'm, having with TPG expire in the middle of the year will be much of a headwind.
TBD, but that that's kind of what we've seen and that's why we've baked into our guidance.
Yeah. That's good color guys. Thank you for that and for the follow up will stick with the guidance topic again.
Switching over to margins.
If I heard correctly.
Youre expecting up to a 100 basis points of operating margin expansion for full year 'twenty for over 23 levels.
Renee: That's a little bit below kind of where the street is pre call.
Maybe it would just love to hear a little bit more about kind of what's.
Embedded in that assumption.
Should we be oriented models to kind of 50 basis points and the midpoint of that range or should we started a 100 basis points.
Uh huh.
Kind of coming out of the Q4 call here and.
Speaker Change: Yes, just would love to hear a little bit more about the philosophy on the leverage piece. Thanks, so much.
Yeah. So we are as usual, we're going to continue investing.
In aggressively in our pipeline, both are sort of hardcore product development side and increasingly.
The clinical trial expenses, which.
Whether it's a V.
Its trial for reducer, the cause you or cause you to study.
Or the various trials such as duo that we're running now or empower we've we initiated multiple trials next year and they're becoming more expensive the last year and this year, we'll spend even more on those trials. So a big step up in clinical our clinical spend.
Will be will continue to augment our global sales footprint, but the U S team will not be growing at the same.
Our rates that it has historically.
We've we're not done we're not done building out that team, but the rate of change will be will be lower.
So the so you'll you'll you'll probably see a little leverage on on sales delever sort of not incremental leverage on on R&D.
We shouldn't see much deleveraging on R&D, but that will probably be static relative to the topline.
We're still spending money right now, we're still having to expense Costa Rica.
And that does not convert into.
Corey until later in the year and so we're still having the we're still having to absorb the Costa Rica costs, which are.
Not insignificant.
I got it and just one clarification, Doug no no change to the 500 basis points.
Operating margin expansion over 23 levels that you outlined.
At <unk> last year, just wanted to confirm that's still the case yeah. We've been we've we've articulated previously that it's gonna be 'twenty five 'twenty six but we're pleased that our if if.
If this plan delivers as expected we're very pleased with a.
Up to five up to 100 basis point improvement if you want to model 50, I'm perfectly okay with that and.
We will always strive to try to do better, but ER, but we're targeting top line growth as our.
<unk> I'm not.
Do you think the.
Margin improvement is really an output of the business versus the specific the objective of the business.
Thanks for the color.
Our next question comes from the line of Bill <unk> with Canaccord. Please proceed with your question.
Hey, great. Thanks for taking my question.
Just a couple of things here.
You gave us a little granularity on what you're seeing from Aetna and you know just.
In terms of when this comes back is this just like a 369 months delay or does this take patients out of the you know.
Out of the funnel or does it come back at some point in time, how should we think about just aetna going forward.
Yeah, I'm going to I'm going to answer this and and bringing Rob Fletcher as well too.
Good color.
Whats unknowable for US is a is a patient is an aetna shockwave patient they've got treated today somebody who would have been treated for months ago.
Two months ago, one month ago Dano, we it's impossible for us to have that level of granularity.
And maybe Rob can talk a bit more about sort of what are you seeing more broadly on from from our team and from societies on on this prior off.
Yeah, that's right high Bill I think you know.
What typically happens after a change in practice from one of the payers that are out there as you. What you see is at the provider level at the hospital level Theres, often a reaction to that they have to do a more documentation or they have to take additional measures are staffs or allow for more time.
To go through a prior authorization process. So typically what we see as you know over time. After you know some initial sort of temporal disruption people figure out how to start working within this and then they plan for it and then it kind of becomes back to a steady state.
Kind of a new normal, but you know you'd wind up with more of a steady state type of of effect and I think that's what we're seeing and hearing now from customers is that that is really sort of stabilize people have figured out how to work within that Meanwhile, while we do see action being taken from the medical societies for example.
Who did over the course of this period come together jointly there was multiple medical societies and did issue you know an additional letter to aetna that covered a bunch of different things, including this prior authorization practice. So you are starting to see some pushback and.
And I expect that you know that well take that under consideration under many other things, but for the time being I think it's us.
Speaker Change: Scribe. It is what it appears to be more of a is a stable situation at a new normal.
Great and then as a follow up.
Speaker Change: I don't want to leave Renee out on our first conference call welcome Rene is.
Your other income was significant in the quarter well above can you kind of call out any one times there for us.
I wouldn't necessarily be one time, but certainly interest income is within that number and then of course, our interest expense out on the curve that so that not that number is going to be nice given interest rates currently and thank you for the question.
Speaker Change: But the so $15 3 million is that something we should model it going forward.
15.3.
Yeah, it might be a little high there's probably some FX in there.
Speaker Change:
Yeah, it's a it's slightly high but there is just because of the FX for that for the period, but it is largely interesting huh.
Great. Thank you.
Okay.
Our next question comes from the line of Patrick Wood with Morgan Stanley. Please proceed with your question.
Amazing. Thank you maybe it is just to hold off on that point.
The amount of cash on the balance sheet, I mean, you're you're approaching $1 billion. So it's familiar as much as in my checking account and so I kind of I got asked like.
What do you like updated thoughts I know there was like a willingness to be sort of strategically put it around M&A. It's obviously like its like chameleon eighths of your market cap, how you're thinking about capital allocation.
Yeah, and if you Wanna Venmo me.
Patrick I'm.
Receptive I'll give you my my number.
So yeah, we we continue to be a very receptive to smart strategic external opportunities.
Maybe emphasis on smart or trying to be smart or at least.
But we raised the convert with the recognizing that there was oh.
A window, where valuations for private companies were down and they still are it's very hard to raise money for small companies.
Speaker Change: And and valuations have said private companies where we're.
And willingness and boards are sort of had changed over over a 12 to 24 month period.
And we didn't at the middle of last year, we did not have the the cash wherewithal to.
Make offers on some on properties that we might have it might be interested or thought we might be interested in and we realize that the.
The convert.
Structure and terms were just so attractive that having a 1% coupon in a period, where we can.
Yeah. We're we're we're netting a nice interest income relative to our interest expense right now and we didnt raise the money so that we could invest the money we raised the money so that we could be opportunistic if something came along.
That said.
The worst thing you can do is just because you have cash run out and buy something that is not smart Dubai and so.
If at the end of the day, we don't see anything that we think is going to.
<unk> be accretive to our growth and accretive to our.
Our shareholder value then we'll we'll.
He will sit on the cash until we find something that is worth investing in but it gives us tremendous amount of strategic flexibility that a.
Where are we feel really fortunate to have for a company at our stage to be growing at our rate to be profitable and to have this much cash on the books is a is a really weird.
Speaker Change: Recognize the unique position we're in.
But we don't feel obligated to run out and spend that money on something because then then we would be more likely to do something that wasn't smart.
Totally and maybe as a quick follow up the Sony.
Finally, more bigger picture I know, we don't talk about or you asked what about much but.
When do you think you're going to get to a point of a body of clinical evidence that can kind of help unlock some of the penetration and somebody other markets. Obviously, Germany went your way recently and I know in the U K nice sort of reformulated that language around peripheral but just kind of is that like a critical mass of evidence that you feel is needed to unlock the market or is it somehow.
Els.
I'll take a shot at that I think in many of the many of the markets. It's unlikely that at least with our coronary and peripheral IV L that will amass enough evidence that those those systems kind of the national health systems will.
Well increase you know or gave extra payment for IV al I think it's those are generally going to need to be large randomized studies showing cost effectiveness compared to other products and we just don't see those studies.
Being <unk>.
Necessary really one but also we're not we've talked about there's a lot internally, we don't know what to randomize against them. Because we don't you know randomized against the balloon and we don't think is.
Appropriate study randomize against Atherectomy, we don't think is an appropriate study there are different tools for different situate in different clinical situations. So we're working on it.
Speaker Change: Have a Japan, we're in a good spot obviously, Germany. We're in a good spot hopefully you know continue to get better.
Or JV is working on regional reimbursement in China, and we'll make progress there, but I think generally it's it's gonna be Ivy I was gonna be paid for out of out of hospital funds and the budgets they have to treat.
The treat patients without any incremental kind of flywheel.
But what it will be interesting to see what will be interesting to see is with cause here too.
Assuming success in that study.
That's exactly the kind of study that that the sham controlled randomized study.
Yeah.
Again, assuming it works it will be undeniable that that product does what it was designed to do and actually increases the chances that reducer could be could get reimbursement in some of those systems and it's a it's a standalone procedure versus IV L that drops into existing procedures that are already.
Paid for so it's harder outside of certain discreet markets, like Germany, and Japan and the U S.
It's harder to get an incremental payment and those systems, because there's kind of not structured to pay more per device, whereas a small small subset of.
Speaker Change: Of countries do paid differentially based on.
On the way they code for for different device utilization.
Got it thanks, so much for taking the questions.
Speaker Change: Youre welcome. Our next question comes from the line of Travis Steed with Bank of America. Please proceed with your question.
Hey, Thanks for taking the question and welcome her day, Doug maybe a little bit more color on what modest peripheral growth means that still in that 10% to 15% range or is it more of a low single digits is that modest growth every quarter of the year.
A more modest early so so low we think probably low singles for the first half of the year stepping up till so it probably.
Low doubles to teens in the in the back half of the year.
Okay helpful. And then in Q1 I'm sorry, just like in January and February so far I mean anything to call out on trends on.
In coronary or peripheral and I'm curious if the total revenue for Q1 still picking up sequentially a little bit.
Ah, yes on the ladder up.
Speaker Change: Up a bit sequentially.
Just and it was a strong fourth quarter, obviously, we were pleased with the fourth quarter.
Speaker Change: You know where we're.
We're pleased we're relieved nah, not surprised but but but encouraged that the the contagion fear did was not realized we weren't afraid of it.
Of a contagion from Aetna, but I know a lot of folks who are probably listen to this call were a little worried that it was going to be multiple payers. We're gonna do whatever and it was doing and we are we certainly aren't seeing that.
It's a procedure volumes.
Speaker Change: Peer sound, we're not where we're not where we're pleased with the what we're hearing from the field.
Great. Thanks, a lot for the questions.
Yep.
Speaker Change: Our next question comes from the line of Larry Alston.
With Wells Fargo. Please proceed with your question.
Good afternoon, thanks for taking the question.
Lawrence H. Biegelsen: But starting Doug in the U S. U S coronary accelerated in Q4, how much do you think the new DRG or helping already and and on peripheral sales were flattish sequentially, there's only 10% to 12% of covered lives I believe.
U S. Peripheral you know was a growth driver for you. So help us understand how aetna has had so much of an impact and I had one follow up.
Yeah.
Yeah, Yeah, we Aetna was the was the.
The phenomenon that was the real change that we noted after the sort of mid it really took place in September so end of of Q3.
Carried through into Q4.
And when.
When we first when we did our call last year.
I don't know that we are we described the underlying sort of slowness of procedures that we were seeing in the in the third quarter into the fourth quarter for peripheral so it would've been we would have been.
A little a little soft on peripheral and then you compounded that with with Aetna.
I'd say on balance peripheral procedures appear to be a somewhat less soft, but but it's.
So I think we feel more bullish about growth, particularly as we turned our focus back to peripheral right now were for good reason with.
Two reimbursement changes and new product launch, we really want to maximize on our coronary opportunity.
And then when we have a three product launches in neuro and peripheral will be spending a lot of time on peripheral. So we're anticipating peripheral will will contribute much more nicely to growth in 2020 four into 25 mm and.
And high hopes for javelin to be a major contributor to that end as well.
So where where youre not wrong Aetna is a.
Uh huh.
10% to 20% player on the AR in a matrix of of all the private Payors are.
So it wasn't just an aetna phenomenon, but aetna clearly.
It was a it was a meaningful had a meaningful impact but it wasn't the entirety of the impact on the peripheral volume in the.
Back end of last year.
And then Doug sorry, the first part of the question was the acceleration in U S. Coronary was just you know the the the strength in the quarter.
Have you started to see an impact from the new DRG is already and I'll ask my follow up Doug.
Lawrence H. Biegelsen: <unk>.
The Theres a late breaker at ACC on Neovasc. This orbit of cosmic how how is it different from coffee or two and is there any read through you know from that trial to what we might see <unk>. Thank you.
It's really hard to well generally as we as we say.
Speaker Change: Additionally, on reimbursement because it's what we've observed it it's a it's a dimmer switch not a on and off switch. So it has an effect.
Gradually over time.
Speaker Change: And we launched <unk>, plus and we had and we got the uplift simultaneously.
Certainly doesn't it did not hurt at all.
It's it's it will always be.
Speaker Change: Impossible to disaggregate, new product launch and reimbursement that happened simultaneously and it's now going to be even harder because now we've got the CPT codes.
What the inpatient I think especially the inpatient.
Uplifting the DRG what it does ultimately is as as the hospitals see the income coming in.
It helps the Cath lab budget get relaxed and so the cath lab them puts less pressure on physicians to moderate their use they can physicians and feel like they can use.
B L.
When it's appropriate and theyre not getting pushback from Cath lab administrators and that takes time I always I always at an account.
Earlier this week in Santa Cruz, and that's that was the input from them is they just don't they don't they're not getting pushback from the administration anymore.
Okay.
And on an orbit of cosmic it's.
We certainly are I'm delighted to see the multiple datasets on for reducer at ACC that's hum.
<unk>.
We don't know the results from that study it's a.
Small 50 ish patients.
So it's.
Not gonna be powered to make any conclusions about it.
They use MRI as an endpoint so really unclear if that's a it's sort of it is I see that as a.
Speaker Change: Hum.
Speaker Change: Usability of that tool versus something that's going to be just positive about the the reducer.
Speaker Change: I won't be surprised if you see that patients symptoms are better because that's what we see consistently are in.
In the various states.
Studies have been done on reducer, and what we see anecdotally from the all the users in Europe.
Whether.
You really learn anything.
That is a read through to Casera too because we don't use MRI as an endpoint in casino too. So I don't know that that's going to really.
Be informative on on on potential.
The outcome of the <unk> two study.
Feel better than they could in the treatment arm that bodes well for consider two I guess is the could be the one takeaway.
Got it thank you.
Our next question comes from the line of Michael Pollock with Wolfe Research. Please proceed with your question.
Good afternoon. Thank you I want to ask on the outpatient coronary reimbursement topic with an eye towards the the map to $5 94.
It kind of two parter the event path from here and then a question on coatings. So is this event past simply we wake up in July we see the proposal.
And we see what we see or do you have an opportunity to engage with CMS here through the spring that might give you.
A better feel for how they're looking at this.
And the second piece is on coding.
I think we're operating under the assumption that this winds up getting solved with the complexity adjustment using the new CPT code that was in effect Jan 124.
Is that correct or is there potentially another.
To be determined coating solution here.
Yeah. It would it would be a waste of I tried to answer this one rod I'm sitting right next to me so I'll, let rubber.
Take this one yeah I think the.
So as part of our normal course of business, we do get on Cms's calendar as they start to make there.
Speaker Change: They they get into their rulemaking cycle and so certainly we have met with CMS you know again about this issue and the issue of the transitional pass through and so on and so forth. So I think your first question was what's the normal course of business and the sort of.
Things that happened in the first thing that happens is that you you sort of talk with CNS prior to them, making the rule drafting the rule.
Speaker Change: You know about your issue at hand, and so so that has happened I think the things that we see from here Yeah, I would mainly point the next sort of public available information.
<unk> is likely going to be the proposed rule, which happens in early July so we won't see or hear much in the public domain between now and then so hopefully that got that part of the question.
Yeah.
I think your second part of the question or your second question was just around the mechanism of that that would proceed here.
And I think you've identified it correctly.
At you know here what were.
In about as a complexity adjustment based on a you know a.
Add on code procedure add on code and that's the normal vehicle.
Speaker Change: Which.
You have an add on code and structure. That's how you get increased payment. It's been you then sort of qualify certain combinations of code qualify for a complexity adjustment and that's exactly sort.
What we're looking at here and.
Speaker Change: For us on this call and others. This is where we have a very large volume of data associated with that we have strong confidence in these combinations of codes and then qualifying.
Pork flexi adjusted.
Oh, well I got a follow up book Yeah, No that was great Rob on both fronts in the brief follow up is maybe back to Doug I think Doug on several instances you'd suggested maybe 95% confident.
Evidence in and the outcome here of kind of achieving $5 94 in 2025 and beyond as well.
<unk> 95 per cent still how you feel about this.
I do not I do not feel less confident.
I wish I wish I wish CMS, when Rob met with them said.
You're right, we're going to do it but they.
They don't say those things they just.
Look blankly at robbing it every time, we meet and usually we get a good outcome and just on I think the facts are pretty clearly.
Point in the direction of moving to a 50 194.
Helpful. Thank you.
Our next question comes from the line of Mike Kratky with Leerink Partners. Please proceed with your question.
Hi, everyone. Thanks for taking my questions and welcome Renee you called out 2% penetration in Germany can you just give us a sense of where you are in terms of penetration within key accounts and what have you seen in terms of how utilization that scaled early on and what procedure volumes look like and some of the top accounts.
Speaker Change: Sure.
We have.
I think it even in the top accounts in Germany. The penetration is still relatively low what what happens in Germany, when there isn't sufficient payment to cover the cost of a product.
And there's a very tight linkage between the hospital administration in a physician's behavior in Germany tighter than I think anywhere else except Japan.
The so what happens is the physicians will use the product until the administration tells them to stop and then they stop so you'd get these cyclical.
You know the current account using the product and then they would just turn off in September.
Or they would use the product and the administration would come back the next year and say Hey, you use 50, you go in you only get 25 this year and so the the product realization, we'll get curtailed and then at smaller accounts. It would essentially be zero because they just didn't have enough money within within the hospital system to cover these extra costs in the administration would clamp down.
So we really have a lot of headroom and in Germany, not jazz gaining adoption and smaller accounts, which is kind of a zero base in those accounts, but then really driving appropriate use and adoption at the larger accounts, where it was being curtailed.
Curtailed by the administration.
That answer your question, Paul and then yes, that's perfect.
Just one separate follow up it looks like on the air to the D. C. Dot Gov is giving you a primary completion date of June 'twenty 'twenty four but just wanted to double check on how we should think about the timing there when we can see those results.
Yeah, we need to update that [laughter] I don't think we've touched that since the acquisition. So that was not a realistic timeline ever yep that was that was the.
Prior companies timeline right.
Right now if you if you recall we.
We're forecasting approval in 27, you got a back up from there for submission.
Our submission and review of a PMA.
And then that puts your.
Enrollment completion somewhere.
Second half of 'twenty five is.
It was a much more realistic timeline and.
And the team is doing a really exceptional job of.
Getting sites up Oh, there was a.
Paucity of sites that had been started in many of those sites weren't really.
Probably the right sites to choose from to get rapid enrollment so our team once they took over of.
I have a get gotten that.
The trial on the rails, but it's it's a sham controlled trial.
With a really rigorous.
The enrollment criteria inclusion criteria.
Which is why every time, we show clinicians the trial design they they universally say when if and we would say win when that study is successful.
Speaker Change: It's a it'll be irrefutable that that device works. So rigorous trial makes it hard to enroll rigorous trial also results in <unk>.
A much more valuable data for a.
The market creation and inclusive of reimbursement.
That's super helpful. Thanks, very much.
Our next question comes from the line of Mike Matson with Needham <unk> Company. Please proceed with your question.
Yeah. Thanks, So just a couple on the the new peripheral products, though Eaton javelin.
Cant remember if you said anything about the pricing on those products at the Investor Day, you did in the fall, but can you can you give us any sense there on where those things would be priced and then.
But job one.
Thinking about it the right way that that's something that could drive more revenue per procedure, because they would likely.
Use that to kind of cross sell Elysian, and then you followed that up with one of the regular catheter sorry balloons.
Yeah.
We are if we said anything about price it would have been something along the lines of we will determine the price when.
When we get closer to launching the product and that would still be what I would say now.
Speaker Change: Uh huh.
Thus far we've we try to make sure that we deliver a.
Really.
Clinically meaningful new devices to our customers and price them in a way that we think is is enables the customers to have a good financial outcome and for us to reflect.
It reflects the value of the technology.
Speaker Change: And in terms of javelin.
There likely will be some cases, where you use javelin plus javelin plessey, a javelin plus <unk> plus <unk>.
But we are what we've what we've witnessed thus far is that the.
Power of the the lithotripsy shockwaves.
Forward effect to get you through the difficult to cross lesions, but it also has a radial effect.
Which enables you to then follow javelin with a standard.
Balloon angioplasty and and so our expectation is that the vast majority of cases will be.
The javelin plus boba versus javelin plus.
Other IV L product.
At some juncture.
You you you start to get yourself in a challenging situation with your customers. If you are if you are allowed to many IV all products into a single.
Less economically attractive.
Attractive for them. So we're our expectation is that that for the most part javelin is gonna be a javelin plus other javelin plus plus balloon.
Okay that makes sense and then just as far as Costa Rica goes you know I understand that there's some kind of startup costs and whatnot.
Near term, but you know.
Is that something that you expect to have a material benefit to your gross margins over time.
We.
We have chosen to date to manufacturer and one of the highest cost places in America in Santa Clara.
So we do expect that our our cost of goods will will come down and in Costa Rica. So we have not forecast how.
How many how many points will pick up but out of Costa Rica, but but cost of cost of doing business there.
Speaker Change: Every respect is going to be lower than other than materials cost.
It is going to be lower in every respect them. What we have right now in Santa Clara just important to remember, though that for 2024.
Alex we sell that'll be manufactured in Santa Clara So we wont see any benefit to gross margin in 'twenty 'twenty four will put product in inventory this year, but it won't hit customers until 'twenty five.
Yeah, I understand so there definitely be a benefit yet to be quantified I guess so.
Worked for 25 got you.
Do you agree correct, yes, I would certainly expect gross margins to be steady for this year and then in the long run we will see 10% given the structure setup.
Okay, great. Thanks.
Yeah.
That was three months in a row.
Mike.
Our next question comes from the line of Imran Safar with Deutsche Bank. Please proceed with your question.
Hey, good afternoon, Thanks for taking my question.
First on Japan, I'm wondering if you can just sort of give us any sort of metrics on where you are in that launch in terms of.
What percentage of the 200 or so cath labs, there that you're.
European now at this stage with one.
Sure. So the again very very good year for our for the team in Japan, It's a relatively small team and they were incredibly productive in in 2023.
Based on the guidelines that we worked with the Shockwave worked with Steve at the cardiovascular Society in Japan to establish a we are currently limited.
Two hospitals that do a certain number of atherectomy procedures. So those tend to be larger hospitals, obviously with surgical backup.
There's also some limitations on because of the way the trial data. We have we don't we don't have trial data of Shockwave, followed by de Novo D. C B and de Novo D. C. B is approved in Japan, We don't have trial data of Shockwave. After atherectomy you know Rota shock for instance, so part of the work we're doing it started last year.
Iran will be going on in earnest this year and following years is to create clinical data to support the use of Shockwave with de Novo D. C. B to support the use of Rota shock Shockwave with atherectomy.
And then as we gather more and more data.
Speaker Change: Work with Steve It to show that the product can be safely used in smaller centers and centers without surgical backup in that as you'll recall you know.
We have that kind of stamp of approval in the U S from sky already so.
There there is.
There is basically a certain number of centers that we've agreed with Steve at the we cannot access until we generate more data in where we're generating those data now so with the centers that we can't really can't access which account for probably 75% of the PCI in Japan, where we're over 50% are.
Launched or so we've lost over 50% of those centers and will run lots of the remaining ones in 2024.
Okay, and what about on the peripheral IV outside in Japan, but what's the latest timeline there.
We haven't disclosed the timeline yet we're working right now with P. M D H two.
Established a regulatory path and then once that once that's done.
Kind of first half of this year, we hope to have the path established then we'll we'll see.
Start.
Lining out the timing and the staff or the the steps and the timing to get there and at some point, we'll we'll tell you what that is.
Okay, and then one more international question on India, Obviously, a massive PCI market can you just remind us where you are there.
At this stage and how are you thinking about that opportunity over the next few years.
Sure we have a distributor in India do we establish the distributor in 2021 launched.
[laughter] coincident with the Corona virus and in February of 2020.
So the the U S.
As that country has kind of gone through some ups and downs like the rest of the world.
We've gotten a good footprint in India through a distributor we generated really nice post market data in India.
Post market registry over 1000 patients all comers.
Core lab adjudicated those were presented at are those data were presented at TCT last fall.
And we continue to have a really nice momentum, particularly on coronary and India.
Okay and then just one very quick pipeline question have you guys started a human cases with the aortic lithotripsy product yet.
We have not no.
Speaker Change: And just as it did.
This year.
This year, Okay perfect. Okay. Thank you very much.
Yep.
Next question comes from the line of Danielle and Salafi. Please proceed with your question.
Yeah, Hey, good afternoon, guys. Thanks, so much for taking my question. Congrats on a strong end to the year and that I was going to ask about C to plus and how are you seeing that being adopted I know, it's early days, but feedback and good but are you seeing it motivate more physicians to pick up by the LNG vessel prep in their patients or is it right now.
More about existing users treating more patients and accessing that it's tougher to treat patients.
Yeah, I'd say, it's a <unk>.
Speaker Change: More adoption existing users versus <unk> versus new users and that's and the.
More adoption is going to be the sort.
With all of the different tailwind, we have reimbursement and technology tailwind followed by another technology upgrade next year.
Yeah, it's really finding ways to help people who use so a shift from.
Speaker Change: 4% to 10% and from 10% to 20%.
Speaker Change: Helping to give them a good reason to use shockwave more than they more than they already do.
Those who don't use the device are yet or.
Are in the minority in less of a sort of much less opportunity for us to drive to drive growth with because they're probably also pre.
Pretty low volume operators.
Okay and that was kind of my one of my follow up questions you already touched on it in existing users.
Oh, yeah yeah.
Please go ahead Sir.
Forest fires.
Speaker Change: Alright.
Yeah.
Reading all of that.
Speaker Change: Alrighty.
Why are they not.
Okay.
So your your your phone made it tricky to interpret your question, but I'm going to I'll restate. Your question as best I can you tell me if I'm wrong.
So what is the impediment to increased use of Ivy hill or efficient positioned right for physicians.
No. That's okay. It's a you know it just makes it a little more challenging them. So the biggest reason historically has been.
He is the economic.
The concern we have a premium device that we priced at a level that we thought both reflected the value and and would ultimately lead to.
A strong reimbursement position that would be.
Beneficial to the hospital.
Thankfully the.
The work, Rob and team did.
With successful we were successful in securing.
Speaker Change: Our own DRG is which was shocking on the coronary side.
CPT code and we think ultimately will also yield.
Sort of landing in the highest APC level for coronary so.
But the the initial reaction to the price was though this is a high price device and there was a lot of anxiety with TPG, that's a little unusual in terms of the reimbursement.
Mechanism.
Speaker Change: And so there's a there's a there's always been a perception amongst physicians that were not really reimbursed even though we have been so there's a there's always been a reluctance in many in many.
Physicians are hands and minds to like I only use shockwave when they absolutely have to because it's an expensive device.
Speaker Change: So now that the first two of the three building blocks for.
Eliminating that economic anxiety with the.
Drg's and CPT code are in place.
We think we were this year will be the first year, where a lot of that economic anxiety is ameliorated.
Speaker Change: The second.
Ace a that's another reason why they they have been reluctant historically as you know I've got this long diffuse lesion.
You're going to I'm going to have to pull to catheters to treat it maybe I'll just use atherectomy instead of Shockwave C to plus addresses that.
Long diffuse.
Reluctance. It also helps diffuse the sort of.
Perception misperception that shockwave.
Is less effective on.
E centric or nodular calcium so now we give you more power you can treat those east centric lesions with.
With one catheter.
So those are those are really the two of the big headwinds we had faced the biggest being the economics are.
Speaker Change: And then ultimately the I think the last one of the sort of next hurdles that will knock down as the.
Our device is very deliverable, but it's not as deliverable as physicians would like so there are times when they choose not to pull it.
Because you know, it's a it's bulkier than irregular angioplasty balloon so I'll just use something else.
That's a that's a 2025 fixed that we'll have with arrow. So we've got we each year, we'll be knocking down.
The remaining some of the remaining.
Pressure points that.
Have a capped utilization and we think we'll just keep on capping utilization each year.
Speaker Change: Thank you so much.
Uh huh.
Speaker Change: There are no further questions in the queue I'd like to hand, it back to Doug Godshall for closing remarks.
Thanks, so much and thanks, everybody for your time and attention looking forward to another great year in 2024, and I'm delighted to have Renee on board and look forward to chatting with you all.
Is your is your progresses.
Yes.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.