Q4 2019 Earnings Call
At this time I would like to welcome everyone to the cardiovascular systems Inc. fiscal year 2019 fourth quarter earnings Conference call.
All lines some at least on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star and the number one on your telephone keypad, if youd like to withdraw your question. Please press the pound key I would now like to turn the call over your truck Nielson, Vice President Investor Relations and corporate Communications. Please go ahead.
Thank you Kelly good afternoon, and welcome to our fiscal 2019 fourth quarter Conference call with me today are Scott Ward, C.S.I., Chairman, President and Chief Executive Officer Wonder, Rob Chief Operating Officer, Jeff points, Chief Financial Officer, and Dr., Ryan I, Glenn Vice President of Medical Affairs.
Hopefully you've had an opportunity to briefly review todays press release, we will discuss our fourth quarter results in detail on today's call.
During this call we will make forward looking statements. These forward looking statements are covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and include statements regarding C ascites future financial and operating results or other statements that are not historical facts.
Actual results could differ materially from those stated or implied by our forward looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q .
Suicide disclaims any duty to update or revise our forward looking statements as a result of new information future events developments or otherwise.
We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results I will now turn the call over to Scott Ward.
Thank you Jack good afternoon, everyone and thank you for joining us today.
I am pleased to report that see us I produced double digit growth for the fifth consecutive quarter with revenue of 68.2 million, representing a 15% increase compared to last year.
This marks our strongest quarterly revenue growth in several years.
Our performance in fourth quarter and throughout F.Y. 19.
Demonstrates that our strategies to accelerate top line growth are delivering the desired results.
And we continued to successfully execute on the key growth drivers that we shared with you during our analyst day, one year ago.
Revenue growth in Q4 was again driven by ongoing strength in our domestic atherectomy businesses.
Similar to last quarter, we achieved double digit unit growth in both our peripheral and coronary franchises.
Sales of our new procedure support products, such as the one millimeter sapphire balloon to tell a poor microcatheter and our radio support products continue to gain momentum.
The commercial launch of orbital atherectomy in international markets continues to produce solid results.
We achieved 2.5 million in international revenue in Q4, driven by strong adoption in Japan and continued market expansion in Asia, the middle East and Europe .
In addition to achieving our revenue objectives. We are also executing on our other key financial goals, we were profitable again in Q4 and gross profit margin remained above 80%.
Our manufacturing operations continue to perform exceptionally well delivering important cost reductions as we drive increased unit volumes.
Our Q4 results represent the commitment of our organization to reach more patients and broaden our revenue streams.
Consistent with that commitment last night, we announced the acquisition of the wire on Embolic protection system from Gardea medical.
Acquiring the wire on system complements our strategy to broaden our portfolio for physicians that treat complex peripheral arterial disease.
It is the only distal embolic protection filter that can be used with any commercially available peripheral atherectomy system to capture all forms of embolic debris, including thrombus.
The device can also be used with any old one for wire, making it an incredibly versatile system.
I can't provide assurance for physicians and their patients undergoing peripheral interventions in more complex cases, where the risk of distal embolization could be higher.
Physicians typically use embolic protection devices in vessels located above the knee with long lesions, hi plaque burden and poor run off.
Each year, approximately 160000 above the knee atherectomy procedures procedures are performed in the U.S. and we estimate apds are used in about one third of those cases.
The wireline system received CE Mark in June 2015, and after FDA clearance in March 2018.
See aside plans to begin us sales of the device in approximately 12 to 15 months following the transfer of manufacturing from Guardian to CSRI.
During this time, we intend to improve and scale the manufacturing process as required to support commercial launch.
In sum.
We're very excited to add an embolic protection system to our portfolio. The acquisition of the wire on system is consistent with our strategy to broaden our product offering.
Leverage our presence in the Cath lab and increase our revenue per procedure.
In a moment Rhonda will discuss our key growth drivers and commercial progress. The first Jeff will now provide you with details on our Q4 and fiscal 19 results and discuss the outlook for fiscal 20.
Jeff.
Thanks, and good afternoon everybody.
As Scott mentioned fourth quarter revenue of 68.2 million represented a 15% increase compared to last year.
It also represents sequential revenue growth of 8% compared to third quarter.
In total we sold nearly 23000 orbital atherectomy devices during the quarter, representing a 22% increase compared to last year.
Worldwide peripheral revenue increased 12% to $48.3 million.
Domestically peripheral you'd have volumes increased 16%.
As our strategies are driving growth in both the RBL and hospital sites of service.
As anticipated we experienced a mid single digit ASP decline in peripheral consistent with our expectations and recent periods.
Worldwide coronary revenue increased 24% to approximately 20 million.
Domestic coronary revenues grew 16%, primarily driven by increased unit volumes.
Coronary asps declined modestly as anticipated.
The revenue generated in the U.S. and Internet International markets was as follows.
Total us revenue increased 13% to 65.7 million.
Domestic peripheral revenue increased 12% to $48.2 million.
And domestic coronary revenue increased 16% to 17.5 million.
International revenue totaled 2.5 million.
In Q4 gross profit margin remains strong at 80.3%.
Operating expenses of 53.5 million increased about 9 million or 20% compared to last year.
R&D expenses associated with investments in new product development and enrollment in the eclipse clinical trial increased 42%.
We are accelerating our investment in R&D to broaden our product offering expand the use of orbital atherectomy and drive long term value.
SGN a increased 16% due to increased investments in clinical specialists, along with physician training and medical education investments to support our international expansion.
We were profitable in fourth quarter with net income of 1.5 million.
Or four cents per share and adjusted EBITDA of $4.7 million.
We ended the year with a $123 million in cash and marketable securities.
That concludes my comments on our Q4 financial results.
Before I discuss our fiscal 20 guidance I will now provide financial details surrounding the acquisition of the wire on Embolic protection system from Guardian medical.
Consideration related to the asset purchase a 17 billion.
$7 million of which was paid at closing in the form of 80% cash and 20% Cxi stock.
The balance of 10 million.
Up to which 50% can be paid in CS livestock at our election.
Is to be paid upon successful completion manufacturing transfer, which we expect to occur at approximately 12 to 15 months.
There is no wire on revenue in our fiscal 20 plan. However, we anticipate expenses related to intangible asset amortization, along with some direct expenses in anticipation of a full launch in the first half of fiscal 2001.
I plan to provide an update on the timing and amount of these expenses on our Q1 earnings call.
I'll now comment on our fiscal 20 annual guidance.
We anticipate revenues in the range of 278 to 283 million, representing an annual revenue growth of 12% to 14%.
Gross profit margin of 79% to 80%.
Net income or loss of approximately breakeven, excluding intangible asset amortization indirect expenses associated with the wire on asset acquisition and positive adjusted EBITDA.
Consistent with our fiscal my team results fiscal 20 revenue growth will come from a combination of three drivers.
Double digit growth in our core atherectomy business.
Second growth in procedures support product revenue is expected to come from increasing adoption of our emerging coronary tool kit and radio support devices.
And finally, the continued commercialization of orbital atherectomy outside the us.
Which is forecasted to grow 27% to 39%.
Increasing to 10 to 11 million in revenue in fiscal 2000.
Combined these three revenue streams drive attractive.
Overall revenue growth in fiscal 2000 and position the company for continued growth in fiscal 21 and beyond.
Our breakeven net income guidance reflects the continued investment into our key growth drivers.
The composition of these investments will continue to shift in fiscal 20, as we leverage SGN I spend as a percentage of revenue in favor of increased investments in R&D.
As you refine your quarterly models.
Please note that Q1 is our seasonally lowest quarter of the year.
If you look at the last two years, our first quarter revenue is 5% to 6% lower in Q4 of the prior year.
Also due to timing of our national training meeting at key conferences.
Such as Amp at TCT, our expenses will be higher.
As a result, Q1 typically represents our lowest revenue and largest net loss period for the fiscal year.
We anticipate both revenue and profitability to improve sequentially throughout fiscal 20, similar to our experience in fiscal 2019.
Rhonda will now discuss our commercial developments Rhonda.
Thank you Jeff throughout fiscal 19, our core domestic orbital atherectomy franchise has been strong and stable and in Q4, our core device revenue grew 11%.
The stability of our atherectomy business as a result of a combination of factors that together establish the site as the partner of choice for physicians treating complex coronary and peripheral disease.
First in peripheral our worldwide business grew over 12% in Q4, driven by 16% unit growth in the core domestic peripheral atherectomy business.
We continue to drive above market growth through the successful execution of a number of key initiatives.
We provide exceptional case support with deep clinical acumen, we focused on market development and drive continued success in the office based lab market. We continue to execute on long term value based contracts with pricing stability and were driving continuous innovation on our core technology, including products that offer novel access sites like radio and the rate. We recently launched exchangeable device with quite assessed and our dual mode of action provides a sustainable competitive advantage.
Our medical education programs generate new accounts and new users and finally with Liberty 360 Eclipse and most recently the launch of the reach radio study, we continue to expand the medical evidence and publications in peer reviewed journals.
To support the increased use of our products.
The sustained growth in orbital atherectomy in both health and hospital is particularly encouraging as we continue to compete in a dynamic and increasingly competitive environment.
As we have shared previously.
Our accelerating patient access to care and we now believe they account for over 50% of peripheral atherectomy procedures.
For nearly two years, we have successfully targeted high volume will be all sites offering long term volume based contracts combined with increased procedure support and now for the third quarter in a row CSR revenue from Obiols has increased over 25%.
In addition, we continue to see increased utilization of novel access sites like radio appeal and with the unique competitive advantage with our five French system, we generated 22% sequential revenue growth in accounts that have adopted radial access.
And finally, we are seeing some incremental growth due to the controversy surrounding paclitaxel coated balloons and staff.
Our medical Education front, we trained over 3000 medical providers in fiscal 19.
Providing strong medical education differentiate see aside from competitors and physician appreciate our dedication to training and procedure support to ensure improved patient outcomes.
We follow up a robust medical education programs with a large and clinically focused sales channel. We now have over 300 sales representatives and clinical support personnel that can educate and introduce our technology to physicians by discussing our vast clinical studies.
As we have the strongest medical evidence in the market the expansiveness of our peripheral clinical evidence for orbital atherectomy, including duration of follow up to three years is exclusive to CSRI and an area, where we will continue to invest and differentiate versus our competitors.
Turning to coronary our worldwide business grew 24% in Q4, consistent with Q3 results.
Continued strength in coronary was the result of several strategies, we implemented over the past year, including increased sales focus and the number of dedicated coronary sales rep.
The commercial launch of our complex coronary tool kits, including a teleport microcatheter and one millimeter sapphire balloon.
Investment in medical education programs to train new users and international growth.
The demand for orbital atherectomy outside the U.S. remains strong.
We now launched have now launched orbital atherectomy in 10 countries across Asia, Europe , and the Middle East and we surpassed our new account goals in 2019, we certified 120 physicians outside the us to use orbital atherectomy and we are now about 18 months into the coronary launch in Japan, and we are encouraged by the strong sequential growth in this market.
Since introducing coronary classic and Viper wire advance with flex products in Q3, we have seen an acceleration in new and existing users. We remain on track to capture 20% or more of the Japan market in fiscal 2000.
Transitioning now to our R&D initiatives in June we announced the first enrollment in the reach peripheral radial study. This study will prospectively evaluate acute clinical outcomes of orbital atherectomy using radio access for the treatment of peripheral arterial disease. We believe this study will demonstrate many have been known benefits of radio access such as low complication rates high cost effectiveness and shorten time to emulation.
In June we also conducted our second pre submission meeting with the FDA to discuss the preclinical and clinical requirements for our percutaneous ventricular assist device. We continue to target fiscal 21 for first in human.
Enrollment in our clip.
Our 2000 patient randomized controlled coronary trial have now topped 950 enrollment and we are targeting completion of enrollment in fiscal 21.
And finally, we look forward to a late breaking presentation at Amp next week, where the three year data for our landmark Liberty 360 study will be presented.
Recall that last year, the two year data from this study so the endovascular interventions resulted in high freedom from major MP trait patient across all Weatherford classes.
Looking ahead to fiscal 20 Cxi growth drivers will include continued expansion of domestic core or threat or atherectomy business. Our peripheral franchise will be driven by continued growth and success in the hospital and it will be all markets with continued adoption of our emerging radio access tool kit the full market launch of our exchangeable platform a quite a swift.
Full market launch of our next generation dining back and stealth peripheral platforms, which will include. The addition of the glide assist feature on select models and the launch of additional peripheral procedures support products, including Jade angioplasty platform of balloons in late fiscal 20.
In coronary we will continue to allocate field resources to target high volume coronary centers focusing on complex coronary artery disease.
In F Y 20, we plan to double the number of dedicated coronary route.
To focus on high volume complex PCI account.
Strong case coverage clinical acumen and innovative tools provides the ESI reps with a unique competitive advantage in the coronary cath lab.
We also look to build on our coronary tool kit with the anticipated approval of the night no Viper wired bags with flex tip.
Combined with Diamond backs with light assist with the teleport microcatheter and the Sapphire 1.1 millimeter balloon, we will offer a compelling and effective coronary tool kit for treating the most complex challenging coronary lesions.
And finally with the recently announced inpatient final and outpatient proposed rule for 2020 payments. We also anticipate continued stability and reimbursement.
Internationally, we will look to increase adoption of away asks in our current markets and plan to launch our products in up to 10, new countries and Thats why 20.
Our portfolio will also continue to evolve and change as we optimize our position in the complex coronary and peripheral spaces and identify new opportunities for growth and we're excited to provide an update to our product portfolio at TCT on Thursday September 26.
That concludes my prepared remarks remarks, I'll be happy to address your questions. After Scott provide some closing thoughts.
Thank you Rhonda.
Q4 was another outstanding quarter for CS side, and we exit fiscal 19, now with real strong momentum.
Before I close I want to thank our more than 800 cxi employees for their extraordinary dedication and commitment to our mission and the patients that we serve.
CS Ais a patient centric and customer focused company in fiscal 19, our 800 employees made a positive difference in the lives of over 80000 patients.
And the families and friends that care for them.
As I've discussed in the past we've assembled a strong management team here at sea OSI with significant experience in leading and scaling complex high growth Medtech businesses.
And about one year ago, we presented our five year strategic plan to build and grow this company.
As you have just heard we concluded the first year of that plan the solid results from each of our key growth initiatives.
In fiscal 19, we achieved strong progress in core orbital atherectomy growth with the introduction of new products and with international expansion.
Our core atherectomy business grew 11% in fiscal 19, and we generated $12 million in revenue from new products and new geographic markets.
We began selling procedure support products to produce more revenue per procedure, including the one millimeter sapphire coronary balloon to teleport microcatheter and resilient peripheral wire, we generated nearly $4 million in new revenue as these products gain traction throughout the year.
Internationally, we certified 120, new physicians conducted nearly 2000 orbital atherectomy cases and generated nearly $8 million in revenue.
Growth from our core atherectomy business, a new revenue streams.
Mike support products and international expansion combined to accelerate our total fiscal 19 revenue growth rate to over 14%.
Gross margins remained above 80% for the full year, and we believe our manufacturing quality and supply chain teams represent an important competitive advantage for CSRI.
Operational and quality excellence initiatives are part of our long term strategy and future success.
In fiscal 19, we delivered on commitments to improve productivity control spend and to implement raw material savings as a result, we reduced our cost of goods sold at a rate faster than our ASP erosion.
As planned in fiscal 19, we leveraged our SGN ate spend and reinvested in research and development.
R&D expenses, which include new product and clinical investments increased by 25% year over year.
We remain committed to investing $250 million through fiscal 23 to develop new products and the medical evidence necessary to expand our market in the treatment of patients with complex coronary and peripheral artery disease.
In addition to delivering solid financial results. We are also executing on our key development milestones as we continue to build Cxi. We are transforming from a single product single geography company into a multi product company with world wide reach.
Our Q4 and fiscal 19 financial results highlight the early successes that we have achieved as we broaden our product offering expand internationally and deliver attractive sustainable revenue growth.
We are well positioned to achieve our strategic growth goals, we look to the future with confidence and a clear focus on our mission to save limbs and save lives every day.
Thank you for your continued interest and see US high we look forward to updating you on our progress and we will now take your questions.
Kelly would you please repeat the instructions at this time. Thanks, certainly at this time I'd like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad, if youd like to withdraw your question. Please press the pound key your first question comes from the line of Brooks Oneil from Lake Street Capital. Please go ahead. Your line is open.
Good afternoon, everyone. Congratulations on a terrific year.
Let's see overview gave us.
Outstanding and comprehensive.
Do I have a couple of questions. So first I'll, let Scott I'm curious.
Historically.
Huge to are we in terms of development too.
But your sales growth and expand your product line.
Sorry.
Should you announced this morning.
The change in philosophy delusional philosophy.
Exactly.
Yes, Thanks Brooks for those kind comments.
In terms of the.
Wire on acquisition from Gardea, we have said that we will pursue.
Transactions, where we can add products that will complement our current product line and allow us to increase our revenue per procedure I think in that context. The addition of an embolic protection device really fit those requirements quite well.
And were very excited to add this product because as I said.
This is a product that is used really not only during atherectomy devices, but during any.
Peripheral vascular intervention and has the potential to to add meaningful revenue to our business. This would fall into our focus on the addition of support products. So you can consider this to be an addition to our product line, where we're currently selling let's say.
A wires will ultimately be selling balloons, and and were selling of course catheters as well. So this is.
A good addition to our support product line.
Good.
Two more quick ones.
First you mentioned you know maybe call many years.
Maintaining gross margins are going to be pursued.
Well as I know you're investing.
We keep the guidance for the new fiscal year does include the possibility on the slipped below 80%.
Let's talk about.
To give you you feel cheated the door.
How do you view the gross margin.
Look.
Well I can tell you I get your observation is correct, what we intend to continue to operate this company.
With very strong gross margins and as we as we look to the future we will be adding revenue streams from clearly lower margin international markets as well as.
Some of these lower margin support products.
But we are continuing to make every effort across our full product line to reduce our cost of goods sold.
And to do so in a manner that allows us to respond to pricing pressures in the market and yet still retain really strong gross margin. So we are we're continuing to work hard to do that and as I said in my commentary I believe that our manufacturing operations is a real competitive strength for CSRI and I have great confidence in our ability to continue to reduce our cost of goods sold as as we address these market challenges.
Right.
Thank you congratulations again.
Excellent. Thanks Brooks.
Your next question comes from the line of Matthew Blackman from Stifel. Please go ahead. Your line is open.
Good afternoon, everyone.
And just start Ron you mentioned I think an uplift in peripheral volumes from the pack with Doxil related controversy personal.
Hear that correctly and then just follow on to that I know, it's it's challenging but it's like a way to.
Hi, Bob maybe like the back half of Nineteena could have added up a point or two.
Do you think thats reasonable and the last piece of that Multipart question would you expect that type of tailwind to sustain and you're up 20 outlook and then I've got one follow up.
Sure.
Yes, you did hear me correctly I did mention that we believe are hospital business.
A particular is benefiting from.
From the Paclitaxel.
Controversies.
Our hospital atherectomy business in Q4 increased 7.4%, 5% excuse me and it's just in in doing a lot of market checks. We're hearing a lot about with the absence of a refund of anti richness adoption physicians are placing increased focus on vessel preparation and increasing lumen area.
So piece of this we think year over year as some share gain but a piece of that is also we think particularly in the last quarter positive market forces for atherectomy.
Okay and in no way to sort of frame that you gave us a little bit color. There, but you think a point or two points is too much to think that that it's adding.
Think about the portfolio as a whole.
Yes, Matt I think it's this is Scott I think it's difficult to quantify that we have so many different initiatives underway and and the flywheel.
That is hard to tease that out and say that the DCB.
Controversy is influencing our business by X amount.
No no actually we're seeing real strong growth and radial where we're where we see 22% growth and strong growth in our hotels, where frankly, the drug coated balloons typically have not been use.
I would just remind you that.
The drug coated balloon business influence is really only a small segment of our market overall and that is because we focus 60% of our revenue typically comes from below the knee cases.
In peripheral and about.
Let's say, 25% of our peripheral revenue comes from Obiols, where.
For coated balloons have typically not been used due to reimbursement issues.
So that means that roughly let's say, 15%, 20% of our business is opened to influence.
Now in that segment, let's say that physicians are using one or two more of our devices per month.
To treat their patients as Ron just said.
You know really focusing on on opening that lumen assuring good paid unsi and getting a good broadloom and to start obviously achieve better outcomes in the long run.
But if it wasn't that rate it'd be hard for us to tease it out I think thats.
That's probably the best color I can give you on it at this point.
No. It's got that that's really helpful. I appreciate that.
And then just my follow up question bigger picture how to go back to the strategy of adding revenue per procedure, whether its M&A like last night or adding to the procedures support portfolio. It's a way to frame how much more revenue per procedure is left for you to capture it is a way to quantify that how far along you on that process, how much more opportunity there is down the line.
I think it's a little bit hard for us to quantify how much opportunity is remaining I can tell you that in coronary where we have our full.
Well just about full product line out you know we've got we've got the coronary balloons out we now have our teleport microcatheter.
There. We are we are seeing really strong progress with almost half of our coronary accounts now using at least one of our support devices during a procedure.
There probably is on the order of a thousand dollars per case available in coronary and I would say right now we don't have a wire out in that market. So theoretically our Max there is probably somewhere on the order of seven or $800. So right now we're providing.
A good line of products in coronary.
Staying on coronary for a moment so Matt we compete obviously with companies that have much larger offerings than we do and as a result and that complicates our ability to access this marketplace because.
A lot of these companies will have large contracts with hospitals that include their support products wounds wires catheters, and maybe thats bundled his stance or other products.
Sometimes it's difficult for us to crack those accounts. So I don't think I would expect to see 100% of our accounts using our.
Support devices.
We do want we do want to see our support devices used in the majority of our cases and that's what we're striving to achieve so in coronary we've made good progress in peripheral we haven't yet launched our balloons in peripheral we anticipate launching our ptca balloon line as Ron just said late in fiscal year 2000, and at that point in time I think we'll see our fiscal are are.
Our peripheral.
Support products.
We continue to to really take off and grow in the meantime, resilient wire is our offering there and so we're really only scratching the surface on.
Procedure support product revenue that could be generated in peripheral.
Okay, that's really helpful and congratulations guys on a really terrific year. Thanks, so much.
Thanks Max.
Your next question comes from the line of Mike Matson from Needham and company. Please go ahead. Your line is open.
Hi, Thanks for taking my questions.
So.
Hi, Jeff.
Starting with the wire.
Acquisition.
I thought that you guys are kind of position your oral products is thats not meeting.
The.
Kind of downstream protection.
But this can provide so are you have to change your messaging there or is this really just go after kind of a subset of the countries that you talked about and.
Maybe some of the competitive products that are being used out there.
I'm going to I'm going to ask.
Our vice President of Medical Affairs.
Brian Egland to respond to that but just before before I do I'll tell you that.
Not not.
All of our.
Overlap directed me devices are used in really simple cases, and our orbital atherectomy devices are used in relatively complex cases and under those circumstances.
It just makes intuitive sense at times for physicians to want to use.
Embolic protection. So Ryan do you want to add to that yeah. I think just as Scott said the concept of trapping debris, preventing distal embolization is mechanistically and clinical appealing.
Both for.
Complex disease, but of course.
In particular with large disease burden and seeking significant atherosclerotic disease.
And in combination with compromised just the run off.
Paul It protection, just makes intuitive sense to our inner vascular specialists and of course that occurs.
Not only with atherectomy, but as Scott said with both stenting balloon angioplasty and even simple guidewire exchanges.
And I would just maybe add onto that Ryan I think it gives us an opportunity for fresenius sites to compete.
Further in a T.K. market in particular and whats unique about this device is that it is truly universal and can be used with any atherectomy system in any plaque morphology. So that's that's an important strategic advantage along with any wire.
Okay.
Thanks, and then just.
There I guess, there was something in the Medicare proposal around potentially coverings, PCR and from the acute setting.
So just wanted to see if you could maybe comment on that if that happens and you know the two are they don't cover atherectomy what does that.
For.
I guess.
If theres start doing more procedures there.
And they're not covering atherectomy in that setting is there a risk is that it's just increased use of atherectomy or are they really just begun those cases for you sign on more of a hospital inpatient setting.
Yes. These are really complex cases that are typically performed in a hospital settings, where their surgical backup. So we'll continue to monitor that but we don't anticipate that that will influence our market at this time.
Yes.
Add though in our early analysis of the final inpatients and proposed outpatient.
Looking at potential coronary procedures for Cfive being up 3% for reimbursement continues to move in a favorable direction at least with the early assessments.
Yeah, and I guess, just as a follow up I mean, it didn't look like the LDL reimbursement was down a little but I guess it didn't seem like it would be.
Big enough to really move the needle there in terms of using atherectomy about setting, but I just wanted to get your thoughts on that as well. Thanks.
Yes, Justin just to comment on the LTL setting remember those are the inpatient is final rule the LDL setting which is still in a proposed rule.
And even with those reductions that will be higher than where it was last year at this time, So I think.
I think we were cautiously optimistic about where that stands at this point. The public hospital was also positive and so kind of on balance with with where.
Our procedures are taking place we expect it to be.
Flat to positive for CSRA as well in the peripheral setting.
But we won't know that until the proposal becomes final.
Okay, great stuff all I have thank you.
Your next question comes from the line of Danielle Antalffy from SBB Leerink. Please go ahead. Your line is open.
Thanks, so much.
For taking the question and congrats on a really excellent year on just one question on the setting that's becoming a bigger percentage of your revenue and just wondering if you can comment on what you've seen so far is how sticky is.
That customer is that a relatively sticky or less sticky customer what are they most focused on I assume you're going to take price, but just trying to get a sense of.
Whether the dynamic that competitive dynamic changes Ob all becomes a bigger piece of your.
Revenue.
Daniel we have really well first of all Daniel Thank you for the comments on the full year, we appreciate that.
As as you recall, we have pursued a strategy in the LPL setting which is very deliberate.
And we did so in a manner.
Well, we were trying to assure that we would maintain.
Consistent use of our products in the LDL setting overtime.
So we call that we focus in the LDL setting on the physicians that treat.
Complex cases complex severely calcified cases, and so as physicians may have normally been performing those more complex cases in hospital settings as they began to move to the LPL.
We would move with them and in doing so we would offer them.
Long range long term contracts.
With obviously, some preferential pricing and we would also provide.
Clinical support so as you know we now have over 100 clinical specialists in the marketplace and much of that field force is focused on.
Providing support in old in the LTL setting. So we have really tried to surround that customer with first really the best product in the market and then with the best service and support that they can find and then have that extended out over a longer period of time with favorable pricing that is contained in a long term contract.
In that way, we think that that becomes fairly sticky business.
Got it and is it safe to say that your larger I think you guys have commented on this before but your larger.
Aren't actually providing clinical support do you actually have a leg up.
Not just from a technology perspective, but also from a case coverage perspective.
It's safe characterization.
Yes, I think we have a meaningful competitive advantage based on the extensive clinical support that we provide to the marketplace and in particular in the LTL you know not only do we have the capacity, but we have a really strong core competency I'm really pleased with the clinical acumen of our field support I think we get we frequently obtain or get very positive feedback.
From customers on the clinical acumen of our field support organization.
Scott.
Got it thanks.
And then just a question for you on the radio.
Study that you just announced.
What.
Yes, it's going to be something like I guess the question is why conduct the study.
Is this going to be something that expands the number of physician adoption.
Is this something that could change guidelines.
With that strategy and rationale for this study thanks so much.
Yeah, I'll start and then maybe ask Brian England to help augment desks I mean really there's never been a radial study done in peripheral before and so it was really an opportunity for us to sit to take this unique differentiated competitive advantage and learn more about it we've seen.
Clinical benefits clearly.
You know outlined in the coronary space in coronary clinical trials and our feeling is that the similar type of benefits whether its low complications increased ambulation, we'll see that in in radio but in truth. The OSI spirit, we really want to collect the evidence to prove it and so that's really kind of a strategy behind it Ryan maybe you can add some additional commentary as well no I think thats spot on just as Ron stated the coronary experience in radio as well studied and of course the benefits to the patient both in terms of complications and early ambulation time are intuitive there, but we just havent validated that the community hasn't study. This in the peripheral setting so were taking some leadership role in generating that evidenced in validating that value proposition as well in the peripheral space. So that's what we intend to do and I'll say the investigators that we've engaged to participate in that so really excited to bring forward evidence, but that's never been shown before so.
It's a it's a way for us to innovate and the medical evidence field.
Thank you so much.
Thanks Danielle.
Your next question comes from the line of Jason Bedford from Raymond James. Please go ahead. Your line is open.
Hi, good afternoon, congrats on the progress so just a few questions.
I realize that you don't have full information and not in the market is quite dynamic right now but.
Can you comment on.
Peripheral atherectomy market growth and then secondly, as you look to your guidance for next year, the double digit core atherectomy growth what are you assuming for peripheral.
Yeah. Thanks, Jason Thanks for those comments, so we think that the peripheral marketplace continues to grow in that high single digit range, we haven't really seen any any change in that.
It just has continued to remain pretty stable and strong.
I'm sorry, what was the second part of your question well here, it's kind of a follow up to that and then once the second partners Scott the high single digit that's on a dollar basis or unit basis.
Because there is not a high high single digits on a unit basis. So that tracks back to you know the epidemic that we're facing in peripheral vascular disease and just see the continued.
A large number of patients that are presenting with this.
This disorder.
Okay, and then I asked just in terms of when you comment on guidance was.
Double digit core atherectomy and I was just trying to break out what are you assuming for peripheral versus corner.
Yes, similar to what we've talked about before Jason.
You know high single digit growth in peripheral and kind of that mid teen growth in coronary lands you at a at a double digit around a 10% growth rate in the core business, we've talked about $10 million to $11 million.
International revenue.
And then the balance between our interventional support products and so that's how we got to the guidance number.
Okay.
And just in that 10 to 11 million international.
What's the plan for new countries I think you mentioned 10 right now.
Look through the fiscal 20, how many more countries do you think you will enter.
Yes, Thats correct, there's really kind of two pieces that go into that number there's continued adoption, where we've already launched so really looking at deeper penetration and adoption within the 10 countries that we've already accessed in this past year and then we will add up to 10, new countries in Fytwenty as well.
And just finally just on the international.
You mentioned.
I think your capture 20% plus the.
Market in Japan in fiscal 20, what is the denominator, what's the size of that market.
Paul the size of the market in Japan is about 10000 units. So we would anticipate getting to about that 2000 unit level and.
In this coming fiscal year.
Perfect. Thank you.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Margaret Kaczor from William Blair. Please go ahead. Your line is open.
Hi, everyone. Thanks for taking my question. This is actually Brandon in for Margaret I wanted to go back first to the wire on discussion were having earlier and maybe approach it a little bit different.
I was curious if you think.
Acquisition is something that maybe can enable more orbital atherectomy procedures as maybe some doctors get more comfortable with having a filter or where do you think the real benefit of it is just having another kind of differentiated support product.
Capture more of the procedure revenue.
Thanks, Brian we definitely do think that this is going to expand the use of orbital atherectomy.
For.
Many patients.
There are circumstances, when you are using radial access as well as when you're treating as Dr. Mary Lynne referred to really complex cases, where physicians are concerned about.
About.
And boy and in those cases.
The physicians may choose to do different types of procedures under these circumstances now we think that we can provide a full product offering that will enable their use of overlaps rack to me. So we do anticipate this.
We do anticipate that this acquisition will increase the utilization of overlap directly as well.
Okay that makes sense, thanks, and then.
Just one other one that as we look to fiscal 2020.
Especially specifically in the peripheral side, what kind of ASP declines are factored into the guidance.
Just kind of continued mid single digits and I guess part of the reason I ask is as you get deeper into some of these RBL accounts, maybe some of the.
Yes.
Headwinds, maybe you would annualize and is that.
Would that offset some of the.
Headwinds you see in 2020.
Yes, Brandon Thanks for the question.
On the peripheral side, we're forecasting continued kind of that low to mid single digit.
Price erosion of course look at higher erosion in the RBL space, but offset by very sticky SP is in the hospital space, we'll get the coronary side those have been.
More consistent we've had lower erosion in the coronary space and we would expect that to continue as well and of course, we stay focused on reducing costs as Scott mentioned.
You know really thoroughly outpace ASP erosion that we're seeing in the marketplace.
Thank you.
Thank you.
And there are no further questions at this time I will now turn the call back to Scott Ward for closing remarks.
Great. Thank you Kelly Thanks, everyone for your continued interest in CSPI, we look forward to.
Seeing you all and providing an update on our product portfolio at TCT. Once again that will be on Thursday September 26, and thank you for dialing in today that will conclude our call. Thank you.
This concludes today's conference call you may now disconnect.
[noise].