Saul, In your recent monthly portfolio update you mentioned that you felt that for NARI “…their conference call and guidance for the rest of the year had an air of extreme caution, hesitation, and worry”.
When I first read the transcript I didn’t get the same impression as you - but my ‘spidey senses’ are certainly not as well developed as yours. Can you please explain what comments in the call lead you the draw the above conclusion? Thanks for your feedback.
I read the transcript for a second time today and I have picked out the following statements (quoted below) which lead me to the conclusion that the managment are actually quietly confident - all metrics are moving in the right direction and reopening is a tailwind - the unknown is that they have no “have a pre-COVID normal” and that they perfer for guide numbers which they are very comfortable for them to achieve (setting them up for a likely beat).
Prepared Remarks
Bill Hoffman – President and Chief Executive Officer:
We treated a record number of patients and reported revenue above our guidance.
During Q1, our physician customers performed approximately 5,500 procedures, up about 130% from the same quarter last year and up about 20% from Q4.
As in the past, the vast majority of revenue in the quarter came from replenishment of inventory after procedures while the balance came from stocking orders, which include inventory for new customers, increases in inventory levels as customers grow, and new product introductions.
While recent developments are encouraging, we continue to believe that some caution in the short and intermediate-term is prudent.
We have noticed for example some hospitals are full of non-COVID patients as they return for treatment that was deferred during the pandemic.
First, we continue to expand our sales organization to target new hospitals and physicians.
Our performance in Q1, strong as it was, suggests that we treated fewer than 5% of all patients who we believe can benefit from treatment with our devices.
We remain very early in our efforts to penetrate our core markets and the effort will require a lot more sales professionals. We continue to believe that when fully built out, our sales organization will rival in size the largest interventionally focused sales organizations in the market today.
We are currently targeting 180 to 200 total territories by the end of 2021.
We are excited about our recently announced partnership with Aidoc…We believe their purpose-built PE software solution can be helpful in developing this scalable and repeatable VTE center of excellence model.
Our fourth growth driver is to continue to expand our product portfolio. During our last earnings call, we announced the limited market release of our T20 Curve, which has been FDA cleared for a clot in transit, as well as our flows basis venous closure system…Both devices are now in full market release and enjoying brisk adoption. Looking ahead, we remain very excited about the robust lineup of new products and innovation in our pipeline.
Our fifth and final growth driver is expansion into adjacent and international markets. We continue to make progress early in our European launch… the operating environment for new product introductions remains challenging. …The most recent pandemic surge has caused new lockdowns, limiting travel and hospital access, but even with these headwinds we are seeing case volumes steadily increase, and we remain optimistic about our European opportunity as we look forward to an improved COVID environment.
We are excited about several opportunities beyond our core DVT and PE markets. We are actively working on multiple ideas to address significant unmet needs in these adjacent markets and we’re looking forward to discussing them in upcoming calls.
Mitch Hill – Chief Financial Officer:
Gross margin increased due to a modest 2% increase in revenue per procedure year-over-year as well as positive operating leverage in our manufacturing facility due to continuous improvement initiatives.
The $5.2 million increase in R&D expense was primarily driven by an increase in headcount, as well as product development and clinical evidence development costs SG&A expense was $36.9 million in the first quarter of 2021 compared with 16.4 million for the same period of the prior year.
As I’ve mentioned in previous quarters, our intent is to grow sustainably and we expect to continue to invest heavily in our growth drivers, as described by Bill…Our intent is not to maximize cash flow but to invest in growth.
While we continue to experience COVID-related challenges and uncertainties, we are comfortable providing forward-looking guidance as follows. For the full year of 2021, we are guiding to $240 million to $250 million in revenue.
Questions & Answers
Q from Cecilia Furlong re COVID recovery?
Mitch Hill – Chief Financial Officer:
…the operating environment is considerably improved since Q4 and probably even since our last earnings call, which was not so long ago, so the decline in hospitalizations and the decline in COVID diagnoses all have allowed hospitals to ease up on restrictions. The challenges, value analysis committees are meeting their functional, they’re never efficient or fast, but they’re meeting and so I don’t think there are any COVID related headwinds to bringing on new customers.
We continue to expand our activities with non-interventional stakeholders, again that’s pulmonologists, hospitalists, intensivists, and of course ER physicians, restrictions for our sales professionals to be in other departments, that’s eased up as well.
We’ve even seen some diversions …. so many patients who have deferred treatment
So we want to keep an eye on that. But generally speaking, the environment is clearly a different and more functional environment than it’s been in some time.
Andrew Hykes – Chief Operating Officer:
During the quarter we added about 140 new accounts, which brings us just up to about 1,000 active accounts. Keep in mind, only about 60% of those accounts are using both technologies. So we’ve still got some runway left to pull in the second technology in about 40% of those accounts.
Q re guidance from Larry Biegelsen?
Mitch Hill – Chief Financial Officer:
… we are kind of thinking through how we will make it through Q2, obviously, and thinking about the second half of the year, we wanted to be comfortable and sort of confident in our guidance. Just as a reminder, the IPO is about a year ago right now, and we’ve not yet had sort of a COVID free quarter as a company. So we’re still trying to understand exactly what that’s going to look like and I think as a result of that we are seeing obviously an improving business environment in the second half of the year, but we wanted to continue to be very confident and comfortable with the guidance, and we think the numbers we provided at the 240 to 250 sets us up in that territory or that range.
Bill Hoffman – President and Chief Executive Officer:
…We don’t have a pre-COVID normal.We don’t know what that means. So we just wanted to be thoughtful, I think we’d like to stay away from intra-quarter trends. We’d like to stay away from sequential trends and commentary on that. We feel very good and we always will when we provide a number, we feel very confident in our ability to hit that number.
Q from Danielle Lastly re data coming out of Flame inflection driver?
Tom Tu:
… multiple studies ongoing …I think what you see is that there is rapid commercial adoption of this technique even in the absence of the clinical data, and I don’t anticipate that the results of this trial are necessary to continue the growth trajectory of this company.
Q from Danielle Lastly re competitors?
Andrew Hykes – Chief Operating Officer:
… I think on the competitive front, no big changes… We do see trialing of competitive products out in the market, but we continue to very much like our own chances when we’re competing head-to-head with the other devices, we have not seen any changes in the pricing dynamics… So we’ve been able to maintain if not hold those pricing levels and get modest uplift along the way.
Q from Bill Plovanic re international growth?
Andrew Hykes – Chief Operating Officer:
…From a financial standpoint, as you’ve heard us describe in the past, I think the rest of this year and even into 2022 will continue to be a building year where we will be able to see measurable contribution from Europe, but nothing that approaches anywhere close to material contribution to the broader commercial franchise and I think that’s still a pretty good way to think about Europe in the short to medium term. Relative to some of the other markets, we are under way from a regulatory standpoint in both China and Japan, but those are going to be much longer roads for us to navigate.
Q from Bill Plovanic re new products?
Mitch Hill – Chief Financial Officer:
… those products that are being added to the FlowTriever price per procedure are going to have a bit of a drag on the gross margin of that particular product, and so that’s something that will, I think, have a noticeable, but fairly small effect on the gross margin for the product.
Q from Marie Thibault re Aidoc?
Tom Tu:
We chose Aidoc specifically because of their advanced work in this pulmonary embolism space, I think not just from the artificial intelligence aspect of automating the RV to LV ratio calculation, but also in their communication ability, once the patient has been identified and to be able to activate the appropriate physicians who can then make a rapid decision about patient triage, I think this will be a very fruitful partnership with the patients being the ones that benefit the most.
Thanks