NARI Earnings Call -My Notes

Starts with Q/A from Analysts and follows with remarks that may be in addition to the prepared remarks. Moving onto the UPST call now and will share my notes from that once that call concludes.
sjo

NARI Q1 2021 Earnings Call 3:30 CST
Caroline Corner –IR
Bill Hoffman, CEO
Mitch Ell, CFO

Q Covid recovery mix of new accounts vs. existing accounts
A Operating environment has improved since Q4 and since last earnings call. Increasing their interactions among sales professionals amongst pulmonologists. Lot of patients in the hospital who have deferred treatment who are now getting their pulmonary issues addressed.
During qtr., added about 140 more accounts, of which 60% are using both technologies. Total of 1,000 accounts now. 90% of use came from existing accounts and 60% of growth came from the existing account base.

Q Adoption of clot and transit and flowstasis and growth in the future.
A T20 curve has been really fantastic. Total number of patients to whom this will apply are about 20,000, which is one of the most lethal situations. Like electrophysiology for venus closure use with flow stasis. It is not a part of their core business.

Q Talk about case mix trends. Looks like PE is becoming bigger part of the mix. DBE smaller part of the mixture?
A Yes, that’s a good way to frame it. In Q1, more growth in PE (more robust) than in DBT during the pandemic. That’s probably what’s behind the slight increase in PE compared to DBT.

Q Adjacencies outside of Venus. Cadence and guidance –how should they think about growth each quarter?
A Want to be comfortable and confident with their guidance. Seeing improving business environment in the 2nd qtr. This company has not had a covid-free environment since they went public/IPO’s approximately a year ago. They want to be thoughtful about this and want to focus more on the annual vs. quarterly.
Adjacencies between PE and DBT, Flow saver is not FDA-cleared yet and they like a number of adjacencies beyond PE and DBT.

Q Flame trials –Ton of opportunity within PE, yet 10% of patients are getting intervention. Once there is more clinical evidence, will it likely turn into a pivot?
A Massive/High-risk PE remains one of the most mortal death rate occurrences 20-90% death. They want to change the outcome of this with their flow-triever product. Clinical efforts won’t stop there. Rapid commercial adoption, even in the absence of clinical evidence. Standard blocking and tackeling. There is not an inflection point they can see, for better or for worse, this is an execution play.

Q RE: Competition –What are you seeing. Are competitors getting more aggressive re? pricing or having more sales people out there?
A Do see trialing of competitive products, but do not see changes on the pricing dynamics. There will be a modest increase in their pricing to $9,200-$9,300 per each. Ability to differentiate both markets is good and they continue to like their outlook.

Q International –As we think about Europe and rollout to Asia Pacific. How to think about roll-out and financials associated with that?
A Europe was really a tailwind/headwind kind of story. Gotten started with case studies in both markets. Figured out a way to navigate this. Doctors are enthusiastic and appreciating what they’re seeing out there. On the headwind side – lots of impediments to access to hospitals with lockdowns due to Covid. They hope that as they get into the late summer/fall that this will change.
They don’t expect Europe to be a major financial contributor to revenue until after 2022. Asia/Pacific will likely be more a matter of years vs. quarters and sequentially.

Q New products
A Toolkit approach for physicians to be able to use them with pulmonary embolism. This may have a bit of a drag on their profitability. Much larger production facility in Irvine, California will allow them to produce more product, but that may have a bit of a drag on the company’s drag on their gross margin in the fall and into 2022. As the company continues to grow, they expect they’ll be able to get their gross margin back to where it is today. Looking at a variety of other opportunities to address additional diseases/medical issues.

Q Expansion of Salesforce territory. Where are you adding these? Splitting already productive territories? Please explain?
A Almost all of the 150 existing territories are split territories. Seeing productivity increases currently. Goal is to increase sales force to drive greater adoption of their product. Want to more systematically identify more PE and DBE patients to triage them properly. Future territories will be more greenfield territories.

Q It will be a learning curve for these hospitals to communicate this to patients.
A Aid Doc will help to systematize this process. They’ve funded research that tries to help hospitals develop systems and processes to be sure a patient doesn’t get missed. Chose Aid Doc because of their experience with pulmonary embolism and their ability to communicate this to patients.

Notes that may be in addition to prepared remarks.
Revenue was up 113% Y/Y and up 18% from Q1

CEO
5 Key growth drivers:

  1. Expand sales organizations
    US TAM is 460k patients, $$3.4 B
    They provide services to just 5% of the cases each year that can benefit from their services.

Will be increasing hiring of sales professionals

  1. Building product awareness is 2nd growth driver

Aid doc purpose-built product is a new partnership they’re announcing
3) Build upon base of clinical use
Flash study has yielded great best practices and have enrolled (now) over 1,000 patients to the study.
Monitoring device on a smart watch to monitor heart rate, blood/oxygen levels, exercise tests more often and more simply than typical clinical monitoring
Believe they can set the bar by which all VTE therepies will be done.
4) Continue to expand product portfolio
Robust pipeline of additional devices
5) Expansion into adjacent growth markets such as Europe and 3 additional countries

Working on several unmet needs in additional markets, and continue to invest heavily in their growth drivers.
Committed to a cause and mission to impact their patients
In the earliest phase of their mission and will grow sustainably in the future.

CFO
Growth 35% from clot triever products and 65% vs 63% previous year
Guidance:
Full yr 2021 $240 to $250M in revenue.

sjo

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A Europe was really a tailwind/headwind kind of story. Gotten started with case studies in both markets. Figured out a way to navigate this. Doctors are enthusiastic and appreciating what they’re seeing out there. On the headwind side – lots of impediments to access to hospitals with lockdowns due to Covid. They hope that as they get into the late summer/fall that this will change.
They don’t expect Europe to be a major financial contributor to revenue until after 2022. Asia/Pacific will likely be more a matter of years vs. quarters and sequentially.

I have a small position in NARI.

The numbers look fantastic and Inari’s valuation seems to have compressed modestly as it has continued to grow. My biggest concern is the overall TAM. I noted the US TAM is $3.4 billion which should give it plenty of room to grow for now. But it sounds like international expansion is on the horizon mainly in 2022 and beyond. Is there any idea on the TAM internationally?

Dave

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