Good morning, everyone. I'm Robbie Marcus, the med tech analyst at J.P. Morgan. Thanks, everyone, for joining the 2024 J.P. Morgan Healthcare Conference. Very happy to have our next presenter, Adam Elsesser, the CEO, will be speaking for Penumbra. Adam?
Thanks. Good morning. It's great to be here at this year's 42nd annual J.P. Morgan Healthcare Conference. Of course, I want to thank Robbie for inviting us and your coverage of Penumbra. That's our safe harbor statement. Penumbra is a healthcare company focusing on interventional products that treat a variety of medical conditions throughout the body. We're best known for our thrombectomy business, removing blood clots from head to toe. We started the company in 2004 and currently have approximately 4,000 employees worldwide. We're headquartered in Alameda, right across the bay from here, and we manufacture all of our products in California. Our revenue guidance for 2023 is between $1.05 billion and $1.07 billion.
In addition to this, strong growth, we're also delivering strong profitability in 2023 and expect that to continue in the future. Now, let's turn to the details of our business and why we are so optimistic about 2024 and beyond. We think about our business in three categories: thrombectomy, embolization and access, and immersive healthcare. In our embolization and access business, we have unique market-leading products that have grown in the high single digits on average over the past few years. Our embolization coils are unique in that they are larger in diameter and longer in length in certain sizes, together with being very soft, so they create a dense packing ratio, which is clinically important. Regarding our access products, we continue to innovate and provide additional tools to make accessing the neurovascular anatomy easier and easier, whether from a femoral or radial approach.
Our immersive healthcare business is developing novel technology for physical rehab and mental health issues, with the additional focus on being able to provide individualized patient monitoring and assessment, as well as an in-home solution. We are working closely with the Department of Veterans Affairs on developing this technology, as well as validating the pathways of care for these therapies. Now, I'd like to do a deeper dive into our thrombectomy products. Our unique products remove blood clots from the brain, the arteries in the body, the veins, pulmonary arteries, and the heart. 2023 is the year Penumbra launched our true second-generational platform technology, Computer-Assisted Vacuum Thrombectomy, or CAVT for short. This technology is the result of almost 20 years of incremental innovations that have led to this transformational second-generational platform.
CAVT now exists for arterial with Lightning Bolt 7, DVT and PE with Lightning Flash, and Thunderbolt for stroke, which is in an IDE trial. I want to share a few examples of recent cases with all three of these products. This first case is a DVT case with Lightning Flash. An elderly patient presented at the hospital with an occluded iliofemoral vein, which the physician anticipated to be chronic. This hospital was new to Penumbra's technology for DVT and PE. Flow was completely restored after 1.5 minutes of aspiration time, and the patient's symptoms resolved. As you can see from the picture of the clot here, some of the clot has a white color, which is indicative of a much older, more chronic clot. The next case is a pulmonary embolism case.
This patient presented with severe shortness of breath, and a CT revealed a bilateral pulmonary embolism. With only five minutes of total device time, both the right and the left were treated, and the patient's O2 saturation improved from 88% to 95%, and their PA pressures dropped from 40 to 20 on the table. This physician was also new to our technology when he did this case and has since adopted Lightning Flash for both DVT and PE cases. This next case is an example of clot in the arteries in the leg. This case is actually quite extraordinary. One Lightning Bolt 7 removed 4 separate clots very quickly. Again, the physician was new to our technology. This patient is in their early fifties and has a history of AFib. They presented to the hospital with acute leg pain.
Imaging showed an occlusion at the popliteal artery. Lightning Bolt 7 was introduced and cleared both the popliteal and the posterior tibial in a single pass. You can see those in the next 2 images. A second pass cleared the peroneal artery, but an angiogram revealed additional clot in the distal anterior tibial artery.... Lightning Bolt 7 was about 5 centimeters away from this clot. You can see that in the second to last slide. And it was unable to track further because of the length of the catheter. However, the physician turned on the system anyway, and after less than 5 seconds, Lightning Bolt 7 went into Bolt Mode, which indicates that the clot is being ingested. The physician watched the clot come into the tubing as the system returned to sampling mode, and subsequent imaging confirmed that the clot was cleared.
The total device time for this entire procedure was about 5 minutes. The final case, the final case is a stroke case. This is a case performed as part of our IDE study for Thunderbolt. This patient had suffered a severe stroke and was not doing well when they first got to the hospital. The clot is in the first segment of the middle Cerebral Artery. You can see that in the red circle there. The physician first used a RED 72 with SENDit to get to the face of the clot. The first image shows the blockage and where the clot is located. Thunderbolt was then attached to RED 72 and used to successfully, quickly open the M1 occlusion. The second image shows the vessels open after Thunderbolt removed that clot. 24 hours after the procedure, the patient was doing really well.
These four cases represent the best-in-class technology for thrombectomy now. 2023 also had two other significant milestones for our thrombectomy business. First, we estimate that in 2023, over 100,000 patients were treated in the United States with our thrombectomy products. A significant milestone, but we believe it is just the beginning. The second milestone in 2023 was the clear communication from our customers, including a significant number of new users of our thrombectomy products, that our second-generation technology, or CAVT, was proving that the technology was now so good that they wanted to start doing the work together with their hospital systems to expand the pathways of care for their thrombectomy patients to be successfully treated with our products. This is significant. This huge interest has created significant momentum in bringing our CAVT platform to more and more people in the United States.
In fact, we believe that our U.S. thrombectomy business will grow over 25% this year. Now, let's turn our attention to the specific vascular beds and review our market share in the United States for thrombectomy and the opportunity in front of us for the next several years in the U.S., before we also get to bring our CAVT platform to the rest of the world. Focusing on stroke first, let's look at the U.S. market for purposes of our latest technology, where we have our 4 RED catheters and RED 72 with SENDit. We currently have 57% share of the current stroke aspiration mechanical thrombectomy market. 28 other catheters compete for the remaining 43% share. We estimate that mechanical thrombectomy, in any form, is used only 30% of the time to treat large vessel strokes.
So we have an opportunity to both gain share of the current mechanical thrombectomy market and help increase the number of patients getting mechanical thrombectomy. Now, let's look at coronary. Currently, we have 44% of the mechanical thrombectomy market with our power aspiration platform with CAT RX, while five other manual aspiration products share the rest. With CAT RX, we have the opportunity over time to convert the remaining 80% of patients to a better therapy. Now, looking at pulmonary embolism, where we just this past year, we launched our second-generation computer-assisted thrombectomy, or CAVT. We estimate that we grew our share of the mechanical thrombectomy market in 2023 from low single digits to about 20%. We think as more and more physicians try Lightning Flash for PE, we have room to continue to gain share with our CAVT platform to be the market-leading product.
In addition, that still leaves a significant percentage of eligible patients not receiving mechanical thrombectomy. Our STORM-PE study is underway and will hopefully unlock the larger group once the trial is complete and after we have broadened our footprint with CAVT. In DVT, we also launched our second-generation CAVT platform this past year, and we already estimate that we have almost half the market share with Lightning Flash, compared to nine other products competing for the remainder. Our share has grown significantly this year with Lightning Flash. As you can see on the slide, there are more than 90% of the possible patients to treat who are not getting treated today. In a moment, we'll review the work we're doing to help those patients as well. Finally, let's focus on arterial....
We also introduced our second generation CAVT platform in arterial this past year, with the launch of Lightning Bolt 7. We estimate that we currently have about 75% share of the mechanical thrombectomy market, with 12 other products competing for the remainder. As you can see from this slide, the vast majority of patients with clot in their arteries are still getting either open surgery or catheter-directed lysis. With the launch of Lightning 7 and the CAVT platform and the work ahead on market access, we are confident that we will continue to grow our arterial business significantly. Recently, we have outlined the three areas of work that we are undertaking that will help our thrombectomy technology available, to be available to all patients that can benefit from these products. The first area is, of course, innovation.
We intend to launch four new CAVT products within the next 16 months, some sooner than others. These products are intended to fill out the spectrum of needs that our CAVT platform reaches, the broadest possible areas in the body and variety of clot morphology. In addition, we have commenced work on integrating the collection of information, both procedural and case-specific, into our CAVT platform, to better inform physicians, both in real time and in reflection, so as to better treat their patients by focusing on the safety, speed, and simplicity of each case. This is made possible by the proprietary tech, technology already embedded into our CAVT platform. The second area is the continued evolution of our commercial team. This work started in the very end of the third quarter and took a good deal of effort in the fourth quarter.
But most of the work is completed, and the team is set up for success in 2024. This evolution has included making sure we have the right team in place, with the right numbers of territory managers, to take advantage of the opportunity in front of us. This means we're adding roughly 25% more territory managers in vascular. The majority are already hired, and we plan to have the rest hired, trained, and fully in place during the first part of this year. Importantly, we saw a noticeable uptick in our peripheral thrombectomy business starting late November. We believe this is the direct result of new customers getting Lightning Flash and Lightning Bolt 7, as we discussed on our last earnings call, coupled with the changes we have made to our commercial team. This new trajectory gives us a great deal of confidence for 2024 and beyond.
The third area of work is our market access effort. This involves working with large hospital systems to first validate the clinical benefit of our thrombectomy products, and then review the health economics of our thrombectomy products, which then empowers hospitals to make better informed decisions on treatment paradigms. For the past 20 years, the Penumbra team has worked very hard to continuously innovate, and in so doing, has built what has become the largest thrombectomy company in the world, removing blood clot from head to toe. With that effort, we understand that we now have the privilege to work with hospital systems and physicians to make our technology available to everyone who can now benefit. That work will be hard, but motivating and profound. I believe our team is not only ready, but fully engaged in doing so. Thank you.
Well, great. Thanks, Adam. You know, I want to start realizing you haven't pre-announced the fourth quarter yet here. I want to start with your comments for 2024, given everybody's always looking forward. In 2023, you made comments at a couple sell-side investor meetings that you expect to grow 20% or better, I think, or at least 20%. One of those ways.
There's a difference.
Why don't you tell us what it is, and then give us, you know, what's driving the confidence to make that so early in 2023 before guidance was even ready?
Yeah. So, first of all, it's a fair question. What I specifically said was, we thought 20% growth was achievable, if I quote myself pretty accurately. The reason we said that was really just in reaction to what we saw what was happening with our business. This is not... First of all, this is not linear. You know, growing at this scale like we're doing at $1 billion, you know, and accelerating that growth is not typical.
Mm-hmm.
You know, our growth rate obviously accelerated in 2023, and we think we're going to keep a more elevated growth rate. What we're seeing is what I laid out in the prepared remarks, which is the technology platform is changing the way these cases are going. It's changing the outcomes are changing the perceptions of physicians and hospitals in wanting to treat these patients with mechanical thrombectomy. We had a lot of work to do to be ready for that. And I laid that work out, not just on the innovation side, but in the structure with our commercial team and also in how we engage with the hospital systems so that we can do that work with them. They're asking us to, and we're rising to the occasion. But we weren't set up.
We didn't have a team built around that work because we'd never done it before, because the products weren't at the level that they need to be in the field to do it until now. So we're obviously seeing that in the prepared remarks I just said. That, you know, we saw really in the late November time frame, some of the benefits. Again, not linear, but some of the benefits like taking hold, and that's really exciting. But again, we're not looking at, you know, 2023 anymore. We're fully into 2024 and focused on that, and we have a lot of confidence, given what we're seeing in the work we've already done.
There's a lot to talk about product specific.
Yeah.
But I want to start with the different penetration charts that you put up.
Yeah.
That was the first time we've seen that level of detail, really helpful. It was sort of on the left was share, on the right was-
Mm-hmm
... penetration. While there were impressive share numbers, especially already in PE, going from low single digits to 20% in the U.S., what struck me more was-
Mm
... how small the penetration into the addressable markets were-
Yeah
... for all of the different segments you discussed. So maybe we could start there and focus on, you know, one, what can Penumbra do to drive better penetration? And two, what can the industry or what is the industry doing?
Yeah. That's a really important question, and it's taken us a while, I think, to understand that, because each area is slightly different. We learned those lessons from stroke, where we got to a certain point and stroke was more complicated than these because it involved moving patients from hospital to hospital. Here, you don't have that issue with DVT, PE, and arterial. What we know is that for the first time that we've been in these other vascular beds, the physicians and their hospital systems have wanted to do something about this. Up until then, you know, there were other things they did, and they were fine. You know, open surgery for an arterial clot was fine.
And for the first time, we're hearing not one or two, but a large number of people engage on this. So that's led us to engage in what can we do? And obviously, what one has to learn is what... You know, let's validate that the clinical outcomes are good. You know, that this new technology is doing what we think it's doing in a scale of numbers, and you can do that, relatively quickly when the hospital systems are engaged. And then look at the health economics, making sure that it's a viable procedure financially.
And when you add those two up, you know, that allows the hospital, as I said in the prepared remarks, to do the work that they need to do to make the right decisions on changing their own algorithms or paradigms inside the hospital system, not just with the treating physician. You know, the treating physician has some capacity to do that, but in most of the time, you know, more so on the arterial side, but most of the time, it's a group of physicians that all have to sort of agree and be part of that decision-making process.
I remember 2014, MR CLEAN-
Yeah, yeah.
and then 8, 10 different trials.
Yeah.
Global, well-run.
Yeah.
Tons of patients, and that's what was needed to drive stroke. Stroke even still is a very low penetration-
Yeah
... to the addressable market. Do you need that same level of clinical data?
It's-
in all of these
Yeah
Peripheral applications? And if not, why?
So it's a really good, good question. It depends on which one. So in PE, you know, our STORM-PE trial is similar to those early stroke trials, where we're randomizing this treatment to traditional treatment, which is anticoagulation. That is sort of necessary because you have a whole group of physicians involved in that treatment decision, just like you did in stroke. So there's a lot of parallels between PE and stroke. The only big thing is, once those trials are done, you don't have the same issue of moving patients. That has kept the stroke numbers from really achieving their biggest potential. Because of that logistic, you have the patients there already in the hospital.
There's a lot of conversation, and I've had with some very senior physicians, the conversation about the mistakes made in the market development work with stroke and making sure in PE, you know, they're not made. And again, a lot of that's at a system level. On the other areas, DVT and arterial, again, they're slightly different, and the conventional wisdom says you don't need randomized data. There's no question that randomized data needs to answer. You really need other kinds of information, and that's what I've alluded to working with the hospital systems, to make sure that you can get those patients. It's hard to think about a randomized trial in those areas that would... What question would it ask or answer that would-... change those growth curves. They're just different.
We're pursuing less randomized data, more collective system data, you know, health economic data, and so on.
If I just focus on Flash for a second-
Mm-hmm.
that was probably the most exciting, the most anticipated launch
Mm-hmm
-for Penumbra in 2023. You gained over 15 points of market share, low single digits to 20% in the U.S.
In PE. We gained a lot more-
Mm-hmm
in DVT, obviously.
In PE.
Yeah.
You know, in that market, it's really two competitors that I would say have the vast majority-
Yeah
-of the share. So my question is: How far can your share go? You know, 15% plus is good. I would imagine you're probably not gonna be happy to stop there. How far can you go, and why look, why wouldn't people be using Flash in DVT or PE?
Yeah. So, well, I appreciate that you know me as well as you do. Yeah, I'm not satisfied with anything other than making sure that patients have the best treatment that they can, and I'm very, very convinced that we're offering that now with our CAVT platform, and we're gonna make sure that over time, we make that the standard of care. I believe that's very viable. I think that is just a question of innovation, you know, and that's been what's driven Penumbra for the last 20 years. You know, we've just kept going and going, and all those small, incremental changes, you know, one little improvement, one little improvement, one little improvement, has really allowed us to get to this more transformational point using the computer. Now, what's interesting, you know, is that now changes aren't just catheter-based.
You know, for so long it was, "Is the catheter a little bigger? Is the catheter a little longer?" You know, I mean, you heard obviously, we could use a slightly longer catheter on the arterial side. We got lucky with that case. But, but that's sort of the spot we're in. But the changes are also software-based. You know, the algorithms can keep getting better and better. And as that happens, I think it's gonna be hard to imagine us not getting, you know, significant more share.
So part of adding the software to the hardware is that you can charge a higher premium for higher, more innovative technology, and-
Yeah, that's not the rationale-
No
... obviously.
But for us financially-minded people-
Yeah, yeah
that's one of the
The rationale is-
-side effects
... because the computer can do what the human hand can't do much better and more efficiently. But yes, there is a bit. It costs a little more to make.
If we're thinking about our models here, I think we've started to see the benefit down the P&L.
Mm-hmm
... with a pretty significant amount of margin expansion in-
Mm-hmm
2023. So maybe you could speak to, one, what's sort of the reception to the higher pricing for the better technology-
Yeah
... at your customer level, and then how we can think about that moving forward down the PNL, in terms of upside-
Yeah
-margins.
Yeah, it's a good question. The conversations... You know, there's nobody in any hospital system, you know, says: "Oh, my God, you're raising your price a little bit. Thank you. I'm so glad." At least I'm not aware of anybody who's ever done that. So there is a discussion and a process there. That being said, we are still, you know, a fairly priced in the markets that we're in, and that allows us to sort of move through that relatively quickly. You know, over the course of 2023, some of those, you know, pricing discussions, you know, slowed it down a little, but I'm not aware of any, you know, moment or significant business that we didn't get because of the pricing situation.
That being said, you know, I think the larger health economic piece, you know, it's a very efficient and, and, you know, and hospitals aren't losing money-
Mm-hmm
When they do the procedure this way, and I think that will help us going forward.
Earlier in 2023, when you launched, there was a little slowness, as you mentioned, with some of the value committees moving through hospitals.
Yeah.
Do you think that's been resolved at this point?
Yeah. I wouldn't articulate it as a slowness. I think it was very typical for us. You know, the first wave happened in the first sort of six months. The difference was we are adding, and still are, a significant number of new customers. So we had that many more processes to go through and not just the value analysis committee, but then the process of actually ordering it, getting it on the shelf, and doing all that work. That was just at a level that we hadn't seen in our thrombectomy business ever before. So that also led to re-evaluating and making changes in the commercial team so we could do that work as more efficiently. When you have, you know, 18-20 accounts, that's a lot of work when everyone wants it all. And that's just different.
We hadn't had that. So, I’m really, really proud of the team for kind of rethinking and getting organized. The good news is, when you're adding people to your sales force, and you're doing it in the context of, you know, a pretty transformational launch—who you attract is very different. So we've been really lucky to see some incredible talent, some very experienced folks, you know, join our team and probably at a higher level than ever before in our company's history. And that's partly 'cause of, you know, the word out there in the street and the products that are performing.
We touched on PE. DVT, you said you gained even more share-
Mm-hmm.
-in 2023. So maybe touch on that market, the competitive dynamics you're seeing there-
Yeah
and your outlook for that?
Yeah, DVT's not... I mean, we don't have a 100% share, so there's always competitive aspects to it. It's not really, in our minds, a competitive play now. It's really just penetration-
Mm-hmm
... and getting the products where, where they need to be, and getting everyone used and trained on them. And then, you know, ultimately, that's an area where, getting to all the various clot and all the various locations of DVT, you know, will benefit from additional products as well.
The stroke side, you have RED with SENDit.
Mm-hmm.
That's launching.
Yeah.
And you also have, we'll get to questions on-
Mm-hmm
-market growth-
Yeah
and dynamics there. When you put the two together, you know, how do you feel about the stroke business?
Mm.
I remember I published a note a couple of years ago. Stroke used to be a growth driver. It's now peripheral-
Mm-hmm
for the overall business.
Yeah, yeah.
Is that still holding true, or do you think stroke can help, you know-
Yeah
into the overall growth?
Well, so you heard the way we talked about the business a little bit differently. In the past, we have talked about it sort of in this, you know, neuro versus vascular, and, and it was against, sort of pitted against each other. Now, we're talking about it as our thrombectomy business that use our CAVT platform, you know, as a whole, which is primarily, you know, in the U.S. now, and will come to the rest of the world. That's the right way to think about it, 'cause that's where we're seeing the elevated growth is in our U.S. thrombectomy business. Now, we're lucky in that we've had SENDit and, and the RED series to really gain market share this year, you know, in our, in our stroke business, but it's also reinvigorated the field and gotten people pretty excited.
So I do think stroke is a growth driver. You know, will it be as big a growth driver as the Flash and Bolt and those products in the short term? You know, probably a little less, but I wouldn't dismiss it at all. I think, you know, we've seen that happen nicely this year. I think in general, you know, what you're hearing is our U.S. thrombectomy business, as broadly defined, is obviously the key driver of our growth right now. And as we bring those products, the CAVT products, to the rest of the world in a couple of years, that will also add future growth, you know, in those years, once the CAVT platform comes. From my vantage point, like, that's a really, really great place to be.
You know, where we have a lot of work ahead of us, but work that we now have, you know, done over this year to set ourselves up for 2024 and 2025 to get those patients. And we know that that work is still to come in, you know, Europe and Japan and China and other parts, where we don't yet have those products. And, you know, from my vantage point, that's, that's a pretty fun setup. And it's gonna make, in our mind, a really, really great, you know, number of years.
It's a good segue. Most of the business is in the U.S., but you have a fairly large outside the U.S. business as well.
Mm-hmm.
The presentation was focused on the U.S. What are some of the trends you're seeing outside the U.S., both in stroke and peripheral?
Yeah.
How does... You know, we lump OUS as one market.
Yeah.
But it's,
Yeah, it's very-
-different market.
Yeah.
How do we think about trends there and the growth rate for the OUS versus the US moving forward?
Yeah, well, you know, once we give guidance, we may be able to give some more. Oops!
Remind everyone to silence their phones.
Usually, that's me, so I'm grateful that that's not me. We'll, you know, we'll try to give some more color. Obviously, the U.S. business is going to grow. Our U.S. thrombectomy business is gonna grow more than the business outside the U.S. Exactly how much between those two? I think we'll wait till we give formal guidance to sort of give those numbers. I did say in the prepared remarks that we thought our U.S. thrombectomy business would grow at least, you know, 25%. So that gives you at least some sense of that. I also said that our embolization and access business globally grew in the high single digits. So, you know, you can start to put some math around how we think our business is gonna grow.
Our growth and our focus is obviously starting in our US thrombectomy business. That's where the sea change has happened, that's where CAVT is now becoming dominant. But the nice thing is, we get to take it everywhere, and we get to bring it to other places in, as soon as we can.
Adam, I think historically, a lot of people would look at stroke, you know-
Mm-hmm
... US, OUS stroke, thrombectomy, access, embolization, other, you know, peripheral vascular-
Yeah
-combination of thrombectomy and, embolization.
Yeah.
So the numbers you're giving combine thrombectomy from peripheral and stroke together and-
Mm-hmm.
Embolization from stroke and peripheral together?
Yep.
Okay, just, wanted to-
Yeah, and we'll, you know, we've said in the past, and we'll, you know, do this when we close out and do our, our fourth quarter call later in the, you know, quarter, comparative numbers, so people can start to reset how they're thinking about the business. 'Cause that's how you should. I mean, most people aren't, I assume, looking at how many coils I sell in a random country in other parts of the world. They're good coils. We love them. We're very proud of them, but, but that's not how our people are looking at our value. It's, it is coming from our CAVT platform, which is now in the U.S., which makes it the U.S. thrombectomy business for now.
From a corporate level, are you still gonna look at peripheral vascular versus stroke as two different business units, or is it now a thrombectomy unit, and will there be any change in reporting structure?
In terms of sales force, it's separate teams that call on neuro people versus vascular, and that really isn't gonna change. But from a how we think about the technology, how we think about, you know, the messaging of what we're talking about, it's blended more than it's ever blended inside the company.
Maybe just a few questions before we run out of time. Thunderbolt-
Mm-hmm.
Stroke is a really interesting pipeline asset. Can you give us an update of where you stand and the timelines?
Yeah
for when we could see that asset?
So right now, I think clinicaltrials.gov says sometime in 2025. We're standing by that for now. The trial's going well, enrollment's going, the cases are going. I actually showed you a case. It's amazing. Again, I think I've said publicly a couple of times that we aren't counting on that having, you know, revenue in 2024 or 2025. So that becomes another future growth driver as we get that platform. I'm pretty excited about it. It's fun to see the cases. But again, in the next 16 months, you know, we also have four other products that probably have, you know, pretty significant drivers to them as well, that we've only alluded to as four other products for now.
Okay. I look forward to seeing them. Maybe with the last minute here, we've seen a pretty substantial margin step-up in 2023.
Yeah.
Any reason we couldn't continue to see that type of upside continue into 2024 and beyond?
No.
Okay. You wanna tell us what,
What the specific numbers-
Save it for guidance.
No.
All right. Well, we can leave it there. Adam-
All right.
Thank you very much.
Yeah.
Thanks, everyone, for attending.
Thanks. Thank you.
See you.
Yeah, thank you. Appreciate it.