Live, Barry? Good. All right, welcome back. I'm Larry Biegelsen, the med tech analyst at Wells Fargo, and it's my pleasure to host this session with Penumbra. With us we have Adam Elsesser, the Chairman, President, and CEO. The format is gonna be fireside chat. If anyone has a question they wanna ask, just raise your hand, and we'll come around with a mic. Adam, thanks so much for being here.
Yeah, thanks to Larry for having us, yet again. Appreciate it.
So Adam, you know, let's start with the big picture question. You set a goal of $1 billion in revenue by 2023. You clearly achieved it. Broad strokes, how are you thinking about the company's next billion-dollar revenue growth, and how do you get there? Of course, I'm not asking for growth rates, just the drivers.
Yeah, I think that's really the key question. And it's not just the billion, but I reframe it as, how do we go after, and what do we do to ensure that the, you know, almost a million people, if you take into account stroke, eight hundred, you know, plus thousand, in just the peripheral vascular beds, who aren't getting mechanical thrombectomy with our system can get that over the next number of years? So what are we doing to do that? What's the strategy? How are we gonna execute on that? Because that really is the fundamental driver of the next, you know, number of years, you know, not just sort of in billion-dollar chunks.
And we've been outlining that, you know, at length, you know, and I did it on the earnings call and in subsequent meetings. And that's really the essence of what the next number of years look like.
Got it. All right, we'll jump into the growth drivers. But first, on the guidance, you lowered the 2024 revenue guidance, and due in part to a more conservative approach. What is management's current approach to guidance, and why has it changed?
Well, I'm gonna say this somewhat tongue in cheek 'cause it's you. It's to not do what I did on this very stage last year. That's our fundamental approach. Look, the last year was a transformational year. There we launched the two most consequential products we've ever had. The level of interest and excitement, the feedback, was hard. It was different. It was hard to sort of put your hands around, and I was a little too optimistic last year and leaned into it. I've since said, "Let's not do that," so we can focus on, in all the conversations, everything else that is going to drive the growth more substantively. So I think we learned from that, but we're here to now talk about all that other stuff.
Got it, and we'll definitely get to the other stuff. Just a couple more guidance questions. You lowered the guidance by $60 million due to a variety of factors. How much or any of it do you get back next year? So for example, $20 million in China, $15 million from Europe.
Yeah, the way we framed it, rather than again quantifying everything, specifically, is that what we've faced this year in terms of headwinds, whether it's this issue with China, which is very hopefully short term, the slight delay in the process around the CE Mark, which has been resolved, you know, that was somewhat, you know, easy, not easy, time-consuming, but now resolved. All of those things, you know, were headwinds. We also got out of some markets with our embolization and access business that weren't profitable anymore, so we don't face some of those issues next year. And so, what we've said is we expect, you know, next year to have a different set of comps and a different sort of trajectory based on that. I'm not quantifying it. I'm not going to, but those are things that aren't known to us to be headwinds next year.
You talked about the SKU exits, I think. I guess I understand you don't want to talk about specific markets. You know-
Yeah
We've talked about this before. But are you willing to, you know, provide an aggregate number of how much that's impacting 2024, so we can evaluate the underlying business?
Yeah. The way to think about it is this, and I'll give you a little color, and then really talk about it. So every country has different reimbursements. Some countries, for example, if you take our embolization business, reimburses it per product or per coil. In those situations, it's hard to compete because our coil is very different. It's much larger. It's much longer in many cases. In the U.S., for example, reimbursement's done on a DRG basis, and so the dollars play out differently. We're actually a better cost alternative. You know, we use a lot less coils, even though our coils cost more per coil, 'cause there's an awful lot more platinum, you know, in a much larger, longer coil.
So the underlying business, you know, to answer your question, both in embolization, which is primarily a peripheral business, and access, which is primarily a neuro business, those are really strong. We have fairly significant dominant share in both. That share has continued to grow. Those markets aren't growing at the rate we expect thrombectomy to grow, but underlying, they're in really good shape. And I think we showed that this year, where we had competitive launches in the U.S., it , you know, took some energy in a quarter to react to that, and I think we've shown that time and time again, we can do that. So that business is great. It's something we're very proud of.
We help an awful lot of people with these uniquely designed coils that are not sort of, you know, easily interchangeable with other product, and we're pretty proud of it. That being said, you know, when you compare the growth opportunity in both of those businesses to the growth opportunity ahead in thrombectomy, obviously, thrombectomy has a much bigger opportunity ahead, so we're gonna spend more of our time and more of our growth will come from thrombectomy.
Right. But in terms of quantifying the SKU exits at the beginning of the year when you guided-
Yeah.
It looked like it was about $40 million. And does that-
Yeah.
Is that close?
Yeah. Again, let's not go... I don't wanna speak off the cuff. I don't have that number in my head the way to be accurate enough, but it is not the same headwind in next year that we had this year. And so it, it's a little bit different comp next year.
All right, so transitioning to the thrombectomy business. The U.S. thrombectomy business missed, you know, Street estimates by about $5 million in Q2, and you lowered that guidance by about $20 million. Why, why was Q2 lighter, and why did you lower the guidance? I mean, that's your key growth driver.
Again, so we're almost ten minutes in, and we're still talking about guidance. But I'm happy to answer that question as best I can. We obviously launched Flash 2.0 a little later, which I said on the earnings call, in the quarter than not. We obviously had some attention focused on the coil business because of the competitive launches. None of that, given the scale in our minds, you know, was something for us to worry about. When you look at the component that we talked about, our arterial business, you know, grew in the high thirties, which is pretty good. Our VTE business, even without the Flash 2.0 there the whole quarter, outgrew our competitor substantially, obviously.
And our stroke business grew, you know, at 19%. So we did pretty well on an annualized basis, and I feel pretty proud of that. I think moving forward, we've laid out, you know, a process and a guidance that is slightly more comfortable. And most importantly, and this is what I think, you know, we have to remember, is we have. If you look at in peripheral, we can talk about stroke as well, we have the best product on the market, the product that takes out clot the fastest. That's critical. You don't get to go the next step if you don't take out clot the fastest, and the product that has the best safety profile. And I think that's what's clear, and you're seeing doctors talk about that a lot.
Not every doctor yet, because we don't yet have 100% share. If every doctor was talking about it, obviously, but a lot are, and it is happening where we're seeing that movement. Again, not to get ahead of results, it's doctor by doctor, person by person, but it's happening because at the end of the day, the best product, the best product almost always gets the most usage. I think that's fairly obvious.
Right. So, you know, you had a good Q2. Still, growth rates-wise, you know, U.S., well, U.S. Vascular Thrombectomy grew around mid-20%. You talked about venous and arterial, each up in the high 20s%, and coronary growing low double digits. So before we talk about neuro, what's, you know, driving, what's the outlook for, you know, the U.S. Vascular Thrombectomy business?
Yeah. So let me maybe spend a minute walking through what does that look like? What are physicians saying and reacting to? So, what I've said is that when you use Flash, start with DVT and PE. When you are a first-time user of Flash 2.0, you did not use Flash 1.0, the doctors are having a fairly significant, like, positive reaction to the speed in which the clot comes out compared to what they currently use. It's a faster procedure. That's not up for debate. If people who haven't used it say it's not true, it's 'cause they haven't used it. If they have used it, I am not aware of any... I'm sure there's somebody, but a significant number at all, who have not had an incredibly positive reaction to how fast the clot can come out.
That really matters. The shorter the procedure, if you can get the clot out in 10 or 15 minutes, in what otherwise is a case that they're used to spending 45 minutes to an hour, you're going to notice that, and it's ultimately good for the field and for the patient. So that's the first step. For people who had used Flash 1.0, they certainly like 2.0. It's a nice iterative improvement, but they already understood the benefits of using CAVT in those cases. So that's the first and most important step. So that's where we start. But then the next step, and we had this conversation way back in the day around stroke, and I think you remember it. You have to also talk about what trade-offs you now don't have, and that's where some of the discussion around what are the safety benefits of this.
We don't have, in our IFU, the same qualifications or contraindications or warnings around some of those issues, like cardiac decompensation, the need to put blood back in, because we don't take a clinically significant amount out, and on DVT, the idea of interacting with the wall of the vein in a way that isn't appropriate. Those are not things we have to deal with. So we talk. The doctors respond. Now, if you have a product that takes the clot out better, you might tolerate some safety challenges. That's normal. That's sort of how innovation works. So there's no judgment in that. It's just the process of innovation.
But now that we have a product that can get the clot out faster, and it doesn't have those limitations, that's something that doctors are talking about. And, you know, I just find it interesting that doctors talking to each other about what is best for patients is somehow a bad thing. Like, God bless! Like, that's what we want doctors to do. I'm incredibly proud that doctors are doing that, and we should let them figure out what's best to do. That seems to make a lot of sense. And in a field like this, we wanna keep innovating. We don't wanna stop, and we're gonna keep innovating.
We got a lot more coming. We have some new products coming. I think that will be fun to... You know, you'll be all over that, because you usually find them first. And I can't wait to extend the reach of CAVT to other vascular beds or to expand the number of patients in certain vascular beds we could treat.
Sounds like we should check the trademark database, or?
I didn't say trademark database-
Yeah.
but, you know, I was alluding to your historic ability to be the first to know when things are ready to go.
All right, we'll keep looking. Adam, that's helpful. I mean, clearly, you're the market leader in, on the arterial side.
Mm-hmm.
That's both. On the venous side, you know, you've gained more share in DVT than PE. You've said that before.
Well, historically.
Right.
I don't expect that to-
Right. That's what my question is.
I think we'll catch up on PE, yeah.
So you feel like you're, with Lightning Flash 2.0, you're catching up?
No question.
And-
I mean, got a ways to go, but we're definitely seeing some progress.
Yeah. I mean, I think at JP Morgan, you gave share of numbers-
Yeah, yeah.
DVT and PE.
Yeah.
That was.
While ago
... catching up. But you feel-
That was nine months ago, yeah.
You know, you talked about the competitor issues. I guess there's two issues. One is the ClotTriever XL issue, and then the FlowSaver issue. You alluded to both of those. Which one is having more of an impact in the market from your perspective?
I don't. It's not in my place to talk about other companies' products per se, other than for us to be able to talk about the benefits of our product in comparison. I mean, that's sort of what companies do, as you know. So that's what we're doing. I think those are real issues. It's not me saying something. You know, I find it interesting that it's somehow an opinion or, you know, competitive noise. They're factual things. They're in the documents. They're in, you know, the literature. They're in their own data that they support. I don't think it's a debate. It's just factual. I think, you know, doctors are understanding that.
Again, not everyone all at once, and that would be a lot, and it's not sort of how information travels. But over time, I think doctors who are spending the time to look at it and discuss it are understanding those limitations. And so I think all of it adds up to a question of going back to the most thing, fundamental thing: gotta get the clot out fast, and you gotta do it safely.
PERT is next week.
Yeah.
That's a big meeting, PERT-
Yeah
It's a big meeting.
I'm excited about it.
What do you think will come out of that meeting that's noteworthy?
I think it's a forum to put a bunch of physicians together and have them talk about what is the right way to treat patients, and I think anytime you can do that, patients benefit.
I know you wanna talk about your own product, but returning, what is unsafe about returning blood to the patient?
So, well, let's start with our own research. And this is, again, about us, 'cause I think it's important to start there. So we did a ton of research almost ten years ago. I can't give the exact time, but we had, you know, catheters and pumps, and we needed to get bigger to be effective in the venous side. So we did a ton of research around, okay, well, if you're sucking out clots from those locations, and the catheter has to be of a certain size, what do we do? You know, that's too much blood coming out. So what do we do in order to protect against that? And we did a ton of research around putting shed blood back in? Could you filter it? Is it damaged? Is it whatever?
We concluded that for lots of reasons, that it wasn't a good idea. It wasn't a good idea because of, you know, standards that had been promulgated in other fields. It wasn't a good idea to what happened to the blood. We moved away from it and didn't pursue it. We then pursued CAVT because it was a better way to not run into that safety issue. We know that intuitively from our own work. If you just look at the work outside, and again, it's available, you know, for others to research. I'm not going to, you know, publicly sort of lay it all out against the competitor's product.
But it's all available, why one would rather not do it if they didn't have to, and the fact that it doesn't help and it could hurt. I just think you have to ask, why do you do it then, and I think the answer to that is really the more important question. But again, I'm not here to talk about other people's products.
Got it. So the three new products you have coming, you have CAVT.
Mm-hmm.
Does that still include one this year?
Yes.
Okay, and the only thing, I feel like the only thing you really said on the new products is other vascular beds. I think people have interpreted that, interpreted that to mean below the knee. That's about the only kind of, I think, clue you've offered. Is that fair?
Yeah, one of them is definitively below the knee.
Okay. The other two are, remind me again?
Other products.
Okay, but they're peripheral. You have said they're peripheral.
Yes.
Okay. How are you thinking about the market growth in general for peripheral? There's a ton of studies going on, like seven outcomes trials, randomized controlled trials, including one of your own. Do you think these trials are going to just kind of keep the kind of trajectory of, call it, 20% growth for the market, or we could see an inflection?
Yeah, so I think the randomized trials are mostly in PE, where having... Again, the ones that matter are the ones that randomize against mechanical thrombectomy versus anticoagulation. Though that's the question.
Right.
You know, other randomizations aren't really the key question. So, I think we have, you know, they won't be bad for the market, but they're not the same-
Magnitude
Magnitude. So we have to wait until the series of trials that and there's us and obviously our competitor, and then there's NIH and lots of those trials that are randomized against anticoagulation. Those we'll see come out in a couple of years, hopefully. That's the time frame. And I think it will have an important you know, I think the market will still grow until then in PE.
But in the other vascular beds, DVT and arterial, it's less about a randomized trial and more about doing the groundwork that we're doing now, and starting earliest days of really working with hospitals and hospital systems around, you know, looking at the data sets that we now have from two different GPOs around clinical outcomes of us compared to anticoagulation and thrombolysis and open surgery for arterial, and then also looking at the health economics of it, and then laying out sort of a plan for hospitals to do work as opposed to, you know, us that will bring in and change the treatment paradigm for all those patients, the 90% that we're not treating.
That's just work every day, you know, lots of different places to go, lots of different people to talk about it and get that work started. That's not a one-year project. So, the inflection point coming from that work is more just steady, good growth. Not small growth, but good growth. Over time, you might hit some inflection point there, where you've done that work enough, then it accelerates. That's premature to be able to talk about that until we know. What I am heartened with, and this is I think the best thing, is the early conversations, and I've been, I was at the first one. I've been hearing, you know, direct reports as the team has done multiple, you know, conversations. This is typically with, you know, C-suites of hospitals and hospital systems.
The reaction is incredibly positive. It really... They, they're not surprised. They kind of get it. They're, I think, surprised—positively surprised at the difference on the health economics and how beneficial it is, you know, at a scale that I think even they are a little surprised at, in a good way. But no one's really disagreed and challenged it. It's intuitively where they thought it would be. So then they just have to get to work, and we help lay out a good plan. And again, that just takes time, but that's how one goes after the rest of the patients and brings the technology to them so that they can be benefited.
Just to go back to PERT next week, you're not aware of any, like, new data coming out there, positive or negative or anything? It's more the physician just discussion that you were alluding to earlier?
Yeah,
I looked at the program. It's not obvious, you know?
Yeah.
So-
I don't want to oversell information that will come out. So, I mean, I'm going. I think it'll be really interesting.
Got it. Is there a specific day we should be there? You made a comment earlier about Lightning Flash or Lightning Bolt in Europe. Is there any change there in terms of, like, CE Mark approval?
No change. It's just, you know, we had hoped to have approval sometime, like, in the second quarter, you know, early second quarter, so we had-
Right
A good year, you know, or almost a year.
Right.
The issue that got stuck has been resolved, and so I think we're in really good shape right now.
Okay. So you haven't announced a CE Mark for those products?
I have not announced that.
Okay, got it. All right, so turning to neuro, you had a strong quarter, second quarter for U.S. Neuro.
Mm-hmm.
About 20% growth, I think. The market's gotten pretty crowded, and the interesting thing is we're seeing. So Adam, there's two approaches. You know, it's kind of like stent retrievers, and you pursued aspiration. Now we have these aspiration companies pursuing large core aspiration devices, right? 088, you alluded to it a bit on the call. You're pursuing cyclical aspiration or, you know, you call it, I think, something else. But there's companies pursuing that, like you, and there's companies pursuing these large bore catheters. You know, why is Thunderbolt a better approach?
Yeah. So let's just sort of go back to, you know, first of all, cyclical aspiration refers to the idea of turning a pump on and off. That's not what we do. That doesn't do anything. Modulated aspiration, we're using the combination of aspiration and non-pressurized saline to, you know, open up and do it at a rapid pace, is what we do. I'm not aware... There's one company, you know, that has that idea. They obviously have lost two IPR actions. There's a third one filed. So, you know, we'll see how that goes. Again, we have some pretty good patents on this topic, and I don't expect to see a ton of followers based on where we are with our current patents.
As it relates to large bore, you know, that was an idea that probably was one step too far. You know, if you're a company saying, "Oh, let's compete with Penumbra, you know, we have to make a catheter that's slightly different. Let's make a little bigger one!" You know? And I think they went too far because the catheters don't typically fit in the M1. They're, and that's just the physical dimension. You know, the literature says, you know, the average dimension of an M1 artery is 2.3-2.5, roughly. An 088 catheter is 2.79. So by definition, it's a little too big. But like everything, people try it, and they get excited and, you know, this.
But at the end of the day, what we saw at SNIS this last year is the reality of that setting in. You know, the fact that it doesn't get there most of the time. It doesn't actually bring the same results, 'cause people sort of forgot about the science of aspiration. How does aspiration actually work? You can't be occlusive and still aspirate. You know, aspiration happens because of the pressure differential. And so it is- I think we're seeing those products be less interesting to most physicians as the reality of them are setting in. And I think that's helping, you know, our business grow, and I think it will continue to, that going forward. And so then if that's not the viable solution, then what is? You know, it's a better catheter than we make.
And, you know, fair enough, you know, I'm always open to be challenged, to compete with people trying to make a better catheter than we do. We have a pretty long track record of doing well in that competition. We add Thunderbolt to it, it becomes a challenging barrier. But, if that's how stroke ends up, you know, fighting, you know, I think we're set up pretty well in that dynamic.
So you think basically they're too big, they won't be able to, they can't-
I don't... It's not me. Again, please don't keep saying I'm just telling you the facts. Like, that's the size of the artery, and that's the size of the catheter.
Right.
You tell me if you would want that put into your, M1. I don't know. Like, I don't really want someone stretching my M1 if they don't have to.
Makes sense.
So please, I mean, that's not me. It's really important to keep the facts here, not opinion.
Yeah. Adam, you know, we ask you this all the time, but timeline on Thunderbolt. You know, you've got a public database out there. The company, I believe the company is responsible for updating it.
Yes.
Some update it regularly, some don't.
Yeah.
You know, your update, you know, the ClinicalTrials.gov has the THUNDER trial ending, you know, in March 2025. Any commentary if that's-
Yeah
Up to date?
We will update it. We have an obligation, obviously, to... You know, we can't predict, and last time I tried to, you know, I was slightly wrong because things changed. So we obviously have an obligation to update it when we've finished enrollment, and we will do that.
Okay, and you're happy with the pace of enrollment, it sounds like?
Yeah. Very.
Good, and you know, what kind of impact do you think Thunderbolt could have on your stroke businesses? Should we be thinking about the analogs, you know, for peripheral?
Well, it's a two-step process, as I've said. So if you're already using our catheter, I think people are going to find it very helpful. There may be, you know, people who decide to not use it in every single case, but I don't expect that. There have been some people in our trial, for example, who were somewhat skeptical, who are incredible converts now, you know, like, "You use it all the time." So I have a lot of optimism of that.
For those who aren't using our catheter already, you know, then we have to do the two-step process, and I've laid that out for a while, of first having them want to use our catheter, you know, and the trackability, which now with RED and SENDit, I think will give them that comfort, and then, of course, want to use Thunderbolt. But there's a lot of excitement around it, and I think the thing that gives us a lot of confidence, and I think that gives a lot of physicians a lot of confidence on the neuro side, is that the technology is basically the same as Lightning Bolt 7. Lightning Bolt 7, we've done, what? 25,000 cases already. You know, it's not... You know, even though we're running a trial, this is not untested.
Like, we've done a lot with this technology, and it really works. And I think that gives the whole field some comfort that this isn't novel. It's new to neuro, but it's not new to taking out clot in the arteries.
Yeah, Adam, I'm gonna go back to peripheral, if that's okay?
Of course.
You know, we don't have perfect information, but we try to, you know, look at your share gains in venous, and you gained a lot of share over the last year, but the share gains seem to slowed a little bit in Q2. The question is, with these differences you talked about between your product and competitor products, do you think your share gains can re-accelerate?
Yeah. The right answer to that question, it's a totally fair question, and it's probably what I know intuitively, and I got in trouble with last year. Share is not a linear process.
Right.
You know, there's a process. You can't look at it and say, "This is their share gain, and they're gonna just map that out in a straight line." So it doesn't happen that way because it's doctor by doctor, person by person, you know?
Right.
And that process is a little harder to predict quarter by quarter. When you look at the whole year, you're gonna see a different number, but we unfortunately measure it on a quarter-by-quarter basis. I am feeling incredibly confident. Again, not to get overconfident, not to, you know, project that I don't understand the hard work ahead. I do. But again, going back to the most important question, when you have a product that gets the clot out fastest and you don't have some of the same safety limitations of their current technology, you will ultimately do really well with that.
So Adam, let me ask. We've done surveys too, I think, you know, in the last year. We've talked to doctors. I understand your perspective that returning blood might be unsafe, okay? But there's still some doctors that think that your product-
Yeah, I just... I need this to stop. It's not my perspective. It's a fact.
Okay.
Please come to PERT, come other places.
Yeah.
Talk to people. It is a fact.
Are there still physicians out there, because we see it in our surveys, that still-
Obviously
... are concerned about the blood loss with the number of products?
Anyone who's used our product with Flash 2.0, I cannot imagine, unless there's some weird reason, that they would say that. It is not true.
So it's just people that-
Yeah
... have not tried it yet. Okay, and that's fair. I'm sure not every doctor has tried it.
If every doctor tried it, we wouldn't be talking about share. We'd have it all. We'll leave it on that note that-
Try it. It doesn't mean-
Our goal is to get everyone to try it, 'cause so far, when you try Flash 2.0, it might take a little while to deal with it, but you are going to switch.
Okay. So the concerns people might have had in the past about blood loss will... That will go away, if you will, when they try it-
It's just not true. There is not an inappropriate amount of blood loss. In fact, it's the opposite with the product that you're talking about.
Okay.
That's why they have to put it back in. That's the reason for it.
Understood
... that they put it back in, because there's so much. It's a very interesting dynamic, isn't it?
I didn't have a chance to ask you about twenty twenty-five, but maybe we'll skip that this year.
Perfect. Thank you.
Thanks for being here.
I appreciate it.
Thank you.
Thank you, guys.
I'll let you off the hook. Bye.
Thank you.