All right. Good morning, everyone. I'm Larry Biegelsen, the Medical Device Analyst at Wells Fargo, and it's my pleasure to host this fireside chat with the management team from Penumbra . With us, we have Adam Elsesser, Chairman and CEO; Shruthi Narayan, newly appointed President; Jee Hamlyn-Harris, Head of Strategy; and Cecilia Furlong, Head of Investor Relations. The format is fireside chat. If anyone has a question they want to ask, just raise your hand and we will call on you. Adam and Shruthi, thanks so much for being here.
Yeah, my pleasure. Thanks for having us.
Let's start with a few big picture questions. Adam, what's the state of the union for Penumbra, today? How are you thinking about how the company will evolve, call it over the next three to five years?
The state of the union is in really good shape. You want to share what the next few years look like?
We're very optimistic about the next five years. We're well-poised. Continued innovation that has been sort of at the core of Penumbra . We'll continue to see new products be launched, and we've talked about that as one of sort of the core aspects of what we're focused on. Beyond that, ensuring we have the right sort of commercial footprint to not only take advantage of the sort of large CAVT opportunity that we're in the midst of, but through some of the recent developments, also focusing on our embolization opportunity where we do have the market-leading products, but still a lot of opportunity to grow that franchise. We're sort of making sure we have the commercial footprint to really service the demand of our customers.
We've also alluded to the clinical data and the market access initiatives, which are really meant to focus in on answering some of the questions that either the interventional or the non-interventional community is looking for in order to really penetrate in these areas. You'll see that play out over the next few years. Of course, doing all of this with having a good focus on profitability. I think that sort of becomes the next phase of how we're poised as a company, and we're pretty excited about that.
That's helpful. Adam, you appointed Shruthi President last week, I believe.
Yeah.
Why was this the right time to create a President role? I know you have had one in the past. How are you thinking about succession planning at Penumbra?
The right time. If anyone who is within the company or our customer base knows Shruthi, it was without a doubt the right time. We're at the beginning of a huge amount of opportunity. We've talked about that over and over again with the products and the data and so on that Shruthi's talked about. Shruthi's been one of the core architects, drivers of that work. It really is just an acknowledgment, a recognition, and an opportunity to give some more work to do that. In terms of ultimate succession, I'm not going anywhere. I'm only 64 years old and feeling great. You can assume, and we certainly take succession in the same methodical approach that we do our innovation and anything else in the company. Obviously, there is a lot of thought, but right now it's just the two of us helping grow this thing to its fullest potential.
Got it. That's helpful. Let's transition to some of the growth drivers Shruthi talked about. You raised the 2025 revenue growth guidance after the Q2 report. It implies low teens revenue growth in the second half of the year. By our math, that's a little bit of a deceleration from the kind of mid-teens growth in the first half of the year. Why would second half growth slow given that the comps get a little bit easier, I believe?
Yeah, I think as you commented on, Larry, we already updated our guidance this year, and we just don't want to get ahead of ourselves. That's what you see reflected in the math there. Adam, I don't know if you have any other color to add.
Yeah, I think it's that simple.
You think it's that simple. Okay, got it. I just wanted to check, you know, when we're thinking about underlying growth, I think you've said China's about a $50 million headwind this year. The underlying guidance of 13% - 14% underlying is more like 17 %- 18%. Is that a fair way to look at it?
Yeah, the number is a little over $40 million, not $50 million. Yeah, that conceptually is the direction.
Okay. Shruthi, you talked about clinical data. You guys have talked about Storm- PE being, you know, an important potential catalyst for your business. What, you know, helps set investor expectations of what we should expect to see and which study endpoint you think physicians are likely to focus on? We're going to see the data TCT, I think, in October.
Yeah. Yeah. Just to level set, Storm- PE is the first randomized controlled trial comparing mechanical thrombectomy versus anticoagulation in the intermediate high-risk PE population. This is a question that the non-interventional community has been looking to have answered. We ran this trial together with the PERT Consortium, the leading society that's centered around PE. We designed the trial to focus on answering the question of, is mechanical thrombectomy superior to anticoagulation? If we can show that through the results of Storm, it then starts to get the non-interventional community to feel good about referring those patients on to the interventionalists for treatment. Beyond that, there's a ton of secondary endpoints that will also inform how these patients do over time, the quality of life, functional outcomes, things like that that will also be interesting and haven't really been talked about before.
I think those are the factors that we're looking to highlight through the results of Storm. If positive, I think it could be a really important pivotal moment for the field and get different hospital systems rallying around how do we now go and address PE in a real way. TCT will be, we had the primary endpoints ready and that got accepted to TCT. We also will have more additional endpoints presented at Viva as well, which is the following week. It's going to be a nice busy fall, I would say, with data sets that will be highlighted in the PE space.
In addition to all that, you'll also see some of the Stride PE data that's gotten accepted to both TCT and VIVA, which will also be important questions that, for example, in the high-risk PE population, there's another late-breaking session at TCT that will highlight that data set.
Will we see secondary endpoints from Storm- PE at TCT or not?
We'll see those at VIVA. You'll see the primary endpoints at TCT, and then the other outcomes at VIVA.
The primary endpoint is improvement in RV/LV ratio. I know the design papers are in the public domain. We've had a chance to read that. I guess the question is, do you think that it's important to show benefit on some of these secondary endpoints, like Quality of Life, potentially mortality, or is RV/LV ratio improvement enough?
Great question. The RV/LV ratio is really the point around, you know, you have a strained right heart. If you can show rapid, you know, right heart recovery without an increased safety risk, that is the most important question that you're trying to answer in, you know, this patient population. Beyond that, all the other outcomes then start to add to it. This is the most important question that, you know, the experts in the field think need to be answered in order to have the rest of the discussion.
Let me just push back a little. If you show benefit on RV/LV ratio, but not on the other endpoints, could these referring physicians say, so what? You know what I mean? If you're not improving quality of life or outcomes, RV/LV, what's the benefit of just improving RV/LV ratio?
Yeah, I think it's going to need to be both. I think you can only have the conversation around the Quality of Life and functional outcomes if you show that you've attained, you know, rapid right heart recovery without an increased safety risk. That first question has to be answered before you can have the rest of the discussion. Yeah.
We've talked about this a lot. Going back to the original stroke trials and all, lots of discussion about what were the right endpoints and what would matter. At the end of the day, the non-interventionalist community really drove those conversations. If you look at the steering committee for our trial, we had more non-interventionalists on the steering committee than interventionalists. This is not Penumbra deciding this. This is some of the world's big experts deciding this. My suggestion, and we've talked about this in greed, let the experts present the data and let the experts talk about it rather than us second-guessing it. I think that's probably, in the long run, best for patients in this situation.
Let's frame the opportunity for Storm -PE. You presented last year, 2024, at JPMorgan, 157,000 annual U.S. PE patients per year. Only 11% get mechanical thrombectomy, and your share at the time was 20%. Of those 157,000 patients, how many are represented by Storm- PE? Help us think about, if the study is positive, what those metrics could look like, the penetration and share.
Yeah. A majority of those 157,000 patients are the intermediate high-risk PEs, which were what was studied in Storm- PE. The penetration numbers are in that same ballpark, somewhere between 11%- 15%, probably in terms of, you know, what is currently being done today. Like Adam alluded to, through a data set like this, if positive, very similar to what you saw happen in some of the stroke days when MR CLEAN came out, you'll start to see a shift in terms of, you know, patients being referred on for advanced therapy versus getting anticoagulation and sort of build on that. I think the hospital systems will start to rally. A lot of them are already doing, you know, mechanical thrombectomy, but it isn't their sort of first-line option.
I think the goal of the field and the PERT community will be to start moving this up in the paradigm if the results are positive.
How much of the 157,000, you said majority, and do you have who's not represented, and do you get spillover? What I'm trying to think is, you have a positive outcome here. You kind of get the rest of the 157,000 kind of by extrapolation.
The patients that have more severe strokes or more severe PEs, more of them are being treated now, you know, because you have to do something quickly.
Those are the massive.
Yeah, you're going to get that percentage of patients being treated today are more on that line than not. This is pulling up the middle into that mixture.
The 20% is almost 18 months ago. Where do you think your share is today?
It's hard to tell.
Higher than 20%?
Yeah, definitely. Obviously, over the last three quarters, taking share.
No, you know.
A dark number for us.
It's hard to get numbers that are accurate enough, and they're changing pretty rapidly. You know, we'll do that when we can. I don't want to just be throwing out numbers.
Do you plan to have an investor event after one of these presentations?
We will definitely have at least one, if not two, investor events after both of them.
ASP, just so people are like putting parameters around this, $10,000 a case, probably a good rough number?
A little less.
A little less. Yeah, $9,000 - $9,500.
Okay. Last question on this, if you don't need FDA approval, if there is a positive outcome, we should expect to see an impact fairly quickly. Is that the right way to think about it?
I think the way to think, like you said, you know, we're already indicated for the treatment of pulmonary embolism. At this point, the work will be with the hospital systems, updating their protocols as they become aware of the data set, starting to sort of, like I said earlier, update their protocols and move mechanical thrombectomy and advanced therapy as their first line of treatment. You'll see that start to happen. That's where the PERT Consortium will play an important role to help raise that awareness amongst not only the interventional community, but also the non-interventional community, which encompasses, depending on the institution, but you have your pulmonologists, you have your physicians, ICU physicians, your hospitalists, all the different folks that are involved in the care path of these patients are the ones that will need to be made aware of these results. That will build over time.
That's helpful. All right, let's switch gears. I do want to ask about the embolization opportunity. You mentioned that up front, but I want to ask about stroke first.
Okay.
There is a lot going on in stroke. There are a couple of big questions here besides the Thunderbolt question. There are so many cross-currents in this market right now. We heard from you the market was flattish in Q2. What is your strategy in stroke going forward, and how are you thinking about the market recovering?
Yeah. Our strategy in stroke has been what it has been over the extent of the past years, which is make sure we can get access to the clot as quickly as possible and then ingest the clot as quickly as possible. That is ultimately sort of the goal when you're treating these stroke patients. There's been significant progress made. In fact, last quarter, the newest product in this category, the RED 72 Send-It silver label, has had a really positive sort of response from our physician customers. We saw that product then take share in Q2, and we expect that to continue. The other sort of factor here is that some of the SuperBore trial data have also started to come out.
I think the physician community has realized that that's probably not the direction the field is headed in, which then sort of poises the field well for what is the next sort of revolutionary innovation. That's modulated aspiration. That's what we're planning on introducing when it becomes available. We're really poised for setting that up well because you have now the catheter that can get access to the clot as quickly as possible. The next step of modulation to help ingest it as quickly as possible will be sort of that one-two punch, if you will. When you think about the market itself, stroke has had these ebbs and flows over pretty much the time that we've been in this space. It's not something that we think as like a unique trend that we saw recently or any of that.
I think it's just been regular ebbs and flows of treating these patients. I think folks have alluded to some of the distal trials and whether that had had an impact. Over here in the U.S., most folks have already moved away from stent retrievers, and those trials were largely focused on stent retrievers. I wouldn't say that we have seen it as a broad-based impact. There may be a handful of pockets here and there where maybe the referring neurologist had some questions. They talk to the interventionalists, they get those questions answered, and continue on to treat those patients. In fact, if I may share, just about a month and a half ago or so, I was visiting one of the high-volume institutions in the Northeast. As we were there, you know, a patient came in with a distal stroke.
They went ahead and treated it and took out a 2.5-centimeter piece of clot, right, an inch of clot. Imagine if that were one of our family members and that patient wasn't going to get access to treatment, right? That's not the real direction. These physicians all see the value and obviously the impact to their patients. I think the regular ebbs and flows is what you're seeing with stroke. That being said, Penumbra has been gaining share and growing above the market. That's what we saw reflected in Q2, and we'll expect that to continue.
Not to put words in your mouth, but to kind of summarize, when I hear ebbs and flows, it makes me think maybe, you know, Q2 was one of those, I think, ebb, and maybe, you know, it was just kind of a temporary lull in the market.
Maybe the market, Shruthi, and I don't talk in quarters. We don't actually run a business that way, as you know. I think what we're talking about here is this is, if you look at the last decade plus, go back 20 years when we started in stroke, it has a certain rhythm. There are things that are similar. We're now facing in stroke some interesting times. You have the distal issue, which is getting an awful lot of interest and attention, which is a good thing right now. We have a dinner symposium at SNIS, which we always have every year on different topics. Looking back, more than 15, 20 years, we had more people come to this dinner symposium than any other one we've ever had. There is a lot of interest in that topic in a positive way.
I think that's a good sign that people are trying to make sure that we don't forget these patients that can get benefited. That being said, you alluded to we have a bunch of different players. We have a more crowded field than we've ever had. That creates less of competition, more just sort of noise. I think we're seeing the beginning of that writing itself. Why do people want a bigger catheter? Well, they want a bigger catheter because we, as a company, innovated from an 041 to an 054 to an 060 to an 068 to an 072 for the purpose of getting the clot out faster every time. We stopped at 072 because if you go bigger, significantly bigger to like an 088, you actually don't do that. You actually go backwards because aspiration, the physics of it, works by having flow.
If you occlude or semi-occlude that flow, you actually reduce the aspiration. We understood that physics some years ago, which is why at 072, we started working on the original modulated aspiration system. Initially, we were doing it for stroke. It got cleared without a trial for the rest of the body and has had a huge impact. That was the point to improve or increase the speed of getting out the clot. That's the goal, get it there, get out the clot fast. I think we're pretty excited about what that future looks like. Once it's out there, I think the field will likely look a little different going forward.
You said once it's out there, remind us of when you think it's going to be out there.
Larry, good try.
You filed before the Q1 call. You said you had filed on the Q1 call, which was April. We at least know what you had filed before that. Any update on kind of how it's progressing?
We're progressing as you know, any project or any product we've ever submitted progresses. There's, as I've said before, an amazing group of folks in the neuro division. They're incredibly thorough. Doing things in the brain is different than in other parts of the body, and they're being really careful.
I lost my train of thought. Let me just ask, it's not in the guidance. If it got approved in 2025, it represents a potential upside.
Yes, we said it's not in our guidance.
In the past, Adam, we've talked about, or Shruthi, the benefit to your business from Thunderbolt. We framed it as kind of an ASP lift. I don't know if you go from, call it, $5,000, $6,000 a case to maybe $9,000. Is there more to it than that? Does it accelerate the market? Does it help you get more share? Is it just really a mixed benefit?
I think it's a combination of two things, maybe three. Obviously, there's ASP lift for our current customers and those who are using us, but also using a stent retriever with us. It's actually a why, so it's not more money. That is a benefit. I do think as the launch continues and word of mouth goes, and in neuro, word of mouth is very different than in peripheral because it's a much smaller community, so it travels faster. I do think there's likely going to be, maybe not an insignificant movement or share shift as well. I think you get those two benefits. Then the unknown, but worth us paying attention to it. I wouldn't put it as something to yet see, is the possibility that it also could grow, sort of reignite growth in the market for a lot of different reasons. We can go into those later.
I think there's a lot of opportunity with Thunderbolt.
I think you've said ASP kind of slightly below $10,000 and where you could go to. Where's the starting point per case right now?
About?
Yeah.
Yeah, roughly about $5,000 or so, like you mentioned. The point here is that a lot of times they're using adjunct therapy like stent retrievers or some of these other larger bore systems with guide catheters. The total cost in the field today for stroke is sort of in that $10,000- $12,000 range. Where we land with Thunderbolt will be within that range. As an institution, they're not spending a ton more. At the same time, there's real innovation here. That's sort of what that upcharge would be geared towards.
You know, a lot of neuro physicians have colleagues in the peripheral space. Sometimes they share angio suites, so they're watching and have watched lots and lots of cases, thousands of cases where people are using Lightning Bolt or Lightning Bolt 6X in the legs and other parts of the peripheral. They're not unaware of this. It's not like, oh, I've never heard of it. There's some excitement about it. I think that will help us a lot, obviously.
Good. Before we get to the future of the outlook beyond 2025, I want to test one on embolization. Shruthi, you talked about it early on. I think embolization access to Q2 grew low teens. Ruby XL just starting the launch there. Is that business on the cusp of a sustainable turnaround?
Yeah, great question, Larry. The embolization franchise as a whole, maybe again to level set, we have had the market-leading technology for embolization for multiple years. You have sort of these three configurations that you might hear about: the Ruby Coil, the POD coil, and then the Packing Coil. They're available in those configurations with different catheter compatibility. Depending on whether the physician is using a smaller catheter or a larger catheter, they have these configurations available. The most recent introduction is in the largest catheter platform, which is why the coil is called the Ruby XL and the POD XL and the Packing XL. The idea there is now for your larger vessels, when you just want to be able to go in and fill spaces faster, you can just use the XL coil.
It's about 20% or so of the overall embolization market that previously we weren't sort of playing in. That's what the XL opportunity is. The reason we went about with adding the sales force that we did on embolization is that we saw the real opportunity on the CAVT side. We saw the share shift that was starting to happen. We had three quarters here of +40% growth in VTE. We wanted our existing team to really be able to focus on that remaining 90% of patients that don't yet have access to CAVT on the thrombectomy side. We took our existing team and focused in on that. At the same time, like I said, we have these amazing coils that our physicians love.
In order to continue to service the demand for those coils, we brought on a team, a really tenured team, I must add, a team that came from spaces like TAVR and other coil companies, as well as the AAA spaces. Very tenured reps that are looking for stability in their careers and looking for a company that is going to add true innovation into the space. We brought on this amazing group of people in the first half of the year that, timing-wise, kind of worked out that we got XL cleared when we did because this new team now that has been trained is out there introducing a new product to our customer. I think with all that said, embolization is going to be something that you're going to see continued ramp up in.
I do think, with XL being accretive to the corporate gross margin, it also changes up the conversation.
That's helpful.
I also want to add on the neuro side, and we've touched about this, the sort of interest now in treating MMAs and our products sort of having unique properties as a coil platform versus, you know, shaped coils that don't really work in that setting has sort of opened up a possible, and certainly we've seen some growth in it, but potentially a much larger growth opportunity. Not something I would say we were, you know, like we planned it, but as it's developed, our technology is uniquely capable, you know, good in that setting. I think we're going to see that continue as well. It's not, you know, I won't say, you know, it's somewhat a little happenstance or a little, you know, good luck, but yeah, I do think our embolization platform in both neuro and peripheral will be a pretty positive thing for a while.
Good. I wish we had an hour. Unfortunately, we only have 35 minutes. You know, I have to ask about next year. The street is at, I think, you got it to 13 %- 14% this year. We already talked about China being a +$40 million headwind, but I assume you don't have that next year. The street's at 14% next year. The question really is underlying growth, you know, it's like 17%- 18 this year, and you have these catalysts coming, hopefully with Thunderbolt, hopefully Storm- PE, no China headwind or less, certainly. Why wouldn't next year be better, I guess, is the question than this year? Without giving a specific number.
If your definition of better is just what percentage, obviously, I'm not going to answer that. Everything you just said is, though, true. We are set up in a really good way. We're feeling pretty confident about the business as we move into not just next year, but the next year following that. For some of the technical reasons that you said, but from our vantage point, more importantly, from the reasons that drive us, which is the new innovation coming, the data coming, the things that we have invested in that I think will really ultimately help a lot more patients. That's why we've been saying that as a statement that we're in a pretty good position to help more and more people, not only next year, but in the years beyond that.
We do have a few minutes left. I want to give you a minute to touch upon the P&L as well. I know you've been making good progress on margin expansion.
Yeah.
Talk about if you expect that to continue, where does that come from? Gross margin, operating OpEx leverage, all of the above.
We're right on track, like we said, to exit 2026 at at least 70%. I'm particularly proud of our team for that. Some of it is, of course, mixed, and some of it is efficiencies, and that's, of course, without adding our new facility that we're starting to build in Costa Rica, which will only add to that. On the gross margin side, I think we're in pretty good shape, and I think our focus on increasing profitability has been obvious, and I don't think that will stop.
Okay, I want to, we have two minutes left.
Sure.
I'm going to come back to stroke.
Yeah.
Large bore catheters and modulated aspiration, could those work together? In other words, could they be, you know, why not do both? On stroke, I had one, there was one other question, but I forgot. Why not do both combined?
I'm not sure what specifically the question is.
Like when 072 is as big as yours, the competition is going up to 088.
Is it possible that 088 plus modulated could actually be?
Let me just clarify. We have a pretty robust patent portfolio. It's not likely that someone else can take on and successfully do modulated aspiration. If that's the case, then the question is, would we make a bigger catheter? Why don't we wait and see how what we got works? Remember, there are lots of variables in when you use modulated aspiration. Catheter size is certainly possible. One thing we've seen in the peripheral where we went smaller, you know, with 6X, we could go deeper into smaller vessels. We also have seen in changing and improving the algorithm, and that is a part of the future as well. Let's do all of that, and we'll figure out the exact combination. For somebody to buy our whole system and then buy someone else's system and pair them, they're not designed to work with other catheters.
That would be a silly mistake.
All right. We're almost out of time, but I want to give you guys the final word here. If there's any closing remarks, anything, Shruthi or Adam, that we didn't cover that you want to highlight?
I think a lot of great questions today. I think we're poised, like I said at the beginning, for a really good phase coming up with continued innovation, the important data sets being added, having the team in the field, and doing it responsibly. I think that's sort of the next few years for us, and that's what you can expect.
I agree with that.
Great. Okay. Adam, Shruthi, thanks so much for being here.
Thank you.
Appreciate it.
Thank you.
Thank you.
Good job.
Thanks. Thanks. Appreciate it.