Penumbra, Inc. (PEN) Earnings Call Transcript & Summary

Well -- so we'll start with coronary. Coronary Is a very, very different thing. And the needs there are very particular. The clot tends to be much softer and easier. And it's really an ancillary to a larger -- not always, sometimes the clot is the main issue. But most of the time, it's ancillary to other things that you need to do. So that's sort of a very unique thing that we can sort of put on one side. The venous side, between DVT, PE and arterial, the product -- the concepts can be the same. We're moving the clot mostly using aspiration. But how the tool works, the size of the tool, the blood loss issues, all that. Those are all going to be a little bit different. And again, you have to deal with the valves and DVT and make sure you're not damaging those. So there is technological differences. And obviously, even on the arterial side, your -- it is a different product, it's going below the knee versus above the knee, depending on the size of the artery. So by definition, the products at some point start to -- and you see that with our sizing on Lightning, and there'll be some continued differentiation. It's not one size fits all. But the core philosophy is the same, which is to sort of do it as quickly and safely as possible. Again, all the other companies that are in this, I think, at this stage, unlike neuro where the field was already sort of developed, everyone had done the work, the trials, where this big moment back in 2014 and '15 that sort of defined the sort of starting point of the growth. Here, I think it's going to be a longer road as we continue to move into that direction. And having a lot of other companies talking about it and encouraging people to go to sort of single-session mechanical thrombectomy as opposed to lytic or, in certain cases, an artery surgery, I think is a really valuable moment. I'm not in the slightest bit anxious about that. I might be if I didn't think our technology would rollout. But I'm not at all anxious about that. I think more voices, more discussion is going to be necessary to sort of move a field. And again, I want to remind everyone, people have been doing lytic drip for 20 years and with no data. There's no data that says that's good, and they're doing it because they have to. These patients have to have something done to them. So they do that. So to switch them is going to take time. And I think it's great. I think in the long run, and we don't try to go head-to-head. There's no need to go head-to-head. There's so much greenfield here. But in the cases that we have, and there's a hospital system recently that had to pick between the 2, they picked us. I think we're going to be in pretty good shape. But most of our efforts are focused on the greenfield in this opportunity, and it's pretty good right now.

Last question, just we're seeing this -- your partnership with RapidAI, that helps the PERT teams [indiscernible] how important is this to development of the market? How necessary is it today? Or is this kind of for something that you'll need to kind of keep that penetration up in the out years?

Yes. I think the work that Rapid is doing, and I'm really proud of them. They've done such great work in stroke around imaging and quantifying that. And as important, the workflow and communication tools that their mobile application has done with the physicians. It's a multidisciplined specialty in PE -- that you've got a bunch of different people sort of weighing in on the treatment paradigms of those patients, just like in stroke. And to connect everyone, to be all on the same page, be able to communicate. And eventually, we'll have enough -- they'll have enough information to really start to use that in a more substantive way. I think it's critical because right now, it's very informal. There's all these PERT teams that are trying to formalize it. But if you have a software that connects them all and enables that even faster, there's no question you're going to get better treatment and better decision-making for those patients. So I'm really proud to be part of helping them, encourage them, getting it out there. Their installed base in the neuro world is so dominant that most of the hospitals already have it. And so this becomes more of an add-on. I'm tickled. I think it's going to be an important development for the field. And just better decision-making for the patients.

Clarifying question. As they put the PERT teams together, would a user of RapidAI in neuro be part of that PERT team?

No, not likely. But if the hospital already has the system installed, having another module is, I think, a different psychological thing than a brand-new vendor going through all the IT qualifications and stuff that happens. So I think it's a little bit...

It's easier to sell an add-on than it is for the first time, that's for sure. Neurovasc -- let's switch over to neurovascular. I mean that's the roots of Penumbra. Last year was a challenging year, especially the COVID dynamics. Just talk about what you're seeing today macro in that market and then specifically for you.

Yes. Neuro continues to evolve. We went from having 4, 5 key players in the field. Now there's a lot more -- I'd be honest, not to be disrespectful, I've sort of lost track of all the companies a little bit that are sort of in this space. The field to step back a touch is, we saw a notable decline in the heart of COVID last spring in stroke patients. It was well documented. That's coming back. Hard to know exactly given the data sources out there. Has it come all the way back? I think so. That's most people's perception and in certain cases, it's growing. But there's a lot of energy at the recent SNIS meeting, which is the first in-person medical conference I've been to since the pandemic. There was a lot of energy. People are ready to get back out in the community, sort of get talking to their -- the services to sort of be part of driving stroke growth again. So that made me feel a lot of confidence that the field is alive and going. As it relates to our place in it and our products, obviously, with the recall of Xtra Flex, we lost share as people tried other folks' products. With the launch of RED 62 and now 68 and the newest -- the final catheter in that series coming this quarter, I have a lot of confidence. People are ready for our technology again. I think those products will be just what they're looking for. No one is happy with other -- people use other people's stuff. But there's not one that's like, "Oh, my God, this is the greatest one ever." And so for that reason, I think we have a lot of confidence that we can do pretty well in the back half of this year. And it's great to -- and again, I'm so proud of our team for the -- just the ability to constantly make changes and adapt and develop products that I think will be really good. So just at the most core level, we're pretty excited about that. And then we'll wait and see as things develop with our product that I put the name out there on our earnings call, Thunderbolt. Again, the goal is really simple, which is we want to be able to get all the clot out in as many patients as possible, as fast as possible. And that's not true across all boards. Stroke cases still sometimes are hard. They're challenging. You don't always get all the clot out. And I think we can make a big difference and sort of -- sort of reset the thinking in this field in a way that can drive even more growth. If it's easier, if it's more democratized, it's likely that we'll see even more growth. So I'm pretty optimistic right now about how not only the business itself and stroke will go, but our place in that business.

Let's transition to the international. It says here it's 25%, 30% of your revenues. Japan is no longer a headwind. You got China is a driver. How should we think about -- like is this a one-country driver? Is this -- I know you're in multiple countries. But how should we -- if you think about the drivers and kind of the biggest opportunity, where do you think you're going to put the most time and effort?

Yes. I think there's a few regions that are more immediate. Our European business has always been good. Can we make it even better? We don't have really the core of our peripheral drivers there yet. Lightning and Indigo aren't really an active part of that business. I think that's coming. So I think that could really reignite some of the excitement and growth, obviously, and the same thing with the RED series. So Europe, I think, is going to see some renewed focus and energy. And then, obviously, we've talked about our China business model and our great partnership there. I think there's room to go, that started out as a more limited trial with a couple of our older stroke products. I think there's a lot of room there. And then our business in Japan last year was tough. This year, we're sort of back on track and that partnership is feeling particularly strong. And I think we're going to see some additional growth there. The other parts of the market, Latin America and other parts of Asia Pacific, are still good opportunities, but you can't do it all simultaneously. So those are the more focused areas. But even in the other ones, we'll have some growth to it.

How should investors think about -- we've seen the growth come back and the earnings are -- it's like you're making money, but you're not making a ton of money. And how do you think about forward? Is it more about continued -- because the opportunity is so big, continue driving top line growth and -- just as long as you're not burning cash or a lot of cash, we're fine. How do you think about that?

Yes. Look, you want to balance it to some degree, but the way I look at it is pretty simple. As long as there are significant areas where we can help an awful lot of people and we think there's a decent shot of our success, we should take that as long as it's financially responsible. And that's how we've always run the business. And I think we'll continue to do that. What those metrics change as we get bigger, obviously, but so do the opportunities. And maybe it's a perfect way to sort of end. But September 21, you'll hear about that, because that's an opportunity that has the ability to help so many people measured in the millions and millions and millions of people, which is extraordinary, who gets the privilege of having a real shot at helping that many people. Like that's an important thing and to do it with a type of dynamic where there's a lot of people rooting, the whole field sort of wants this to happen in the sort of our health care world, I think it puts us in a really good spot. And I think it's going to -- if it's successful, be obviously another significant part of our business in the future years. So that's how we think about it. Let's spend what's necessary in a responsible way in order to help as many people as possible.

I think that's a perfect point to end this. I want to thank you for your time, Adam. Again, this is Canaccord Genuity 2021 Growth Conference, and we just had a conversation with Adam Elsesser of Penumbra. Thanks, Adam.

Thanks. Appreciate it, Bill.