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

All right. So we are going to get started. Good morning, everyone. Thanks for coming out to the William Blair & Company Growth Stock Conference. My name is Margaret Kaczor. I am the research analyst at William Blair who covers Penumbra. I am required to inform you that you can obtain a complete list of research disclosures and potential conflicts of interest at williamblair.com. With that said, very pleased to have Penumbra here with us. I'll introduce Adam Elsesser the CEO; Maggie Yuen sitting in the office, she's the CFO; and Jason Mills, EVP of Strategy of Penumbra. I'll turn it over to you guys.

Thank you. It's great to see everyone, and thanks to William Blair for inviting us to their conference. That's our safe harbor presentation. I think most of you know some of the details were headquartered in Alameda, California. All of our products are made in the U.S. in California. We sell in over 100 markets and we have about 4,000 employees at this point. I want to sort of start with just sort of the review of the markets that we're focused on. Our thrombectomy business is obviously the driving force of our mission and success and really the future. These are the 5 areas that we're in, pulmonary embolism as about 160,000 patients that we think we can treat. These are U.S. numbers. Deep vein thrombosis, about 350, again, a lot more DVT patients, but these are the ones that are sort of amenable to be treated with our current technology and the current data that's out there. Acute limb ischemia, about -- just shy of 260. On the arterial side, ischemic stroke, we've talked about for many years, about 200,000. That's the most penetrated of these areas already. And then coronary just shy of 300,000. When you add that all up, again, these are patients in the U.S. that can be treated today with our products. But I want to focus, and we started talking about this on the last earnings call, on the 3 vascular beds where Lightning Flash and Lightning Bolt 7 can have an impact today. So pulmonary embolism, deep vein thrombosis in the arterial side. These are, again, numbers in which we really believe that with our current technology, we can go after that. Each one is a little different on how to access that. For example, on the arterial side, those patients today, for the most part, come to the hospital because it's more of an acute event and not quite as time sensitive as ischemic stroke in the brain, but fairly similar in that. If you don't get that clot out, you don't have blood flow to the further ends of limb and you can potentially lose your limb. So those tend to be in the system, and we can get them, if you will, and evolve the treatment for those patients. Right now, the biggest challenge is catheter-directed lysis and open surgery where vascular surgeons sort of go in and remove that clot. They've been doing that for a long, long time. We are now, I think, at a point with Lightning Bolt 7, and this is coming from physicians who have recently tried Lightning Bolt 7 but had been doing one of those other 2 modalities that we can start to legitimately look at going after all of those patients. Now it takes time. We're talking to physicians about doing something different than they had done for many, many years. But it works, and it works really quickly, and it's at a point where I think we can start to look at this number in the next 5-plus years and think it's not impossible. DVT, again, is a little bit different pathway here. The patients that we're going after are patients that people generally know are viable to be treated. We're not talking about all DVT patients. But if you go back to the ATTRACT study and what the indications there were technically failed, but there was a sort of indications that certain types of patients would potentially benefit. Again, they didn't -- weren't even using anything close to what we're doing now. Those are the patients that we're talking about for the most part. With Lightning Flash, we're having a lot of success. And I think there, it's a referral situation, trying to talk to general practitioners and the larger community and doing that the right way through the doctors who would be doing this procedure, this isn't sort of a product-specific or company-specific thing, but a field effort. And I think we're seeing an interest now really growing that we can build this practice for their -- the physicians can build the practice. Pulmonary embolism that's a little bit more like stroke, where the patients controlled by pulmonologists and hospitalists and others and having them look at their comfort level and data and there -- the STORM-PE trial comes into play, which is our randomized trial that we announced a bit ago and are going to be enrolling very soon, primarily using Lightning Flash, and we think that could be the gateway to open that up. But even before then, we're seeing market growth as people are seeing the benefit of Lightening Flash and how fast and safe the procedure is, and therefore, having the opportunity to say -- that took about 4 minutes. Maybe I should consider enrolling or referring more patients to it, and we're starting to see that a little bit in those markets. So if you add all that up, it's just shy of 800,000 patients, and that is what I announced on our last earnings call our real focus. That is the work ahead over the next 5-plus years to go after those patients and make sure that they're getting the best treatment that they can. Brief touch on Immersive Health care only because I want to make sure everyone knows we're still working on it. There -- it's a much, much larger opportunity from a patient standpoint. There's a lot of work to be done in order to bring that out to the market in a proper way. We've talked about the work we're doing with some health care, large health care systems plus, of course, the VA. And we're just sort of putting our head down and doing that work. It's pretty well defined, and we're seeing how sort of monitoring that so far, I'll tell you, again, you watch both some of the data, but also some of the stories and anecdotes. It's really pretty compelling. There was an experience where through a couple of VAs, they did sort of a whole session with dozens and dozens and dozens of veterans. And the reaction, we videotaped a lot of them, and the reaction was pretty emotional. Here folks who haven't been able to get some of the care and the sort of not for lack of the VA trying, but being able to feel relief from what was troubling them in a pretty compelling way. And I feel very, very strong that we're on the right path here. And I think we'll see some of the benefit from this in the years to come. I want to briefly start though with a product that we mentioned on our earnings call on the stroke side because in addition to the focus on vascular, I talked about -- we have a pretty strong focus over the next bit of time to drive market share growth with RED 72 with SENDit. And when I say that, everyone hears it, but they don't quite know what it is. And so I want to use this opportunity in this setting to describe it a little bit more. So the big issue in stroke is how do you get a big catheter like a catheter that has an .072" inner diameter all the way up past what's the ophthalmic artery, which feeds the eye deeper into the brain. That ophthalmic artery has turned, its hard sometime -- many times to get past. And what SENDit does, it comes preloaded, you can see that inner catheter that also has a lumen for the wire and it takes up the space between the catheter and the inner catheter. So this is the history of how these procedures have evolved. The velocity of product that we launched many, many years ago as a product sort of inner catheter people were using that to sort of take up some of the gap so that when you got to the turn, you had something else other than a tiny guidewire to try to pull it off the turn and keep going. Otherwise, if we just jam into the artery that bifurcation, you couldn't get it past. Then we went to 3MAX again, many years ago, which is a little bigger. And here it's tricky because the catheter can't be so stiff or thick that it makes it harder to track. It has to make it easier to track. Then RED 43 came more recently, much bigger. Also, you can see just from the picture, it's pretty lighter, the less the technology is a little different. And so you can see less metal structure in there and now SENDit, which fits almost perfectly. Still has lumen for the wire and it can just sort of sail right up and so we're seeing a pretty nice share shift. And if you can't get the catheter there, obviously, you can't do anything and that's really important. Thunderbolt still is critical because notwithstanding some folks -- there are 2 steps to this. First, you got to get it there. That's sometimes hard but then you've got to get the clot out. And not every case is easy. Some cases are harder and Thunderbolt will play a really important role. But before thunderbolt comes, while the trial is going I think SENDit will play a really important role for this franchise and continuing to take share. So we're pretty proud of what SENDit is doing. Take a look at this. This is just a video of a case in which the catheter is sailing up. The first thing is the wire catheter just tracks really fast all the way over the wire way out there, you can see the catheter and then the SENDit pulled out and then the catheter is still there. You can see at the tip that lower ring, that's the marker of the catheter deep into the M1 of the patient. But that pace that ability to track that fast is, again, something we saw with Extra Flex, but we haven't seen with this size catheter since with, of course, none of the downside of Extra Flex. So we're pretty excited about SENDit where it's going. Let me switch over to Lightning Bolt for a little bit here. Again, just a quick review of the history on the arterial side, open embolectomy or open surgery was really the standard where you go in and try to surgically remove the clot and you started using some drugs, a few people tried with some stentrievers, manual aspiration, and then we came out in 2015 with continuous aspiration. But really now, we're at a point where it's computer-aided aspiration, I think that's where we moved to a different world. And here's sort of what Lightning Bolt looks like just from a physical standpoint. You still have the unit that attaches to the pump you can see there with the Penumbra P. And then you have the actual unit that sits in the sterile field. I'll go through that. And you really have 2 aspects. You have the bolt mode, which is the modulated aspiration part as well as the algorithms that can tell whether you're in clot or not in clot so that you're only taking out clot not blood. And how that bolt mode works is friction builds up -- if this is catheter and this is a clot at the tip of the -- the clot is usually bigger than the tip of the catheter and it gets stuck there. We used to have a separator. You guys have heard us talk about that. That manually was designed to sort of break that friction. But you're using your hand and you're sort of doing it over time, and it doesn't happen automatically. What we now do is, in effect, modulate the aspiration. And there's a big difference. Some people have tried turning the pump on and off, they call it secular aspiration. That doesn't really work because there's a friction built up. And so it doesn't change or impact that friction. So that doesn't work. But what we do is modulate between full aspiration and ambient pressure with a little bit of ambient sailing dripping in, doesn't come out of a catheter. And that, again, just like Thunderbolt, dramatically changes how fast you can suck out the clot through the tip of the catheter. And many of you have seen the videos of this that we've shown in the past. We can treat with Lightning Bolt in a lot of different locations. So that has all kinds of applications, including in-stent restenosis and locations in the body. The panel itself is relatively easy to follow. One button says go, the other one says stop. There was a lot of debate on how simple we wanted to make those terms. We decided to go simple. But there are obviously other indicators there so that you with anything that is controlled by a computer, you want to make sure you know what's happening if something is not working, you know to fix it, if you will. It's very straightforward. It's in the sterile field. The physician is controlling this in the sterile field. He's not relying or she's not relying on someone else to control it outside the sterile field. Just some images. The image on the left is the pre picture you can see and then the image on the right, the flow has been totally reestablished between those 2 and that's the clot that was taken out. Again, another picture here. This is the superior mesenteric artery. The picture on the pre, you can see just no flow at all beyond that. And then once you've taken off that clot, you can see the flow is lit up and reestablished again, really quick cases, a minute, 1.5 minutes, that kind of thing, in many of these cases and this is a little interesting. You can see the color is a little different. It's color of clot sort of matters. The lighter color it is, the more sort of harder or chronic. People use that term sort of incorrectly, but it's less. Fresh clot tends to be ruby red and this tends to have a little lighter. There's a picture coming up of even lighter clot. Again, here's pre- and the middle picture is sort of in the middle of the case, and then they continued. And you can see the little saddles they took out the rest of that little clot and continued on pretty successfully. So now we'll turn our attention, and I think I'll finish a touch early. So we'll have some opportunity for some questions in this room before we go to the breakout. But Lightning Flash, that's obviously lots of conversation about it. What is it? How does it work? Obviously, again, there's a computer controlling the valves on the pump opening and closing them really quickly based on are you in clot, are you not in clot, so you have a faster clot detection and also easier chance to suck out the clot fast and then stop. We're using it with a 16-French system. We have called this MaxID technology. I want to share briefly what that is. I got a question earlier today about it. For many, many years, our catheters were made sort of the more traditional way [indiscernible], where you have a liner that starts on a mandrel, you wind a wire around it to create the structural element and then put the extrusions on top of that. We now start with these catheters with Nitinol hypotube and then laser cut a pattern, it's very strong, but it also can make the wall thinner and maximize the inner diameter. That's what MaxID meets so that you can have less of a OD and still have a big ID, so you maximize it. And that's for any form of aspiration, really important. You want the catheter to not collapse on itself, which the Nitinol allows you to have that strength, but also to maximize the diameter between the inner diameter versus the outer diameter that everyone agrees the smaller the outer diameter the better, if you can have a big enough inner diameter to get the clot out. So obviously, the Lightning Flash is used in both pulmonary embolism and venous thrombosis. Again, some pictures of cases here. This is a pulmonary embolism case. There's sort of 3 steps here. The first one is at the beginning of the case. You can see in the middle of the case, there's a little bit more flow establishing the sort of bulk there has a little bit more contrast and then most importantly, at the end, the whole branches are lit up, and that's the clot that was taken out. These cases are really device time or minutes at the most now, which is a huge deal and making it very successful. This is not the greatest image from being able to see, but you can see the difference between on the pre side and then the post is the whole trunk is there and the branches are starting to show up the image is a little less blurred -- a little more blurred. On venous side, again, this is able to go in a lot of different locations. I put this in here really because of the color of the clot. So this is coming out of a filter. You can see the sort of on the images, the strands of the filter that has been -- had been put in earlier and it got clogged and they needed to clean it up. But there's always this whole debate and you guys I know have heard this from talking to physicians and heard it from what other companies have said, chronic clot versus acute or subacute clot. So I just want to sort of be clear about what is happening. So chronic the definition typically of chronic clot, and I don't want to get into defining it, most of the people would think it means clot that has evolved from being freestanding clot to clot that is no longer really clot but sort of part of the vessel wall, sort of part of the vein. If that's what we're talking about, we don't do that because the only way to do that is to take out the wall of the vein because it's part of the vein, wall of the vein. And you have to rip out the vein, the lumen of the vein. We don't do that. Our device doesn't grab and sort of scrape the vessel wall. That being said, anything that's freestanding, even if it's really old, Flash seems pretty capable of getting out and this picture shows that because you can see the color of that, that clot is not fresh. That clot has been there for a while. It's obviously turned to a much different color. So that type of clot we can get out pretty successfully. So that's why I wanted to show you that picture. Again, this is more sort of relatively straightforward iliofemoral. You can see the pre- and the post picture, a fair amount of clot that sucked out. This is more acute and subacute from the color and the texture but again done in a matter of a minute or 2 of device time, okay? Pretty quick. I want to play these in sequence. But before I do, I want to show -- these are coming from a case, so this isn't a bench model. It was filmed in a case and the reason I want to play them, it shows you the different sort of auditory and visual cues that a doctor gets when they're doing a flash case, and it may be sort of put to rest some of the concerns or nonsense around blood loss and other stuff because it's just not the way it kind of works. If you look at the green, that's when you're not in clot. So you're sampling, you're in free flowing blood. When you're in the solid yellow, the clot is initially detected and then immediately then after flash mode is activated and you sort of get a big gulp and that stops, okay. So that you're not taking out blood, you're just taking out clot. And you can sort of see it look both at the colors, but also the canisters when you go. So that's the drip when you're not doing anything. Like that's not that much, right? That's just sort of quick sampling. Then when you feel the clot, you start like starting to like, okay, I know I have it. Again, not a lot until you get the flash mode kicked in -- hold on, what happened to my video. All right. Something happened. Let me see if I can go back and start again hold on. Is there anyone here can go back to the beginning of that. I think I talked too long before I played the videos.

Right as we are getting to the culmination.

I know, I know, always that way.

So case would have been done by now?

Case would be -- in certain hospitals, the patient would already be back on the ward, it would be good. It won't work. It's all right. What you would have seen in that last thing is just a big gulp, the gulp is all the clot and it just came out and it's that. You can sort of see the splashes, if you will, on the actual canister, which is that big amount of clot coming down and then you're done. And it's that simple. It really is that simple. I mean you have to pay attention. You have to be watching, but most doctors do that. And so it is not more complicated. You are not having to control it. You're letting -- you're moving the catheter to the right place, but you're letting the product itself do the work. You're watching the colors, you're hearing the sound difference and that is telling you where you should be and then the clot comes out. So I want to say that because -- and I apologize for the last video not working. I'm trying to push all these buttons and it doesn't seem to work. I apologize for that. But it is that simple. So I think we have a few minutes before. Now the whole thing is just frozen. That was my last slide.

Isn't it the most important slide?

It's okay. So we have a couple of minutes for questions.

All right. Perfect. If there's questions from the audience, please feel free. But I guess just to start out on my end, there's 2 bigger themes, right? You've got the peripheral thrombectomy side, you've got the new slide, which is SENDit. So I guess first, just to start on SENDit, I think the surprise for us was the reacceleration that we saw in stroke in the last quarter. Wasn't that because of SENDit coming out into the marketplace? And can you true us up on where your share is versus where you think it can get to again?

That's a great question. So there's no question -- SENDit is, I think, it was SENDit and 43, which started -- we had limited inventory on SENDit, 43 you saw on that slide also took up a lot more room than the other products. So the combination of those 2, I think was driving market share shift toward us. I think it can continue for quite a while. There are so many different data sources that have shared in different places. But there was a point when we were fairly dominant, 80-ish-plus percent share. Most of us remember that, and we kind of like being in that spot. So we'll leave it at that as to where we want to go. I think the key is to get to a place where getting there is sort of solved even with the rightsized catheter. We're also seeing sort of a slight change in the market. There is like 4 or 5 companies ahead what physicians are now calling oversized catheters, where they're taking guide catheters all the way up to the M1. And that had sort of an allure initially like, well, the bigger the better. But just like everything in intervention, bigger isn't mostly better and perforations and all kinds of stuff that blooms sort of often, I think the combination of that together with the ability to quickly access our sort of .072" platform to the clot is allowing us to take share. And I think that will continue for a while. And then when Thunderbolt finishes the trial, that will be the most logical next step because Thunderbolt, you have to use these catheters. And so we don't want people to say, "Well, I would love to try it, except I don't like your catheter because I struggled getting it there. We want them to say, of course, I'm already using your catheter and for a clot that I need help getting out, I can how we Thunderbolt. That's a different discussion obviously than having to convince them. So we are in a good spot with the work ahead and the sequencing of it kind of makes a lot of sense.

I'm looking at my time, which is now officially read unfortunately. So we're going to take this to the breakout after all. We'll try to get the slides working, but thank you all for being here and the breakout will be in the Adler room.

Okay. Thanks, guys.