Penumbra Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 30, 2024

Key Takeaways

  • Revenue momentum: Penumbra reported Q3 revenue of $301 million, up 11.1% year-over-year (10.9% constant currency), driven by U.S. Thrombectomy growth of 21.2% and U.S. VTE growth of 32%.
  • Product expansion: The company received FDA clearance for Lightning Bolt 6X and 12 and CE Mark for Lightning Flash 2.0 and Bolt 7, broadening its CAVT portfolio in the U.S. and Europe.
  • Margin improvement: Gross margin rose to 66.5% (+90 bps YoY) with a path to >70% within 18–24 months, while non-GAAP operating margin reached 13.4% (+110 bps YoY).
  • Strong cash generation: Penumbra generated $51.3 million in operating cash flow before a $100 million stock buyback, ending Q3 with $291 million in cash and no debt.
  • Strategic priorities: The company is focused on continuous innovation, clinical and health economic data generation, commercial and market access investment, and disciplined operational efficiency to sustain growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Penumbra Q3 2024
00:00 / 00:00

There are 15 speakers on the call.

Operator

Good afternoon. My name is Jeremy, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's Q3 2024 Conference Call. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. Thank you.

Speaker 1

I would

Operator

like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, you may begin your conference. [SPEAKER UNIDENTIFIED COMPANY

Speaker 2

REPRESENTATIVE:] Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the Q3 of 2024. A copy of the press release and financial tables, which includes a GAAP to non GAAP reconciliation, can be viewed under the Investors tab on our Company website at www.penumbrainc.com. During the course of this conference call, the Company will make forward looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality, compliance and business trends. Actual results could differ materially from those stated or implied by our forward looking statements due to certain risks and uncertainties, including those referenced in our 10 ks for the year ended December 31, 2023, filed with the SEC. As a result, we caution you against placing undue reliance on these forward looking statements, and we encourage you to review our periodic filings with the SEC, including the 10 ks previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock.

Speaker 2

Penumbra disclaims any need to update or revise our forward looking statements as a result of new information, future events, developments or otherwise. On this call, financial results for revenue and gross margin are presented on a GAAP basis, while operating expenses, operating income and adjusted EBITDA are presented on a non GAAP basis. The corresponding GAAP measures and a reconciliation of GAAP to non GAAP financial measures are provided in our posted press release. Non GAAP operating expenses and operating income exclude expenses related to the wind down of our immersive healthcare business in the Q3 of 2024 of $5,000,000 a one time expense associated with the acquisition of IPR and D of $18,200,000 in the Q3 of 2023 and amortization of acquired intangible assets of $2,400,000 in the Q3 of 2023. Adjusted EBITDA of $56,700,000 for the Q3 of 2024 excludes the wind down expenses, stock compensation expense, depreciation and amortization, provision for income taxes and interest income expenses.

Speaker 2

Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the Q3 of 2024 and Jason Mills, our Executive Vice President of Strategy, will discuss our 2024 guidance. With that, I would like to turn the call over to Adam Elsesser.

Speaker 3

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's Q3 2024 Conference Call. In the Q3, we generated total revenue of $301,000,000 representing a year over year increase of 11.1% on a reported basis and 10.9% on constant currency basis. Our 3rd quarter results reflect another strong performance by our U.

Speaker 3

S. Thrombectomy business, driven by continued adoption and further market penetration of our current CAVT portfolio, Lightning Flash 2.0 and Lightning Bolt 7. U. S. Thrombectomy grew 21.2 percent year over year to $162,100,000 with our U.

Speaker 3

S. VTE franchise delivering revenue growth of 32% year over year and 13% sequentially. The balance of our U. S. Thrombectomy franchise continued to perform very well, in line with our expectations.

Speaker 3

In the quarter, we received FDA clearance for 2 new CAVT products, Lightning Bolt 6X and Lightning Bolt 12, which further enhance and build out an increasingly comprehensive CAVT portfolio. I will provide additional details on these products later in my prepared remarks. In addition, we received CE Mark for Lightning Flash 2.0 and Lightning Bolt 7 in mid September and are in the early phases of introducing our transformative technology to European markets. The trend of improving profitability continued in the 3rd quarter with gross margins expanding to 66.5%, up 90 basis points over the prior year period and non GAAP operating income of $40,300,000 or 13.4 percent of revenue in the Q3, up 110 basis points year over year. Behind positive product mix shift and operating efficiencies, we continue to see a path to a gross margin profile of over 70% within the next 18 to 24 months and expect non GAAP operating margin expansion to outpace gross margin expansion for the foreseeable future.

Speaker 3

Additionally, backed by strong revenue growth, expanding gross margins and disciplined operating spend this quarter, we generated $51,300,000 in operating cash before you include the impact of our $100,000,000 stock buyback. We are well positioned to continue to increase our profitability and operating cash flow into the future. Within our U. S. Peripheral business, the standout of the quarter was Lightning Flash 2.0.

Speaker 3

FLASH 2.0 consistently removes blood clots in VTE patients considerably faster than all older products. Given the speed of the procedure now with FLASH 2.0, there is no significant blood loss. This FLASH 2.0 technology compares very favorably to other companies' older technology that takes much longer to remove blood clots with enough blood loss to make physicians feel like they need to return blood to the patients. As a result, FLASH 2.0's performance continues to command physician interest and our Q3 results reflect strong adoption of our latest Flash technology in its 1st full quarter on the market, with September representing our highest month of VTE procedure volumes ever as we continue to gain VTE market share. The speed of Flash 2.0 was extremely evident in a PE case this quarter, where a firefighter who was 39 weeks pregnant was treated for a very serious PE with a FLASH 2.0.

Speaker 3

The speed of the procedure saved the patient and her baby. I had the privilege of watching a video of her and her baby being greeted by a line of firefighters when she was being discharged from the hospital. In addition, we received FDA clearance for lightning bolt 12, expanding our portfolio of latest generation CAVT products engineered to address VTE. Lightning Bolt 12 combines our proprietary modulated aspiration technology validated by Lightning Bolt 7's strong clinical outcomes with a catheter size designed to address smaller parts of the venous anatomy. The initial cases have gone very well, and this technology expands the number of VTE patients we can treat with our CAVT technology.

Speaker 3

While we expect modest initial contributions in the Q4, looking to 2025 and beyond, we view CAVT's demonstrated value proposition and our increasingly comprehensive VTE focused CAVT catheter portfolio, helping accelerate conversion from other mechanical thrombectomy products, lytics and medical management. Our U. S. Arterial business led by Lightning Bolt 7 continued to perform well in the Q3. FDA clearance of Lightning Bolt 6X in September further expands the reach of our advanced CAV technology to smaller arteries, including below the knee arterial occlusions, where our legacy catheters are currently used to treat a portion of the patient population.

Speaker 3

The introduction of BOLT 6X will deliver CAVT's benefits, improved procedure efficiency and a reduction in procedure times to these patients. Similar to lightning bolt 12, we expect modest contributions from 6X in the Q4 as we commence commercialization. That said, we see a meaningful opportunity for our arterial focused CAVT portfolio, currently including Bolt 7 and Bolt 6x to accelerate physician conversion from open surgery or the use of lytics to a computer assisted endovascular first approach to treating arterial clot. Despite significant progress to date, we remain in the early stages of helping the over 800,000 patients annually in the U. S.

Speaker 3

Who suffer from VTE and arterial clot with our proprietary CAVT technology. Turning to the neurovascular business, our team delivered another solid double digit performance in stroke thrombectomy. As interest wanes in the super large bore OE8 catheters as aspiration catheters, most of the companies with those products have switched to positioning them as guide catheters. This positions us very well with our market leading aspiration portfolio, led by RED72 with our proprietary CENDIT technology and RED43 as we prepare to bring Thunderbolt and the benefits of our CAVT technology to the neurovascular field. As we previously announced, our THUNDER trial recently completed enrollment with follow-up scheduled to be completed by the end of the year.

Speaker 3

We will provide additional future updates as appropriate, but needless to say, we are excited about the prospect of bringing CAVT and its demonstrated clinical benefits and procedural advantages to the neurovascular field, further solidifying and enhancing our market leading position in the field of stroke thrombectomy. Shifting to our international business, in September, we received CE Mark for Lightning Flash 2.0 and Lightning Bolt 7, further expanding the global reach of our latest CAVT technology. Physician interest in the technology in European markets is high. And while we have commenced initial sales, we expect revenue contributions to scale in a measured fashion given the current reimbursement landscape across the region. That said, over time, we see opportunity for CABT in international markets, supported by the work we're currently doing in reimbursement and clinical evidence generation and backed by strong commercial execution.

Speaker 3

As we look toward 2025 beyond, we view a significant opportunity for CAVT to globally transform the way blood clots are addressed and treated. Over the near term, we are focusing on executing a 4 pronged strategy that we previously laid out. Number 1, constant innovation to further enhance CAVT's comprehensive value proposition and further expand the patient population with clot burden able to be treated with CAVT therapy safely, effectively, swiftly and simply. Number 2, clinical and health economic data generation, be it randomized clinical trials, real world studies and our global and our market access initiatives to increase awareness not only of CAVT's outcomes benefits, but also of the economic benefit to hospital systems. Number 3, investment in our commercial and market access teams to fully realize CAVT's potential and support sustainable strong growth in the number of patients able to benefit annually from a computer assisted interventional approach.

Speaker 3

And number 4, executing our strategy with a disciplined focus on driving operating efficiencies and an improving profitability profile. I'll now turn the call over to Maggie to go over our financial results for the Q3.

Speaker 4

Thank you, Adam. Good afternoon, everyone. Today, I will discuss the financial results for the Q3 of 2024. Financial results on this call for revenue and gross margin are on a GAAP basis, while operating expenses and operating income on a non GAAP basis. The corresponding GAAP measures and our reconciliation of GAAP to non GAAP financial measures are provided in our posted press release.

Speaker 4

For the Q3 ended September 30, 2024, our total revenues were $301,000,000 an increase of 11.1% reported and 10.9% in constant currency compared to the Q3 of 2023. Our geographic mix of sales for the Q3 2024 was 75.2% U. S. And 24.8% international. Our U.

Speaker 4

S. Region reported growth of 16.2 percent driven by 21.2% growth in our thrombectomy franchise. Our international regions decreased by 1.9% reported and 2.5% in constant currency, primarily due to a reduction in China revenue of $13,600,000 which was offset by an increase of $12,200,000 in all other international regions. The sequential growth in our total revenues of 0.5% was primarily driven by an increase in our U. S.

Speaker 4

Thrombectomy revenue of $8,300,000 relatively flat revenue in Europe and offset by a decline in China revenue of $9,400,000 Moving to revenue by products. Revenue from global thrombectomy business grew to $204,100,000 in the Q3 of 2024, an increase of 14% reported and 13.8% in constant currency compared to the same period last year. Our U. S. Growth of 21.2 percent is driven primarily by continuous adoption of CAVT.

Speaker 4

Our international business declined by 7.1%, primarily driven by a decrease in China revenue, which was offset by an increase in all other international regions as compared to the same period last year. Revenue from embolization and excess business was $96,900,000 in the Q3 of 2024, an increase of 5.5% reported and 5.2% in constant currency, which is in line with our expectations and primarily driven by an increase in the U. S. Gross margin for the Q3 of 2024 is 66.5% compared to 65.6% for the Q3 of 2023. We delivered 90 basis point improvements driven by favorable thrombectomy product mix across all regions and strong productivity improvements.

Speaker 4

Additionally, sequentially we had an 100 basis point improvement in our gross margin excluding the one time $33,000,000 immersive healthcare inventory write off in the Q2 of 2024, which reflects higher thrombectomy product mix and favorable distributor mix. Our manufacturing team will focus on ramping up our volume while driving our productivity and efficiency for our new product launches in the Q4. Now on to our non GAAP operating expenses, non GAAP operating income and margin and adjusted EBITDA. Total operating expense for the quarter was $160,000,000 or 53.1 percent of revenue compared to $144,500,000 or 53.3 percent of revenue for the same quarter last year. Our research and development expenses for Q3, 2024 were $22,600,000 compared to $21,000,000 for Q3 2023.

Speaker 4

SG and A expenses for Q3 20 24 were $137,400,000 or 45.6 percent of revenue compares to $123,500,000 or 45.6 percent of revenue for the Q3 of 2023. We recorded operating income of $40,300,000 or 13.4 percent of revenue in the Q3 of 2024 compared to an operating income of $33,200,000 or 12.3 percent of revenue for the same period last year. We wound down out the immersive healthcare business in the later half of the quarter, resulting in GAAP operating expense savings of approximately $6,000,000 We expect to create GAAP operating expense savings of approximately $40,000,000 a year moving forward. With the full quarter of immersive savings, we expect to continue our sequential margin expansion into Q4, 2024. We posted adjusted EBITDA of $56,700,000 or 18.8 percent of total revenue compared to $51,500,000 or 19% in the Q3 last year.

Speaker 4

Turning to cash flow and balance sheet. We ended the Q3 with cash, cash equivalents and marketable security balance of $291,000,000 and no debt, which is a decrease of $48,700,000 sequentially due to the stock repurchase of $100,000,000 during Q3 2024. Excluding the stock repurchase, our operating cash increased by $51,300,000 driven by operation profitability and improvement in working capital management. We continue to expect positive operating cash flow trends for the rest of 2024 and beyond. And now I'd like to turn the call over to Jason to discuss our guidance.

Speaker 5

Thank you, Maggie, and good afternoon, everyone. We reiterate our total revenue guidance range for 2024 of $1,180,000,000 to $1,200,000,000 With 1 quarter remaining in the year, we are comfortable with expectations at the middle of this range which is where they were coming into this call. Furthermore, we are raising the lower end of our 2024 guidance range for U. S. Thrombectomy growth to 24% to 25% from 23% to 25% previously.

Speaker 5

Moving down the income statement, we expect gross margin in the 4th quarter to be consistent with 3rd quarter levels and we expect non GAAP operating margin to expand sequentially. Excluding the impact from the immersive healthcare impairments, these metrics would correlate with our full year guidance of 100 to 150 basis points improvement in gross margin and 100 to 200 basis points improvement in operating margin. Operator, we can now open the call for your questions.

Operator

Your first question comes from the line of Richard Newitter from Jefferies. Please go ahead.

Speaker 6

Hi, thanks for taking the questions. Maybe just to start off on the U. S. Thrombectomy, it was a healthy 22%. I think you said that your U.

Speaker 6

S. Venous or VTE was 30 2%. Maybe can you just go over the U. S. Neurothrombectomy piece?

Speaker 6

By my calculation, and it might be wrong, but it would suggest a pretty big deceleration in the Q3. Is that right? And how should we think about the trend there and going forward?

Speaker 3

Yes. Thanks for the question. I appreciate it. Our stroke business had a really good sort of high double digit growth. So I don't think I would qualify that as a deceleration.

Speaker 3

If you remember the elements that go into U. S. Thrombectomy, we have neuro, we have arterial, peripheral arterial, coronary, as well as VTE. And obviously coronary, which has been out there with our legacy product for many years, is in the single digits. So I think that's the delta, but neuro did really well this quarter.

Speaker 6

Okay. Sorry, that's my math, so I apologize there. Congrats, that's a very solid U. S. Neuro growth rate.

Speaker 6

I guess maybe just on the international piece and the China, what does this do to your view of recovery for those regions? And as we look forward into 2025, it seems like the international business continues to be somewhat unpredictable. So what's your visibility there? And how do we think about new product contribution in some of the areas that you're just launching in with the new products to offset that? Thank you.

Speaker 3

Yes, I think it's a great question. I think, look, we've talked about China last quarter and sort of the what's happening for us, particularly as we go from our licensing revenue model to the distribution model that's part of our deal. We spent a lot of time last quarter walking through that. So really nothing has changed. That's just now showing up.

Speaker 3

So we've sort of taken that into account. There's no new information there. Obviously, as China recovers, that will be an upside in the future, whether that's in the back half of 2025 or 2026 or beyond. There's certainly significantly fewer headwinds in 2025 than there were in 2024 internationally and there's some real bright spots with, as we called out on this call, the launch of Flash 2.0 as well as Lightning Bolt 7. Obviously there's a lot of interest, there's a lot of conversations between physicians here in the States that are using it to their colleagues in European markets.

Speaker 3

And I think as we roll that out, we're going to see that part of the business do really, really well. So there's not a lot of new news on our international markets. This is playing out how we had talked about it for a while.

Speaker 6

Okay. Thank you very much. Thank you.

Operator

Our next question comes from the line of Robbie Marcus from JPMorgan. Please go ahead.

Speaker 7

Great. Thanks for taking the questions and congrats on a nice quarter here. 2 from me. First, I wanted to ask on the margin expansion. It once again came in nice, saw some upside there, especially on EPS.

Speaker 7

How should we think about your ability to continue to drive this margin expansion? Is it one of these things that 100 to 200 basis points is a good range to use so long as thrombectomy continues to grow at the elevated levels? Or is there something one time in 2024?

Speaker 3

Yes, there if you're talking about gross margin, that is a longer term process that we've laid out for a while now, which is it's a combination of efficiencies together with the product shift as we move toward a bigger chunk of that business coming from our CAVT platform. So that will continue. If you're talking about operating margin, again, that also we think will outpace the gross margin and I think this is a quarter that is like some of the past quarters that has shown that we have a really profitable business here and we can do both things. We can obviously invest in this and we laid out again sort of clearly the 4 pronged strategy where we can invest in innovation, we'll invest in the clinical data in a variety of fashions as well as in the growth of our commercial and market access teams. All of those investments focused on growth, at the same time doing that in a very, very profitable business.

Speaker 3

So I think we were pretty clear in the prepared remarks about that, that that hasn't changed from the past. It's just clearer than ever now, and I think this quarter puts a pretty fine point on that.

Speaker 7

I was thinking operating margin. So you got both of them. I appreciate that. Just to be

Speaker 3

sure, I covered it all for you.

Speaker 7

I appreciate it. And then, just came back from TCT today and we saw yesterday the Peerless data from your competitor. And I guess the question is, do you think that's going to be viewed by the clinical community as specific to your competitor? Or do you think that's going to be applied to thrombectomy in general and translate to your business as well? Thanks.

Speaker 3

Yes. Look, without being inappropriate, given the pretty muted reaction that we've seen and heard from most physicians, we certainly hope that it's not viewed for all products. Obviously, some of the details there were not surprising given the procedure, the duration of the procedure with their older devices and really the bleeding rates that aren't true now with Flash 2.0. So I think Flash CAVT and 2.0 are commanding a lot of attention. And I think from everyone we've talked to there on the ground as well as who are reading that, I think we're all looking past that particular type of study and to the more important comparison, which is against anticoagulation like we're running in our STORM study.

Speaker 3

And I think that's where the real energy is put in the field and that's where the interest is. So I guess given those issues, we weren't surprised with somewhat of the muted reaction, but I don't think it's a negative for us at all.

Speaker 8

Appreciate it. Thank you.

Operator

Our next question comes from the line of Larry Biegelsen from Wells Fargo. Please go ahead.

Speaker 9

Hi. It's Larry calling in for Leigh calling in for Larry. Thanks for taking my questions. Just starting with the Thunder trial, congratulations on completing the patient enrollment. We saw on clinicaltrials dot gov that the sample size, the patient sample size has changed.

Speaker 9

It's a little bit less than what you started with. And endpoint has changed. 1 of the safety endpoints has changed. Can you just comment on those and if the FDA agreed to those changes? And I have a follow-up.

Speaker 3

Yes. The FDA did agree to those changes. That is accurate.

Speaker 9

Okay. For both of those changes?

Speaker 3

Yes.

Speaker 9

Okay, perfect. Thank you. And then Adam, you've mentioned a few times before and again on this call that there are fewer headwinds in 2025 versus 2024. Can you just elaborate on which headwinds would go away in 2025 versus 2024 and what additional tailwinds that we can see in 2025? Thank you.

Speaker 3

That's a good question. So some of the things we've talked about this year, at the beginning of the year, we talked about getting sort of recalibrating selling some of our embolization products and our access products in certain markets significant issue that will not be prevalent in 2025. We talked a bit about China over the last couple of calls and recalibrating that as we move to the next phase. And also the delay, if you will, in getting CAVT in Europe. So those are sort of the big topics that we were dealing with internationally and those really go away in, for the most part, in 2025.

Speaker 3

Some of the things that are looking positive, obviously, we've also talked about new product launches are coming. We have this sort of continued share gain with existing products like what we just saw, pretty significant share shift just again in yet another quarter with Flash 2.0, so pretty consistent movement there. I think when you add those up, we're looking forward to 2025 as well.

Operator

Our next question comes from the line of Joanne Wuensch from Citi. Please go ahead.

Speaker 10

Thank you very much. I actually have two quick questions up and up and front. Can you walk us through your steps to get to your 88% gross margin goals over the next 18 months? How much of that is coming from Real or the renamed label for that or something else? And then my second question has to do with Thunderbolt.

Speaker 10

Congratulations on that completion of the clinical trial and the filing, but I'm curious about the steps to commercialization and how you think about uptake. Thank you.

Speaker 3

Yeah, good questions. I maybe misheard you. I think you asked about gross margins and I think you said getting them to 88%, as opposed to what we had said out there, which was 70%. So I just want to make sure I heard it right. I might not have, but gross margins we think can get to above 70%.

Speaker 3

And the big issue there is continued efficiencies, but the primary driver is just as we go further and deeper into CAVT products, the margins are different and the product shift drives that. So that's the primary driver getting to the gross margin number that we talked about or above that. On Thunderbolt, you talked about sort of the question was related to commercialization. Let's before we get ahead of ourselves, let's do the follow-up for that. That's due, we should complete that by the end of this year and then obviously we'll submit it and go through that.

Speaker 3

We certainly know how to launch products after 20 years and we certainly are pretty excited about it, But let's wait till we can get the trial formally finished with the follow-up and move on and then we'll give you more updated information at that point.

Speaker 10

Thank you. Sorry if I set your goals too high.

Speaker 3

Well, it's a good internal goal. No, I'm just joking.

Operator

All right. Our next question comes from the line of Michael Sarcone from Jefferies. Please go ahead.

Speaker 11

Hey, good afternoon. Thanks for taking the questions. Just first one for me, really nice growth in U. S. VTE.

Speaker 11

Could you maybe talk to us about where you think your share is shaking out across both PE and BDC?

Speaker 3

I think it's probably premature, maybe we'll sort of do it at the end of the year like we did last year to sort of do a recalibration. Obviously, quarter after quarter this year, we've seen a share shift toward us, but in terms of putting the exact numbers on it, I think it's premature we'll consider doing that again as we finish the year. The PE part of it has been pretty significant. We already were pretty successful in DVT, sort of sharing that business fifty-fifty, but we've seen a huge change in the PE shift and a lot of that really comes down to what I said. The product FLASH 2.0 is so fast, the time of the procedure dramatically different, no significant blood loss at all.

Speaker 3

Therefore, you don't have the same anxiety, the same worry of having so much blood loss that you have to put the blood back in using other products and so on to do that. And that's just by definition if you can get all the clot out much faster and don't have any issue of need to put anything back in, that's better for the patient, it's able to stabilize patients much faster, and frankly, I think it bodes really, really well for the future. And again, it just goes to the need to constantly be innovating in these fields. Things change, products get better and better, and I hope all of us are excited about that and applaud that. That's sort of the point of innovation that we've been obviously known for, for the past 20 years.

Speaker 11

Got it. That's helpful, Adam. Thanks. And just my follow-up, BOLT 6x and BOLT 12 just got FDA clearance. You have to go through back processes for each account to start selling those.

Speaker 11

Can you just talk about that process? And then maybe anything on pricing and what it does for economics on the P and L?

Speaker 3

Yes. Well, a couple of things. Just first on price. Obviously, the CAVT products have a little bit different price point than the non CAVT products do. So they're in a comparison to legacy products, which are literally just the catheter and the original pump, there is obviously going to be a difference.

Speaker 3

In terms of the process, yeah, I am not aware of a blanket free pass and not having to go through the process with new products. These are obviously new products, we'll go through that process. And again, having launched multiple products every year for many, many years now, I think we know how to do it and we'll keep going. But they do have to go through the back process.

Speaker 11

All right. Thanks, Adam.

Speaker 3

Yes. Thank you.

Operator

Our next question comes from the line of Matthew O'Brien from Piper Sandler. Please go ahead.

Speaker 10

Hi. This is Samantha on for Matt today. Thanks for taking our question. I guess we want to ask more about the 6X and the new full 12 devices. And I guess specifically starting with the 6X.

Speaker 10

Can you talk just a little bit more about the difference between the below the knee catheter versus upper one? Is it just the size of the catheter that's different? And then maybe talk about some of the competitive dynamics going on in the arterial market too.

Speaker 3

Yeah. There's not, on the size of the catheters, it's obviously a little smaller. The numbers, 7 French, 6 French, connote that the smaller it is, the further distal it can go. So not just below the knee, but into smaller arteries in other parts of the body as well, which I mentioned in the prepared remarks. And that's just the natural evolution of CAVT as we bring it to other places.

Speaker 3

The X part of the 6X is really a tool similar to what we call SendIT in the neuro space where we help get the catheter and track it to more distal places. So it's really ease of tracking and so on. But overall, I think you've got the gist of the product. It just goes further into the vasculature so we can remove that clot. Your second question was what again, I apologize, was it around 12 or what was the second part of that question?

Speaker 10

Well, just competitive diet, the competitive diet. In arterial, yeah,

Speaker 3

in arterial. I'm sorry, I apologize. You know, I think everyone knows, you know, there's not a lot of competition of act. You know, there's a lot of companies with, you know, sort of gizmos and various things. I think we've seen this play out in stroke in the brain for years, this game

Operator

sort of

Speaker 3

happened for many years in stroke. Aspiration works, aspiration, the whole science behind aspiration is pretty clear, I think folks have understood that now in the neuro space and I think that's working and people are starting to pretty clearly understand that in the arterial space on the vascular side. So there's not a lot of companies that are focusing on that and certainly none of them have the modulated aspiration that we bring with lightning bolt 7 and lightning bolt 6X, which is really a whole total game changer. It sort of creates a new class, if you will, of technology. So really the fight for us, the competition, if you will, is open surgery and anticoagulation and also lytic.

Speaker 3

All of that is where we put our energy and that's where our focus has been and that's what's really seen the continued growth of that business sort of quarter over quarter.

Speaker 10

Great. Thank you. And then

Speaker 9

just one more quick one.

Speaker 10

I know we touched on the, vendor trial a couple of times in the call. From a different point, when with follow-up ending at the end of the year, when could we expect to see data for that trial?

Speaker 3

I'm not going to so I made a mistake a few years back, obviously, in putting out times for trial to end and all. So I'm not going to do that with a specific time. Obviously, as soon as we know that answer in a very specific way, we will let everyone know. Obviously, we're pretty excited to get that out there, but this specific timeframe will update when we have that when we have more information to finish the trial.

Speaker 10

Great. Thank you.

Speaker 3

Thank

Speaker 1

you.

Operator

Our next question comes from the line of Matthew Blackman from Stifel. Please go ahead.

Speaker 8

Good afternoon, everybody. Can you hear me okay?

Speaker 6

Yes.

Speaker 8

Great. I had a couple of stroke questions. Just curious, first of all, can you view the high the current sort of U. S. Stroke growth rate as sustainable until they get thunderbolts?

Speaker 8

And then I'll just lob in the follow-up. Last week, Medtronic and Philips announced the partnership. Any targeting stroke awareness, just your thoughts on what impact, if any, that could have on the market over time? And it doesn't seem like it, but are there any competitive implications of a device provider teaming up with an imaging provider? Just interested in hearing your thoughts on that.

Speaker 3

Yes. Well, let me answer that first and then I'll go back to the sort of sustainability of our growth in stroke. I was thrilled to see that. The more folks are bringing awareness to the idea that we should be intervening on stroke patients. I mean, this is something that 10 plus years ago now was shown definitively in many different randomized trials.

Speaker 3

So I think it's great. I don't think it has any device specific impact. I mean, I think we all know that, that physicians are going to pick the product that works the best and gets the cloud out fastest. And I don't think there's anything we should say other than applaud everybody, whether it's imaging companies, device companies, hospital systems in their local community to bring all kinds of awareness. We've been involved in lots of programs bringing awareness to this, working with some of the big societies, get ahead of stroke, as you know, over the years and I applaud it and I'm glad to see it and I think it helps many, many patients.

Speaker 3

So I'm all in. As it relates to our growth in the stroke business, I think we're in a really, really good spot. As I mentioned on the call, you know there are a lot of companies with sort of these super bored catheters that interest is clearly waning as people understand it and realize that maybe they're better focused as guide catheters, which is a very different thing than an aspiration catheter. And I think that's really laid the foundation for what I think will be a pretty good run on our business in stroke and a lot of excitement as we move toward bringing Thunderbolt to the neuro space as well.

Speaker 8

All right. Appreciate it. Thanks.

Speaker 3

Thank you.

Operator

Our next question comes from the line of Mike Krutke from Leerink. Please go ahead.

Speaker 1

Hi, everyone. Thanks for taking our questions. On the arterial side, can you provide some more specifics on your U. S. Arterial thrombectomy growth during 3Q and if the really strong momentum you've seen to date in that segment continued?

Speaker 1

And then just as a follow-up, was there anything specific to call out in 3Q in that segment that may have led to any deviation in the recent growth you've seen, if any?

Speaker 3

No. The arterial business

Speaker 11

grew in

Speaker 3

the high teens off pretty challenging comps from the prior year with the launch of Lightning Bolt 7. So we felt really, really good about the growth of the Artero business. That's

Speaker 11

the

Speaker 3

product works, Guy. I mean, it's just that simple. Lightning Bolt 7 really works. Lightning Bolt 6X really works. And it's getting the clot out quickly, easily.

Speaker 3

There's not a lot of issues there. So I think we're seeing that continue. And again, we just are doing the work between launching 2.0, continuing to launch the brand new products, continue to penetrate with 7. The guys in the field have their hands full talking about some of the most innovative products this field has ever seen, But that business is really, really solid right now.

Speaker 1

Understood. Thanks for the color there. Then maybe just one quick one. In terms of the BTK side of the world, do you think about that as more of a market expansion story or is that something that you think is probably going to be more of an increased utilization?

Speaker 3

It really is just a catheter size question. Right now, if you dial if you go backwards to before we had CAVT, we didn't really think about them as below the knee or not because the catheters, whatever size you could get to the clot is what you would use. But it became a little more like that when we had CAVT only on a catheter size that really doesn't go below the knee, which is the Bolt 7. Now that we have it on a catheter that can go further down and below the knee, we're bringing that CAVT. Our goal is to bring the CAVT technology to every part of the body that has blood clot where CAVT can be helpful.

Speaker 3

And we're not fully done yet. And then continue innovating from there. So we're well underway on that plan. Again, in the 4 pronged strategy that I laid out pretty clearly, innovation is number 1. Innovation has always been number 1 for Penumbra, and that's why we made sure it was crystal clear.

Speaker 3

We're going to continue to bring Sabey technology to every part of the body that can benefit from getting the clot out so much faster and so much safer.

Speaker 1

Awesome. Thanks, Adam.

Speaker 3

Thank you.

Operator

Our next question comes from the line of Pito Chickering from Deutsche Bank. Please go ahead.

Speaker 6

Hey, guys. Thanks for taking

Speaker 12

my question. A quick one here on guidance, you're raising your U. S. Thrombectomy guidance to add above the Street, but maintaining your overall revenue guidance. Are there any other changes to the other segments of your guidance?

Speaker 3

No, I don't think so.

Speaker 5

No. So in the Q4 I laid out, we said comfortable at the midpoint. That'd be reflective obviously of at least the midpoint of that new range of 24% to 25%. As you model out the international thrombectomy business, we've already talked about the headwinds that we we're seeing internationally, especially in China, and so that's reflective of that. But, you know, at the midpoint of the guidance, obviously, the Q4 ends up being in and around 20% growth for U.

Speaker 5

S. Thrombectomy is what is implied at the midpoint of guidance. And the rest of the business, I think, the Street is modeling somewhat appropriately.

Speaker 12

All right, great. One more on margins. So I understand gross margins expanding as a positive mix offers those tailwinds. But if I look specifically at SG and A leverage, how should we be thinking about how you balance revenue growth with investments sort of for that growth? How much leverage that you can drive over the next couple of years?

Speaker 12

It seems as though there's going to be a lot of SG and A leverage over the next 3 to 5 years. Is this like a 50 plus basis point margin expansion per year on SG and A over the next couple of years?

Speaker 3

Yes. Without giving you a specific number, I think we've been pretty clear that we can really kind of do both. We can invest pretty significantly in the things that matter. And again, those really go back to the 4 pronged strategy, which is continued innovation, the data that will be relevant to continue to grow the thrombectomy business as well as the commercial team and the market access team that will drive really market growth going forward and do that by continuing to run a pretty significantly profitable business. And that I think this quarter shows that, and we're going to continue to do that going forward.

Speaker 12

Great. Thanks so much.

Speaker 6

Thank you.

Operator

Our next question comes from the line of Margaret Haxor Andrew from William Blair. Please go ahead.

Speaker 13

Hey, everyone. It's Macaulay on for Margaret tonight. Thanks for taking our question. There's been a lot of discussion around changing the guidelines, obviously following the data at TCT this week. And I understand it was product specific.

Speaker 13

But as we look towards the longer term adoption of thrombectomy and CAVT in particular, I guess, how do you think about guideline changing recommendations? And ultimately, how does that tie into the market access work that you've been continuing to work on in the background?

Speaker 3

Yeah, I think it really depends on the vascular bed you're talking about. You're focusing on PE. Obviously, we're talking about PE a lot and I'll address that in a second, but there's also DVT, which is obviously, as I think you know, larger number of patients, as well as arterial, which are also larger number of patients than PE. So the guideline issues are really most acute right now around PE. And I think legitimately, if you just think about the numbers, 85% of patients in the pool of PE patients still are getting anticoagulation, 10% or so are getting mechanical thrombectomy in the balance, I think 5%, if my numbers add up, are getting catheter directed lysis.

Speaker 3

So you're not the guideline change around the 2%, 3%, 4%, 5% isn't really relevant and it would be somewhat not particularly relevant for guidelines change around a specific product, particularly given the reaction for most physicians to that data. I think really the field is looking to the trials that come out with anticoagulation endpoints. And then I think guidelines will likely change. I think it's unlikely that it will be product specific even if we're the product that really stops innovation and no one wants to stop innovation. What you want to do is prove the concept and move on and continue to innovate and get better and better.

Speaker 3

And I think back to 10 plus years ago when the stroke trials came out, there was no real desire to stop innovation. So it was interventional means what people are using today versus what they used 10 years ago in stroke are dramatically different, but the point still holds. So I think that's how I would look at the field going forward.

Speaker 13

That's great. And then just as a follow-up, acknowledge the larger driver is the CADT platform itself, but we've also heard quite a bit of positive receptivity, of the Select Plus launch this week. So has that been able to drive any incremental growth similar to when SendIT first launched as kind of a comparator?

Speaker 3

Well, yes, thank you for raising it. We don't typically talk about inner catheters like Select Plus. They're sort of you know, there to just make the case faster and easier. People really, really like Select Plus and it definitely has, caught a lot of people's attention and made the cases even faster in terms of the access of the case. So it's really inside the umbrella of Flash 2.0.

Speaker 3

If you're just making Flash 2.0 from start to finish that much faster, getting it there faster, getting a cloud out now extremely fast, all of that adds up to an impression that this was really, really a great case. And I think that's going to continue to be what people gravitate to for quite a while.

Speaker 13

That's great. Appreciate taking the question.

Speaker 3

Yes. Thank you.

Operator

Our next question comes from the line of Chris Pasquale from Nephron Research. Please go ahead.

Speaker 14

Thanks. Adam, I wanted to follow-up on the question about Bolt 12 and 6X. Give a rough sense what percentage of venous and arterial clots occur in vessels that are too small for Flash or Bolt 7 to reach? And are you guys involved in those cases today with non Cav T products? Or do those patients need to get treated with something else or with surgery?

Speaker 3

Yes, it's a good question. I don't have really good numbers. So, I don't want to just sort of throw out sort of more guesstimates on the percentages within sort of if you take 12, the venous space and some of it's preference as well. People would like a smaller catheter in a certain case and so on. But the answer to the I think the more significant question is, are we in those cases today?

Speaker 3

Most of the time, if they are using mechanical, we're in those cases. They're just using the non CAVT to the extent that they need the smaller size product. And so that gives us an opportunity to move and bring the CAVT products to those vascular beds. And most of the time those physicians have already experienced them with our larger systems, both on the arterial and venous side. So they're all excited about getting the benefit of CAVT in those smaller vascular beds.

Speaker 3

So I think it's a pretty straightforward understanding of it. And I think it will just again make the it will provide the benefit to those patients in the smaller vascular beds with CAVT.

Speaker 14

That's helpful. Thanks. And then you mentioned that reimbursement constraints in Europe could lead to a more measured uptake of flash and vault. Do you see any opportunities to push for incremental reimbursement maybe through some additional in country clinical studies or things of that nature?

Speaker 3

Yes. So I want to just maybe clarify the word you used. We don't really have reimbursement concerns. We just want to make sure we get an appropriate reimbursement for these products. Obviously, they come with more cost.

Speaker 3

When you're adding a computer to every chip, it's not like a catheter or syringe or something. It's a much different type of product. So by definition, that requires sort of more work to get that reimbursement and to prove that. And so, yes, there are going to be opportunities to do that in different forms, including with data, for sure. And we sort of I sort of mentioned that again, if you go back to the 4 pronged strategy, in addition to that innovation, is the generation of data that will continue to drive the growth of this.

Speaker 3

So it sort of fits into that bucket.

Speaker 1

Okay. Thank you.

Speaker 3

Thank you.

Operator

Our final question comes from the line of Mike Matson from Needham.

Speaker 12

Just a couple on Thunderbolt. So on the THUNDER trial, do you think we'll see the data at some point maybe in the first half of next year before you submit it to the FDA? And then just pricing on Thunderbolt, I know you're not going to tell

Speaker 1

us what it is, but is it going to

Speaker 12

be at a similar sort of premium to

Speaker 1

what we've seen with what the Venus side?

Speaker 3

Yes, those are good questions. We haven't even begun to sort of think about the exact timing of when the data would be published and presented. Usually, you do that around one of the significant neuro meetings, but we haven't. Let's get the trial done first and then we can give you updates on the specific timing and I hope you appreciate that. But again, I'm excited about getting through that and getting it done.

Speaker 3

In terms of price, sort of within the confines of the reimbursement structure of neuro, we'll obviously price this to be a profitable procedure for the hospitals. But yes, there likely will be a premium. I can't tell you that it would be dollar for dollar matched to a particular other CAVT product. They're all a little different based on the reimbursement structure of those vascular beds.

Speaker 12

Okay, great. Thank you.

Speaker 3

Thank you.

Operator

All right. There are no further questions at this time. Ms. Furlong, I turn the call back over to you.

Speaker 2

Thank you, operator. On behalf of our management team, thank you all again for joining us today and for your interest in Penumbra. We look forward to updating you on our Q4 call.

Operator

This concludes today's call. You may now disconnect.

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