Inari Medical Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 30, 2024

There are 15 speakers on the call.

Operator

Good afternoon, everyone, and welcome to the Enari Medical, Inc. 2nd Quarter 2024 Earnings Conference Call. All participants are in a listen only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. As a reminder, this call is being recorded and will be available on the company's website for replay shortly.

Operator

I would now like to turn the floor over to Marissa Beich. Ma'am, please go ahead.

Speaker 1

Thank you, operator. Welcome to Inari's conference call to discuss our Q2 2024 financial performance. Joining me on today's call are Drew Hikes, President and Chief Executive Officer and Mitch Hill, Chief Financial Officer. This call includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including statements related to Inari's estimated full year 2024 revenue, operating loss or profitability expectations and the expected operating performance and potential strategic benefits of LimFlo.

Speaker 1

These statements are based on Inari's current expectations, forecasts and assumptions, which are subject to inherent uncertainties, risks and assumptions that are difficult to predict. Actual outcomes and results could differ materially from any results, performance or achievements expressed or implied by the forward looking statements due to several factors. Please review Inari's most recent filings with the SEC, particularly the risk factors described in our latest Form 10 ks for additional information. Any forward looking statements provided during this call, including projections for future performance, are based on management expectations as of today. Inari undertakes no obligation to update these statements, except as required by applicable law.

Speaker 1

On today's call, we will refer to both GAAP and non GAAP financial measures in announcing our Q2 2024 results. Please refer to today's press release for a reconciliation of the non GAAP measure discussed on this call and referred to in that release. The press releases and slides accompanying this call are available on our website at anarimedical.com. A recording of today's call will be available on our website by 5 P. M.

Speaker 1

Pacific Time today. And with that, I'll turn the call over to Drew.

Speaker 2

Thank you, Marissa, and thank you all for joining our call today. In the Q2, we continued driving strong adoption of our therapies, achieving record revenue of $145,800,000 23% year over year growth. In addition to our strong Q2 performance, earlier today we also announced the retirement of Mitch Hill, Onari's CFO and the appointment of Kevin Strange as his successor. I want to speak for a moment about this announcement before turning to our quarterly results. Mitch joined Inari in Q1 of 2019, shortly after we had started to commercialize our FlowTriever and PlotTriever products.

Speaker 2

In that quarter, Anar recorded approximately $6,000,000 of revenue. Today, our quarterly revenue is 25 times larger. During this time, Mitch helped build and scale a solid financial, operating and technology foundation for Inari. He also led our IPO in May 2020 helped us identify and develop Kevin Strange as his successor. On a personal note, Mitch has become a close friend, trusted colleague and thoughtful advisor.

Speaker 2

Most importantly, Mitch's commitment to our mission and our patience has been unwavering. We thank Mitch for his married contributions to Inari and after a highly successful career spanning 4 decades, we wish him the best of luck in his well deserved retirement. Looking ahead, I share Mitch and the Board's confidence in the leadership Kevin will provide as Inari's next CFO. Kevin is well known to our sell side analysts and investors. He's been at Inari since 2020 initially as our VP of Business Development where he led the Limflo acquisition and more recently as our SVP of Finance and Accounting, where he has led our day to day financial operations over the last year.

Speaker 3

Over these past 4 years,

Speaker 2

I have come to deeply respect and rely upon Kevin's experience, expertise, judgment and leadership. I also appreciate Kevin's commitment to our mission and patience. In summary, he is uniquely qualified to lead our finance and accounting organization into the next phase of growth and impact. We expect a smooth transition of the CFO role from Mitch to Kevin as of October 1, 2024. At that point, Mitch will continue to support Kevin's efforts in every way and will remain with Inari through early January 2025.

Speaker 2

Now on to our discussion about Inari's Q2 financial results. As I mentioned, we drove 23% growth in the 2nd quarter. Our performance was underpinned by strong contributions across the Inari portfolio, including our market leading PE and DBT therapies, as well as our expanding set of solutions for new patient populations, which we call emerging therapies. Finally, we had another strong quarter of growth in our international business. As we look ahead to the second half of the year, we're increasing our annual revenue guidance and are also pleased to reaffirm our expectations to reach sustained operating profitability in the first half of twenty twenty five.

Speaker 2

Looking ahead to the rest of this year, we'll continue executing against our strategic objectives in support of strong sustainable growth across our VTE, emerging therapies and international businesses. I'll now share highlights in each of these areas. In Q2, our global VTE revenue was $138,000,000 up 21% versus the prior year supported by our ongoing commercial expansion and market development efforts. Despite some seasonality in Q2, we continue to see strong underlying growth in USVT procedures and expect that this market defined as mechanical thrombectomy alone can and will continue to grow in the neighborhood of 20%. We have the largest VTE focused sales force in the industry and we continue to hire reps in split territories at a measured pace.

Speaker 2

Our sales professionals are making meaningful progress in helping their hospital customers build VTE Excellence programs, which are intended to ensure that each patient diagnosed with a DVT or PE is given consideration for interventional therapy. As we shared last quarter, in some of our most advanced hospital accounts, we're seeing case penetration rates above 50% of the target addressable market. Despite these impressive adoption rates, much work and opportunity remains. Over time, we're confident our team can continue to move from our current high single digit TAM penetration to strong double digit penetration and beyond. Before I talk about the work we're doing clinically, I would like to provide a brief update on our Klaxweaver XL catheter, the first purpose built tool specifically designed to treat complex DVT.

Speaker 2

We recently issued a voluntary field notice for CTXL, updating the instructions for use. This update provides additional procedural guidance to physicians and is not related to device malfunction or defect. The scope of this action applies only to CTXL and we do not expect any revenue impact. Turning to clinical, to support our commercial efforts, we will continue to lead the field with high quality clinical data as we develop our markets and drive toward better patient outcomes. I'm excited to share that we will release our Peerless data at a major medical meeting in Q4.

Speaker 2

As a reminder, Peerless is the first of our 3 major RCTs to complete enrollment and was designed to evaluate patient outcomes using FLOWTRIBIR as compared to catheter directed thrombolysis. Today, we estimate approximately 20% of the intermediate risk PE patients are undergoing some type of catheter based intervention. Despite our progress to date within this interventional segment, we believe up to a third of patients are still being treated with legacy lytic based interventions like ECOS. Peerless will have an impact on this segment of the market, driving more of those patients to receive mechanical thrombectomy with FlowTriever over lytic based treatment. We expect Peerless to further establish FlowTriber's competitive mode as the optimal interventional therapy for intermediate risk PE patients.

Speaker 2

Peerless will also usher in the beginning of a golden era of RCT data in the PE space. Meanwhile, we are continuing to advance enrollment in our 2 other RCTs, both of which compare our products to conservative medical management. Peerless II comparing FLOWTRIVOR to anticoagulation alone in PE and DEFIANCE comparing clotTreevert to anticoagulation alone in DVT. We believe these studies will change guidelines, extend our leadership position and ultimately change the standard of care in VTE away from conservative medical management to frontline treatment with FLOTREVER and clotriever. Turning to our Global Emerging Therapies business.

Speaker 2

Following years of purposeful investments, in Q2 we delivered over $8,000,000 in Emerging Therapies revenue, up 66% versus the prior year and 36% sequentially. This segment consists of 4 distinct patient populations outside of VTE, together comprising a $4,000,000,000 TAM in the U. S. Alone. Our Q2 success was driven in part by strong early adoption of VenaCore, our 2nd purpose built tool for the treatment of chronic venous disease or CBD.

Speaker 2

VenaCore progressed to full market release during Q2. As a reminder, we believe the addressable market for CBD includes an annual incidence of approximately 100,000 patients, representing a $1,000,000,000 U. S. TAM alongside a substantial prevalence pool of over 1,000,000 patients. In addition to VenaCore working well in CBD, many of our physicians have also found that it has clinical utility in DVT and we're exploring how this can potentially further strengthen our DVT toolkit going forward.

Speaker 2

Turning to CLTI, we continue to make great progress integrating the Lympho business into Inari and our early U. S. Launch is advancing well. LEMPLO offers new hope for the 55,000 patients per year suffering from no option CLTI translating into a $1,500,000,000 U. S.

Speaker 2

TAM. We continue to view 2024 as a year of foundation building and remain focused on physician training, VAC approvals and thoughtful patient selection and deliberate wound care follow-up. Just as we have done with our flow triver and clot triver toolkits, we're actively working to iterate and refine the existing 1st generation lympho system. 2 weeks ago, we received PMA approval from the FDA for our 2nd generation stent delivery system. This approval improves a key component of the Linflo system.

Speaker 2

After we complete the limited market release in Q3, we look forward to beginning to commercialize this product in Q4. In addition, we're pleased to highlight that earlier this month in the recently released draft 2025 outpatient prospective payment system rule, CMS proposed to increase hospital outpatient reimbursement for the lympho procedure from $27,500 to $35,000 a meaningful increase of $7,500 This enhanced reimbursement is relevant to the roughly 20% of lympho cases currently performed in a hospital outpatient setting. This is in addition to the NTAP proposed earlier this year that would add as much as $1,250 to the existing DRG based reimbursement for lymphop procedures performed in the inpatient setting beginning October 1 this year. We expect to see the final ruling from CMS for inpatient reimbursement in the next week or so and the final ruling for outpatient reimbursement in Q4. A third market addressable by our emerging therapies portfolio is acute limb ischemia, a $600,000,000 U.

Speaker 2

S. TAM characterized by tremendous unmet needs and a lack of purpose built tools. To address this market, we remain on track to initiate a limited market release of our 2nd generation ARCTIC system in Q4. Our final emerging therapies market addresses the treatment of AV fistula clots using our enthril device. We continue to work on a 2nd generation enthril platform and look forward to bringing it to market next year.

Speaker 2

Driven by all these efforts, over time, we're confident our emerging therapies business can one day account for at least 20% of Inari revenue. Finally, I would like to discuss another strong quarter in our international business. Revenue of $10,000,000 was up 93% versus the prior year. Strength was primarily driven by adoption of our solutions in Europe and Latin America. Additionally, we remain on track to treat patients in both China and Japan in Q4.

Speaker 2

We are excited about the progress we're making and expect total international sales to one day account for at least 20% of Inari revenue. Before I turn the call over to Mitch, I'd like to share as always a story about the incredible impact of our technology on patients. A 56 year old man from New York presented to the hospital months of pain and swelling in his right leg. He was diagnosed with a DVT and like most patients was offered conservative medical management consisting of anticoagulation medication alone. Despite 6 months of therapy, his symptoms worsened.

Speaker 2

Desperate for a better solution, he sought care at another facility that was skilled with interventional treatment of both acute and chronic deep venous thrombosis. By the time the patient came in for a second opinion, his condition had progressed to chronic venous disease. The obstruction in his veins was no longer clot, but it transformed into fibrous wall adherent scar tissue. His physicians determined that he would be a good candidate for treatment with VenaCore, the only tool specifically designed for treatment of chronic venous disease. In a short 45 minute procedure, the patient had all the chronic material removed from his instructed vein using elements of the clothever toolkit, including PROTrieve, clothever bold and especially VenaCore.

Speaker 2

The physicians were amazed as they had not been able to treat lesions of this complexity previously. The introduction of VenaCore greatly expands our ability to treat CBD patients and further demonstrates our continued mission to bring transformative technologies to patients with significant unmet needs. In closing, we're pleased with our Q2 performance and how we're positioned for the remainder of 2024 and beyond. There are a number of exciting catalysts for the business on the horizon. And as we often say, despite all our progress to date, we are just getting started.

Speaker 2

With that, I'll turn the call over to Mitch.

Speaker 4

Thanks Drew. Turning to our Q2 2024 results. Anari's revenue for the Q2 of 2024 was $145,800,000 up 22.5 percent over the same period of the prior year. This represents sequential growth of over $2,600,000 Global VTE revenue in the 2nd quarter was $137,700,000 up 20.7% over the same period of the prior year. Global Emerging Therapies revenue in the 2nd quarter was $8,100,000 up 65.6% over the same period of the prior year.

Speaker 4

International revenue of $10,000,000 was up 92.9% compared to the prior year. Our best in class gross margin was 86.3% for the Q2 of 2024 compared with 88.4% in the prior year period. The year over year change was due to product mix, the ramp up costs associated with new products and increasing internationalization of the business. Operating expenses were $148,300,000 in the Q2 of 2024 compared with $106,700,000 for the same period of the prior year. R and D expense was $24,900,000 in the Q2 of 24, up 18.1 percent compared with $21,100,000 for the same period of 2023.

Speaker 4

The increase in R and D expenses was primarily due to increases in personnel related expenses, material and supplies related expenses and professional fees. For the back half of the year, we expect R and D as a percentage of revenue to be roughly similar to the first half. SG and A expense was $114,200,000 in the Q2 of 2024, up 33.4% compared with $85,600,000 for the same period in the prior year. The increase in SG and A expenses was primarily due to increases in personnel related expenses as a result of additional team members, increased commissions, share based compensation, legal, marketing and other admin expenses. As we move through the second half of the year, we expect SG and A expenses as a percentage of revenue to decrease to the approximate level we saw in Q1 2024.

Speaker 4

In the Q2 of 2024, the change in our fair value adjustment of our contingent consideration liability was $5,700,000 as our Linflow business continues its exciting progress. Amortization expense related to the acquired intangible asset was $2,400,000 and acquisition related expenses were $1,000,000 dollars There were no expenses related to these three items in the prior year quarter. Enari recorded a GAAP operating loss $22,400,000 in the Q2 of 2024 compared with a GAAP operating loss of $1,500,000 in the same period of the prior year. On a non GAAP basis, which excludes acquisition related expenses, acquired intangible asset amortization and changes in the fair value of contingent consideration, the 2nd quarter operating loss was 13,200,000 The non GAAP adjustments had no impact on the Q2 of 2023. Net loss was $31,300,000 for the Q2 of 2024 compared to a net income of $2,100,000 for the same period of the prior year.

Speaker 4

The basic and fully diluted net loss per share for the Q2 of 2024 was $0.54 on a weighted average basic and diluted share count of 58,100,000. This compares with a basic and fully diluted net income per share of $0.04 on a weighted average basic and diluted share count of 57,200,000 58,500,000 respectively in the same period in the prior year. As we execute against our goals of driving strong growth and leverage within the business, we are also maintaining a thoughtful approach to managing our balance sheet. In the Q2 of 2024, our cash flows used in operating activities were $800,000 compared to our cash flows provided by operating activities of approximately $7,700,000 in the same period of 2023, primarily due to investments in the Lympho commercial team and supporting functions. At the end of the second quarter, we held a healthy balance of cash totaling $109,700,000 We remain confident in our ability to self fund our business and strategic objectives with our current cash and access to liquidity.

Speaker 4

We anticipate our cash balance will remain above $100,000,000 for the duration of the year. Turning to our 2024 outlook, we are raising our full year 2024 revenue guidance to $594,500,000 to $604,500,000 an increase of $2,000,000 at the midpoint of our prior guidance range of $592,500,000 to $602,500,000 reflecting growth of approximately 20.5 percent to 22.5% over 2023. Our guidance reflects contributions from all three of our growth pillars: VTE, Emerging Therapies and International. From a phasing perspective, given the timing of our second half catalysts that we have discussed, we would anticipate Q3 sequential growth this year to be roughly half the Q3 sequential growth from last year. As a result, we expect to see stronger year over year growth in Q4 compared to Q3.

Speaker 4

Lastly, I would like to comment on Inari's progress towards profitability. We are continuing to invest in our strategic objectives to drive growth while remaining fully committed to achieving sustained operating profitability in the first half of twenty twenty five. Reaffirming commentary from our Q1 call, we expect to see an improvement in operating losses in the second half of twenty twenty four versus the first half. Specifically, we expect to sequential operating loss decreases in Q3 and again in Q4. Before turning the call to the moderator for questions, I would like to quickly comment on my retirement news as Drew mentioned earlier.

Speaker 4

Working at Inari has been the highlight of my professional career. Drew mentioned our tremendous growth since the 2019 timeframe. While that's impressive, I feel we are just getting started. I see a day when any patient diagnosed with a venous and in the future arterial clot will say to his or her doctor, I want to be Inari. Inari has the products, financial resources and most importantly the people to continue to be the leader in our chosen markets.

Speaker 4

I would also like to express my confidence in Kevin Strange as Inari's next CFO. His promotion reflects the culmination of a deliberate and long term succession plan. Kevin has been an immense contributor to our NII team for many years already, leading our financial and accounting functions as well as our strategy and business development efforts. I'm excited about the contributions Kevin will continue to make as he works closely with Drew, Tom and other members of Inari's senior management team. Like mine, Kevin's blood runs purple and I'm confident in his vision to lead Inari's financial affairs into the future.

Speaker 4

With that, I'll turn the call back to the moderator for questions. For the Q and A segment, we will be joined by Doctor. Tom Tu, Inari's Chief Medical Officer and Kevin Strange, Inari's incoming CFO.

Operator

And our first question today comes from Larry Biegelsen from Wells Fargo. Please go ahead with your question.

Speaker 5

Hi. This is Samiran on for Larry. Thanks for taking the questions and congrats on the retirement, Mitch. Maybe to start off, if we put all of the pieces together, we back into U. S.

Speaker 5

VTE sales growth of about 17% year over year for the quarter. So how does that stack up to the underlying core market growth that you saw in Q2? And do you see that growth sustaining into the second half of the year? Yes.

Speaker 2

This is Drew Hikes. I appreciate the question. I can get started on that. Others may want to join in as well. So relative to BTE, we saw 21% growth in that part of the business in Q2.

Speaker 2

So another strong quarter of growth. A little faster than that internationally, a little slower than that, albeit off a much larger base here in the U. S. That growth was across a backdrop of what we continue to see as robust underlying market growth here in the U. S.

Speaker 2

In the past, we've characterized that as being in the neighborhood of 20 percent. And as you heard us state in the prepared remarks, that continues to be our assessment today, robust underlying market growth. We have every anticipation of that continuing as we move forward. And within that fast growth market, we remain highly confident in continuing to be the market leader. We believe we have a 4:one lead in PE, 1.5 or 2 times lead within DVT.

Speaker 2

And despite competitive dynamics, we continue to be the leader and anticipate and be confident in continuing to be the leader. I think that confidence stems from the performance of our technology, the high quality data getting stronger every day, the strength of our commercial engine, our IP portfolio, highly differentiated approach to market development, all of those things give us confidence. We're going to continue to be the leader in this market and we're going to continue to drive as a result robust growth in VT just like you saw in the first half of this year. And maybe I could quickly add, by the

Speaker 4

way, thanks for the retirement well wishes, but the 21% growth in VTE, when you combine that with the 66% growth in emerging therapies and the over 90% growth internationally, we feel like we're well on our way towards building this kind of Internet this multi product platform company that we started out after in fact probably 5 years ago. And we are again guiding with the updated numbers as of today to I think 21% at the midpoint. So we're pleased with the way the year is setting up.

Speaker 5

Great. Thank you for all of the color. Maybe for my follow-up on guidance. You raised total revenue at the midpoint by the magnitude of the B and gave great color about sequential quarter over quarter growth in Q3 and Q4 that we should expect. So what are the key drivers of that sequential growth?

Speaker 5

And anything we should note in terms of competitive headwinds in the second half?

Speaker 2

Sure. I can speak to that. So the $2,000,000 increase in guidance, I think reflects the confidence we have here halfway through the year and the continued strength we see across all different parts of the business. Keep in mind that comes on the heels of a $10,000,000 raise at the end of Q1. Looking ahead from here, in the second half of the year, we continue to see the same set of catalysts that we've described in the past.

Speaker 2

Continued runway with VenaCore and the full market release of that product, the anticipated reentry in acute limb ischemia with ARDEX, a Peerless data coming in the readout in Q4, some nice catalysts with Limb flow relative to the NTAP and a new product update and then finally anticipated launch in both China and Japan by the end of the year. Those are the catalysts that we've talked to in the past and all of them remain intact here in the second half of the year. Many of them with more clarity on timing at this point are tilting towards a Q4 impact as opposed to a Q3 impact. And as you heard us describe in the prepared remarks that was clearly taken into account as we updated the guidance with the $2,000,000 raise today.

Operator

Our next question comes from Cai Lomitichmarch from Morgan Stanley. Please go ahead with your question.

Speaker 6

Thank you very much.

Speaker 7

And again, Mitch, would like to wish you a happy retirement. Just on the DOJ inquiry, just looking for any comment or update on this. Is there any chance of a resolution sooner than the multiple years you've mentioned previously? I know you're pretty limited on what you can say, but it's certainly an overhang to some clients that I speak with. So I would appreciate any color you could give on that.

Speaker 2

Sure. Happy to speak to that, Collin. So status quo in Q2 on the DOJ, we continue to cooperate with the CID as we have all along. That cooperation at this phase is really related to producing information for the DOJ. In the meantime, as we've stated historically, the CID has had no impact on our commercial strategy nor our commercial tactics.

Speaker 2

Always a chance that it resolves sooner rather than later. But keep in mind, I think most of the precedents point to a timeline that's likely measured in quarters, if not years as opposed to weeks months. So that's the update relative to the DOJ.

Speaker 7

Great. And then one follow-up. Lots of doctors we've spoken with really view PILLAS II as the key to unlocking a significant part of that TAM you talked about in PE. We're obviously not expecting a readout from this until, call it, 2027. I guess, in the interim period between now and a substantial RCT like PLS-two, call it, through 202520 6.

Speaker 7

What gives you confidence of market growth trending around that 20% level that it's called out at today? Or is there a risk that we might step below that temporarily in the interim period? Thanks.

Speaker 3

Alan, this is Tom. Thanks for the question. Yes, I do think that several physicians are pointing to PURELISS 2 given that it randomizes FLOTRIVER to standard of care, which is anticoagulation. But let's not forget the tremendous impact that PURELIS 1, which again is going to read out later on this year, will have on the market. As you heard in the prepared comments, we think, up to a third of interventions for pulmonary embolism are performed still using an outmoded therapy called catheter directed thrombolysis.

Speaker 3

And PURELISS-one is going to be the first randomized data that is comparing FLOTREVER to that form of therapy. We think that it raises the bar in terms of quality of evidence in this space. I think there's a lot of excitement and you're going to see the market impact of that probably in 2025 and

Speaker 2

beyond. Thanks guys.

Speaker 4

Thanks, Tom.

Operator

Our next question comes from Stephanie Pesky from Bank of America. Please go ahead with your question.

Speaker 8

Hi, thanks for taking the question. I just wanted to follow-up on some of the comments about the CFO transition and we'll echo sentiments on a happy retirement to Mitch. But as Drew mentioned, we all know Kevin and is a great choice on CFO. But curious, Mitch, anything more you're saying on why is now the right time to kind of hand over the reins and if the plan is to do a full retirement?

Speaker 4

Yes. Thanks for the question, Stephanie. I feel definitely like this is a great time for me to retire and kind of pass the baton to Kevin. I haven't given a lot of thought to what I'm going to be doing after Inari. I do really look forward to working closely with Kevin through that October 1 timeframe to have a smooth transition.

Speaker 4

And then through the end of the year to help him and the company in any way I can. In terms of my 2025, I'm not sure. It's kind of TBD in terms of what I'll be doing. The one thing I can say is I will not be taking another executive role at the Med Device Company. So hopefully, I can log some more ski days compared to what I've been doing for the past few days and certainly wish the

Speaker 8

maybe just maybe just another follow-up, wanted to ask about trends you saw throughout the quarter. On the Q1 call, you mentioned seeing some vacation impact in the 1st weeks of April. So just curious how procedure volumes trended throughout the quarter and maybe exiting the quarter and how that ties into the Q3 and Q4 sequential guidance you gave? Thank you.

Speaker 2

Yes, Stephanie. I can take a stab at that one. So we did see seasonality in Q2. That's historically been pretty consistent. And as you mentioned, we anticipated that at the front end of the quarter and sure enough that's what we did see.

Speaker 2

Despite those seasonal headwinds, we were able to grow 23% on the top line, 21% within VTE. If the past is any prologue here, the underlying procedure trends will improve as we move into the second half of the year, particularly as you move through the rest of the summer and into the fall. So we're hopeful for those trends to repeat, but we're also very pleased with how the business performed in Q2 despite those anticipated Q2 seasonal headwinds.

Operator

Our next question comes from Marie Thibault from BTIG. Please go ahead with your question.

Speaker 9

Hi, thanks for taking the questions this evening. Mitch, congrats so much on your retirement. I hope you enjoy it and get a lot of skiing. And Kevin, pleased to have you in the role. I wanted to start here, I guess, a little bit and see if we could get an update on enrollment for Peerless II and Defiance.

Speaker 9

I know that they underway. Wondering if you can give us any details on timelines given the importance of those data readouts in addition to Peerless I?

Speaker 3

Thanks for the question, Marie. So yes, I'm very excited to talk about our clinical trial strategy. I know we seem to be skipping over PeerlessONE. But again, as a reminder, it is our first RCT looking at FLOWTRIVER versus catheter directed thrombolysis and we're excited about the presentation of those results later on this year. Answering your question directly, PURELISS 2 and DEFIANCE are 2 RCTs that are randomizing our therapies versus anticoagulation alone.

Speaker 3

And I know those trials are greatly anticipated. Of course, these are very large trials and are going to take a bit more time to enroll. We're very pleased with the enrollment so far. It's going on schedule and as predicted. So we're excited about executing on those.

Speaker 3

But I think our focus right now is getting the PeerlessONE results out there in the public eye.

Speaker 9

Yes. We look forward to it too. Thanks for that, Tom. And then quick follow-up here. You mentioned China and Japan, you'll be treating patients in Q4.

Speaker 9

Can you tell us a little bit more about those markets, your sales approach there? Will you be working with distributor partners or going direct? Any details on those markets?

Speaker 2

Sure, Murray. I can take that one. So we continue to execute the regulatory path approval for both China and Japan. We remain on track for helping patients in both of those respective markets. Both of those pathways are pointing more towards a Q4 start than a Q3 start.

Speaker 2

They're both large market opportunities for us, particularly China, just given the population size is an enormous unmet need. But Japan is also a compelling market for us as well. So as you know, we've been working really over 2 years now to gain approval and put ourselves in a position to help patients in those respective markets. I think as we get closer to those milestones, we will certainly have more to share on our go to market strategy and our more general commercial strategy in those two respective markets. But I think for today, we'll leave it at that and provide more color as we get closer to actually launching in those two markets.

Speaker 9

Okay, got it. Thank you so much.

Speaker 4

Thank you.

Operator

Our next question comes from Bill Klavanyc from Canaccord. Please go ahead with your question.

Speaker 10

Yes, great. Thanks. Good evening. Thanks for taking my questions. First, just Mitch, in regards to guidance for Q3, I think if we look at the Q3, 2% to 3% last year, I think it was up 6.2% sequentially.

Speaker 10

That would half of that would be 3.1%, which would get us to 150.3 percent. I think if you look at consensus, it's about 151.5 percent. The question is, did you give that guidance because you just don't want people to lift the Q3? Or are you signaling that maybe the $151,000,000 is a little high and we need to scale back a bit? And then just secondly, as you talk about the Venacor launch, as you got some upside from that this quarter, is that sell in, sell through?

Speaker 10

How should we think about that? Is that you got it out, it just ramped we got to sell off what you got in or that will continue to ramp? Thanks.

Speaker 4

So on the guidance question, Bill, I think your math is really well done. And one of the things that we sort of saw last year is we had a lot of catalysts in Q3 of 2023. This year the catalysts appear to be lining up more in Q4. So from a sort of a year over year comparable basis, our Q3 of 2023 is a tougher number. And I think what we're trying to suggest to people is sort of from the point of view of how the revenue will profile from Q2 to Q3.

Speaker 4

I think your math is pretty close. And then again from Q3 to Q4, we see a greater acceleration at that point in time. So hopefully that's helpful commentary in terms of how we see the rest of the year. Of course, the consensus stuff is all up to you guys in terms of your models, but we just wanted to see if we could be helpful there.

Speaker 2

And then Bill on your second question related to VenaCore, I can provide some color on that. So as you heard in the prepared remarks, we did move into full market release with VenaCore in Q2 and we've seen some really enthusiastic VenaCore as our Core. Lots of runway out ahead of us to continue the SMR with Vena Core given how early we are in rolling that product out. So we're excited about how it will contribute in the second half of the year. One other thing to note with VenaCore is we're seeing physicians also use VenaCore in DVT.

Speaker 2

And again, you heard us mention that in the prepared remarks. So nice to see that and we're continuing to understand that and explore that as a way to continue to bolster the strength of our DBT franchise.

Speaker 10

Great. Thanks for taking my questions.

Speaker 4

Thanks, Bill.

Operator

Our next question comes from Chris Pasquale from Nephron Research. Please go ahead with your question.

Speaker 11

Thanks and congrats, Mitch. Maybe I'll start with a CFO question in honor of your retirement. I was hoping you could go into some more detail on what drove the $11,000,000 sequential step up in SG and A and why that number comes down in the back half of the year?

Speaker 4

Sure. Happy to help with that, Chris, and thanks for your well wishes. In Q2, we saw some expense related to headcount growth, commissions, some stock based comp. Obviously, you're familiar with the legal. We talked about DOJ and there's also a matter with Imperative in Q2 and then also some bad debt and some other things.

Speaker 4

So kind of a whole collection of different items that happened. Some of those items are more one time in nature and that's kind of what led us to comment on the trajectory of SG and A as we kind of move into Q3 and Q4. I think in Q1 of this year, the SG and A spend kind of looking at the excluding the non GAAP stuff was about 72% of revenue. And so we expect to see a drop from the high 70s back into the low 70s with the move through the remainder of the year. So I think the that's kind of some commentary we wanted to provide on that.

Speaker 4

And I think longer term, as you heard me say during the prepared remarks, we're confident in the company's ability to narrow its operating losses as we move through the remainder of 2024 and then return to operating profitability as we move into the first half of twenty twenty five. So I'd say it's all going to be fine.

Speaker 11

Thanks. And then one quick one for Drew or maybe Tom. Just would love some thoughts on how the Limflo limited launch is going and what does this rollout of the 2nd gen system mean? Is this a key

Speaker 2

milestone where we should expect an inflection

Speaker 11

in activity there heading stone where we should expect an inflection in activity there heading into 2025?

Speaker 2

Yes. Thanks for the question, Chris. Actually, Kevin has been closest to Limflo going all the way back to the acquisition. I think he'd be in a good position to answer that question first.

Speaker 12

Yes. Thanks, Drew. And thanks for the question, Chris. So as you know we're about 8 months post deal close of LimFlo transaction. I think from an integration perspective overall we feel really good about where we are.

Speaker 12

We're pleased with the progress that we're making and having gotten through some key early hurdles from an integration perspective. So still some more work to do, but overall feeling really good. From a commercial perspective, I'd say we're also very pleased with what we're seeing out of the gate, good traction in the marketplace, a lot of good hospitals. We've had several very ensuring we get really good outcomes in the early stages of the rollout. But having said all that, as you've heard in the prepared remarks, 2024 really is a foundation building year for Lympho.

Speaker 12

We're in the process of getting through back committees. We're training physicians. We're establishing wound care protocols. We're really making sure we're trying to pick the right patients to ensure we get really positive outcomes in the early stages of the rollout. As you heard also in the prepared remarks, we're going to have a couple of catalysts towards the end of the year that will be the Intap coming online in October and the launch of the new handle both of those towards the end of the year.

Speaker 12

So we feel like we've got good momentum in this foundation building year and we're setting ourselves up for what should be a very positive 2025.

Operator

Our next question comes from Adam Meter from Piper Sandler. Please go ahead with your question.

Speaker 13

Hi, good afternoon. Thank you for taking the questions. And Mitch, congrats on the retirement and Kevin, congrats on the appointment to CFO. I wanted to first double click on the U. S.

Speaker 13

VTE results in the quarter. I know you don't disclose the breakout between clotriever and flow retriever, but would just love any incremental color that you're willing to provide on the performance in the quarter for each of those even if it's just qualitative? And then I had one quick follow-up. Thanks.

Speaker 2

Sure, Adam. I can get started on that. So, 21% growth in VTE, a little slower than that here in the U. S, a little faster than that internationally. Within the U.

Speaker 2

S, specific to your question, we did see balanced growth across both DVT and PE, pretty consistent kind of mix to what we've seen in the past. We were facing some transient seasonal headwinds as you've heard us describe. So that was certainly a factor in the quarter. But all in all, another nice quarter of growth within VTE internationally and certainly here in the U. S.

Speaker 2

And we hope that and expect that momentum will continue here as we look ahead into the second half of the year.

Speaker 13

Thanks for the color, Drew. And for the follow-up, did want to ask just briefly on the voluntary field notice for Clotriever XL. Doesn't sound like a big deal. I heard the commentary in the prepared remarks. You don't expect the revenue impact.

Speaker 13

But wanted to give you the opportunity to maybe just expand on exactly what the field notice said and what's being addressed there? Thanks for taking the questions.

Speaker 3

Thanks for the question, Adam. So yes, to address it briefly, it's a voluntary field notice that we proactively went to FDA with. It offers additional procedural To level set on the patient population we're talking about, the XL device To level set on the patient population we're talking about, the XL device is the 1st purpose built tool designed specifically to treat complex DVT, that's about 15% of patients. And we've seen excellent feedback from our physicians. This, of course, is a disease that's associated with pretty severe outcomes with conservative management.

Speaker 3

Discussed refers to a very small subset of these patients. It's a particular combination of factors including specific nature of the clot, specific location and some technical aspects. And this labeling update is not a recall, so the device is going to stay on the market. I think the reason for all of this is our patients first ethos. When we learn something that can reduce risk for patients, we will communicate this transparently and proactively.

Speaker 6

Thank you, Doctor. Tu.

Speaker 4

Thanks, Adam.

Operator

Our next question comes from Richard Newitter from Truist. Please go ahead with your question.

Speaker 6

Hi, thanks for taking the questions.

Speaker 13

I was hoping I could just maybe ask a

Speaker 6

little bit looking forward to 2025. Is there anything that you see that would potentially stop you from growing in the by my calculation in the mid to high teens in your core U. S. Venus business, thinking putting everything together, the market acceleration that sounds like you're expecting and any share dynamics there. We'd love to hear kind of your confidence in sustaining that level of growth if possibly even accelerating it.

Speaker 6

Thanks.

Speaker 2

Yes. Thanks for the question, Richard. So we're going to be careful not to obviously put out 2025 guidance today. What I can tell you is we feel really confident in our VTE franchise globally and certainly here in the U. S.

Speaker 2

As well. Keep in mind this is a $6,000,000,000 market that we believe is maybe 7% penetrated with our technologies. We're going to continue to execute the same playbook you've seen in the past in 2025. We're going to continue to iterate and refine our technology. We're going to leverage high quality clinical evidence.

Speaker 2

In 2025, of course, we'll have Peerless fully read out and be able to leverage that data set. We're going to continue to execute against our VTXcellence market development program. We're going to continue to leverage our commercial engine. All of those things give us confidence. We're going to continue to drive momentum and growth in VTE for some time ahead.

Speaker 2

The runway is long and this is a large market that we are just getting started converting from conservative medical management over to frontline treatment with FLOTREVER and CLOTREVER.

Speaker 6

Great. Thanks. And maybe just a follow-up. I'm not sure if someone asked, I'm juggling calls, forgive me if they did. Q2, on what the contribution was from unit price mix?

Speaker 6

Would love to hear kind of how the trend was going there in the core business? Thanks.

Speaker 4

Yes. We you can see the revenue contributions, Richard, just in terms of the disclosure that we provided. By way of price, we continue to see stable pricing in the marketplace. If anything, we are looking for opportunities to take price. We've been successful with many of our hospital customers.

Speaker 4

There's something called the VPE, PPP, so the price per procedure. That allows the treating physicians to basically avail themselves of tools from both product tool kits when we have that pricing plan in place. So we feel good about the kind of pricing positioning of the products in the marketplace. Our procedure volumes were very strong in Q2. We also saw some stocking revenue in Q2.

Speaker 4

In this case, it was less than in some of the other quarters where we've had more product introductions. In Q2, it was primarily related to VenaCore. So that's something that we are just kind of it fluctuates quarter to quarter. And I think you've heard us talk about that long term in terms of where we expect that will land.

Operator

Our next question comes from Margaret Kaczor from William Blair. Please go ahead with your question.

Speaker 14

Hey, good afternoon guys. Thanks for taking the question. Mitch, again, like everyone else, I wish you good luck in your retirement and look forward to seeing you maybe at the Salt Lake Olympics at some point

Speaker 5

with your skiing. No one asked a few

Speaker 14

of those questions, so I'll come out and ask a few of those questions. A couple, I guess, within this. One, can you still meet the time line to publish at a meeting like PCT? Or should we assume that it's another one at this point in time? And then I guess more importantly, as we look at the level of awareness and how you look at from a

Speaker 9

kind of

Speaker 14

commercialization perspective or a sales perspective, how are you going to use that data in the following weeks months post the data launch, especially maybe based on the outcomes of the win ratio? I know it's kind of one big number, but depending on if you see all cause mortality, what would that potentially do for you guys versus something more like ICU stay benefit? What's most meaningful for clinicians and how might that drive share? Thanks.

Speaker 3

Margaret, thanks for the question and for all that detail on Peerless. I'll expand on that a bit by saying we're really excited about Peerless. We've committed to presentation at a meeting later on this year and nothing has changed in that regard. As we get more specific, certainly we'd be happy to share those, but no change in terms of timeline of data presentation. As a reminder, the primary outcome of Peerless is a win ratio as you described with 5 very important endpoints.

Speaker 3

Some of these are hard clinical endpoints, others of them are hospital resource utilization endpoints like ICU length of stay. But one thing all of these endpoints have in common is that they are incredibly meaningful to patients, physicians and hospitals in the care of pulmonary embolism. So we think that the win ratio is a very kind of exciting and somewhat new statistical technique that's going to really comment on which form of therapy is superior. And as far as how we're going to market this, we've been very clear that Lytics is an outdated form of therapy for a variety of reasons and we think Peerless is going to highlight why we think FLOTRIVER should be the standard of care for these patients. And you will see a great deal of discussion of Peerless being the first in what I've been describing as the golden era of clinical studies for the VTE space.

Speaker 14

Okay. So from your perspective, you think clinicians are going to look at the whole win ratio versus kind of picking and choosing, I guess, which subcategories that they would find more important to move their share one way or the other?

Speaker 3

I think sophisticated physicians will look at all of the different aspects of the study. Like I said, there's multiple meaningful endpoints there. But the top line result is the win ratio taken in total because it comments on strategy A versus strategy B.

Speaker 14

Appreciate it. Thank you.

Operator

And ladies and gentlemen, at this time, I'm showing no additional questions. We'll be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

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Key Takeaways

  • Enari achieved record Q2 2024 revenue of $145.8 million, up 23% year-over-year, driven by strong adoption of its PE, DVT and emerging therapy portfolios, as well as international growth.
  • The company raised its full-year 2024 revenue guidance to $594.5–$604.5 million and reaffirmed plans to reach sustained operating profitability in H1 2025, with sequential operating loss improvements expected in Q3 and Q4.
  • All three growth pillars delivered robust results: global VTE revenue of $138 million (+21%), Emerging Therapies revenue of $8.1 million (+66%) and International revenue of $10 million (+93%), with China and Japan launches targeted for Q4.
  • CFO Mitch Hill announced his retirement after building the finance organization and leading the IPO, and Kevin Strange will succeed him as of October 1, 2024, under a deliberate succession plan.
  • Enari will present Peerless RCT data in Q4 2024, comparing FlowTriever to catheter-directed thrombolysis in intermediate-risk PE, while two additional trials (Peerless II and DEFIANCE) versus medical management continue enrolling.
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Earnings Conference Call
Inari Medical Q2 2024
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