Inari Medical, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to NRE's third quarter 2020 earnings conference call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, press star 0. I would now like to hand the conference over to your speaker today, Ms. Caroline Corner. Please go ahead, ma'am.

Thank you, Operator. Welcome to ANARI's third quarter 2020 earnings call. Joining me on today's call are Bill Hoffman, President and Chief Executive Officer, and Mitch Hill, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which ANARI operates, trends and expectations for Inari's product and technology, trends and demands for Inari's products, Inari's expected financial performance expenses and position in the market, and the impact of COVID-19 on Inari's operations and Inari's customers' operations. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance, or achievements to differ materially from any results, performance, or achievements expressed or implied by the forward-looking statements. Please review INARI's most recent filings with the SEC, particularly the risk factors described in INARI's S-1 filing and in INARI's quarterly report on Form 10-Q for the third quarter ended September 30, 2020, for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. INARI undertakes no obligation to update these statements except as required by applicable law. Inari's press release with third quarter 2020 results is available on Inari's website, www.inarimedical.com, under the Investors section and includes additional details about Inari's financial results. Inari's website also has the latest SEC filings, which you are encouraged to review. A recording of today's call will be available on Inari's website by 5 p.m. Pacific time today. Now I would like to turn the call over to Bill for his comments on third quarter 2020 business highlights.

Thank you, Caroline, and thank you, everyone, for joining us today. We have enjoyed a busy and highly productive Q3, which we will review in a moment. But I'd like to start first with a story that might help remind you of who we are and what we do. Last quarter, I shared with you a story about a patient with a massive pulmonary embolism who was in such poor condition that his wife was summoned to the cath lab to say goodbye. Moments later, the physician used our flow tree for technology to extract several large blood clots from the patient's pulmonary arteries, leading to immediate improvement of symptoms and vital signs while the patient was still on the table, followed by a remarkable and rapid recovery. I'd like to share now with you a very different story about a deep vein thrombosis, or DBT, patient with a guarded prognosis due to his underlying cancer. This patient, in fact, has terminal metastatic prostate cancer. The patient presented multiple times to the hospital for various cancer-related procedures, drug infusions, and follow-ups. He complained of heaviness, pain and swelling of his legs worsening with each visit. Further and further, this formerly highly active man's ability to even walk. During a multidisciplinary tumor board meeting at the hospital in which various imaging and cancer treatment strategies are discussed, the interventional radiologists are discussed, the interventional radiologist asks a simple question. How's the patient doing? The answer was the patient could not walk. A simple imaging test revealed extensive blood clots in both legs, extending into the pelvis and even into the vena cava in the abdomen, which was causing the leg swelling and significant pain. Sadly, clotting disorders and deep vein thrombosis are very common in cancer patients. The interventional radiologist lobbied the consulting oncologist, all of whom were consumed with his cancer treatments, to consider treating the blood clots. After some discussion about whether it is quote-unquote worthwhile, to treat DVT in a terminally ill cancer patient. The patient was ultimately treated with the Inari clot treater. Large volumes of clot were removed from both legs. The patient was discharged from the hospital the next day. The pain, swelling, and heaviness resolved. A few weeks later, the patient's son sent a letter to the treating physician thanking him for paying attention to the patient's chief complaint and allowing him to enjoy whatever time he has left in the highest quality way. The letter included a picture of of the patient playing in the yard with his grandchildren. Deep vein thrombosis, unless it embolizes to the lungs to become pulmonary embolism, is rarely a life-threatening condition. It is, however, one of the most miserable and severely lifestyle-limiting conditions imaginable. We, along with our physicians and customers, are committed to impacting the lives of our patients, regardless of the quantity of life remaining, in the most beautiful and important ways. This is not just what we do This is who we are. We remain so thankful for this opportunity and for the responsibility entrusted in us by our physicians, our customers, and our investors. As you'll hear shortly, we are growing our DVT business along with our PE business aggressively. Despite our success to date, fewer than 5% of all patients who can and probably should benefit from our devices are being treated with FlowTriever or CloudTriever. Most of them never even see a physician who knows about our devices or or that these treatments even exist. We have work to do, and we love the work. With that, I'd like to turn now to our quarterly performance. Our revenue in Q3 was $38.7 million, up 172% from the same quarter last year, and up 52% sequentially from Q2. As you know, we pay close attention to procedure volume, as this metric more closely than any other aligns with our mission to treat our patients. And over time, we believe it correlates strongly with revenue. During Q3, our physicians performed more than 3,700 procedures, up over 185% from the same quarter last year and up 48% sequentially from Q2. Our sequential growth of approximately 50% in both revenue and procedures was strong. Like Q2, we saw positive intra-quarter trends as procedure volume in July, August, and September were all sequentially higher. We have seen that trend continue into the early part of Q4 as procedure volume and revenue were up modestly in October again. Please note, similar to other companies, we are offering this monthly, inter-quarter information due to the pandemic, and we may discontinue this practice in future earnings calls. In Q3, we believe we took a strong step toward returning to the company's pre-pandemic growth. We found the hospital operating environment in Q3 mostly constructive, and we have found ways to execute effectively through the pandemic in all areas of our business. We are, however, encouraging a bit of caution as we look forward. Cath lab volumes have not returned to normal, while COVID cases and hospitalizations, already at all-time highs, continue to rise as we approach winter. We have again seen impact on our hospital customers, on patients seeking and gaining access to care, on our commercial efforts at various hotspots throughout the country, and on our day-to-day operations. While we remain confident in our growth drivers and our medium and long-term prospects for aggressive and sustainable growth, we continue to recognize the uncertainty of the immediate term. We are not in position to issue forward-looking guidance at this time. During Q3, our DVT procedures represented 54% of total case volume, while PE represented 46%. Procedure mix has been consistent within just a few percentage points since the beginning of 2019, suggesting that adoption of each product and procedure is equally strong. Perhaps useful to note that this consistency in case mix is organic. There are no differential sales incentives, messaging, or emphasis on one device or procedure compared to the other. Not coincidentally, we believe, this ratio of our PE to DV procedure volume closely reflects the ratio of total addressable market measured by procedures. Revenue mix favored FlowTriever 63% compared to ClotTriever at 37%. owing largely to the higher average selling price for Flotriever compared to Clotriever and the fact that Flotriever is used in a small percentage of DBT procedures. Our revenue mix has also been consistent from quarter to quarter. Before jumping to our discussion about growth drivers, I'd like to update you on the progress of our FLASH registry. Interim data from the first 230 patients enrolled into our FLASH registry were presented in on October 18th as a late-breaking clinical trial at the annual transcatheter cardiovascular therapeutics conference, or TCT. The results further confirmed the excellent safety record of flow treatment of pulmonary embolism. There were no deaths at the 48-hour follow-up. Patients with similar risk profile historically carry a significant mortality risk. In addition, there were no cardiac injuries, no pulmonary injuries, no procedure-related deteriorations, and importantly, there were no instances of intracranial hemorrhage, a devastating complication associated with both systemic and catheter-directed thrombolytic-based treatments. Efficacy data were equally compelling. Statistically and clinically significant decreases in heart rate and pulmonary artery pressure were shown, along with statistically and clinically significant increase in cardiac index, all while the patient was still on the table. These data are consistent with anecdotal observations that patients feel better even before they leave the cath lab. Finally, ICU stay post flow trigger procedure was zero days. This is, of course, always important for clinical and economic reasons, but even more so in the midst of a pandemic, while hospitals are doing their very best to preserve ICU beds for COVID and other very sick patients. 30-day results of this cohort will be presented at the annual meeting of the American Heart Association and available tomorrow. November 13th. Perhaps the most important metric in this new data set will be the 30-day mortality endpoint. Attention will also be paid to the 30-day readmission rate, as well as the continued improvement in hemodynamics and dyspnea scores. PE studies to this point have invariably focused on surrogate endpoints, primarily RVLV ratio, whereas the FLASH study shows significant impact on clinical endpoints that have considerably more important and relevant implications for patient care. We believe these endpoints represent an important step forward in the assessment of PE treatment. I'd like to turn now to our key growth drivers and the progress we have made on each in the third quarter. First, we continue to expand our sales organization to target new hospitals and physicians. Given the estimated size of our U.S. addressable market, which comprised more than 440,000 patients and $3.6 billion in revenue potential, we continue to believe our sales organization will rival in size the largest interventionally focused sales organizations in the market today. Historically, we have added about 10 territories per quarter. Although that cadence was interrupted by COVID in Q2, we increased our pace of hiring and began Q3 with approximately 90 territories. Throughout Q3, we found the candidate pool especially deep, perhaps as a result of our IPO and the increased awareness of our company and our story, and we seized the opportunity to hire more aggressively. As a result, we entered Q4 with approximately 120 territories. Between now and the end of the year, we will be pursuing our next quarterly cohort of sales professionals in anticipation of their joining the company in January of 2021. At this time, we do not anticipate this group will be as large as our Q4 cohort. Increasingly, this expansion has and will continue to provide opportunity to split territories to focus on our second growth driver, which is building awareness and driving deeper adoption at existing hospital customers. Our goal is to access the patient population conventionally treated with conservative medical management, which represents perhaps 90% of our PE TAM and about two-thirds of our DVT TAM. We believe we are beginning to have some success on this front. We see growing interest in our procedures from referring physicians such as pulmonologists, hospitalists, critical care physicians, and emergency room physicians. And we have increased our efforts to educate and communicate regularly with these physicians at the account level. Similarly, we are increasing our efforts to help install more systematic processes for identifying, triaging, treating, and following up on PE and DVT patients. Such programs are standard for heart attack and stroke treatment but are virtually non-existent in PE and DVT treatment. We also continue to execute and expand our Clot Warrior Academy, which is a virtual training education and physician engagement platform. In addition to our weekly insight series and technique series, which we have discussed in the past, we recently installed several additional Clot Warrior Academy programs. These include a patient series, in which we invite patients to share their life-saving stories to a broader audience, a leadership series, which is an interactive forum for our faculty, And Clot Warrior Academy Unplugged, which is an interactive peer-to-peer education program tailored to the specific needs of our local physician groups at the account level. We conduct five to seven such unplugged events each week. Even more recently, we have added Clot Warrior Academy Live, in which we stream live cases to invited customers. Our vision, which we expect to execute in 2021, is to conduct full days of live cases on a regular basis. Our commitment to training and education via Clot Warrior Academy represents yet another example of our comprehensive approach to advancing the understanding of these disease states and improving the standard of care for our patients. Our third growth driver is to continue to build upon our base of clinical evidence. In addition to the FLASH registry results, which we discussed earlier, we continue to make progress on our FLAME study, a multicenter prospective two-arm trial for high-risk PE patients. The protocol is complete. and we expect first patient enrollments in the first half of 2021. Finally, during the third quarter, we saw the publication of 14 articles in peer-reviewed journals featuring the Inari technology. The highlight was a retrospective multicenter analysis by Thoma et al., in which 34 high-risk PE patients were treated in four centers. Only one mortality was reported at the mean 205-day follow-up. For reference, patients of similar risk carry a mortality rate up to 40%. Our continued investment in clinical data is useful not only for expanding the market and driving adoption, but it will also inform the eventual design of definitive, controlled trials for both of our technologies. Our fourth growth driver is to continue to expand our product portfolio. For example, earlier this year, we introduced the TRIVR24, which is a 24 French aspiration and delivery catheter for pulmonary embolism. This resulted in significant migration from our smaller 20 French platform. This is important as larger bore catheters remove more clot, and the clot matters. We believe this is critical to both acute and longer-term outcomes. More recently, we introduced the T24 Flex, which is 40% more flexible than the original Trever 24, making it even more deliverable. The early response from our customers to the T24 Flex has been highly favorable, and we expect it will drive further migration to the larger platform. We anticipate introducing several additional product enhancements over the coming months, including our FlowSaver device. This device is a simple disposable filtration system that will enable physicians to reintroduce extracted blood back into the patient. This will enable the physician to be more aggressive, making more aspiration passes without concern for blood loss. The goal, again, is to remove as much clot as possible. We'll have more to say about this and several other new product offerings over the coming months. Looking further into 2021, We are very excited about the robust lineup of new products and innovation in our pipeline. Our fifth and final growth driver is expansion into adjacent and international markets. There are multiple large and unmet needs in the venous space beyond our current TAM and in the vascular space more broadly. We are actively exploring these ideas. We're also making tangible progress toward international expansion with an initial focus on Western Europe. We've recently received an updated CE mark for our current generation of clot-triever system, and we also anticipate an updated CE mark for flow-triever early in 2021. Beyond Europe, we have begun initial market assessment and regulatory work for other key international markets, targeting countries with the largest markets, but also with the longest regulatory and reimbursement lead times. With our focus on best possible patient outcomes and treating physician experience, we expect our international commercial ramp to be gradual. I'd like to conclude by reminding you that we are committed to our mission to save and transform the lives of our patients. As for the anecdotes we shared earlier, this cause is bigger than ourselves and much more important than business. We believe that nothing is more important than taking care of our patients. We believe that all business success and consequent value creation are merely byproducts of doing the right things for our patients while taking care of our customers and our teammates. We believe we're in the earliest phase of our mission and that we can and will grow sustainably and aggressively for many quarters and years to come. With that, I'd like to turn things over to Mitch.