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spk02: Ladies and gentlemen, thank you for standing by, and welcome to the Yonari Medical, Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. And now I'd like to introduce your host for today's program, Caroline Corner, Investor Relations. Please go ahead.
spk01: Thank you, Operator. Welcome to ANARI's fourth quarter and full year 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 Inari operates, trends and expectations for Inari's products and technology, trends and demand 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 statement. Please review ANARI's most recent filings with SEC, particularly the risk factors described in ANARI's S-1 filing and in ANARI's annual report on Form 10-K for the year ended December 31, 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. ANARI undertakes no obligation to update these statements except as required by applicable law. Inari's press release of fourth quarter and full year 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 fourth quarter 2020 business highlights.
spk08: Thank you, Caroline, and thank you everyone for joining us today. As many of you know, based on our pre-announcement of revenue and procedure volume in January, we enjoyed a successful and productive fourth quarter. Most importantly, we treated a record number of patients. We are excited to share with you some of the detail about Inari's progress, including an update on all of our growth drivers. But first, as is now officially tradition in our third earnings call as a publicly traded company, I'd like to share with you a patient story that will remind you about the powerful impact our technology and our team have on the lives of our patients. Late in January, a 32-year-old mother of two young children presented at a hospital in Pennsylvania with a systemic blood infection, endocarditis, and an infected blood clot or vegetation in her right atrium and on the tricuspid valve in her heart. She was very sick. Surgery, in which the chest is cracked, The heart is incised and the infected clot is removed is sometimes considered for these patients. This young mom, however, like most patients with this condition, was far too sick for this sort of surgery. Still, her only chance for survival depended on removal of this infected clot. The physician team opted to utilize the brand new Inari T20 curve. The curve is a 20 French aspiration catheter with an angled or curved distal end that can be pointed directly at the clot. which is often stubbornly adhered to the valve. Two aspiration passes, or whooshes as we call them, through the curve, and 20 minutes later, the entire infected clot was extracted. This eliminated not only the mechanical issues caused by this clot, but also the source of the infection, enabling successful antibiotic treatment of the systemic infection. The physician who treated this young mom told me that without the curve, the only other remaining option was palliative care, in which the patient would have been kept comfortable but with no expectation for recovery. Instead, the patient recovered fully and was discharged to her home and to her children just a few days later. Ms. Mama is not alone. We believe that just in the United States, there are approximately 20,000 patients who present with clot in transit or clots in the right side of the heart, either with or without endocarditis and vegetation. The T20 curve represents a simple, safe, and highly effective solution to this complex problem in a very sick patient population with otherwise limited and poor treatment options. In January, we received an FDA clearance for the T20 curve, along with an indication specifically for clot in transit, the first such clearance for any thrombectomy system that does not require cardiopulmonary bypass. The FDA clearance of the T20 curve represents the first of several TAM-expanding products in a very robust pipeline of new products at Inari. We'll have more to say about this a bit later in the call. As a reminder, we are treating fewer than 5% of all the patients we believe can and probably should benefit from our devices in our core DVT and PE markets. We are still in the earliest phase of our mission, and we remain committed to this cause in ways that are far more important to us than business. I'd like now to turn our attention to our Q4 financial performance. Our revenue in Q4 was $48.6 million, up over 144% from the same quarter last year and up 26% from Q3. 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 Q4, our physician customers performed approximately 4,600 procedures, up 156% from the same quarter last year and up 24% from Q3. While our sequential growth of approximately 25% in both revenue and procedures was strong, we experienced a number of important COVID-related headwinds, both anecdotal and measurable. For example, the COVID surge pushed many hospitals beyond bed capacity, resulting in diversion of patients to other hospitals. When this occurred in our top centers, we saw measurable declines in procedure volume. Many times, all of the hospitals in an entire city had more patients than capacity, resulting in medical management of patients who might otherwise have been treated with flow trigger or clot trigger. Similar to what we have observed earlier in the pandemic, during Q4 in at least some geographic regions, we also believe patients suffering from VTE were likely reluctant to even present for care. Finally, we saw important restrictions to access to hospitals. This limited our ability to in-service and educate non-interventional stakeholders including emergency physicians, pulmonologists, hospitalists, and intensivists, about our devices and the benefits to patients of the Inari procedures. Similarly, both physicians and administrators often had limited bandwidth to discuss the establishment of systematic processes for identification and triage of BTE patients that we believe will be important as we work to establish MI and stroke-like programs. Still, throughout Q4, we found the hospital environment mostly constructive. despite the important increase and even acceleration in COVID diagnoses and hospitalizations. As highlighted several times in the past, to date, the characteristics of our products and procedures have proven perhaps more resistant to the impact of the pandemic than others in the medtech space, and we have continued to find ways to execute effectively in the COVID environment. We believe this is reflected in our growth. For starters, our procedures are simple, require limited hospital resources, and no ICU stay. all of which are important, given the significant resources and ICU requirements for COVID-positive patients. Our patients most often present emergently, so our procedures, particularly pulmonary embolism, are not usually designated as electives. Our sales professionals, who typically cover approximately 90% of our procedures in person, are often deemed essential to the procedure by the hospital, which preserves valuable face-to-face time with our physician customers and cath lab staff. And we continue to use Clot Warrior Academy, our Zoom-based training platform accompanied by our online educational portal, to remotely communicate, train, and educate physicians, nurses, and techs in a highly effective manner. I'd like to turn now to our key growth drivers and to the progress we have made on each of them in the fourth quarter. First, we continue to expand our sales organization to target new hospitals and physicians. We estimate the size of our U.S. target addressable markets than 460,000 patients, recently expanded to include the 20,000 caught in transit patients, similar to the young mom whose story we shared earlier. This represents a $3.8 billion revenue potential. We remain very early in our efforts to penetrate our core markets, and the effort will require a lot more sales professionals. We continue to believe that when fully built out, our sales organization will rival in size the largest interventionally focused sales organizations in the market today. We began Q4, as you know, with 120 territories, and we began Q1 with 130 territories. This is consistent with our historical cadence, excluding earlier pandemic anomalies, of adding about 10 territories per quarter. Increasingly, this expansion has and will provide opportunity to split territories to focus on our second growth driver, which is building awareness and driving deeper adoption at existing hospital customers. We believe as many as 85 to 90% of PE patients who can benefit from our FlowTriever system are nonetheless treated with conservative medical management or anticoagulation alone. Similarly, over 60% of DVT patients who can benefit from our devices are managed conservatively. Our goal is to access this patient population by educating and communicating regularly about the benefits of large volume clot removal with the non-interventional physicians who manage these patients. again, such as the emergency physicians, pulmonologists, hospitalists, and intensivists. We're doing this in several ways. We continue to leverage Clot Warrior Academy, and we have recently expanded it to include live cases, local hospital Clot Warrior Academy unplugged sessions, and a leadership series for our key opinion leaders in both interventional and non-interventional specialties. Since its launch in March 2020, Clot Warrior Academy has engaged over 2,800 customers, 70% of whom are physicians, across 150 live streamed events featuring over 50 physician faculty members. In addition, our CWA online portal has received over 1,000 unique customer visits to more than 100 online courses. We are continuing to build our medical affairs team and capabilities. We recently hired Dr. Venkat Tamala, a world-class high-volume interventional radiologist as VP of Medical Affairs. This is a full-time position, and Dr. Tamala has exited his clinical practice. His broad clinical skills, deep technical expertise, and strong social media presence in the interventional radiology community help further our ability to communicate with a broad customer base. He was previously a frequent contributor to Clot Warrior Academy and is now serving as co-host of these events, in addition to providing clinical support to customers worldwide. As we've discussed in the past, we continue to see interest from customers to establish more systematic processes for identifying VTE patients who might benefit from intervention and triaging these patients to the hospital-designated VTE experts. Such systems and processes are standard for heart attack and stroke patients, but are virtually nonexistent for VTE patients. With the right resources and focus, we believe we can have a positive impact on these dynamics. Our third growth driver is to continue to build upon our base of clinical evidence. Last quarter, we shared with you the interim results on 230 patients enrolled into our real-world all-comer flash registry for PE. These acute data demonstrated excellent safety and dramatic on-table improvement in a battery of hemodynamic variables. The day after our last earnings call, a 30-day follow-up from the same patient population were presented at the American Heart Association's scientific sessions. We believe the 30-day data demonstrates the potential for flow trigger to both interrupt the natural progression of the disease and impact patient recovery in positive and significant ways. The results show just one death at 30 days and a 6.7% readmission rate over that same timeframe. By contrast, historical studies and registries on similar patient populations treated with anticoagulation alone or with thrombolytic drugs have reported mortality of 5% to 15% and hospital readmissions of at least 25%. More recently, we also reported exciting results from CLOUT, a real-world all-comer DVT registry. A sub-analysis of challenging chronic clot patients showed that clot shriever could achieve a 90% median clot removal. This was performed in a single 34-minute procedure on average with no thrombolytics. There were no device-related major adverse events, and the average blood loss was just 50 cc's. The results are even more remarkable given the chronic nature of the clot. Previous studies, like ATTRACT, for example, selected for patients with the most acute clot, focusing exclusively on patients whose symptoms were less than two weeks old. This cloud sub-analysis selected for patients whose clot was at least six weeks old. Older clot, as many of you know, is more firm and more adhered to the vessel wall and therefore more difficult to remove via other devices that rely on aspiration, and or thrombolytic drugs, the clot treever is purpose-built for this sort of clot. It is designed to get between the vessel wall and the clot and to core the clot from the vessel wall. This sub-analysis confirms that it does this really well in a safe and consistent way. Finally, we are excited to share that we recently saw publication of the first-ever study in which a histopathological analysis was conducted on clot percutaneously extracted via clot treever and flow treever from DVT and PE patients. The study showed, not surprisingly, that PE and DVT clots are subacute to chronic in nature containing limited fibrin. Because fibrin is the pharmacologic target of thrombolytic drugs like TPA, the limited fibrin content shown in this study suggests why these drugs have limited impact on PE and DVT clots. We believe this is an important study and the first of many in which increasingly interesting questions will be asked and answered about these clots. We will have a lot more to say about Chroniclot and the treatment of it in the coming quarters. Meantime, we continue to invest heavily in clinical studies and the production of data that is useful for expanding the market, driving adoption, and informing the design of randomized and controlled trials that we remain committed to executing. Our fourth growth driver is to continue to expand our product portfolio. On this front, we have enjoyed an exciting and highly productive few months. Earlier I shared with you that we recently received FDA clearance of our T20 curve, along with the clearance for clot in transit for the entire FlowTriever system. The ability of physicians to direct the large bore tip of the curve toward the clot has been useful not only for clot in transit, but also for treating clot in very large diameter vessels such as the inferior vena cava and the most proximal pulmonary arteries. We have included the curve in our per procedure pricing so that it, like all devices in the flow-to-reverse system, can be used for a single price. This ensures that physicians can make appropriate decisions about which tools to use interprocedurally based exclusively on clinical need without any concern for the impact on the hospital's procedural economics. We remain committed to the best possible patient outcomes above everything else. Next. We recently completed the limited market release of our flow stasis venous closure system. Flow stasis represents a simple and consistent method of tensioning the compression stitch often used to attain hemostasis after our procedures. We believe this device might have applications beyond Inari procedures, as there are many medium and large-bore catheter-based procedures in electrophysiology and structural heart that might benefit from a simple closure system that leaves nothing behind and does not involve suturing into the vein. Finally, we previously reported FDA clearance of our T24 Flex, which is a much more flexible version of our 24 French aspiration catheter. You might recall that this flexibility makes the device more trackable, more deliverable, and easier to use. This has accelerated migration to the larger 24 French system, and it is now used in more than half of our PE procedures. This is important. because the larger the diameter of the catheter, the stronger is the force on the clot, and the more clot can be removed. As you know, we believe that maximization of clot retrieval is important to optimal patient outcomes. Looking further into 2021, we're 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. We've made important progress toward expansion into international markets, especially in Western Europe. We reported during our Q3 earnings call that we received an updated CE mark for clot-triever. We are pleased to report that we have now completed several successful clot-triever procedures in Germany. We are pleased also to report that we recently received an updated CE mark for flow-triever. We are seeing considerable enthusiasm for both devices as many European physicians have seen the positive readouts from our flash and cloud registries and investigator-initiated trials And they've heard positive anecdotal stories from their American counterparts over the past year or two. Lockdowns, limited access, and other challenges caused by the pandemic have certainly created challenges for our initial European launch. But at the same time, we are encouraged by the interest we're seeing and the progress we're making. We look forward to a much more constructive environment in Europe soon. Finally, in addition to our efforts in Europe, we have also begun work on the long path toward regulatory approval and reimbursement for our products in both Japan and China. Regarding opportunities in markets adjacent to our core DBT and PE markets, we have identified multiple unmet needs in the venous space and in the vascular space more broadly, and we continue to explore these ideas. We'll have more to say about these in upcoming calls. I'd like to conclude by reminding you that we are committed to our mission to save and transform the lives of our patients. This cause is bigger than ourselves and much more important to us than business. We believe that nothing is more important than taking care of our patients. Any business success and consequent value creation that we might enjoy are never the goals, but instead are merely byproducts of doing the right thing for our patients while taking care of our customers and our teammates. We believe we are in the earliest phase of our mission and that we can and will grow sustainably and aggressively for many years to come. With that, I'd like to turn it over to Mitch.
spk09: Thank you, Bill, and good afternoon, everyone. ANARI revenues for the fourth quarter of 2020 were $48.6 million, compared to $38.7 million for the prior quarter, and up $28.7 million, or 144%, from $19.9 million for the same period of the prior year. This year-on-year increase was driven by the continued expansion of our sales force, the opening of new accounts, and deeper penetration of our products in existing accounts. Revenue was split between our two products as follows. 36% of our revenue was derived from the sale of Quatriever products during the fourth quarter of 2020, compared with 38% in the fourth quarter of 2019. And 64% was derived from the sale of Flowtriever during the fourth quarter of 2020, compared to 62% in the same period of prior year. Gross margin was 92.4% for the fourth quarter of 2020, compared with 89.2% in the fourth quarter of 2019. Gross margin increased due to a modest 3% increase in average selling prices year-over-year, as well as positive operating leverage in our manufacturing facility due to continuous improvement initiatives and the addition of a second production shift in Q4 of 2020. Operating expenses were $37.9 million in the fourth quarter of 2020, compared with $16.6 million for the same period of the prior year R&D expense was $6.5 million in the fourth quarter compared with $2.7 million for the same period in 2019. The $3.8 million increase in R&D expense was primarily driven by an increase in headcount as well as product development and clinical evidence development costs. SG&A expense was $31.4 million in the fourth quarter of 2020 compared with $13.9 million for the same period of the prior year. The $17.5 million increase was primarily due to personnel-related expenses as a result of increased headcount across our organization and public company compliance costs. Net income for the fourth quarter of 2020 was $7 million compared with net income of $0.4 million for the same period of the prior year. As I did with our Q3 results, I'd like to make a quick comment on the company's positive net income during Q4. As Bill mentioned a few minutes ago, We believe Inari is well positioned for quarters and even years of sustainable revenue growth. We're not optimizing the company operations to produce net income. We plan to continue to invest aggressively in our growth drivers, and we do not necessarily expect to produce positive net income each quarter. The basic and fully diluted net income per share for the fourth quarter was $0.14 and $0.13, respectively. and the weighted average basic and diluted share counts were 48.7 and 55.2 million, respectively, compared with a basic and fully diluted net income per share of 6 cents and 1 cent, respectively, and a weighted average basic and diluted share count of 6.2 and 44.7 million, respectively, for the same period of the prior year. The number of shares last year is significantly lower because of the conversion of the preferred stock and additional common shares issued as a result of the IPO. In terms of our full year 2020 financial results, revenue was $139.7 million for the full year 2020, representing an increase of 173% over revenue of $51.1 million in 2019. Our product mix remained constant, 37% of our revenue was derived from the sale of caught sugar products during 2020, compared with 38% in 2019, and 63% was derived from the sale of Flowtriever during 2020, compared to 62% for 2019. Gross margin increased slightly to 90.6% for the full year of 2020, compared to 88.4% in 2019. Operating expenses were 108.1 million for the full year of 2020, compared with 44.4 million in 2019. R&D expense increased by 155% to 18.4 million in 2020, compared to 7.2 million in 2019. SG&A expense was 89.7 million for 2020, compared to 37.2 million for 2019. Net income was $13.8 million for the full year 2020, and net income per share was $0.43 on a weighted average basic share count of $32 million and $0.27 on a diluted share count of $51.6 million, compared to a net loss of $1.2 million and a loss per share of $0.20 on a weighted average basic and diluted share count of $5.9 million for the prior year 2020. I'd now like to move on to a few balance sheet updates. Our cash of $114.2 million and short-term investment balance of $50 million at the end of the fourth quarter totaled $164.2 million compared to $168 million at the end of the third quarter. We have not yet utilized our $30 million revolving credit facility, although we ended Q4 with borrowing capacity under the credit line of approximately $20 million. Our cash flows from operating activities were $1.9 million in 2020 compared to cash used in operating activities of $4.9 million in 2019. As I've mentioned in previous quarters, Inari continues to operate and grow with a relatively neutral cash flow profile. I'd now like to turn to guidance. While we continue to experience COVID-related challenges and uncertainties, we are comfortable providing forward-looking guidance as follows. For the first quarter of 2021, we are guiding to $54 to $56 million in revenue. For the full year 2021, we are guiding to $225 to $235 million in revenue. With that, I would like to thank you for your attention, and I'll turn the call back over to the operator for your questions.
spk02: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered and you'd like to move yourself from the queue, please press the pound key.
spk09: And, Jonathan, this is Mitch from NARI. I thought I'd mention that Bill and I actually were just joined by Drew Hikes, who's our Chief Operating Officer, and then by Dr. Tom Tu, who's our Chief Medical Officer. We thought they could be helpful for some of the questions that may be asked.
spk02: Certainly. And our first question comes from the line of Bob Hopkins from Bank of America. Your question, please.
spk06: Oh, great. And congrats on all the progress. I have two quick questions I wanted to ask. And yeah, I hope you guys are doing well. But the first thing I wanted to ask, because I was just wondering, Bill, if we could just sort of take a step back and maybe Drew could chime in here too. Clearly, despite COVID, it looks like things are just inflecting in your business and in this category generally. So I was just wondering if you could maybe... take a little bit of a step back for us and just highlight, like, what do you think is driving the inflection now? Is it maybe just the cumulative effect of all the work that you've done over the past 18 months in the U.S.? Or, you know, wondering if there's anything more specific than that? Because it really is quite a remarkable, you know, last 12 months in terms of your performance in the United States. So we just would love to start there with any kind of top-down comments.
spk08: Yeah, I'll jump in first, and then we'll have Drew fill in some details if you like. So first of all, thanks for the good words, Bob. It's been a grind through COVID. We found ways to execute crisply. I would say, let me just say two things. First of all, I don't think there are any, there's not one driver. And we've said this about our potential for growth going forward as well. There's not an inflection point. There's not a one binary sort of catalyst that's going to drive things. For better or for worse, this is a pure execution play. And I think all the variables from data to new products to crisp commercial execution and so forth play an equal role here. I will say this also. We had a VIP visit. We do these pretty routinely. And there was a physician here just a few days ago. And he was telling me about a patient that he treated. And the patient was dying, right? The patient had that look. He said, this patient has that look. And the patient was dying. And everyone in the room knows that. The patient recognizes that their potential to die is right now. And a few seconds later, he took out a big chunk of clot. And another few seconds after that, he took in another big chunk of clot. The anesthesiologist commented that the, what did you do, right? The heart rate is down. The blood pressure is back up. The patient's joking about dinner and how bad the chicken sandwiches are going to be here at the hospital. And the whole mood changes, right? That is visceral, right? That has nothing to do with data, has nothing to do with the product per se or price, right? There's a visceral component to this that I think cannot be overlooked. And I believe there's a cumulative effect to those sorts of experiences that are going on in cath labs all over the country. Drew, I'm sure you probably had something a little more data-like.
spk11: No, I think those are all the key points. I think it's the aggregate impact of all the growth drivers coming together. So it's the expansion of the field team and the methodical addition of new reps and territory expansion. I think we are making progress in driving deeper and deeper penetration in our existing accounts, and some of the investments and programs we've developed along those lines I think are really starting to bear fruit. Some of the new products and some of the new R&D investments that we've made continue to improve the the speed and the efficacy and the safety of the procedures, and then the clinical evidence portfolio, building along with that, supporting all of the immediate impact that docs are seeing firsthand with hard clinical evidence that supports the impact we're having. So I think it's all those things taken together that's really driving the growth, Bob.
spk06: Okay. Yeah, I realize it's kind of a softball question, but just wanted to get your overview taken. The second question I wanted to ask really quickly is just on – you're starting to talk about some new opportunities both in terms of outside the United States and then in the U.S. and specifically with closure. And I was wondering if you could, you know, put any more kind of meat on the bone, if you will, in terms of, you know, quantifying the opportunity that comes from these new markets and new technologies, you know, specifically, again, with the Venus Closure System. Thank you.
spk08: Thanks, Bob. I think we're maybe a little too early to be talking about quantifying these opportunities. I will say that we developed the flow stasis for our own procedures. The full intent was just to include this in our per-procedure price as part of our flow tree pricing and system. It certainly looks like there are opportunities beyond our procedures. There are lots of structural hard electrophysiology and other venous closure type procedures for which we think this might be useful. It's a really simple method of tensioning the compression stitch that can very often be used to close venous wounds. The venous pressure is much, much lower, of course. And so this is a really simple system. It doesn't leave anything behind, and it doesn't kind of get into the vein. There's no stitch into the vein. So we like the simplicity. There's a pretty interesting story here, it seems, to work through our limited market release. But we are certainly in the very, very early stages here. We just completed our limited market release. We'll be getting into more full market commercialization. We'll have more to say on that in upcoming calls.
spk06: And have you included that in the guide that you gave to any meaningful degree?
spk08: No, we haven't really quantified any meaningful revenue for flow spaces. Certainly nothing in the guidance would suggest there's a meaningful number for flow spaces.
spk06: All right, great. I'll circle back. Thanks again. Yep. Thanks, Bob. Thank you.
spk02: Thank you. Our next question comes from the line of David Lewis from Morgan Stanley. Your question, please.
spk07: Oh, good afternoon, and congrats on the quarter and a very constructive guide. I want to start with the guide, and then I'll kind of maybe follow back up with Bill. But just thinking about the guide here, and I appreciate it's still COVID, but you've been doing anywhere from 15% to 25% sequential growth and obviously 13% sequential into the first quarter, even with obviously a tough January. Yeah. if you kind of take out the first quarter, the guidance implies kind of 2Q to 224, low single-digit type sequential growth. So is there sort of anything, you know, momentum-wise, comps, trends in the business that would drive that, or is it just simply, you know, early in the year and we're still dealing with some COVID dynamics? Let me just sort of flush out how you see, you know, the business sort of first half, second half, or across the quarters, given that drop-off here into the second quarter.
spk09: Sure, David. Thanks for that question. You know, as you mentioned, the Q1 guidance would be about sort of a low double-digit sequential improvement compared to Q4. So that's something that we really feel comfortable and confident in. You know, this March 9th, actually today, is the one-year anniversary of what we affectionately at Inari call the Meltdown Day. It's the day we were supposed to start our roadshow for the IPO last year. We didn't really know what would happen after the Meltdown Day. We you know, kind of shut things down a bit for those next couple of months. And we felt fortunate that we were able to do the IPO in late May. But we've really operated under this COVID cloud, you know, for the past, you know, three quarters now. This is our third public report. I think we just want to kind of start out with something and not get ahead of ourselves. And we really look forward to updating our annual guidance as we move along through the year.
spk07: Okay, that's super helpful. And then just my second kind of follow-up question is really sort of two-part. If we think about sort of the trends in PE versus DVT that we saw through the back half of 2020, is there any reason to believe they're in a percent of mix where that PE-DVT mix materially changes in 21 and sort of what's implied in guidance? And then just, Bill, I wanted to push you a little more on this international question. I mean, it was – Our current estimates basically call for zero international revenue, I guess, given the approvals and some commercial agreements you signed here in the first quarter. That's looking a little conservative. So is there any international specifically modeled in your guide for 2021? Those two questions, and I'll jump back in queue. Thanks so much. Congrats again.
spk08: Thanks, David. Yeah, thanks, David. So with regard to the mix, one of the characteristics, I don't know that we would have necessarily predicted this, but the mix has been remarkably consistent from quarter to quarter. There's no emphasis on one product versus the other, either nominally or through compensation or anything of that nature. I think both of these markets are growing equally based on the way that we've chosen to communicate our story, based on the data that are emerging and product development, products being introduced into the mix and so forth. We are not modeling any change in the percent of revenue or percent of cases represented by one product versus the other. It's been pretty consistent. They've bounced around a percentage or two, but that's no change. With regard to international, I think we've characterized this multiple times as being measurable but not really meaningful. So I don't think I would characterize any of the guidance as representing a significant chunk of of international sales, and I think that's a pretty healthy way to think about it. The COVID environment in Europe is considerably more challenging than it is here in Europe. I suspect you're hearing that from most of our peers and other medtech companies. And that's been a challenge. There's a lot of interest, a lot of enthusiasm. These physicians have seen and heard about Inari devices through data releases and through anecdotal communication back and forth with their American counterparts for a year or two. That's been highly favorable. And so it's a little frustrating that with 20-something thousand procedures total that we can't be on the ground training and getting people through their learning curve very quickly. So it's all Zoom-based. And those challenges persist. So I would just ask you don't get too far ahead of us here on international as well because there are some things to work through, including reimbursement as well. So I'll leave it there.
spk07: Okay. Thanks so much. Thanks, David. Thank you, David.
spk02: Thank you. Our next question comes from the line of Larry from Wells Fargo. Your question, please.
spk03: Hey, good afternoon, guys. Thanks for taking the question and congrats to a really strong 2020. Thanks, Larry. Two for me. Let me start with just Salesforce ads and center ads that you expect in 2021. For Salesforce ads, should we think about 10 per quarter sales? And on center ads, I'm not sure I heard you give the Q4 number, but it looks like you added about, you know, by my math, call it 400 centers in 2020. Is that accurate? And what should we expect for 2021? And I had one follow-up.
spk08: Would you take that one?
spk11: Yeah, so, Larry, on the Salesforce ads, you heard we added 10 heading into Q1, so exactly in line with what our historical kind of average cadence have been. I think we are going to reserve the right to, you know, flex that up or down depending on what we're seeing, you know, on the ground as we get into any specific quarter and what we're seeing in our target territories. But I do think that that 10 per quarter is a pretty good starting point to how to think about the rest of the year. Keep in mind, if we bring on 10 incremental territories, we're actually hiring more bodies than that given our promote from within kind of approach to sales leadership. On the center ads, I think the number you quoted is about right. We believe we exited Q4 someplace north of 800 active accounts using the technology, and that's a combination of accounts that are using just FlowTriever, just ClotTriever, or both technologies. We think about half of our accounts are using both technologies, so we have quite a bit of runway still even within that group of 800 accounts to pull in the respective secondary technology where that's an opportunity for us. Keep in mind, we think there's, call it, 1,500 potential targets. There's 1,500 cath labs in the U.S. There's 1,300-some hospitals with 200 or more beds, which would also be a way to gauge the ultimate opportunity here. So we still think we're in kind of early to mid-innings in terms of the account penetration at this stage. That's helpful, Drew.
spk03: And second for me, could you talk about other new products, product launches in 2021, and data that we might see this year, just specifically on new products? Could you give us an update on Flow Saver? Thanks for taking the questions.
spk08: Well, Larry, if there's one thing we've learned, the early phase here of our history as a public company is don't overpromise on new products. We certainly stepped in that. The first opportunity we had in our first earnings call, we talked about Flow Saver and we were dealt a curveball by FDA. So we expect to see that a little later on this year, but I probably shouldn't make the same mistake and tell you a month or week and date. So we'll leave it there. But there are a number of other products beyond Flow Saver that we like. The pipeline is full. Some of these products are inclusive in our per procedure pricing, so there will be, you know, no new revenue like FlowSaver, perhaps, for example. And some others will be TAM expanding, but we'll have much more to say about those as we get a little closer. There's FDA risk, of course. There's LMR risk. What will we see? Will the devices be ready for prime time? So there's a few things to work through, but we're very pleased with our pipeline. And data, Bill? Yeah, clinical. We continue to run our FLASH and our CLOUT registries, 500 patients plus. We are going to expand our FLASH registry. We'll have more detail on that as it emerges here, but I think we'll see some additional readouts over the coming quarters. There are any number of investigator-initiated trials that we'll get to the starting line, so to speak, here with regard to submission and publication. So we'll have other readouts on data coming down the pike here as well. And again, just as a reminder, none of them are inflection. None of them will represent some sort of an important binary inflection point. They're all contributory to the same sort of story and execution play that we've been sharing with you all along. Thanks for taking the questions. Yeah, thanks, Larry.
spk02: Thank you. Our next question comes to the line of Bill Pobanek from Canaccord. Your question, please.
spk10: Hey, great. Thanks. Good evening. And thanks for taking my questions. A couple here just first. And I might have missed this. Was there any commentary regarding the flame study? And have you begun enrollment on that?
spk08: You did not miss anything. Let's let Tom take that.
spk12: Sure. Thanks, Bill. So just to remind everybody, the FLAME study is our trial in massive pulmonary embolism. This is the most mortal of all PE conditions and is planned to be the largest contemporary trial in this disease state. The trial design has been completed, and we are anxiously awaiting enrollment of our first patients.
spk10: Okay, so you have ID approval and you're good to go. You're just waiting to get the first patients enrolled. Great. And then what is the size of this study? Are there any details you're willing to provide on time? How long do you think it'll take to enroll and when we could see some of the first aid off of this?
spk12: So massive pulmonary embolism represents about 5% of all pulmonary embolism, so it is not very common. And these are quite critically ill patients. So you can imagine enrollment in this study may be somewhat hard to predict. We anticipate it will probably be 18 months to complete this study. And we have no plans to present any preliminary data. So we hope to complete that study before recently.
spk10: Okay. And then, thank you for that. And then I'm just You know, I just wonder, as you penetrate in, you're in over 800 facilities. I think that was roughly the number last quarter. But I'm trying to get a handle on, as you look at those facilities that you're in, you know, have you been able to fully penetrate any? If so, what does that look like? And, you know, how long does it take to get there?
spk11: Yeah, I think if you looked across those 800 accounts, Bill, you'd see evidence of accounts at different stages of their evolution in how they're thinking about VTE. You'd certainly see a group of accounts that are just starting. They're focused on initial outcomes. They're getting used to the technology. They're adopting it into their existing treatment paradigm. You'd see a group of accounts that have progressed past that or in the middle. They are trying to understand the economic value proposition at that stage. They're probably more proactively trying to identify these patients. They're maybe refining their clinical care pathways at the account level and really trying to proactively investigate and invest in these patients in a way that was not like they had thought historically. And then the last group of accounts, are at the final end of their evolution, and they are accounts that have, you know, really made a proactive commitment to VTE program development, like you've seen with MI and stroke, for instance. They have a very sophisticated approach to this patient population. They're making significant investment in time and other resources to manage these patients. And if you looked at our product adoption across those phases, you'd see, you know, obviously growing adoption across those phases. And at least in that last group of accounts, you'd see our technologies being used frontline as standard of care as the go-to option for both DVT and PE patients. That evolution takes, you know, a different amount of time based on the account dynamics and specifics But we have seen accounts kind of move methodically through that evolution. It gives us some confidence. We are developing, you know, a systematic approach to helping support that evolution with different programs and different investments and learning how to help support accounts move through that process.
spk10: Great. And today, Drew, what percent of your accounts do you think have kind of hit that end point of the final phase? and you have the penetration you're looking for. If you could bucket the beginning, middle, end.
spk11: So that last group has got to be our top probably 10% of accounts are in that final group. So we've got a small number that have made that evolution. It gives us some confidence that we're doing the right things, but there's not many that have navigated their way all the way through that evolution yet.
spk08: If I could add just a bit of color, there was – There was a paper just presented out of, published out of University Hospital in Cleveland, which is a very old established PERT pulmonary embolism response team program. And they showed, not surprisingly, that patients who were admitted to the hospital or who see, come into the hospital with a pulmonary embolism and see the PERT team, that's the hospital designated pulmonary embolism experts, they not surprisingly do well by almost every measure, almost every clinical measure you can imagine. The problem is that 70% of the patients who should have been seen by the PERT, by their own admission, by their own criteria, were not seen by PERT. And that's the challenge that we face. Even in our best centers, the consistency with which these patients are identified and triaged to the VTE experts remains... remains limited. You know, those aren't problems that you face that we see in MI and stroke. Most of those problems certainly in MI have been fixed a long time ago. So there's a lot of heavy lifting to do with regard to surfacing, you know, identifying and triaging these patients consistently through systems and processes. And we're spending quite a bit of time and energy with that, you know, kind of that last bucket, that bucket of customers that have progressed to that point.
spk10: Gotcha. That's very helpful. Thanks for taking my questions.
spk09: Thank you, Bill.
spk02: Thank you. Our next question comes in the line of Danielle from SBB. Your question, please.
spk04: Great. Good afternoon, everyone. Thanks so much for taking the question. Congrats on a really strong year despite COVID. And I just have two questions. So my first question is probably for you and it's around, you know, you touched on it a little bit, but like how to think about the guidance and the COVID situation we're in now and the COVID recovery. And I appreciate that a lot of your patients are urgent slash emergent, but there is some component of the business that's likely driven by patients getting diagnosed, getting into the system. And I guess that's more what I'm focused on. And is there any sort of recovery baked in to the guidance or is it kind of just sustaining momentum from where we are today, and there's no sort of backlog that we should be thinking about here, and if there is, that's sort of upside. That's my first question.
spk08: Yeah, yeah, I know the question you're asking. Thanks, Danielle. I think the short answer is there's no backlog. Approximately 70% of both PE and DVT patients in the studies that we've conducted and the ways that we keep track of these things for flash and cloud, for example, present through the ER. So they are emergent by that definition. So I think this has protected us in ways that many of our peers and other med tech companies didn't benefit from devices that treat that sort of patient population. So we have benefited from that through the pandemic. Our procedures were probably a little bit more insulated from the pandemic challenges and the challenges that the elective procedures faced, for example. PE cannot be, you either treat it at the moment that the PE presents or there's very limited capacity to treat it later. DBT on some cases can be delayed for a week or two, but the problem is even when patients may have been entering a hospital that was on diversion, for example, come in with a painful, really painful and swollen leg and were sent home simply because there was no capacity, I don't think most hospitals have any mechanisms for keeping track of those patients. And so, again, the short answer is I don't think we're going to see a bolus of patients coming down the pike here for 2021 or beyond. I think those patients were either treated or not.
spk04: Okay. Okay. Totally fair. And then my next question is a two-part question. So I'm really asking three questions, not two. So, Drew, this is probably for you, and both of these are probably sort of in your in your camp. So just trying to get a sense of theme store sales versus the new center ads and how to think about how that progressed in 2020 and how that will progress in 2021, sort of what's reflected in guidance. Anything you can say there?
spk11: Yeah, I think the short answer is we like what we're seeing. We think the growth we're seeing is sustainable and not overly weighted towards the addition of new accounts. I'll give you a couple metrics that I think support that belief. In Q4, we believe about 90% of our cases in that quarter came from existing customers. Only 10% came from new account ads in that quarter. And if you looked at it through the lens of growth in cases, sequential growth in cases that we saw incrementally in Q4, it was balanced about 50-50 in between existing accounts and brand new accounts acquired in that quarter. So we like what we're seeing there. We think there's a nice balance where we are seeing evidence of success in supporting accounts for broader and deeper adoption of the technology. And I think you see that reflected in those metrics.
spk04: Got it. That was very helpful. And then last question for you. So you gave some good color on half the accounts are using both devices. I'm just curious what percentage of the accounts you're in today are not using Flowtriever, and what's the barrier to getting them to adopt that? Is it just a matter of time getting them to adopt Flowtriever? I'm obviously asking because it feels like that's where the longest growth runway is and where you guys obviously have the biggest, I think, competitive advantage and price advantage there. So thanks so much.
spk11: Yeah, no, I understand where you're coming from. I'm not sure I'd completely agree with some of the things that were kind of folded in there. Maybe first, of the 50% of accounts that aren't using both technologies, it's really a mix of accounts that have adopted just clot-triever or just flow-triever. So we don't see it necessarily biased towards accounts just starting with clot-triever and pulling in flow-triever. It's really a balance between the two. And I think, you know, going forward, we would anticipate, you know, continued kind of balance between the two. We don't necessarily need to manage the growth of one of the platforms versus the other, at least historically we haven't. They've really developed and grown organically right alongside each other at roughly the same growth rates. And I think that would be what we would anticipate going forward as well.
spk04: Okay. That's fair. Thanks so much.
spk09: Thanks, Danielle.
spk02: Thank you. Our next question comes from the line. Marie Thibault from BTIG. Your question, please.
spk05: Hi, good evening. Thank you for taking the questions. And Bill, Mitch, Drew, and Dr. Tu, congrats on a very strong year. I wanted to ask one more follow-on here on guidance. I wonder if you could parse out for us a little bit more the COVID impact you've seen so far in Q1 and then Because we haven't seen, you know, you as a public company without COVID impact, I'm wondering if you can sort of set out for us any seasonality or sort of how we should think about cadence throughout the year going forward.
spk08: Yeah, thanks. I'll dive into that. We get asked the seasonality question, maybe not surprisingly, we get asked quite a bit. We have not seen it thus far, but I just was peeking at some numbers this morning and our You know, Q4 of 2019 was the last quarter in which there was no COVID impact for all of us, of course. In 2019, we did less revenue than we are projecting for Q1. The entire year of 2019 was less revenue than we're projecting for Q1 of this year. And so the point here is that we really don't have anything to compare to, right? We don't really know what a non-COVID or post-COVID environment looks like. So will we see seasonality? We have not seen it thus far. Is that because we're insulated from it in some way, or is it because we were just very, very early in our growth phase and it'll start to emerge at some other moment? I think we just don't know. And so with regard to guidance, we want to make sure that we're not getting out ahead of ourselves Because there's any number of things that, there's any number of potential risks. And we've learned one thing through the pandemic. We've learned many things, I guess, but humility is one of them. So we just want to be a little thoughtful about the way we're thinking about guidance.
spk09: And Marie, if I can add to that just a bit. In terms of some of the signals that we see for COVID impact, actually, as Drew was talking about our accounts, we see the case mix fluctuate in the accounts sometimes, you know, week to week, sometimes definitely month to month, depending on the relative sort of impact of COVID on that hospital. And that's something that we've noticed. You see the case mix for the year as a whole, you know, it's kind of the 54-46 thing, but we sometimes see the case mix fluctuate, and it could be sort of a disproportionate number of PE cases in some you know, months in some hospitals, and that tends to correlate with a higher amount of COVID impact in that hospital. But then sometimes when the, you know, when the ICU, you know, beds kind of go down, then the case mix kind of returns to the historical relationships. I don't know that we went in, I don't think we went into that really level of detail, but in terms of thinking about how that would play out through the remainder of 2021, And as I mentioned, we're hoping to continue to update as we go along here.
spk05: All right. That's really helpful, and I understand that there's no easy comparable, so I appreciate you helping me make sure there's nothing I'm overlooking here. I guess my follow-up would be around gross margins, your Q4 gross margins. Again, very stellar. And I know in the past, you know, there's been some talk about you know, pricing trends and that growth margins aren't necessarily going to stay at this, you know, very healthy level. So I wondered if you could help us think about that, given some of the new products you have rolling out and then, you know, your earlier comments on the international opportunity, if there's any change there on the gross margin outlook.
spk09: Sure, I can start that, Marie. So we're pleased, obviously, with a 92% plus gross margin, you know, for the quarter. up just a bit. As we think about 2021, we had a very productive Q4. The efficiency of our manufacturing operation, the second shift we added, we're continuing to build up inventory. I think we've announced that we're moving into a larger office here in Orange County mid-year in 2021, so we're taking steps to prepare for that move. Some of the things that we think And we're in a great position in terms of our average selling prices. They were up just a bit in Q4 as well. And so we feel like we're in a very strong position. Should we ever need to respond from a competitive point of view to pricing, we could. We're not currently seeing that. And I think we've been successful selling our services to the hospitals based on the value of the services. value of the procedure, essentially, you know, compared to the alternative interventional techniques, which, you know, all involve a ICU stay. So they're not really positive contributors from a hospital point of view. From a future thinking point of view, as we put more products into the flow tree of our price per procedure bag, that's something that could have a drag on the margin. I think as we're continuing to build our international business, that could likewise have a drag on the margin as we go forward and We've talked in a longer-term sense about a kind of a low to mid-80% gross margin target for the business. I think it may take us some time to get there. I don't know if it's going to be one or two years or if it's going to be more of like a three- to five-year thing, but that's kind of how we were thinking about the business over a longer term for modeling purposes.
spk05: Well, that's great. I appreciate the time tonight. Thank you. Thanks, Marie. Thanks, Marie.
spk02: Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.
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