Inari Medical, Inc.

Good day, and thank you for standing by, and welcome to the Inari Medical Inc. Q2 2021 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Caroline Corner, Please go ahead.

Thank you, Operator. Welcome to NARI's second quarter 2021 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 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 of the SEC, particularly the risk factors described in INARI's S-1 filing and INARI's quarterly report on Form 10-Q for the first quarter ended June 30th, 2021, 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 of second quarter 2021 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 NRA's website by 5 p.m. Pacific time today. Now I'd like to turn the call over to Bill for his comments and second quarter 2021 business highlights.

Thank you, Caroline, and thank you, everyone, for joining us today. Our second quarter was productive and successful in terms of financial performance, and we again treated a record number of patients. Our second quarter was also marked by important changes in our business, significant investments in our future, and important milestones in all of our growth drivers. We are excited to share some additional detail about all of this, but we would like to start first, as usual, with a patient story. We appreciate always the opportunity to remind you not only of the profound impact our people and products have on the lives of our patients, but also the sense of responsibility we share to solve some of the most challenging technical and clinical problems facing our physicians, and address some of the most important and devastating conditions in all of medicine. Early in January, One of our top physician customers, an interventional radiologist from Florida, was asked by his colleague, a podiatrist and wound care specialist, to see a patient with a large, deep, weeping ulcer on his leg. The ulcer had failed to heal for three years despite best wound care practices and three arterial revascularization procedures. This man in his early 70s lived with significant pain and was wheelchair-bound due to the ulcer. Our physician recognized immediately that the patient's ulcer was venous in nature, not arterial, and that the cause was likely post-thrombotic syndrome, or PTS, caused by an untreated deep vein thrombosis, or DBT, several years earlier. He used Claude Schriever to remove a significant amount of post-thrombotic scar tissue, establishing a large, patent, high-flow venous channel, and at the patient's three-month follow-up, the ulcer was nearly 100% healed. The patient was walking without assistance, and he was pain-free. If you've ever seen a venous ulcer or even an image of such a wound online, perhaps you can imagine the impact on this patient and those who care about him, not just physically and not just in practical ways, but in much bigger ways, in ways that actually define their lives. This patient was suffering from advanced PTS. It is caused by persistently high pressure in the legs as a result of deep venous scarring. Left untreated, clot gradually transforms to scar tissue over time. About 50% of all patients whose DVT is untreated will develop PTS. It is a progressive disease with early symptoms ranging from swelling and pain and progressing to pigment changes in scaly, dry skin with scabs, and finally, to venous ulcers that often necessitate amputation. There are about 1 million patients just in the United States suffering from venous ulcers right now, many as a result of PTS. While Clottriever was not necessarily designed to treat this disease or to remove this sort of tissue, we are highly encouraged by the many patient success stories emerging in this difficult-to-treat patient population. Beyond Clottriever, we are investing aggressively in purpose-built devices to remove post-thrombotic scar tissue. We'll have a lot more to say about this soon. I'd like to turn now our attention to our Q2 financial performance. Our revenue in Q2 was $63.5 million, up $38.1 million, or 150%, from the same quarter last year, and up about $6.1 million, or 10.6%, from Q1. As in the past, the vast majority of revenue in the quarter came from replenishment of inventory after procedures, while the balance came from stocking orders, which, as always, include initial inventory purchased by new customers, increases in inventory levels at existing customers as they grow, and increasingly important, from stocking orders for new product introductions. Revenue grew more quickly than procedures in Q2 due to the strong demand for and stocking of new products like T24 Flex and the T20 Curve, which we've discussed in the past. During Q2, our physician customers performed approximately 5,900 procedures, including a modest number of cases from Europe. This procedure count is up about 136%, from the same quarter last year, and up about 7.3% from Q1. Procedure growth during Q2 moderated compared to Q1. We believe this was primarily due to the decline in the prevalence of COVID, which, as many of you know, can cause VTE. This was an important source of patients treated with the Inari devices in Q1. In January and February, for example, at the peak of COVID hospitalizations, about 15% of the patients we treated were associated with COVID. By June, that number had fallen to about 4%. In short, COVID created a larger tailwind than perhaps we appreciated in Q1, and the decline in COVID-related BTE procedures tempered our procedure growth in Q2. In addition, as we head into Q3, we are seeing a significant number of vacations by employees, physicians, and staff. The commercial impact of this is uncertain. We believe a note of caution through the remainder of Q3 is warranted. Despite these short-term uncertainties, we remain bullish on the intermediate and longer-term prospects for robust procedure and revenue growth in a post-pandemic environment. The gradual lifting of restrictions to access has begun to enable our field team to once again communicate our story consistently to non-interventional physicians who make decisions about and refer patients for the treatment of VTE. This is important as about 70% of all VTE patients are still treated with conservative medical management. We have also been able to resume in-person physician training, VIP visits to our home office, technology roadshows, and executive field travel, all of which we believe make an important impact on our goal to penetrate these markets and treat more patients. Strategically, our markets remain large, and all five of our growth drivers, which we'll discuss now, are intact while execution continues to be crisp. Our first growth driver is the expansion of our sales organization to target new hospitals and physicians. Given the size of our total addressable market, as we just detailed, our performance in Q2 suggests we treated just over 5% of all the patients who we believe can benefit from treatment with our devices. We are very early in our effort to treat this patient population, and we believe the effort will require a lot more sales professionals. As a reminder, we began Q2 with 150 territories and shared in our last earnings call that our intent is to finish the calendar year with 180 to 200 territories. Consistent with our usual cadence, we recently completed another round of hiring of field sales professionals and we are comfortably on pace to land in the high end of this range by the end of the year. The increasing density of our sales organization and the resulting smaller territories provide opportunity to more effectively address our second growth driver, which is building awareness and driving deeper adoption at existing hospital customers. As we described earlier, A high percentage of our target PE and DVT patient populations are currently treated with anticoagulation alone. Education and training of non-interventional physicians, such as emergency department physicians, pulmonologists, intensivists, and hospitalists, who are often responsible for treatment decisions for these patients, is important. We convene both in-person and Zoom-based training of these physicians in groups and individually. And in addition, our sales professionals routinely visit with these non-interventional physicians in the current less restrictive environment, often inviting them to observe NRE procedures. Smaller territories have been especially useful for these efforts. We are also working with our hospital administrators to establish VTE programs in which systematic processes are installed to identify and triage our target patients to physicians who are experts in these disease states. These efforts continue to show tangible progress. Several of our hospital customers, for example, recently committed resources to hire dedicated VTE coordinators. We believe that this type of coordinator role has been vital to the growth and treatment of other disease states, such as STEMI and stroke, and will be similarly important to the development of VTE programs. We look forward to sharing progress here over time. Our third growth driver is to build upon our base of clinical evidence. We have a lot to share on this topic. First, we presented early in June At the new Cardiovascular Horizons meeting in New Orleans, an interim analysis of results of the first 250 patients enrolled into our prospective clout DVT registry. The safety profile clout treatment remains pristine. No patients with valve damage. No patients with vein damage. No patients with renal injury. And a device-related adverse event rate of just 0.4%. Blood loss was just 50 cc, which is similar to a standard blood draw, making clot-triever thrombectomy virtually bloodless. Effectiveness was equally compelling, and independent core lab analysis showed near-complete clot removal in more than 85% of the patients, which led to excellent clinical outcomes. At six months, every single patient reported a reduction in pain, and 92% were free from moderate and severe post-thrombotic syndrome. All of these results are best in class by a pretty wide margin. These results are even more compelling given that two-thirds of the patients treated in CLOT would not have qualified for trials in which competitive devices have been used because the age of the CLOT was older than two weeks. As you know, as CLOTs age, they become much more firm, more wall-adherent, more resistant to thrombolytic drugs, and impossible to remove via aspiration. Shifting gears to PE, we continue to make excellent progress in our FLAME and FLASH registries. In addition, we have assembled a steering committee of key opinion leaders to design a series of randomized controlled trials, or RCTs, that we believe will establish FlowTriever as standard of care for treatment of PE. Today, we are excited to announce the first of these trials. This trial will compare FlowTriever to catheter-directed thrombolytic therapy, or CDT, which we believe still represents the majority of PE interventions today. The composite primary endpoint will comprise death, intracranial hemorrhage, major bleeding, clinical deterioration, and duration of ICU stay. We are targeting first patient enrollments by Q1 of 2022. We plan to follow this with a separate RCT to compare FlowTriever to standard anticoagulation therapy, and we will have more to say about this trial in future calls. We believe our devices change lives in the most extraordinary ways, and we remain 100% committed to validating this with the highest level of evidence possible. We believe also that each cut of registry data, each new and more clinically relevant endpoint we measure, each RCT we initiate and successfully execute, not only increases awareness, helps drive adoption, and moves us closer to establishing these devices as standard of care, but also raises the bar by which new devices and competitors will be evaluated. Our fourth growth driver is to expand our product portfolio. We have some good news here as well. FlowSaver was cleared by FDA on July 22nd. FlowSaver, as many of you might recall, is an intuitive disposable filtration system that enables physicians to reintroduce extracted blood back into the patient. This delivers two important advantages. Number one, we believe that removing all of the clot carries great clinical value to the patient, and FlowSaver allows pursuit of this goal by enabling the physician to whoosh as many times as they deem necessary without concern for blood loss. And number two, by virtually eliminating blood loss in flow trigger procedures, FlowSaver establishes bloodless thrombectomy across the entire spectrum of Inari procedures, again setting the bar higher both for existing and future competitors. FlowSaver has been highly anticipated by our physicians and has already been received with great enthusiasm. Our 100-patient limited market release, or LMR, was completed in just one week, and we have already begun full market release. Beyond FlowSaver, our new product pipeline remains robust. We expect FDA clearance on several new products late this year and into the early part of next year, and we'll look forward to sharing more at that time. Our fifth and final growth driver is expansion into adjacent and international markets. We continue to make progress early in our European launch. Despite what remains a very challenging operating environment, we have now completed clot-triever and flow-triever cases across most major Western European markets. Enthusiasm and feedback from physicians remains highly positive, and we are seeing steady increases in our monthly case volumes. Most importantly, we are gaining clarity on our longer-term commercial, clinical, and reimbursement strategies. There's much work ahead of us, but we remain optimistic about our European opportunity. Finally, I appreciate always the opportunity to close by reminding you that Inari is more than just business for us. We have committed to a mission. We have committed to changing the lives of our patients in important and beautiful ways, and we increasingly sense responsibility more than merely opportunity in tackling some of the most challenging unmet needs in all of medicine. We love every second of the work, and we remain thankful for your support of our effort and for believing along with us in extraordinary possibilities. We're just getting started. We believe we can and will grow sustainably for many years to come. With that, I'd like to turn things over to Mitch.