Shockwave Medical, Inc.

Good morning and welcome to Shockwave's medical second quarter earnings conference call. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Debbie Castor, Vice President of Investor Relations at Shockwave, for a few introductory comments.

Thank you all for participating in today's call. Joining me today from Shockwave Medical are Doug Gottschall, President and Chief Executive Officer, Dan Puckett, Chief Financial Officer, and Isaac Zacharias, Chief Commercial Officer. Earlier today, Shockwave released financial results for the quarter ended June 30th, 2021. A copy of the press release is available on Shockwave's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations, and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of COVID-19 pandemic that could cause actual results or events to material differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factor section of our annual report on Form 10-K on file with SEC and available on EDGAR and in other reports filed periodically with SEC. Shockwave disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 9th, 2021. And with that, I'll turn the call over to Doug.

Thanks, Debbie. Good morning, everyone, and thank you for taking the time to join us to review Shockwave's results for the second quarter of 2021. We reported $55.9 million in revenue for the second quarter of 2021, representing an increase of 444% from the second quarter of 2020 and a 75% increase from the first quarter of this year. The performance in the quarter was again led by the growing adoption of coronary IVL in the U.S., which continues to outpace our expectations. Our U.S. commercial team continued their stellar execution this past quarter. We saw excellent performance across the board, but obviously C2 carried the day. More and more sites are proving that they are fully prepared to use C2 independently after our launch process is complete, and we were encouraged to witness an increased percentage of our C2 sales resulting from reorders, as one would hope to see as a launch progresses. Sales from launched products comprised 74% of total U.S. C2 revenue for the quarter. We achieved this increase in reorder rates while we were simultaneously adding new accounts throughout the quarter. averaging 1.5 new accounts per territory per month. This steady cadence enables us to continue to provide thorough training and case support at each launched account before moving on to the next site. The initial order quantity for new site starts remained at five units on average per account. During the quarter, 44% of our accounts purchased both coronary and peripheral products, 9% purchased only coronary, and 47% purchased only peripherals. These numbers reflect both the synergy of our two businesses and also how many more accounts we still have in front of us with a C2 launch since nearly every hospital that performs PAD procedures also perform coronary procedures. We continue to compensate our team in a fashion that was designed to create a balanced sales approach between coronary and peripheral, which appears to be working given the peripheral growth we witnessed this past quarter. We're in the process of adding additional field personnel and expect to end this quarter with close to 70 US territories. We also expect to add several clinical specialist positions, which together should be the last meaningful US field expansion for this year. Since we first started selling commercially in the US in 2017, we have focused primarily on providing our customers with the safest, most consistent solution to treat patients with complex calcification. In parallel, We have spent the past several years endeavoring to improve reimbursement to complement the clinical imperative of IVL use. These efforts are now paying off, as is evidenced by the recent granting by CMS of both a transitional pass-through payment for outpatient coronary IVL, which went into effect on July 1st, as well as the new technology add-on payment, or NTAP, for inpatient coronary IVL procedures that will go into effect on October 1st in this year. We've recently added to both our U.S. international reimbursement teams, and we view reimbursement as an area that still offers meaningful upside for the company and our customers. Turning to international, we are now commercial in 58 countries, and our team came through once again with great execution and drove growth in virtually all our markets on both an annual and quarterly basis. While historically our international sales have been very coronary-centric, Our peripheral franchise contributed nicely this past quarter, which suggests our market development efforts in the international pad space are starting to bear fruit. So all in all, great progress internationally, particularly considering the ebbs and flows of COVID. As the usage of IVL has expanded across the globe, we have learned more about our markets, and in the process, it has become increasingly evident that the opportunity for IVL is even larger than we had previously estimated. Therefore, we felt it was time to do a refresh on our estimate of the total addressable market, or TAM, for IVL. Since going public, we have consistently estimated our TAM to be approximately $6 billion. At that time, however, IVL was not approved or launched in most geographies where we operate today, so we lacked visibility to procedure volumes in many countries. Additionally, some markets have experienced significant procedure growth in the last few years. Based on these new inputs, we have increased our estimate of the TAM for IVL to roughly $8.5 billion, based on projections for procedures in 2022. I'm going to quickly run through some of the components of that number that have seen the biggest changes. It's worth noting that our estimate for percentage of calcifications has remained consistent across all vessel beds, consistent with our prior estimates. starting with peripheral and SFA procedures, where we now have improved visibility to international procedure volumes. Our updated estimate of total global SFA procedures is approximately 950,000, up from 700,000 at the time of our IPO. A market that our customers created with Shockwave is treatment of iliac artery to facilitate passing of large-bore catheters, such as TAVR or EVAR. As TAVR cases have grown globally, we now estimate the total large-bore catheter market has grown from 275,000 to 475,000 procedures. We're also increasing our estimate of below-the-knee procedures by 30%, moving from 300,000 to 400,000. And that still underestimates the BTK potential, since it fails to capture the significant population that does not get treated, those who undergo bypass surgery or those who undergo an amputation. And lastly, coronary cancer. Our revised estimate of the addressable market for coronary procedures has increased from 3.5 million to 6 million procedures globally. The sizable change stems from our visibility into more geographies, as well as procedure volume growth, particularly in China, where we now believe total PCI procedures will reach 1.5 million in 2022. Putting this all together, our big opportunity is actually even bigger than we initially had estimated, and we now believe IVL can address a market of over $8.5 billion. Shifting out of clinical, we had the distinction of having three manuscripts published simultaneously in JAK interventions this last quarter, creating something of an IVL journal. We also were recently informed that our abstract describing 750 patients from our PAD3 observational registry was accepted for presentation in a late-breaking session at VIVA 21 conference this fall, making it the second year in a row for us to have a late-breaker at VIVA. And finally, Our JV in China has just started a trial of C2, and we will soon be commencing a peripheral study. These studies are designed to ensure that we are prepared in the event that country-specific data is required for approval by CFDA. If CFDA does not require these data for approval, having local data should still be beneficial for our marketing efforts. During the quarter, our teams attended nine conferences where there were 10 live cases, 8 symposia, and 13 webinars to support our C2 launch. And to complement our leadership in technology and demonstrate our commitment to education, we partnered with the Optima team, led by Dr. James Spratt in the UK, and created Shockwave's Calcium Masterclass, a proprietary educational tool that we believe is the most ambitious and comprehensive resource on coronary calcification. Our R&D team has been hard at work advancing our pipeline with a blend of enhancements to our current products, which we believe will make performance even better in the hands of our customers, as well as some new approaches to the use of IVL that we expect will further expand our treatable population. We've received many inquiries about our pipeline over the past few months, and our approach will be to share details about specific products when it launches on the near-term horizon or if we are preparing to commence a clinical study for devices that require a trial for approval. We are increasingly bullish about our portfolio, but we don't think it benefits us or our shareholders or customers to share details about products that are still years away from entering the clinic. That said, the first product in what we expect will be a steady cadence of new introductions is M5+, which recently received FDA clearance for peripheral indication. M5+, has a longer catheter shaft than our M5 catheter, so physicians will be able to treat iliacs and common femoral disease via radial access. They will also be able to treat below-the-knee disease more readily using M5+, which is appealing for those larger, more proximal BTK vessels. The two features that our customers are even more excited about are the addition of an 8-millimeter diameter balloon and a faster pulse cadence going from 1 hertz to 2 hertz. The 8-millimeter diameter is something our symptomatic ILLIAC and large-bore customers have been asking for, and now they will have it. The faster pulses will cut the treatment time in half from 30 seconds per cycle to 15 seconds. which may not sound like much, but the physicians have loved it in the case we've done so far. We conducted a small, controlled study and are now starting a limited launch, which we will steadily expand, leading to a full launch in the first quarter of 2022. Operationally, we continue to make great progress on both the facilities and people side of the business. We had 528 employees at the end of the second quarter as we continue to build out our sales team, increase production capacity, and to invest in R&D. R&D team will grow significantly over the next two years as we continue to identify projects that we expect will expand the potential of IVL. We recently finalized an agreement with a contract manufacturer, and by the end of this year, they will be producing a majority of our M5 catheters. This will give us extra capacity in Santa Clara for C2 volume and should also improve our M5 margins. We continue to be very pleased with the performance of IVL across the globe. And given the outperformance of our coronary product in the U.S. this quarter, we are increasing our guidance for the year. Our updated expectation is that we will generate between $218 and $223 million in revenue for the full year of 2021. This would represent growth up to 232% from our revenue for the full year of 2020. With that, I will now turn the call to Dan.