Shockwave Medical, Inc.

Good afternoon and welcome to Shockwave's second quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. We will be facilitating a question and answer session toward 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 your host, 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, Isaac Zacharias, President and Chief Commercial Officer, and Dan Puckett, Chief Financial Officer. Earlier today, Shockwave released financial results for the quarter ended June 30th, 2023. 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, other than the statements of historical fact, 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, reimbursement proposals, future product development and approvals, and the integration of Neovask and its technologies into our business are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events, such as the COVID-19 pandemic, that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For list and description of the risks Of the risks and uncertainties associated with our business, please refer to the risk factors section of our annual report on Form 10-K on file with the SEC and available on EDGAR and in our 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 7, 2023. And with that, I'll turn the call over to Doug.

Thanks, Debbie. Good afternoon, everyone, and thank you for taking the time to join us to review Shockwave's results for the second quarter of 2023. Our businesses continue to experience solid growth across the board in the U.S. and internationally in both peripheral and coronary franchises. Second quarter revenues of 180.2 million represented a 49% increase from the second quarter of 2022. We're pleased with the continued acceptance and penetration of our products and are particularly encouraged by the traction we've seen with our two newly released products, the L6 peripheral product in the US and the C2 Plus coronary product internationally. In both cases, the enhanced capabilities of these New designs have resonated with customers and are a testament to the ability of our organization to understand customer needs and work together efficiently to design and launch products that successfully address those needs. This past quarter, we closed our acquisition of Neovask, and we quickly got to work integrating the reducer product and team into Shockwave. The lean resource profile and creative financing structure at Neovask made for a complex integration process and was a heavy workload for our team, But they did a stellar job on our first such project together and proved they were up to the test. Over the last few months, we have begun to infuse additional resources into the reducer program, which we are confident will help upregulate performance and execution. Much of the future value of reducer hinges on clinical data generation, particularly the CoSphere 2 study. We have overhauled the approach to clinical operations and are adding resources to the existing teams. which should lead to a tightly executed study as we have become accustomed to a shockwave. Our principal focus right now will be to activate more sites, since having more shots on goal is a critical component of enrollment. As a reminder, COSERA-2 is a sham-controlled, double-blind, randomized IDE trial to evaluate the reducer system for safety and effectiveness in patients with refractory angina due to obstructive coronary disease that is not amenable to conventional revascularizations. The study will include approximately 380 patients in up to 50 centers. The primary endpoint is change in exercise tolerance testing time. Now that we have begun to get our arms around the clinical and regulatory program, we are projecting U.S. approval in 2027. Ticking with the subject of the reducer for the moment, the energy we saw around this product at EuroPCR was rather remarkable, as evidenced by a standing room-only symposium and multiple very well-attended training sessions. The strong global interest in Reducer has us even more enthusiastic about this acquisition and further increases our confidence that Reducer is well positioned to address a significant unmet need and has great potential to become a meaningful contributor to our business once COSIR2 data is available. EuroPCR was a fantastic conference for us across the board. Many of our customers referred to it as the Shockwave Congress. We had our official international launch at C2+, and at the same time, we celebrated the five-year anniversary of our initial commercial launch of coronary IVL at PCR 2018. The IVL presentations at PCR consistently highlighted the outcomes achieved with IVL in real-world environments, including data presented from the Lilly and replica registries from France and Spain, respectively. That together included almost 1,000 patients and strongly reinforced the safety and efficacy of coronary IVL. It is remarkable that in just five years we have transitioned from IVL being a relative unknown to becoming a standard of care. The fall will include several strong conferences for shockwave, and we are particularly looking forward to TCT in October in San Francisco, where we have many events including several symposia, more real-world evidence, and one of our favorite events, the Top Shock Competition, which will focus on best practices with IVL in eccentric and nodular calciums. We had roughly 100 submissions from our global customers this year. And of course, we're looking forward to the U.S. launch of C2 Plus at TCT and to our Investor Innovation Day on October 23rd. Our IVL clinical work continues to ramp up after a quieter 2022, and last quarter we were pleased to announce the first enrollment in our groundbreaking Empower study, which is the first of its kind all-female, study assessing the performance of IVL in a population that is almost always underrepresented in cardiovascular research. Our BTK study is enrolling at a healthy pace, and we anticipate the last patient will be enrolled by the middle of 2024. We have a full pipeline of other studies in the very near future, which we will discuss at our Innovation Day. Overall, our investment in IVL clinical studies will be roughly 50% higher in the second half of this year than it was at the same period last year. Regarding U.S. reimbursement, we continue to make great progress and are very encouraged by how we see CMS transitioning Coronary IVL from temporary innovation programs like the NTAP to more permanent reimbursement structures as those programs conclude. As you may recall, the duration of the NTAP program for Coronary IVL is two years and is set to expire on September 30th at the end of CMS's fiscal year. Consistent with their procedures, CMS analyzed the relevant data collected on coronary IVL under the NTAP program in order to determine how to best structure and pay for coronary IVL going forward. In April, CMS proposed creating three new MS-DRGs for coronary IVL as being the most appropriate long-term structure coming out of NTAP. We were extremely pleased to see that the final inpatient rule issued last week confirmed the creation of the three new DRGs for coronary IVL. This is a watershed event because this is the first time CMS has created new DRGs in the field of PCI in over 20 years. We think this is good for the field of interventional cardiology and for patients suffering from complex calcified coronary artery disease. The new DRGs capture the use of coronary IVL, whether it's with or without a stent. The vast majority of coronary IVL cases involve a stent implantation, so I'd like to focus on those DRGs, which will pay on average $20,000 or to $28,987 if major complications or comorbidities are present. For comparison, the other PCI DRGs involving stent implantation without IVL will pay $12,767 and $20,187, respectively. So, in summary, effective October 1, 2023, payments for coronary IVL in the new DRG structure will be approximately $8,000 more than the non-IVL PCI procedures and $4,000 more than was paid by the NTAP program. We believe this will help alleviate economic pressures on hospitals and enable physicians to make the best clinical decisions for their patients. On the hospital outpatient front, the transitional pass-through program will continue through June 30, 2024. And while CMS has not given any early signs of how they plan to transition from temporary to permanent, we remain very optimistic about our prospects of landing in the highest APC. As we have seen in the hospital inpatient side, with the conclusion of the coronary IVL-NTEP, CMS follows that process, and we remain confident in what we are seeing from the data. To date, additional remuneration for physicians, be it professional fees or RVUs, have not been available for any of our therapies. We are excited to report that this will change as of January 1, 2024, when a new Category 1 CPT add-on code will go into effect. We will not know the amount that physicians will receive starting in 2024 until the final calendar year 2024 physician fee schedule is released in November. We are pleased with CMS's 2024 draft schedule issued last month, which proposed up to 30% additional remuneration for physicians when coronary IVL is performed. Turning now to operations, we continue to make significant investments to support and sustain our growth. We are accelerating our investment in Costa Rica, where we have a strong leadership team in place and have hired over 50 employees, many of whom are spending significant time in Santa Clara for training to ensure that the new site starts operating at a high level from day one. Based on our global momentum and pipeline, we believe we will need even more capacity in the future than our combined Santa Clara and Costa Rica facilities will be able to provide, so we have exercised an option for a second phase in Costa Rica earlier than we had initially planned, which will nearly triple our clean room space there by 2025. Our strategy of using Costa Rica as our primary production location and Santa Clara as our innovation center is coming to fruition as we had hoped. Our intention is to develop new designs and therapies in Santa Clara, pilot them to optimize processes, and then transfer most of them to Costa Rica in order to make room for the next wave of innovations. Next year, we anticipate having seven products in pilot production, which is a considerable step up and would once again leave us out of space. So we have also exercised an option on a fourth building in Santa Clara, which we will occupy towards the middle of next year. We are fortunate that we have the bandwidth and financial wherewithal to expand our commercial footprint, continue ramping R&D and clinical activities, forward invest in a high-quality, margin-expanding production facility, and layer in a very promising future growth stimulus and reducer. These investments should bear fruit for years to come. We now anticipate top-line revenue in the range of $725 to $730 million for the full year of 2023. representing growth of 48% to 49% from 2022. This number includes less than 5 million of reducer sales for the full year of 2023. With that, I will turn the call over to Isaac to provide more detail on the commercial front.