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Penumbra, Inc.
2/18/2025
Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's fourth quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press star one. Thank you. I would like to introduce Miss Cecilia Furlong, Business Development and Investor Relations for Penumbra. Miss Furlong, you may begin your conference.
Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the fourth quarter and full year 2024. A copy of the press release and financial tables, which includes a gap to non-gap reconciliation, can be viewed under the investors tab on our company website at .penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality, compliance, and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2024, which is scheduled to be filed with SEC on February 18, 2025. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with SEC, including the 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock. Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments, or otherwise. On this call, Q4 2024 and full year 2024 financial results are on a non-gap basis. Non-gap revenue, gross profit, gross margin, operating income, and operating margin exclude a 5.8 million reserve pertaining to Italian payback legislation. In addition, the full year 2024 non-gap operating expenses, operating income, and operating margin exclude expenses associated with immersive healthcare impairment charges of 76.9 million, wind down of immersive healthcare business expenses of 5 million, non-recurring litigation expenses of 4.8 million, and amortization of finite lived and tangible assets of 4.8 million. The corresponding gap measures and reconciliation of gap to non-gap financial measures are provided and are posted press release. Adjusted EBITDA for Q4 2024 and full year 2024 respectively excludes the Italian payback reserve, one-time immersive healthcare impairment charges, immersive healthcare wind down expenses, non-recurring litigation related expenses, stock compensation expense, depreciation and amortization, provision for income taxes, and interest income expenses. Adam El-Sesser, Penumbra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the fourth quarter and full year 2024, and Jason Mills, our Executive Vice President of Strategy, will discuss our 2025 guidance. With that, I would like to turn over the call to Adam El-Sesser.
Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's fourth quarter and full year 2024 conference call. In the fourth quarter, we generated revenue of $321.3 million when excluding the Italian payback adjustment, representing underlying year over year growth of .9% on an adjusted basis and 13% on a constant currency basis. Our U.S. thrombectomy business continued to lead our growth with our comprehensive and proprietary CAVT portfolio, delivering another dominant performance, gaining momentum throughout the quarter and exiting the year in a strong position. Fourth quarter U.S. thrombectomy sales increased .3% year over year to $180.6 million, with our U.S. VTE franchise delivering robust year over year revenue growth of 41%. The balance of our U.S. thrombectomy franchise continued to perform very well in line with our expectations. Our fourth quarter capped an overall solid 2024 performance, with full year revenue increasing .4% year over year to over $1.2 billion, and our U.S. thrombectomy business delivering revenue of $646.7 million, .8% increase versus 2023. During the year, we evolved and expanded our commercial team, concentrated, enhanced our focus on our interventional business via our exit from immersive health care, and invested in generating high quality clinical and health economic data to further support and highlight CAVT's value, all while continuing to prioritize innovation. We introduced nine new products to the U.S. commercial market, including the new CAVT products, Flash 2.0, Lightning Bolt 6X with tracks, and Lightning Bolt 12. Internationally, we expanded CAVT's footprint into Europe and additional OUS geographies, and took steps to optimize our geographic presence to support long-term growth and profitability. At the same time, 2024 also demonstrated the strong profitability profile of our business. In the fourth quarter, gross margin of .4% expanded 170 basis points over the prior year period, while operating income of $48.6 million, or .1% of revenue, increased 200 basis points over the prior year period. In the quarter, we generated $49.1 million in operating cash. Looking forward, we are on track to achieve a gross margin profile over 70% by the end of 2026, which is consistent with the timeline we previously communicated, and we expect operating margin expansion to outpace gross margin expansion for the foreseeable future. In addition, we recently signed a contract to build a manufacturing facility in Costa Rica for efficiently expanding our manufacturing capacity. Therefore, we are well positioned, leveraging favorable product mix shift, operating efficiencies, and disciplined spend to continue to increase our profitability and operating cash flow going forward. Turning to our U.S. peripheral business, Lightning Flash 2.0 continued to lead overall growth in the fourth quarter, with its competitive benefits versus analog technologies, namely the speed and safety with which Flash 2.0 removes blood clots in VTE patients, driving expanded physician interest and adoption, as well as broader and deeper account penetration. In the quarter, we also commenced the commercial rollout of Lightning Bolt 12, introducing our proprietary modulated aspiration technology to the venous anatomy and larger arteries, offering the latest generation CAVT solution for these vessel sizes. Initial feedback has been very positive, and we look forward to continuing to roll out the technology on a broader scale in 2025. Overall, our U.S. VTE franchise continued to gain momentum and market share throughout the fourth quarter, with December representing our highest month of VTE procedure volumes ever. In our U.S. arterial business, Lightning Bolt 7.0 delivered another strong performance, supporting sequential growth acceleration in our arterial franchise. Lightning Bolt 6.x provided initial contributions in the fourth quarter, with Bolt 6.x's commercial introduction expanding our arterial-focused CAVT portfolios' reach to smaller vessels, including arteries that are below the knee. While early feedback on Bolt 6.x and our increasingly comprehensive arterial CAVT portfolio is positive, and looking to 2025, we view a meaningful opportunity for the combination of Bolt 7.0 and Bolt 6.x to accelerate physician conversion from open surgery or the use of Lytics to CAVT. Similar to our Venus business, in December, we treated more patients in the U.S. suffering from arterial clot than in any prior month. The proprietary mechanism of our CAVT technology consistently removes blood clots faster and safer than analog technology. That said, we are in the early stages of reaching and treating the over 800,000 patients annually in the U.S. who suffer from VTE and arterial clot, as well as the even greater number of patients internationally with Venus and arterial clot. This is a huge burden. To further expand CAVT's reach and ability to treat a greater number of patients, we commenced what we refer to as our market access initiatives. These initiatives are focused on increasing awareness, not only of CAVT's clinical benefits, but also of the economic benefit to hospital systems. This past November, during a late-breaking session at the VIVA conference in Las Vegas, Dr. Parag Patel presented the first public view of some of the results of our market access initiatives. The retrospective outcomes analysis presented by Dr. Patel looked at intermediate-risk PE patients treated with either CAVT or anticoagulation, catheter-directed lytics, or other forms of mechanical thrombectomy. The data demonstrated that compared to other treatment modalities, treatment with CAVT resulted in a reduction in composite complications, as well as a significant improvement in the economics for hospitals. We intend to continue to update our analysis to reflect the benefits of our latest generation CAVT technologies and look forward to highlighting Flash 2.0's outcomes in the future. Looking ahead, we are scheduled to present additional data sets focused on CAVT's utilization in DVT and arterial patients at a major medical conference in the next few months. Shifting to our neurovascular business, our U.S. stroke thrombectomy business once again posted strong results, with revenue accelerating versus the third quarter. For the full year, our market-leading, FDA-cleared aspiration portfolio, led by REDD-72 with our proprietary SEDTA technology and REDD-43 alongside REDD-62, REDD-68, and REDD-72 grew nearly 20% versus 2023, well ahead of underlying U.S. stroke market growth. We enter 2025 as the dominant market leader, and looking forward, we are preparing to bring Thunderbolt, our proprietary CAVT technology, to the neurovascular field. Follow-up in our Thunder trial completed as expected in late December, and we will provide additional future updates as appropriate. We have seen the benefits our proprietary Bolt technology delivers to patients with peripheral vascular clot, specifically the speed with which the technology can extract a range of clot morphologies in a safe and simple procedure. We are excited to bring this technology to the neurovascular field, ushering in a new chapter in the treatment of stroke and further enhancing our market-leading position in the field of stroke thrombectomy. We enter 2025 with significant momentum behind our CAVT technology portfolio. With CAVT, we are driving a shift from analog to digital. We are positioning our organization to be able to intensely focus on the meaningful thrombectomy opportunity ahead for CAVT, while also augmenting our leadership position in both embolization and access through additional innovation and commercial focus. As we demonstrate in 2024, we will continue to drive gross margin expansion and operating efficiencies and deliver increasing profitability, while investing aggressively in innovation, clinical and health economic data, and our commercial team to expand and strengthen our position as the world's leading thrombectomy company. I'll now turn the call over to Maggie to go over financial results for the fourth quarter and full year 2024.
Thank you, Adam. Good afternoon, everyone. Today I will discuss the financial results for the fourth quarter and full year of 2024. Financial results on this call are on a non-GAAP basis, which excludes the adjustment highlighted by Cecilia, including the $5.8 million reserve pertaining to the Italian government's legislation requiring medical device companies to contribute to any deficit created by Italian budget overspending on medical devices from 2015 to 2023, which was recently upheld as constitutional by the Italian courts. Given that this amount related to prior years, we have normalized for this amount when calculating our anticipated revenue growth rates for 2025. The corresponding gap measures and our reconciliation of gap to non-GAAP financial measures are provided in our posted press release. For the fourth quarter and the December 31st, 2024, our total revenues were $321.3 million, an increase of .9% adjusted and 13% in constant currency compared to the fourth quarter of 2023. Our geographic mix of sales for the fourth quarter 2024 was .2% U.S. and .8% international. Our U.S. region reported growth of .7% driven by .3% growth in our thrombectomy franchise. Our international regions decreased .4% adjusted and .1% in constant currency, primarily due to a decline in China revenue of $15.4 million, partially offset by an increase of $7.8 million in all other international regions. The sequential growth in our total revenue of .7% was primarily driven by an increase in U.S. thrombectomy revenue of $18.6 million and relatively flat revenue internationally. Moving to revenue byproducts. Revenue from our global thrombectomy business grew to $222.7 million in the fourth quarter of 2024, an increase of .8% adjusted and .9% in constant currency compared to the same period last year. Our U.S. growth of .3% is primarily due to strong growth in both vascular and neuro thrombectomy. Our international business declined 13.9%, primarily driven by a decrease in China revenue of $15.8 million, partially offset by an increase in all other international regions as compared to the same period last year. Revenue from embolization and access business was $98.6 million in the fourth quarter of 2024, an increase of 5% adjusted and .1% in constant currency, which is in line without expectation and primarily driven by an increase in the U.S. Growth margin for the fourth quarter of 2024 is .4% compared to .7% for the fourth quarter of 2023, which represents a 170 basis point improvements driven by favorable thrombectomy product mix across all regions and strong productivity improvements. Sequentially, we had an 80 basis point improvement in our growth margin, which reflects higher thrombectomy product mix due to new product launches and favorable regional mix. Total operating expense for the quarter was $167.9 million or .3% of revenue compared to $149.6 million or .5% of revenue for the same quarter last year. Our research and development expenses for Q4 2024 were $20 million or .2% of revenue compared to $21.9 million or .7% of revenue for Q4 2023. SG&A expenses for Q4 2024 were $147.9 million or .1% of revenue compared to $127.7 million or .8% of revenue for Q4 2023. We recorded operating income of $48.6 million or .1% of revenue compared to an operating income of $37.4 million or .1% of revenue for the same period last year. We posted adjusted EBITDA of $63.7 million or .8% of total revenue compared to $53.4 million or .8% in the fourth quarter last year. For the full year 2024, our total revenue was $1.2 billion, which represents an increase of .4% adjusted and in constant currency compared to full year 2023. Our geographic mix of sales in the year were .1% U.S. and .9% international. For the full year 2024, U.S. reported growth of .1% was primarily driven by growth from our vascular thrombectomy business, while our international regions decreased 1% adjusted and .1% in constant currency, primarily due to a reduction in China revenue of $39.5 million, possibly offset by an increase in all other international regions. Revenue from our global thrombectomy business for the full year of 2024 was $818.1 million, an increase of .8% adjusted and in constant currency. Revenue from our global embolization and access business for the full year of 2024 was $382.3 million, an increase of .3% adjusted and .2% in constant currency. Our gross margin for the year was 63.4%, which includes a one-time $33.4 million immersive healthcare inventory write-off compared to .5% of revenue for the full year of 2023. In 2025, after removing this one-time item, which had a 280 basis point impact to our gross margin in 2024, we target at least 100 basis point expansion in gross margin to over 67% for full year 2025. This reflects continued favorable thrombectomy product mix, productivity improvements, and investment to support new product launches. We had operating income for the full year of $106.6 million, which includes a one-time $33.4 million immersive healthcare inventory write-off compared to operating income of $101.3 million for 2023. And to provide an update on impact of winding down the immersive healthcare business, we had gap operating expense savings for 2024 of approximately $16 million, and we are still on track to create gap operating expense annualized savings of approximately $40 million. Our adjusted EBITDA in 2024 was $171 million, or .2% of total revenue compared to .1% last year. Looking forward to 2025, as Jason will discuss soon, we forecast operating margin to expand to a range of 13% to 14% of total revenue. Turning to cash flow and balance sheet, we ended the fourth quarter with cash, cash equivalents, and marketable securities balance of $340.1 million and no debt, which is an increase of $49.1 million sequentially driven by strong operating profitability and improvement in working capital management. We expect positive operating cash flow trends to continue in 2025 and beyond. And now I'd like to turn the call over to Jason to discuss our 2025 guidance.
Thank you, Maggie, and good afternoon, everyone. Consistent with our guidance philosophy communicated on our second quarter 2024 earnings call, our total revenue guidance for 2025 is a range of ,000,000 to ,000,000, which represents -over-year growth of 12 to 14% compared to 2020. This is a 24-gap total revenue. For our U.S. thrombectomy business, we expect growth in the range of 19% to 20% -over-year. Moving down the income statement, we expect both gross margin and operating margin to expand in 2025. For gross margin, after excluding the one-time expense Maggie described earlier, we forecast at least 100 basis points of expansion in 2025 to more than 67% for the full year. On the operating margin line, we expect expansion to 13 to 14% of total revenue for full year 2025 compared to operating margin in 2024, which excludes the one-time expense previously described. Looking forward, as Adam said in his remarks, we are on track to achieve a gross margin profile over 70% by the end of 2026, which is consistent with the timeline we previously communicated. And we expect operating margin expansion to outpace gross margin expansion for the foreseeable future. This concludes our prepared remarks. Operator, we can now open the call to questions.
At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. And your first question comes from a line of Larry Beegelson from Wells Fargo. Your line is open.
Good afternoon. Thanks for taking the question. Congrats on a strong finish to the year here. Adam, I have one on the guidance and one on Thunder. So I think you did 13 and a half or .4% adjusted revenue growth in 2024. You're guiding to 12 to 14% in 2025. Why shouldn't we see an acceleration in 2025 given the one-time headwinds in 2024, such as the delay in the European launches, some of the sales impact in China and Thunderbolt? So, you know, how are you thinking about the guidance this year from a philosophical standpoint and getting back some of those headwinds we saw in 24 and I had one follow up?
Yeah, Larry, thanks for the question. And I think it's appropriate one. I think we tried to be pretty clear in giving that guidance that this was sort of in line with the philosophy that we talked about in the second quarter of not getting ahead of ourselves. So obviously there are a number of things that we don't yet totally control Thunderbolt being your follow up question, one of them. So we're not going to put that into the guidance until we have more information around that. So you're correct to acknowledge that we had a lot of headwinds last year that we got through and that we don't have most of them this year. And we're going to, in our minds, guide appropriately so we don't get in the same trouble we got in last year.
That's helpful. And Adam, just my follow up is on Thunder. How should we it sounds like the follow up is done. How should we think about the timeline for data readout, filing and clearance. And as a follow up, we did see three negative medium and distal vessel trials at ISC a couple of weeks ago. What are the implications for Penumbra? Thank you.
Yeah, so on Thunderbolt, we will definitely update you as appropriate when there's more information to update you on as to both when it gets cleared and presentation of the data and so on. It's just premature to do that and start to put guesses out there. Obviously, I think you appreciate that. As it relates to the distal trials, it was a little bit sort of deja vu. As you know, those trials primarily used stent reivers and the use of stent reivers in particularly distal vessels as a primary mechanism as opposed to an adjunct. I for the most part, not something that should be done primarily. And I don't think we were surprised with that result. We've always talked about the opportunity, really including just large vessel occlusions, which is the M1, not the more distal. I know people have had great success using aspiration, particularly our smaller catheters, red 43 and 62 in some of those distal vessels. And I think, you know, that like everything, particularly as we've watched over 20 years in stroke, you know, the story is not written yet. And I think we'll see the constant move toward aspiration as the primary mechanism in part because it's just logical in part from studies like that. Thanks so much. Thank you.
Your next question comes from the line of Robbie Marcus from JP Morgan. Your line is open.
Oh, great. I'll echo congratulations on a good quarter. I wanted to ask on the rest of the business, symbolization and access, what you're seeing there. If I'm doing my math right, it implies flat to minus five percent sales growth in 2025. So just want to get a sense of what you're seeing there. US versus OUS and how to think about what's driving the guide for 2025. Thanks a lot.
Yeah. So when you look at our symbolization and access business, we're we have an incredibly strong business in both those segments. We're really the market leader in the in the vascular side on coils and access on the neuro side. And that is an incredibly important part of our business. We're very proud of it. I think you heard in my prepared remarks that we're not done innovating in those areas. And I think that will be something that we'll watch and focus on as the year progresses. And also, as we've gotten bigger and our interest in the CBT has expanded so dramatically, we need to make sure we have the ability to focus. And I use that term very particularly. So I think there are a lot of opportunities, particularly in the US in the short term, to continue to see that grow. By definition, last year we did a little bit of retrenching. We specifically said in markets where we weren't successful and we're going to sort of go into the areas and double down on areas where we can be more successful internationally as well. There's a lot of demand. And with the ability to particularly for for non US markets, but, you know, US markets, if appropriate, as we expand our manufacturing facility into Costa Rica, there's an opportunity to to have a cost basis that that is also more appropriate for some of these markets as well.
Great. Thanks a lot, Adam.
Thank you.
Your next question comes from a line of Margaret Kaysor from William Blair. Your line is open.
Hi, everyone. This is McCaulion from Margaret tonight. Thanks for taking our questions. So I wanted to follow up around the question on guidance and appreciate the comment on US throm specifically. But just given the 40 per 41 percent VTE growth in the US, we saw this quarter. Just wondering if you can help parse out, you know, what that includes either either for vascular versus neuro and know that that that does not include thunderbolt launch or just any commentary focusing on vascular in particular between PEDVT and arterial in the US.
Yeah, look, the guide is a holistic guide for all of the businesses. We don't break it out by each segment in the form of a guide. But obviously, given how we exited 2024, we're feeling particularly confident about the markets where CVT is driving that growth. And that's the focus, obviously, on that. You saw the outsize number, the 41 percent in the VTE business. You know, we also have a fairly tenacious competitor in that market. And we still were able to have that kind of growth because the product gets the clod out faster and safer. We've said that for a bit. You know, they're all products are not the same. You can't just have one and and be part of the market. You have to have something that does it as well as the current best in class. And I think that's pretty clear right now that CVT is making that mark. So by definition, you know, as we look out, we're going to be careful not to get ahead of ourselves. We're not going to, you know, how much more share is there, how much market growth is there, you know, and we're going to watch all of those things on a quarterly basis and we'll update them as appropriate. But obviously, we want to be appropriate as we start the year with our current guide.
Understand and then maybe just as a follow up, wanted to or saw there was an update to the red 72 510 case that the other day and Adam can't help but notice you emphasize the FDA cleared aspect in your script. So was there any modification made to the catheter there? I guess a bigger picture. What should we expect from that pipeline of catheters moving forward?
Yeah, I think it's a fair question. I'm glad that you picked that up. So as I think you all know, we are constantly improving our products. You know, that has been the hallmark of our success for the better part of 20 years. We've never sort of said we're done and read 72 was launched. You know, now what three, four years ago, I've lost track of time. And so it's natural that we would update that catheter with technology that we've developed as we've developed additional catheters. So this is just making the red 72 that much more trackable. We just got cleared at the end of last week. We've already done, I think, roughly half of our evaluation cases in the short period of time. And we'll give more information as we go. But obviously, having a suite of catheters that contract to the clot faster and better than anything else on the market. And then you add Thunderbolt on top of that. When it gets cleared, it puts us in a position for being able to help the maximum number of patients that we can help. And you combine that with, you know, the best in class sales team. And I think we're going to have a pretty good opportunity to have additional impact this year with our stroke business.
Sounds good. Thanks for taking the questions and congrats on the quarter again.
Thank you.
Your next question comes from a line of Pito Chickering from Deutsche Bank. Your line is open.
Yeah, guys. Good afternoon. Thanks for my questions. Looking at the US Threat Big Guide here, 19-20%, you know, end of the year, obviously 27%. How should we think about the seasonality of that growth? Like Comps had in 2024. You know, your fourth quarter x-ray was such a high number that we straight line that growth is almost flat sequentially, which we haven't really seen that since you launched and you talked about how strong December was.
Yeah, let me start and Jason can speak to sort of the rhythm a little more. There's always a combination of seasonality based on, I mean, we've always sort of seen the fourth quarter. Maybe it's the stress of holidays and so on. For example, the stroke business goes up and things like that. That being said, you know, we've also overlay various launches and obviously we haven't talked about launches in timing for 2025, but that changes, again, the ability to just straight line things out and run it out. And then you also add the thing I alluded to in the answer to the last question that as you are taking share, whether it's in stroke or in VTE, that share doesn't come in an even way. You know, it sort of comes in in chunks and then sort of pause and then you take more and we've seen that for many, many, many years with that sort of as a baseline. Jason can add some color to that.
Yeah, Peter, thanks for the question. As you can see, the fourth quarter was the biggest quarter in terms of sequential growth in the US thrombectomy business and on a year over year growth perspective, as you can also see, it was one of the fastest. It was an outstanding quarter from a US thrombectomy, which sets up the fourth quarter of 2025 just in those terms to be the most challenging comp, which would therefore suggest that as you're modeling within that 19 to 20% range, you can probably start in the beginning of the year at the midpoint or better. And then the fourth quarter can reflect the fact that we don't have Thunderbolt in our guidance and can be sort of at the midpoint or lower. So more of a front in loaded year from the standpoint of the growth guidance we gave.
Okay, and then sticking with that 27% growth this quarter, is there any color in what the pricing versus volume was in the quarter? And we'll be reading about 2025 terms of US thrombectomy in terms of pricing versus volume within the guidance.
Yeah, at this at this stage, we're several years into this, it's almost all it's volume, it's volume. There's not a pricing element now. This was just and that's why I went out of my way to say this, you know, we ended the year with the strongest case volume we've ever seen both in VTE and in arterial.
Your next question comes from a line of Bill Plovenik from Canaccord. Your line is open.
Great. Thanks. Good evening and thanks for taking my questions. Just first up on Thunder. I just wanted to clarify one. Have you submitted to the FDA to have you had discussions with them yet? And are they three? Are they asking for any additional information, including any additional clinical studies? Just trying to figure out where we're in the process. Then I have a follow up.
Those are good series of questions. I'll make it easy. We have not yet submitted. So therefore we have not had any of those conversations. Okay, again, again, you know, just less than a month plus ago, we finished the trial and got all the data. And obviously it takes a little bit of time to get that organized and adjudicated. And, you know, there's a process there. So the fact that it could be ready earlier in that would mean you were obviously skipping a step along the way, which we obviously don't do.
No, thank you. And then just on R&D, you know, 20 million is really a low point that we haven't seen in almost two years. Is this a new normal in terms of the kind of the R&D spend nominally? And, you know, should we use this as a base point going forward and expect most of the leverage off of this in terms of operating margin expansion? Yeah, I
mean, I think it was pretty clear that we're I think I use the term we're going to aggressively invest in innovation. So R&D spend changes quarter by quarter, depending on what's on the docket, whether we have certain types of testing or certain, you know, this and that. And so you're going to see that move around based on the work that's in front of us, not by some kind of sort of organized or sort of artificial intelligence. Or artificial spend budget. So I wouldn't read anything into the quarter per se. Our general spend has been a pretty accurate way to read it. And I think everyone would agree we we launching nine products last year, you know, we have a pretty efficient R&D department and a team that can continue to innovate incredibly effectively and at a decent amount. Of spend, but we are not going to back away from that. There is a lot of innovation ahead. I think we're have years of continued innovation ahead of us. We won't get into the specifics, but we're going to we're going to not stop innovating for quite a while.
And Bill, the only thing I would add to that is Maggie and her remarks mentioned the savings to date so far with the immersive health care exit and a very solid percentage of that. Those expenses are in R&D. So we don't break out the investments on the interventional side -a-vis the investments we were once making in R&D and immersive health care. But suffice it to say, as Adam said in his prepared remarks, we continue to aggressively invest in innovation. I obviously on the interventional side.
Your next question comes from the line of Richard Newitter from Truist Securities. Your line is open.
Hi, thanks for taking the questions. Congrats on the performance and the solid finish to the year. Maybe I think Adam, you had mentioned several new product launches and the ebbs and flows of when those hit can dictate quarterly performance. Could you just remind us? You said nine launches, 24. How many are you thinking about? 25 and any direction or where those where those could be value add and fill the bag where there's no need that you don't have today?
Yeah, I mean, I'm not going to specify just like we didn't last year. You know, no one we didn't start the year saying we're gonna have nine launches and we don't even announce them. I think the three that were CVT related. Everyone knows, but the the others, the other six, I don't think most people have focused on. They have had a very positive impact on our overall business as well. So we're not going to go through that. The only one that obviously is possible on that list. We've talked about a couple of times already. Thunderbolt, of course, but the rest we're going to wait till we get those things products cleared and then we'll be happy to talk about them.
Okay, but and just to be clear, though, Thunderbolt is not needed to hit your guidance range. In other words, it's Thunderbolt. Revenue for.
Yeah, revenue for Thunderbolt is not currently in our guide for the simple reason, not because we don't think it's a great product, not because we're not incredibly confident about the where we stand on it, but because we don't totally control that process. And because of that, we're going to be careful so we don't have to change our guide based on something we don't control.
Okay, thank you. And just one last one on Thunderbolt. Do we do we expect you to have this presented at a, you know, at a conference or is it something that we could, you know, we could get press released mid year? Just just how are you thinking about that?
Yeah, it depends on the timing. There are really two major US since the US approval US conferences, one in July and one in November. And so to the extent that the the clearance happened in a time when no one, you know, it's not right around that time. We would obviously not wait to present the data to launch the product, which means, you know, obviously there's a possibility of hearing about it before the formal presentation.
The data. Thank you very much.
Thank you.
Your next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is open.
Just to get Samantha on for that. Thank you for taking our question. There's a handful of clinical trials going on for aspiration based thrombectomy devices, kind of both on the peripheral and the neuro side. How are you thinking about enrollment in these trials potentially impacting sales growth in the near term or potentially, you know, helping grow the market in the longer term?
Yeah, they're not. There's a handful of them. I think you described it the right way. It's it's not really an impact on our sales. Obviously, I think that was pretty obvious this quarter. I think, you know, when you actually speak to the physicians using a lot of those products, it sort of gives you the real story. And I think we'll focus. You know, we don't think that will that changes our strategy changes our momentum or anything like that.
Thank
you. Your next question comes from a line of Michael Sarcone from Jeffries. Your line is open.
Good afternoon and thanks for taking my question. It's just just to start, you know, China was a pretty big headwind in 2024, maybe three or 350 basis points. Could you just talk about, you know, what kind of assumptions you've got for China baked into 2025 guide? Is it kind of stabilized from here? How are you thinking about that?
Yeah, there's no question China, you know, as everyone's talking about the market and and and what it means for US based medical device companies, our deal that we outlined had a number of different elements to it. But the the element that that mattered at this phase would have been sort of for the US based or manufactured product. And that market, you know, really isn't isn't available for a while. There's a little bit of headwind at the beginning of the year. But more than that, I think we're we're sort of have that behind us. And again, I think if you think about what we've said and the opportunity we have, there are international markets that will matter a lot. And we've talked about those markets. What matters, you know, in terms of scale and growth, it changes, you know, from from year to year. And and I think we to just remind everyone we've been selling internationally for for 18 plus years and we have a pretty good knowledge of the international markets and what what's viable and not. It's also why you're going to see a continued outsized growth in the US with the scale of patients again, 800,000 patients in the US alone, more than 90 percent of the market available to us. If we do the work that we outlined, which is continued taking share and continued the market access work so we can grow the market through the hospitals doing the work necessary to make sure they're treating everyone that they can treat. When you add that together, I think we're in a really, really strong position for a number of years. And then the international markets have inflow based on sort of their own economies and and all that as we go forward.
Yeah, Michael, just to add to that, you're you're right. The the headwinds just from China alone in 2024 were actually slightly greater than than what you posed in your answer. And as Adam mentioned, we're going to see sort of the last headwinds of that in 2025, such that next year the the headwinds will be de minimis to nothing. It won't be quite as much of a headwind in 2025 as 2024, but some some headwind, especially in the first half of the year. So as you're as you're looking at our guidance and you're parsing out the US growth versus international growth, if you exclude China, there's actually an acceleration in growth across businesses. And the headwind from China again will land in the first half of the year. So as it relates to the the the 12 to 14 percent guidance, you'll see that hit in the first half of the year in terms of the year over year growth because of China.
Got it. That's helpful. Thanks, Adam and Jason. Maybe just for the follow up, we've seen some M&A activity in the space earlier this year. Just wanted to get your sense on whether or not you're bracing for any change in competitive dynamics or if there's any potential disruption coming down the pike that you may be able to capitalize on. Thank you.
You know, I'm not going to sort of get into particular tactics and things like that, you know, competitively on at this stage. I can tell you that generally overall, we certainly welcome new ownership into the field, but it really doesn't have any change on our strategy or we believe our momentum in the field right now.
Great. Thank you, Adam.
Thank you.
Your next question comes from a line of Ryan Zimmerman from BTIG. Your line is open.
Hey, thanks for taking my question. I want to ask about gross margins for a bit, just because, you know, doing the math. It does imply a pretty significant step up in 26 and gross margins to hit that 70% exiting 26. You know, help me understand. I mean, is that just a... Go ahead, or Maggie.
Yeah, no, thanks for the question. Well, basically, there's no fundamental changes in our underlying drivers that you have seen this year. I mean, majority of our margin expansion drivers came from product mix, from Bectomy product mix and also regional mix. If you look back at 24, I mean, you have seen pretty good momentum in our sequential quarterly growth. We expect similar trend continue in 2025. And if you continue that momentum, I think you can see us reaching exactly at our target of 70% sometime in 2026.
Okay. But just to be clear, Maggie, that is just a function of product mix. That is not a function of any pricing strategies or anything else that you're contemplating to kind of, you know, get you that extra effort in margin in 2026.
No, nothing. It is primarily product mix. And of course, I mean, our operation team has been very focused on leveraging our overhead spend and scaling our capacity. So all those drivers all together...
It is between product mix and manufacturing efficiency that is driving it. It is definitely not price.
Okay, very clear. And then the second question, Adam, I guess, I should direct to you, is the scale up in Salesforce and the amount of additional heads you've hired to grow your Bectomy business. And so what I want to understand is just, you know, where you're at in that process, you know, how you think about that kind of coming into its own and its contributions in either now or early 25. And similarly, that same question, you know, on market access, which is, you know, arguably underappreciated in how you're attacking kind of the market with the market access initiatives. But when do you expect the impact of both of those dynamics to be felt from your efforts? Thank you.
Well, if you competed with us in VTE, you certainly felt it in the fourth quarter. I think that's pretty obvious. I think we've started that process. I've always said it's not linear and nothing in this field is. So I want to be very clear that it is not linear. That being said, we have done a great job hiring an incredible team right now. I really, really mean this. We have the best commercial team ever assembled in MedTech. And I know a lot of people say that about their teams and I appreciate it. I'm glad they do. But it really is true. Our team is extraordinary. And when you add the data that we now have and that we're talking to hospitals about directly and opening their eyes to what they could be doing to help more and more patients, you're in a really good spot. Again, it's not a linear process. It never has been. But I think we have started that process. A lot of that is because we now have technology with CVT that is worth doing that for. It is clearly better. You can get the cloud out faster and safer. We've shown that over and over again. We have now data, large quantity of data that says the same thing. And I think that's just crystal clear. So I think that will continue. And again, it will be a multi multi-year effort because we're only 10% penetrated with this market and we're going to keep going until we get them all and help all these patients. I will, if you will indulge me with a short story, we had our national sales meeting several weeks ago and a patient came to discuss and share with the entire vascular team what happened. She had a big amassapie. If I'm not mistaken from her story, she had coded. She was revived and turned out to have a great recovery. And at the end of her telling her story, she asked the entire commercial team that was assembled to do one thing. And she said, I have one request of everyone in this room, and that is don't stop until everyone that can benefit from this technology gets this technology. We didn't ask her to say that we didn't set her up for it. She said it from the bottom of her heart as somebody who received the best technology available. And that's going to motivate us. It certainly did in the room. And that's what we're going to do for many, many years.
Your next question comes from the line of Shagun Singh from RBC Capital Markets. Your line is open.
Great. Thank you so much. Just a quick one for me for your US Venus thrombectomy business. You mentioned that you're doing a great job of getting the best technology available. You're doing a great job of getting the best technology available. You're doing a great job of getting the best technology available.
You're doing a great job of getting the best technology available. I want to stress no growth rates in a situation where there's market growth and share shift is linear. So you just it's can't be seen that way. And it's not that being said, obviously, both are happening. And that is not so much a direct impact on we have more people. Therefore, we can sell more. It's the product. The product is that good. It takes out the blood clot faster than any other product on the market. And therefore, as people hear about it, as people want to try it and move from analog technology to digital technology, they have to be trained. They have to be, you know, go through the process. But that will continue, I think, for quite a while. You overlay the opportunity to treat more and more people. And as more and more hospitals become aware of that information and what they can do to do that, I think you're going to see continued strong growth, not in linear fashion quarter by quarter, but over the course of the next number of years, you're going to see particularly strong growth continue.
Thank you.
And your final question comes from a line of Mike Crotkey from Learing Partners. Your line is open.
Hi, everyone. Thanks for taking our question. So obviously, great acceleration in U.S. thrombectomy growth. You know, 41 percent U.S. VTE growth. Sorry to bother you with another one on guidance. But, you know, without providing specifics, can you help frame where you're expecting your different verticals between VTE, arterial, stroke and coronary to land relative to that 19 to 20 percent overall U.S.
growth? Yeah, I think it's premature to be that to give you that kind of detail at this stage. Obviously, all of those have drivers. We have Flash 2.0 that's continuing to attract a lot more customers together with the market access work. We have the arterial, which has new products as well. And then, of course, whatever happens ultimately with Thunderbolt, which isn't technically in our guide, so we can't include it, but obviously is going to have an impact. That's not even talking about the new Red 72 catheter, which if it continues to do what the first three days of cases show is going to be a significant benefit as well. So I think we have a lot of drivers. So the exact numbers within that, let's wait and see, and we'll give you more updates when we have more information.
Understood. And maybe just as one follow up, can you comment on some of the early adoption trends for Lightning Flash and Bolt 7 in Europe following the recent launches?
Yeah, there again, the limitation is there's some countries that aren't yet at a place where they're fully reimbursable. And so it's not in every single country, you know, in a big way, but where it is, we're seeing the same benefit that we're seeing in the US. Again, the clot is taken out faster and safer. And obviously, I have yet to meet a physician who says that's not a positive goal.
Understood. Thanks very much.
Thank you.
And this concludes the Q&A portion of today's conference call. Ms. Furlong, I turn the call back over to you.
Thank you, Operator. On behalf of our management team, thank you all again for joining us today and for your interest in Penumbra. We look forward to updating you on our first quarter call.
This concludes today's conference call. You may now disconnect.