Penumbra Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 18, 2025

There are 15 speakers on the call.

Operator

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 twenty twenty four Conference Call. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer Thank you. I would like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, you may begin your conference.

Speaker 1

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 GAAP to non GAAP reconciliation, can be viewed under the Investors tab on our Company website at www.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 ks for the year ended 12/31/2024, which is scheduled to be filed with the SEC on 02/18/2025. 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 the SEC, including the 10 ks 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.

Speaker 1

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 twenty twenty four and full year 2024 financial results are on a non GAAP basis. Non GAAP revenue, gross profit, gross margin, operating income, and operating margin exclude a $5,800,000 reserve pertaining to Italian payback legislation. In addition, the full year 2024 non GAAP operating expenses, operating income, and operating margin exclude expenses associated with immersive healthcare impairment charges of 76,900,000 wind down of immersive healthcare business expenses of $5,000,000 non recurring litigation expenses of $4,800,000 and amortization of finite lived and tangible assets of 4,800,000.0. The corresponding GAAP measures and a reconciliation of GAAP to non GAAP financial measures are provided in our posted press release.

Speaker 1

Adjusted EBITDA for Q4 twenty twenty four 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 Elsesser, Panorama'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 Elsesser.

Speaker 2

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's fourth quarter and full year twenty twenty four conference call. In the fourth quarter, we generated revenue of $321,300,000 when excluding the Italian payback adjustment, representing underlying year over year growth of 12.9% on an adjusted basis and 13% on a constant currency basis. Our U.

Speaker 2

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 27.3% year over year to $180,600,000 with our U.

Speaker 2

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.

Speaker 2

Our fourth quarter capped an overall solid 2024 performance with full year revenue increasing 13.4% year over year to over $1,200,000,000 and our U. S. Thrombectomy business delivering revenue of $646,700,000 20 6 point 8 percent increase versus 2023. During the year, we evolved and expanded our commercial team, concentrated and enhanced our focus on our interventional business via our exit from immersive healthcare 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.

Speaker 2

S. Commercial market, including the new CAVT products Flash two point zero, Lightning Bolt 6x with Trax and Lightning Bolt 12. Internationally, we expanded CVT'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 67.4% expanded 170 basis points over the prior year period, while operating income of $48,600,000 or 15.1% of revenue increased 200 basis points over the prior year period.

Speaker 2

In the quarter, we generated $49,100,000 in operating cash. Looking forward, we are on track to achieve a gross margin profile over 70% by the end of twenty twenty six, 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.

Speaker 2

S. Peripheral business. Lightning Flash two point zero continued to lead overall growth in the fourth quarter with its competitive benefits versus analog technologies, namely the speed and safety with which Flash two point zero 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.

Speaker 2

Overall, our USVTE 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 seven delivered another strong performance, supporting sequential growth acceleration in our Arterial franchise. Lightning Bolt 6X provided initial contributions in the fourth quarter, with Bolt 6x's commercial introduction expanding our arterial focused CAVT portfolio's reach to smaller vessels, including arteries that are below the knee.

Speaker 2

While early feedback on Bolt 6x and our increasingly comprehensive arterial CAVT portfolio is positive and looking to 2025, we view a meaningful opportunity for the combination of Bolt7 and BOLT6X to accelerate physician conversion from open surgery or the use of lytics to CAVT. Similar to our venous business, in December, we treated more patients in The U. S. Suffering from an arterial clot than in any prior month. The proprietary mechanism of our CAVT technology consistently removes blood clots faster and safer than analog technology.

Speaker 2

That said, we are in the early stages of reaching and treating the over eight hundred thousand patients annually in The U. S. Who suffer from VTE and arterial clock, as well as the even greater number of patients internationally with venous and arterial clot burden. To further expand CABT'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.

Speaker 2

This past November, during a late breaking session at the Veeva Conference in Las Vegas, Doctor. Parag Patel presented the first public view of some of the results of our market access initiatives. The retrospective outcomes analysis presented by Doctor. 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.

Speaker 2

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 datasets 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.

Speaker 2

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 RED72 with our proprietary CETA technology and RED43 alongside RED62, RED 60 8 and RED 72 grew nearly 20% versus 2023, well ahead of underlying U. S. Stroke growth 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.

Speaker 2

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 entered 2025 with significant momentum behind our CAVT technology portfolio. With CAVT, we are driving a shift from analog to digital.

Speaker 2

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 our financial results for the fourth quarter and full year 2024.

Speaker 3

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 $5,800,000 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.

Speaker 3

The corresponding GAAP measures and our reconciliation of GAAP to non GAAP financial measures are provided in our posted press release. For the fourth quarter ended 12/31/2024, our total revenues were $321,300,000 an increase of 12.9% adjusted and 13% in constant currency compared to the fourth quarter of twenty twenty three. Our geographic mix of sales for the fourth quarter twenty twenty four was 77.2% U. S. And 22.8% international.

Speaker 3

Our U. S. Region reported growth of 21.7% driven by 27.3% growth in our thrombectomy franchise. Our international regions decreased 9.4% adjusted and 9.1% in constant currency, primarily due to a decline in China revenue of $15,400,000 partially offset by an increase of $7,800,000 in all other international regions. The sequential growth in our total revenue of 6.7% was primarily driven by an increase in U.

Speaker 3

S. Thrombectomy revenue of $18,600,000 and relatively flat revenue internationally. Moving to revenue by products. Revenue from our global thrombectomy business grew to $222,700,000 in the fourth quarter of twenty twenty four, an increase of 16.8% adjusted and 16.9% in constant currency compared to the same period last year. Our U.

Speaker 3

S. Growth of 27.3% is primarily due to strong growth in both vascular and neurothrombectomy. Our international business declined 13.9%, primarily driven by a decrease in China revenue of $15,800,000 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 $98,600,000 in the fourth quarter of twenty twenty four, an increase of 5% adjusted and 5.1% in constant currency, which is in line with our expectation and primarily driven by an increase in The U. S.

Speaker 3

Gross margin for the fourth quarter of twenty twenty four is 67.4% compared to 65.7% for the fourth quarter of twenty twenty three, 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 gross margin, which reflects higher thrombectomy product mix due to new product launches and favorable regional mix. Total operating expense for the quarter was $167,900,000 or 52.3 percent of revenue compared to $149,600,000 or 52.5% of revenue for the same quarter last year. Our research and development expenses for Q4 twenty twenty four were $20,000,000 or 6.2% of revenue compared to $21,900,000 or 7.7% of revenue for Q4 twenty twenty three. SG and A expenses for Q4 twenty twenty four were $147,900,000 or 46.1% of revenue compared to $127,700,000 or 44.8% of revenue for Q4 twenty twenty three.

Speaker 3

We recorded operating income of $48,600,000 or 15.1% of revenue compared to an operating income of $37,400,000 or 13.1% of revenue for the same period last year. We posted adjusted EBITDA of $63,700,000 or 19.8% of total revenue compared to $53,400,000 or 18.8% in the fourth quarter last year. Full year for the full year 2024, our total revenue was $1,200,000,000 which represents an increase of 13.4% adjusted and in constant currency compared to full year 2023. Our geographic mix of sales in the year were 75.1 U. S.

Speaker 3

And 24.9% international. For the full year 2024, U. S. Reported growth of 19.1% was primarily driven by growth from our vascular thrombectomy business, while our international regions decreased 1% adjusted and 1.1 in constant currency, primarily due to a reduction in China revenue of $39,500,000 partially offset by an increase in all other international regions. Revenue from our global thrombectomy business for the full year of 2024 was $818,100,000 an increase of 20.8% adjusted and in constant currency.

Speaker 3

Revenue from our global embolization and access business for the full year of 2024 was $382,300,000 an increase of 0.3% adjusted and 0.2% in constant currency. Our gross margin for the year was 63.4%, which includes a one time $33,400,000 immersive healthcare inventory write off compared to 64.5% of revenue for the full year of 2023. In 2025, after removing this one time item, which had a two eighty 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 $106,600,000 which includes a one time $33,400,000 immersive healthcare inventory write off compared to operating income of $101,300,000 for 2023.

Speaker 3

And to provide an update on impact of winding down the immersive healthcare business, we had GAAP operating expense savings for 2024 of approximately $16,000,000 and we are still on track to create GAAP operating expense annualized savings of approximately $40,000,000 Our adjusted EBITDA in 2024 was $171,000,000 or 14.2% of total revenue compared to 16.1% 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 $340,100,000 and no debt, which is an increase of $49,100,000 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.

Speaker 4

Thank you, Maggie, and good afternoon, everyone. Consistent with our guidance philosophy communicated on our second quarter twenty twenty four earnings call, our total revenue guidance for 2025 is a range of $1,340,000,000 to $1,360,000,000 which represents year over year growth of 12% to 14% compared to 2024 GAAP total revenue. For our U. S. Thrombectomy business, we expect growth in the range of 19% to 20 year over year.

Speaker 4

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

Operator

excludes the one time expense previously described.

Speaker 4

Looking forward, as Adam said in 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 twenty twenty six, 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.

Operator

And your first question comes from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Speaker 5

Good afternoon. Thanks for taking the question and congrats on a strong finish to the year here. Adam, I had one on the guidance and one on Thunder. So I think you did 13.5% or 13.4% adjusted revenue growth in 2024. You're guiding to 12% to 14% in 2025.

Speaker 5

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 how are you thinking about the guidance this year from a philosophical standpoint and getting back some of those headwinds we saw in 2024? I had one follow-up.

Speaker 2

Yes. 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 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.

Speaker 2

So we're not gonna 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 gonna, in our minds, guide appropriately, so we don't get in the same trouble we got in last year.

Speaker 5

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 the follow-up, we did see three negative medium and distal vessel trials at IAC a couple of weeks ago.

Speaker 5

What are the implications for Penumbra? Thank you.

Speaker 2

Yes. So, on Thunderbolt, we will definitely update you as appropriate when there's more information to update you on as to both, you know, when it gets cleared and and presentation of the data and so on. It just premature to do that, and and start to put guesses out there. Obviously, I think you appreciate that. As it relates to distal trials, it was a little bit, sort of deja vu.

Speaker 2

As you know, those trials, primarily used, stentrivers and and the use of stentrivers in particularly distal vessels as a primary mechanism as opposed to an adjunct, 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, read forty three and sixty two in some of those distal vessels. And I think, you know, that like everything, particularly as we've watched over twenty 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.

Speaker 5

All right. Thanks so much.

Speaker 6

Thank you.

Operator

Your next question comes from the line of Robbie Marcus from JPMorgan. Your line is open.

Speaker 7

Great. I'll echo congratulations on a good quarter. I wanted to ask on the rest of the business, Embolization and Access, what you're seeing there? If I'm doing my math right, it implies flat to minus 5% sales growth in 2025. So just wanted to get a sense of what you're seeing there, U.

Speaker 7

S. Versus OUS and how to think about what's driving the guide for 2025? Thanks a lot.

Speaker 2

Yes. So when you look at our Embolization and Access business, we have an incredibly strong business in both those segments. We're really the market leader, in the in the vascular side on on coils, and access on the neuro side. And that is an incredibly important part of our business. We're very proud of it.

Speaker 2

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 CAVT 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 gonna sort of go into the areas and and double down on areas where we can be more successful internationally as well.

Speaker 2

There's a lot of demand. And with the ability to, particularly 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 have a cost basis that is also more appropriate for some of these markets as well.

Speaker 7

Great. Thanks a lot, Adam.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Margaret Khazur from William Blair. Your line is open.

Speaker 8

Hi, everyone. This is Macaulay on for Margaret tonight. Thanks for taking our questions. So wanted to follow-up around the question on guidance and appreciate the comment on U. S.

Speaker 8

Throng, specifically. But just given the 41% VTE growth, in The U. S. We saw this quarter, Just wondering if you can help parse out what that includes either for vascular versus neuro and no, that does not include, Thunderbolt launch or just any commentary focusing on vascular in particular between PE, DVT and arterial in The US?

Speaker 2

Yeah. Look, the guide is a holistic guide for all of the businesses. We don't break it out by, you know, 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 and that's the focus obviously on that you saw the outsized number, the 41% in the VTE business.

Speaker 2

You know, it we also have a fairly tenacious competitor in that market, and we still were able to to have that kind of growth because the product gets the cloud 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 the market. You have to have something that does it as well as the current, best in in class.

Speaker 2

And I think that's pretty clear right now that CVT, you know, is is making that mark. So by definition, you know, as we look out, we're gonna be careful not to get ahead of ourselves. We're not gonna you know, how much more share is there, how much market growth is there, you know, and we're gonna watch all of those things on a quarterly basis and we'll update them as appropriate. But obviously we we wanna be appropriate as we start the year, with our current guide.

Speaker 8

Understand. And then maybe just as a follow-up, wanted to, or saw there was an update to the the red seventy two five ten ks status the the other day, and Adam can't help but notice you emphasized the the FDA cleared aspect in your script. So, was there any modification made to the catheter there? I guess, bigger picture, what should we expect from that pipeline of catheters moving forward?

Speaker 2

Yes. 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. That has been the hallmark of our success for the better part of twenty years.

Speaker 2

We've never sort of said we're done. And Red 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.

Speaker 2

We just got cleared at the end of last week. We've already done, I think roughly half of our evaluation cases in a 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 and I think I think we're going to have a pretty good opportunity to have additional impact this year with our stroke business.

Speaker 8

Sounds good. Thanks for taking the questions and congrats on the quarter again.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Pito Chickering from Deutsche Bank. Your line is open.

Speaker 9

Hey, guys. Good afternoon. Thanks for my questions. Looking at The U. S.

Speaker 9

ThreatBeat Guide here of 19% to 20%, end of the year, obviously, 27%. How should we think about the seasonality of that growth, like comps you had in 2024? Your fourth quarter exit rate was such a high number that if you straight line the growth is almost flat sequentially, which we haven't really seen that since you launched and you talked about how strong December was?

Speaker 2

Yes. 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.

Speaker 2

And obviously, we haven't talked about launches and timing for 2025, but but that changes again the the ability to just straight line things out and 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 you know, in in an even way. You know, it sort of comes in in chunks and and then sort of, you know, pause and then you take more. And and we've seen that for many, many, many years. With that sort of as a a baseline, Jason can add some color to that.

Speaker 4

Yeah. Peter, thanks for the question. As you can see, the fourth quarter was the biggest quarter in terms of sequential growth in the, in The US Thrombectomy business. And 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 twenty twenty five, just in those terms to be the most challenging comp, which would therefore suggest that if 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.

Speaker 4

So more of a front end loaded year from the standpoint of the growth guidance we gave.

Speaker 9

Okay. And then sticking with that 27% growth this quarter, is there any color on what the pricing versus volume was in the quarter? And what should we be thinking about 2025 in terms of U. S. Thrombectomy in terms of pricing versus volume within the guidance?

Speaker 2

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.

Speaker 2

This was just Right.

Speaker 9

Thank you so much.

Speaker 2

And that's why I went out of my way to say this, you know, the we ended the year with the strongest case volume we've ever seen both in VTE and in Arterial.

Operator

Your next question comes from the line of Bill Plovanic from Canaccord.

Speaker 10

Just first up on Thunder, I just wanted to clarify, one, have you submitted to the FDA? Two, 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

Speaker 5

figure out where we're in

Speaker 11

the process. Then I have a follow-up.

Speaker 2

Those are a good series of questions. I'll make it easy. We have not yet submitted. So, therefore, we have not had any of those conversations.

Speaker 10

Okay.

Speaker 2

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 a process there. So the fact that it could be ready earlier than that would mean you were obviously skipping a step along the way, which we obviously don't do.

Speaker 10

No. Thank you. And then just on R

Speaker 6

and

Speaker 10

D, $20,000,000 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 and D spend nominally? And 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?

Speaker 4

Thanks for taking

Speaker 2

your questions. Yes. I think it was pretty clear that we're I think I used the term we're going to aggressively invest in innovation. So so r and 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 spend budget.

Speaker 2

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 and d department and a team that can continue to innovate, incredibly effectively and and, at a decent amount of spend. But we are not gonna back away from that. There is a lot of innovation ahead.

Speaker 2

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.

Speaker 4

And, Bill, the only thing I would add to that is Maggie in her remarks mentioned the savings to date so far with the immersive healthcare, exit and a very solid percentage of that those expenses are in r and d. So we don't break out the investments on the interventional side vis a vis the investments we were once making in r and d and immersive health care. But suffice it to say, as Adam said in his prepared remarks, we continue to aggressively invest in innovation, obviously, on the interventional side.

Operator

Your next Your next question comes from the line of Richard Newitter from Truist Securities. Your line is open.

Speaker 6

Hi. Thanks for taking the questions. Congrats on the performance and a 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. Can you just remind us, kind of, you said nine launches, '24, how many are you thinking about in '25?

Speaker 6

And any direction on where those could be value add and fill the bag where there's an unmet need that you don't have today?

Speaker 2

Yes. 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 CAVT related, everyone knows, but the, the others the other six, I don't think most people have focused on. They've had, you know, a very positive impact, on our overall business as well.

Speaker 2

So we're not gonna go through that. The only one that obviously is possible, on that list, we've talked about a couple of times already, Dave. That's Thunderbull, of course. But the rest, we're gonna wait till we get those things, products, cleared, and then we'll be happy to talk about them.

Speaker 12

Okay.

Operator

But

Speaker 6

and just to be clear though, Thunderbolt is not needed to hit your guidance range. In other words, it's not explicitly Revenue for

Speaker 2

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.

Speaker 6

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 at a, at a conference? Or is this something that we could, we could get press released mid year?

Speaker 6

Just how are you thinking about that?

Speaker 2

Yes. It depends on the timing. There are really two major U. S. Since it's a U.

Speaker 2

S. Approval, U. S. Conferences, one in July and one in November. And so to the extent that the clearance happened in a time when no one, you know, it's not right around that time.

Speaker 2

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 of the data.

Speaker 6

Thank you very much. Thank you.

Operator

Your next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is open.

Speaker 13

This is Samantha on for Matt. 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 helping grow the market in the longer term?

Speaker 2

Yes. They're not there's a handful of them. I think you described it the right way. It's not really an impact on our sales, obviously. I think that was pretty obvious this quarter.

Speaker 2

I think, you know, when you actually speak to the physicians using a lot of those products, it sort of gives you the 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.

Speaker 13

Okay. Thank you.

Operator

Your next question comes from the line of Michael Sarcone from Jefferies. Your line is

Speaker 12

open. Good afternoon and thanks for taking my questions. I guess just to start, China was a pretty big headwind in 2024, maybe 300 or three fifty basis points. Could you just talk about what kind of assumptions you've got for China baked into 2025 guide? Is it kind of stabilized from here?

Speaker 12

How are you thinking about that?

Speaker 2

Yes. There's no question China you know, as everyone's talking about the market and what it means for, U. S. 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.

Speaker 2

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 I think we're we're sort of have that behind us. And 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've to just remind everyone, we've been selling internationally for for eighteen plus years, and we have a pretty good knowledge of the international markets and and what what's viable and not.

Speaker 2

It's also why you're gonna see a continued outsized growth in The US, with the scale of patients. Again, 800,000 patients in The US alone, more than, you know, 90% of the market available to us, if we do the work that we outlined, which is continue 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, you know, we're in a really, really strong position for a number of years. And then the international markets, ebb and flow based on sort of their own economies and and and all that as we go forward.

Speaker 4

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. As Adam mentioned, we're going to see the last headwinds of that in 2025, such that next year, the headwinds will be de minimis to nothing. It won't be quite as much of a headwind in 2025 as 2024, but some headwind, especially in the first half of the year.

Speaker 4

So 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. The headwind from China, again, will land in the first half of the year. So as it relates to the 12% to 14% guidance, you'll see that hit in the first half of the year in terms of the year over year growth because of China.

Speaker 12

Got it. That's helpful. Thanks, Adam. And Jason, then maybe just for the follow-up, we've seen some M and 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?

Speaker 12

Thank you.

Speaker 2

I'm not going to sort of get into particular tactics and things like that, you know, competitively on a on, at this stage. I can tell you that generally overall, we certainly welcome, you know, 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.

Speaker 12

Great. Thank you, Adam.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Ryan Zimmerman from BTIG. Your line is open.

Speaker 11

Hey, thanks for taking my questions. I want to ask about gross margins for a bit, just because doing the math, it does imply a pretty significant step up in '26 in gross margins to hit that 70% exiting '26. So you,

Speaker 3

you know,

Speaker 11

help me understand. I mean, is that just a go ahead or Maggie.

Speaker 3

Yeah. 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, fromectomy product mix and also regional mix.

Speaker 3

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.

Speaker 11

Okay. But just to be clear, Maggie, that that is just a 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 margins in 2020?

Speaker 3

No, not 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 will altogether Yeah.

Speaker 2

It is it is between product mix and manufacturing efficiency that is driving it. It is definitely not price.

Speaker 11

Okay. Very clear. And and then the second question, Adam, I guess I should direct to you is is the scale up in Salesforce and the amount of additional heads you've hired to grow your Thrombectomy business. And so what I wanna understand is just where you're at in that process, how you think about that kind of coming into its own and its contributions in either now or early twenty five. 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.

Speaker 11

But when do you expect the impact of both of those dynamics to be felt, from your efforts? Thank you.

Speaker 2

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 and nothing in this field is. So I wanna be very clear that it is not linear.

Speaker 2

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, and 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.

Speaker 2

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.

Speaker 2

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 gonna 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 a massive pee, if I'm not mistaken from her story, she had coded, she was revived, and and turned out, to have a great recovery.

Speaker 2

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.

Speaker 2

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.

Operator

Your next question comes from the line of Shagun Singh from RBC Capital Markets.

Speaker 14

Great. Thank you so much. Just a quick one for me for your U. S. Venous Thrombectomy business 41% year over year growth.

Speaker 14

How should we think about the durability of that? And given that we've seen that growth rate accelerate sequentially in the past few quarters, I'm just wondering if there is anything else going on. Is it just your commercial team expansion? Are you seeing greater acceptance given the benefits you talked about, greater ability to get into the door? Just anything incremental to what you shared that you may be able to share with us.

Speaker 14

Thank you.

Speaker 2

Yes. Again, I want to stress no growth rates in a situation where there's market growth and share shift is linear. So you you just it just 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.

Speaker 2

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 wanna 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 a linear fashion quarter by quarter, but over the course of the next number of years, you're going to see particularly strong growth continue.

Speaker 14

Thank you.

Operator

And your final question comes from the line of Mike Kratke from Leerink Partners. Your line is open. Hi, everyone. Thanks for taking our question. So obviously great acceleration in U.

Operator

S. Thrombectomy growth, 41 U. S. VTE growth. Sorry to bother you with another one on guidance.

Operator

But without providing specifics, can you help frame where you're expecting your different verticals between PTE, arterial, stroke and coronary to land relative to that 19% to 20% overall U. S. Growth?

Speaker 2

Yes. 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 two point o 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.

Speaker 2

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 gonna have an impact. That's not even talking about the new red 72 catheter, which, if it, that continues to do what the the first three days of cases show, is gonna 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.

Operator

Understood. And maybe just as one follow-up, you know, can you comment on some of the early adoption trends for Lightning Flash and Bolt seven in Europe following the recent launches?

Speaker 2

Yeah. There again, the limitation is there's some countries that are 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've yet to meet a physician who says that's not a positive goal.

Operator

Understood. Thanks very much.

Speaker 2

Thank you.

Operator

And this concludes the Q and A portion of today's conference call. Ms. Furlong, I turn the call back over to you.

Speaker 1

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.

Operator

This concludes today's conference call. You may now disconnect.

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Earnings Conference Call
Penumbra Q4 2024
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