Cardiovascular Systems Inc (CSII) 2019 Q2 法說會逐字稿

Good afternoon. My name is Connor, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cardiovascular Systems, Inc. Fiscal Year 2019 Second Quarter Earnings Conference Call. (Operator Instructions) Thank you.

Jack Nielsen, Vice President of Investor Relations and Corporate Communications, you may begin your conference.

Thank you, Connor. Good afternoon, and welcome to our fiscal 2019 second quarter conference call. With me today are Scott Ward, CSI Chairman, President and Chief Executive Officer; Rhonda Robb, Chief Operating Officer; Jeff Points, Chief Financial Officer; and Dr. Ryan Egeland, Vice President of Medical Affairs.

During this call, we will make forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding CSI's future financial and operating results or other statements that are not historical facts. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise.

We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results.

I will now turn this call over to Scott Ward.

Thank you, Jack, and good afternoon, everyone. Thank you for joining us today. I am pleased to report that CSI achieved strong results in the second quarter. Consistent with the information we provided in our prerelease on January 7, second quarter revenue grew 14.4% to $60.2 million, marking the third straight quarter of accelerating double-digit top line growth. We delivered strong growth in our core domestic businesses, and we continue to make great progress in our efforts to expand CSI through the introduction of new products and the launch of our business in international markets around the world.

We were profitable in Q2. We continue to execute on our cost reduction efforts as we drive increased unit volumes, and our gross margins remained solid. Paired with a strong balance sheet and no long-term debt, we have real financial strength. We are executing on our core strategies and driving market share gains across our businesses.

Our worldwide peripheral business grew 13% in Q2, powered by 19% unit growth in the core domestic peripheral atherectomy business. The strong growth and market share gains in peripheral were driven by exceptional execution in multiple areas, including market development and expansion in office-based labs, the continued adoption of the radial site of access, the execution of long-term, volume-based contracts, increased case coverage and outstanding performance by our sales and customer support teams.

Our worldwide coronary business grew 19%, with 10% growth in the core domestic business. We have sustained momentum in our domestic coronary business through the first half of fiscal '19 with 16% growth year-over-year. The strong momentum in our coronary business is driven by the focused efforts of our dedicated coronary sales reps to drive increased adoption at our current accounts, exceptional customer support from our sales and clinical support teams, medical education programs and a strong market response to our emerging coronary toolkit, including the new GlideAssist feature. GlideAssist really improves the deliverability of our orbital crown, allowing the treatment of patients that otherwise may not be candidates for an atherectomy procedure due to complicated anatomy.

We are also gaining momentum with the sale of PCI and PTA support products. Adding new products to support orbital atherectomy procedures is a key initiative to improve sales productivity and increase revenue from our orbital atherectomy cases. We generated over $700,000 in new revenue from the sale of balloons and wires in Q2, and we expect that to grow as we gain more access to cath labs and launch additional products like the OrbusNeich teleport microcatheter.

Finally, the commercial launch of orbital atherectomy in international markets also contributed to growth in our coronary and peripheral businesses. We achieved $1.6 million in revenue in Q2 driven by performance in Japan, and we are really pleased with the rapid cadence of product launches that we have achieved in Asia, the Middle East and Europe.

We are collaborating with our distribution partners to facilitate the training of motivated physicians, and we are excited by the strong demand for our product. In just a short period of time, CSI has trained over 50 physicians outside the United States, and we expect to train as many as 50 more by fiscal year-end.

So these are the tangible drivers that contributed to our growth thus far in fiscal 2019. Now let me ask Jeff Points to provide a more detailed review of our Q2 financial results. Jeff?

Thank you, Scott, and good afternoon, everyone. As Scott mentioned, second quarter revenue of $60.2 million represented a 14% increase compared to last year. It also represents sequential revenue growth of 7% compared to first quarter. In total, we sold over 19,000 overall atherectomy devices during the quarter, representing a 19% increase compared to last year.

Worldwide peripheral revenue increased 13% to $44.2 million. Our worldwide peripheral units increased over 20% compared to the prior year. Strong sales of peripheral atherectomy devices in the United States were the primary driver of peripheral revenue. We experienced our strongest quarterly peripheral unit growth in nearly 4 years. As expected, we had a mid-single-digit ASP decline. As we've demonstrated the last several quarters, we continue to maintain strong gross margins even as we offer volume-based pricing contracts, the high-volume accounts and gain market share in the fast-growing OBL segment.

Worldwide peripheral revenue also included approximately $800,000 from our international distribution agreement with OrbusNeich as we continue our launched in Asia, the Middle East and Europe.

Worldwide coronary revenue increased 19% to approximately $16 million. Domestic coronary revenues grew 13%, primarily driven by increased unit volumes. Worldwide coronary revenue also included about $800,000 in revenue from our international distribution partners, Medikit and OrbusNeich.

So in our prerelease of Q2 results, we shared revenue contribution from the U.S. and international. I know some of you built your models this way, but to reiterate, total U.S. revenue increased 11% to $58.6 million, domestic peripheral revenue increased 11% to $43.4 million and domestic coronary revenue increased 13% to $15.2 million. International revenue of $1.6 million was split evenly between peripheral and coronary. Hopefully, breaking down the revenue sources in this manner assists in your financial models.

In Q2, gross profit margin remained strong at 80.9%. Operating expenses of $48.3 million increased about $5 million or 11% compared to last year but were lower in the first quarter.

R&D expenses associated with investments in new product development and enrollment in the ECLIPSE clinical trial increased 13%. As we've indicated previously, we plan to accelerate our investment in product and clinical initiatives to broaden our product offering, expand the use of orbital atherectomy and drive long-term value. SG&A increased 11% due to physician training and medical education investments to support our international expansion.

We were profitable in the second quarter with net income of $492,000 or $0.01 per share. Adjusted EBITDA increased to $4 million. With a cash balance of $119 million, no long-term debt and a line of credit placed for borrowings up to $40 million, we continue to maintain financial strength and flexibility. In December, we added to that flexibility by filing a shelf registration to issue up to $350 million of equity.

I will now discuss our updated annual guidance and provide some color on our fiscal third quarter. Our original fiscal '19 revenue guidance was a range of $240 million to $250 million. In our pre-announcement of second quarter results, we narrowed the range while maintaining the midpoint. Our fiscal 2019 guidance is now as follows: Revenues in the range of $243 million to $247 million represent an annual growth of 12% to 14%, gross profit of about 80%, net loss equal to 1% to 2% of revenues and positive adjusted EBITDA. The revenue range for fiscal '19 assumes continued core domestic atherectomy revenue growth of at least 10% and at least $4.2 million from international and new products. For the back half of fiscal '19, we anticipate quarterly sequential revenue growth of approximately 4% to 5% in both the third and fourth quarter.

That completes my prepared remarks. Rhonda will now provide commentary on our commercial developments. Rhonda?

Thank you, Jeff. Let's begin with the review of our domestic peripheral business. Jeff spoke to the fact that this quarter was the strongest peripheral unit growth that we have seen in nearly 4 years. We saw great progress from several key drivers. However, I will focus my comments first on our increased penetration in the office-based lab, or OBL market, and then move into coronary and international.

The OBL site of service is accelerating patient access to care and driving deeper penetration in the peripheral market. As we have discussed previously, we have found increasing success in the OBL market with long-term contracting and increased procedure support. We initiated the strategy 1 year ago as we pursued an opportunity to grow the market, increase therapy penetration and help physicians treat patients with a higher burden of calcified disease at this site of service.

As OBLs were launching, patients treated at this site of service typically had less severe forms of peripheral arterial disease: soft plaques and above-the-knee lesions. As a result, only about 20% of our peripheral business was in OBLs. However, the combination of a growing patient population, limited cath lab availability and hospitals, economics and patient convenience has driven more patients and more complex procedures to the OBL setting. We've executed a focused strategy on the highest volume OBLs that also perform complex procedures. And today, OBL revenue represents approximately 25% of our domestic peripheral business.

The combination of a strong safety profile, ease-of-use, strategic contracting and exceptional procedure support resonates with our customers. As a result, our OBL revenues in Q2 increased 12% sequentially from Q1 and increased 28% compared to last year.

It is important to note that we focus on the care of patients with complex peripheral arterial disease who may also have critical limb ischemia. We won't compete on price. Our customers use highly specialized techniques that require a low profile, deliverable and safe device to remove calcium from diseased vessels in the leg. We're the only atherectomy device that can uniquely reduce surface calcium, facilitate the fracture of deep calcium and deliver proven clinical outcomes with the primary patency rate of 81.2% at 12 months.

In addition to OBL growth, hospital volumes also continue to grow, and we are experiencing stable reimbursement and steady pricing for atherectomy in the hospital-based setting. Overall, we continue to push the peripheral market growth in the mid to high single digits. Again, CSI grew 19% in units year-over-year, resulting in market share gain within both the hospital and OBL sites of service.

We also continue to gain share in our coronary business, with worldwide revenues growing 19% driven by 13% domestic growth and by international revenues. Notably, through the first half of the year, CSI domestic coronary business has grown 16% while domestic ASPs have remained stable.

We are innovating in our core technology and adding new products to create a portfolio of devices that allows physicians to quickly access coronary lesions, remove calcium and prepare the vessel for stent placement. The key components of our coronary toolkit are the Diamondback system with GlideAssist, the 1 millimeter Sapphire angioplasty balloon and now the new Teleport Microcatheter that launched in late December. This catheter is an important complement to the CSI portfolio in both the complex coronary and peripheral patient population. We look forward to building on this momentum when we introduce the new ViperWire Advance Flex Tip to physicians in the U.S. in Q3. When combined with the GlideAssist feature, physicians will be able to more easily track the OAS device through tortuous coronary vessels and effectively modify a calcified lesion to facilitate stent deployment. The safe and rapid access to calcified coronary lesions will expand the market for coronary atherectomy and further increase our market share.

Internationally, we are rapidly expanding our presence by targeting high-volume centers that are already treating complex coronary and peripheral patients. At the end of December, we've trained 50 physicians in Japan, Asia, Europe and the Middle East. Physicians in these markets are eagerly awaiting access to our technology, motivated to learn and are rapidly putting their training on orbital atherectomy into their everyday practice.

As you saw in our release, we recently received approval for both our Diamondback classic crown with GlideAssist and the ViperWire with Flex Tip in Japan. These will launch in February, and we expect to continue to increase our share position in Japan. In less than 1 year since we launched in Japan, we are successfully executing our international expansion plan in many geographies with terrific results. Of note, we are currently seeking European CE Mark for coronary, and we expect that approval later this fiscal year.

Combined with our strong domestic results, our consolidated Q2 commercial revenues through the first half position us to more than double our annual growth rate from less than 6% in fiscal 2018 to a range of 12% to 14% this year. In our second half of the year, incremental growth drivers will consist of continued progress in international, particularly with the launch of coronary classic in Japan; new product launches that will support at least 10% growth in our core business. These include the Teleport Microcatheter, the coronary ViperWire Advance Flex Tip, continued expansion of the peripheral radial device with the new VIPERCATH radial exchange catheter and ViperWire Flex Tip launches in Q3 as well as the launch of peripheral exchangeable with GlideAssist later in the fiscal year. GlideAssist will further assist -- further add to the market-leading clinical performance by facilitating ease-of-use and enabling better tracking performance in complex lesions.

Finally, we will continue to increase the penetration of new and existing accounts through our focused sales organization, our expanding portfolio, world-class training and education, dedicated case support and long-term contracting strategies across all sites of service.

In sum, we remain very confident in our ability to achieve our near- and long-term growth objectives in our core business, in geographic expansion and in new innovations where we will launch more than 20 new products to extend our offering to complex coronary and peripheral patients over the next 5 years.

That concludes my remarks. Scott will now provide his closing thoughts.

Thank you, Rhonda. Well, as you have heard, this was really an outstanding quarter for CSI. Before I close, I want to thank our more than 700 CSI employees for their extraordinary dedication and commitment to our mission and the patients that we serve. We are driving market-leading performance with orbital atherectomy, and we are executing on our key growth initiatives to introduce new products and launch our business in new markets around the world.

Our Diamondback orbital atherectomy system is the only atherectomy product in the market supported by strong medical evidence that has been published in peer-reviewed journals that demonstrates safe and effective calcium removal, vessel preparation and improve patient outcomes.

Indeed, CSI is a leader in medical evidence. Developing a wealth of clinical data with more than 5,000 patients enrolled in controlled clinical trials, over 8,000 lesions studied and 600 physicians participating in our coronary and peripheral clinical research programs around the world. Our core competitive advantage is that we offer the best interventional solution for the treatment of calcium in the vasculature. We are introducing new products for the treatment of complex cases. We have the strongest medical evidence in the market. We offer superior training and education to the medical community. We are extending our global reach through our distribution partners, and we have a U.S. sales channel composed of 200 sales professionals and 100 clinical specialists who focus solely on supporting physicians in the treatment of calcified coronary and peripheral lesions. This is a powerful combination that differentiates CSI and establishes a strong foundation for continued market leadership and growth in the quarters and years ahead.

We are well positioned to sustain a strong growth that we have achieved in the first half of fiscal '19, and we look to the future with confidence and a clear focus on our mission to save limbs and save lives every day.

Thank you for your continued interest in CSI. We look forward to updating you on our progress in the coming quarter, and we will now take your questions. Operator, if you would, please repeat the instructions. Thank you.

(Operator Instructions) Your first question comes from the line of Mathew Blackman with Stifel.

Scott, maybe starting with you. Are you seeing any changes in customer behavior since the publication of the paclitaxel meta-analysis in December? And what are you hearing from clinicians about the potential impact on peripheral intervention volumes broadly, but atherectomy specifically? And then I have a few follow-ups.

Yes. Thanks, Mat. Clearly, that has been an interesting development in the marketplace. I think it is still early days. Frankly, we haven't seen too much influence in our marketplace. We think that the potential impact at this point is probably neutral. And at this stage, we're just monitoring the drug-coated balloon company's response to this meta-analysis that's been published. And like everybody else, we're just continuing to watch the results. I would say our customers are measured in their response. And at this point, we really haven't seen much change. So that's about all I have to report on that.

Okay. Appreciate that. And then, Jeff, just a couple for you. I just want to make sure I'm capturing your third and fourth quarter commentary correctly, the 4% to 5% sequential growth. So that implies for the third quarter something in the neighborhood of $62 million to $63 million and roughly $65 million to $66 million in the fourth quarter, am I capturing that correctly?

Yes, that's correct, Mat.

Okay. And then this is a bit of a long-winded question for you, Jeff. Just curious, how far along are you in the price, volume contracting initiatives in the OBLs? Is there a way to quantify what percent of your OBL business is now contracted? I guess, what I'm really trying to get at is it's possible that the next 2, 3, 4 quarters, you anniversaried some of the multiyear contracts you signed in that pricing -- in that segment could potentially be modestly less negative than recent trend?

Mat, this is Scott. I think in terms of our contracting strategy, it's pretty important to just remind you that we actually don't cut contracts with that many OBLs centers. As Rhonda said in her remarks, we really focus on OBL accounts that also focus on the treatment of complex peripheral lesions. So these are typically physicians that formerly were in an in-hospital setting. They treat CLI patients. They treat complex peripheral lesions. They now have moved to the OBL setting. We now are supporting them in that setting, and we are executing not only these long-term contracts with them, but we're providing strong clinical support to assist them with these procedures. So even though it has been a very, very effective strategy for us, we don't necessarily see it as something that would be implemented, for example, across a broad swathe of the OBL market segment.

Mat, the one thing I would add, we have been able to take on several new accounts and really add to our market share in the OBL space by that strategy. And so that's fairly effective and really helped drive our 28% growth in the OBL segment.

Your next question comes from the line of Danielle Antalffy with SVB Leerink.

Just wanted to follow up on Mat's question regarding the paclitaxel meta-analysis. I appreciate that you expect this to be neutral, but just wanted to dig a little deeper. I mean, my one concern is that it could impact overall referral volume from referring cardiologists to peripheral -- for peripheral intervention. Just curious about what you're hearing around that. And then I have one follow-up.

It's a fair question, Danielle, and thank you for that. At this point in time, the feedback that we are receiving is that it really is not having much impact on referral -- the referral base. Clearly, it's something we'll continue to monitor. We have not, at this stage, seen any impact from that. We're watching it closely. But right now, I can report that the referral channels and the system continues to be working as it has in the past.

Okay. Great. And then my follow-up is probably for Rhonda. So you gave some details on what the drivers were for peripheral growth in the quarter, but wondering if you can give a little bit more color, I mean, it was your strongest -- I think you said the strongest peripheral growth quarter in 4 years, which is amazing. So just trying to get a sense of the driver, how much of that do you think is new access like radial, new products, shifting to OBLs. Obviously, price is a headwind. So just trying to get a sense of what the different drivers are and how big each of those drivers are to that growth.

Yes. Thanks, Danielle. Appreciate the question. It was obviously a spectacular quarter, and we continue to see -- I think the biggest thing is we're seeing office-based labs actually have an impact on the number of patients being treated. So it's actually improving penetration in the peripheral market. Hospital volumes also continue to grow. So that's -- that I think is a really exciting development so there's strong market development happening in the space, there is continued adoption of the radial site of access. And particularly as we come up with some of the new tools in Q3, Q4, we expect that to continue. A big driver really has been the execution of the long-term volume-based contracts. And you can see that in the numbers, the percent growth of 28%. It's really spectacular, so I would say that's one of the most significant drivers. But we've also increased our sales coverage and case coverage. And the expansion of the clinical specialists has really given us the level of focus that really differentiates CSI. And that's just been outstanding performance by our sales and customer support team. So I think it's a combination of all of those things that really has made CSI distinct in terms of winning in the OBL setting.

Your next question comes from the line of Margaret Kaczor with William Blair.

This is actually Brandon in for Margaret. First, I just wanted to focus on -- I know one of the things you've been focused on is kind of going deeper into your current accounts. And can you just talk about the success you had in doing that so far? And really just, do you think success there is more of a function of having a broader portfolio? Or do you think that there's just an increase interest in vessel prep, and that's kind of helping drive core business? And I have one other question.

Yes. So I think it's a little bit of a different question depending on whether we're talking about peripheral and hospital or coronary. Certainly, in the case of peripheral, we do see continued adoption there as more and more physicians utilize our products and achieve strong outcomes. We have increased demand for participation in our medical education programs. Last quarter, we conducted almost 50 medical education programs, and we have very strong attendance at those programs. We have very strong demand to participate in those programs. And generally, the participants are physicians who are coming from existing accounts who have had peer-to-peer training from one of their colleagues where they're -- at the location where they're coming from. So that has really been an important driver for us, and I think that continues to really increase the number of physicians that have been trained and educated. In the case of coronary, I think that the continued focus there on these complex Coronary lesions and the continued focus of the medical community on treating these patients has really continued to have a beneficial impact for us. And what we find there is that the fellows training that we're conducting -- I think in the first and second quarter, I think we certified over 30 new fellows, most of which were in the coronary space. And there, we really see a strong adoption related to this commitment to improve the quality of care for patients that have complex coronary lesions. So I think, overall, that gives you some idea. I think this is really driven by local demand. And the other thing, I guess, I would emphasize in coronary that has really made an important difference is our introduction of GlideAssist, and you've heard me talk about that for a couple of quarters. But GlideAssist is a new feature that we have on our Diamondback system that makes this device really deliverable. And it helps physicians deliver the crown of our device to really angulated and tight lesions. And as a result, now physicians who are using it routinely are gaining increased confidence that they can reach lesions that are deep and that have formerly been difficult to get to. I made a really important comment there, and that is confidence. GlideAssist gives physician’s confidence to access these lesions. And as a result, that's why they will choose orbital atherectomy first. So when they look at their case, they'll do their case planning, and they'll decide from the outset that they're going to use orbital atherectomy and try to access that lesion. So I think Diamondback's had a really important impact, and it will continue to as we move forward. But those, I think, are the primary drivers for our increased adoption at our current sites.

Great. That's very helpful. And if I could just switch internationally. There's a lot of exciting things going on in a lot of different international regions and countries. It's my understanding that CSI is going to be responsible for the training and support on the ground. Can you just talk about how comfortable you guys are with making sure you're not stretched too thin across too many geographies at once and if you need to make any meaningful investments in those regions in the coming quarters?

Thanks, Brandon, and appreciate that question. You're absolutely right. We have experienced very strong demand outside the United States. Just to be clear, OrbusNeich, our partner in markets other than Japan, is responsible for sales, physical distribution and support of customers. Our organization is responsible for medical education and training those customers. So we will train them and bring them up. But once they're up and running, OrbusNeich will continue to support them in the future. Now what we have seen is we are basically executing a peer-to-peer type training model where we will go into a particular geography, train and educate a physician who then will work to train and educate his or her colleagues. And that has proven to work very effectively for us in Japan. We're continuing to do that now in other markets around the U.S. And that gives us some capacity in, let's say, our ability to extend our medical resources. So that has been effective. I can assure you that we're watching this very carefully, and we're adding resources to our education teams as necessary. We have had very strong demand in Asia and also for our peripheral products in the Middle East and in Europe. And naturally, as you can imagine, those geographies are widely spread. So we're working to kind of build our core competence in each of those areas and really assure that we have the people on the ground that can support our customers. We are firmly committed to assuring that our customers achieve great outcomes with the use of our products, no matter where in the world they're used. So we will continue to invest in medical education and training to support these physicians in both coronary and peripheral procedures. So I hope that answers your question. Other questions on that?

Your next question comes from the line of Bob Hopkins with Bank of America.

Just a couple of quick ones. I was intrigued by the comments on OBL and the growth in OBL, the 28% number. Just can you just give me a quick sense as to the contribution from pricing to that 28%?

It's actually hard to splice that out. Bob, as you recall, about -- it was in August of last year that we added a significant number of clinical specialists. We also, at that time, began rolling out some of these long-term contracts to our larger accounts. And what we see is that the combination of those 2, along with the fact that we have the only device that can be used to treat severe calcium in the vasculature, those 3 things combined have really led to great success in the OBL. I think this is more about focus and really focused execution by our sales and clinical support teams than it is about pricing. We do have -- we are establishing these long-term contracts. And I guess, that's how I would approach it. Jeff, do you have anything you would add to that in terms of...

No. The only thing I think I would add, Bob, is the pricing contract and strategy has really allowed us to get into some of these labs. And actually, [omni] ASP rose specifically within labs, it's actually gotten more favorable this quarter. So that's been a great sign of stability and has helped us drive that revenue.

Okay. So just roughly then, of the 28 points of growth, it's probably not much more than a couple of points of that, that's being driven by price, is that fair?

No. Like I said, Bob, we just don't know. We just don't differentiate it in that way. As you can imagine, we have simultaneously launched multiple initiatives that focus on the OBL segment. And I think what I can say at this point is I'm really pleased that, in total, working very effectively.

Got it. And then just curious, and this might be simple math, so I'm sure I could do it offline, but if OBL's growing 28%, the kind of revenue growth in the rest of the peripheral business is probably mid-single digit. I mean, basically, is there anything tricky about the math I'm trying to do?

Bob, this is Jeff. No, there's not. I mean, we continue to grow in kind of that mid to high single digit in the hospital and then grew 28% in the OBL. So if you pro rata that, you get to the 11 -- roughly the 11% growth rate in the U.S.

Yes. The only thing I would just add, Bob, we are really pleased. I mean, our hospital segment has also continued to grow well. So that's why you see this large growth in peripheral and the real strength that we have there. I mean, clearly, we're gaining market share every day in our peripheral segment. And we're really, really happy about that. We're doing that both in the hospital portion and in the OBL. So right now, I think we're really hitting on all cylinders in peripheral.

And then one last question here. If you look at the guidance and then the revenue generated in the first half versus what you need to generate in the back half, obviously, there's some acceleration in growth assumed there. And it's roughly $10 million to $12 million of incremental revenue in the back half. So maybe if you wouldn't mind just kind of breaking down for us, what are the biggest buckets that drive that incremental growth or incremental $12 million that you need in the back half?

Bob, this is Rhonda. I'll take that. I think the first and large one will be the new product launches. And we've said, it will support at least 10% growth in our core. So we have a number of new things coming that will continue to complement our coronary and peripheral portfolios. And I mentioned, a few of those, we're really excited about, the microcatheter, Advance Flex Tip with that in combination with GlideAssist really kind of round out this coronary toolkit that we think is going to give us access to even more cases in the coronary setting. And then we also talked about the continued expansion of the peripheral portfolio as well. So we have a lot happening that's pretty exciting in the back half of the year with regard to new products that are going to support that core business. I think in addition to that, it's just continued focus of our resources, as we articulated earlier, in terms of our sales organization, the volume-based contracting that will continue in the OBLs but also, as I said earlier, extend to the hospital-based setting as well for both peripheral and coronary. And then the last one is continued progress in international. And we mentioned that the launch of coronary classic will occur in Japan, so that will continue to be a driver within Japan as well as extension into other geographies as well. So it's really those 3 things.

Your next question comes from the line of David Saxon with Needham & Company.

First, I was just wondering if you've seen any change in the competitive landscape, particularly from companies like Shockwave or Ra Medical? And then also -- I mean, if you've seen any impact from the Eluvia drug-eluting stent?

So in terms of the 2 companies that you referenced, no, we really haven't. I guess, as you could tell, we gained significant market share in the second quarter. Both of those companies, I think, participate in the peripheral segment but are not present in the coronary segment. And you saw the very large unit growth that we had in peripheral and really strong performance that we had in the United States. So we really don't see either of those companies in our segment. And perhaps, that's because they focus on the patient population that has a little lighter disease burden. Remember, we partner with physicians who treat really complex cases. And we have a very unique position there, and we've enjoyed success in that segment for many years. And you can tell that, that has continued this past quarter. So your second question was regarding drug-eluting stents?

The Eluvia, yes.

Oh, the Eluvia. No. So Eluvia -- I think in terms of the launch of Eluvia, it's a very intriguing product. And I think physicians -- it's received a positive response from the medical community, but we don't really necessarily see that as a driver to increased adoption for drug-eluting stents. We do think that it will gain share. But to say how much, I don't know. But right now, Eluvia has not had a really direct impact on our business. The one thing that I would say, it is encouraging to see companies successfully develop, get PMA approvals for these products and bring them forward because really anything that drives patients to cath labs helps us because when patients arrive at cath labs and they have severe calcium, our product is used.

Okay, that's helpful. And then just looking at the balance sheet. I mean, you have a pretty healthy cash balance and you filed for a shelf. Just wondering what you're thinking there and if you have any M&A aspirations.

Yes. Really, that just gives us flexibility. It's just we look at it as matter of good housekeeping. And we think that's a pretty standard thing that other companies in the industry put out there. There's nothing imminent that is being planned. It's just something that we think we would -- that would be important to get into place.

In terms of the cash, we do -- we like to have a nice, strong, stable balance sheet. And so we're pleased with that cash position, and that makes us a bit unusual perhaps in terms of small cap med tech companies. But I enjoy that position, having a good, strong, stable balance sheet.

Your next question comes from the line of Brooks O'Neil with Lake Street Capital.

At the investor meeting this summer, a lot of the focus was on the significant ramp-up in spending for new product development. Obviously, you've got a lot that you've already talked about, but are there some developments that you have made in terms of progress with new products that are kind of behind the scenes?

Brooks, it's a great question. We will continue to provide updates on our key growth drivers over time as it becomes appropriate. A lot of those projects now are in the design stage. And as they move from one stage to the next, we will certainly let you know about it. So the next key events coming up would be the completion of Phase I testing, completion of animal testing and moving forward with IDEs, let's say, for our vascular laser as well as our mechanical circulatory support pump. So at this stage, both of those projects continue to make strong progress. They're right on plan. But they are obviously in the early stages of development. So I hope that answers your question.

Yes, that's fine. Secondly, obviously, some conversation about progress internationally. I was hoping you could just talk a little bit about how significant you think the international opportunity is, how significant you think the opportunity in working with OrbusNeich is for CSI now?

So OrbusNeich has been a terrific partner, and we've really been impressed with their motivation and the way that they have approached this marketplace. They have really rapidly moved forward. And that is something -- we develop the relationship. We know OrbusNeich very well because, of course, we distribute their products in the United States. They distribute ours outside of the United States. And we've really been pleased with how rapidly they have launched our products. And not only that, but where they've launched, we've had very significant uptake and we've had strong case volumes. So we're very excited about our international launch and pleased that at this point in time, it's kind of right on schedule, maybe it's even a little bit ahead of schedule of where we thought it might be. In terms of the long-term potential for international...

Yes, so we announced in July with -- a fiscal '23 goal of $25 million to $50 million in international. That would still be a good estimate to go with, Brooks.

Your final question comes from the line of Jayson Bedford with Raymond James.

Just I guess, a few quick ones. While we're on international, I want to ask about peripheral. What markets are you and OrbusNeich targeting right now? And can you maybe just talk about the reimbursement environment in those countries?

Yes, sure. So thanks, Jayson. Right now, as I've indicated earlier, I mean, we're in Asia, we're in the Middle East and in Europe for peripheral. Now in Asia and the Middle East, we have focused on really a number of different countries where there is favorable local payment, oftentimes cash pay. These are environments that have already adopted the use of interventional procedures for the treatment of peripheral vascular disease. So we are not engaging in new market development. We're not working with customers, let's say, who need to develop referral channels or have a past history of reimbursement issues. We're working with institutions and centers that have already got well-established practices. We're basically coming in and taking market share based upon the strength and superiority of our technology. As a result, right now, we have not really had reimbursement issues. I think as we continue to grow over time, reimbursement can become a barrier, as you know. And you and I have talked about this before, I'm always paranoid about reimbursement. But right now, we feel pretty confident that the business model that we offer, the value proposition that we offer is favorable in many of these markets. And what I mean by that is oftentimes, if physicians will choose to use orbital atherectomy first, they can do more cases in a day. So as a result, a lot of times, the value proposition for the use of our product is captured at the cath lab level because the cath lab does much better in total revenue, total business, total number of patients cared for if they can treat more patients every day. And using our technology enables them to not only provide a safe and effective treatment, but also to do it more quickly and efficiently.

Scott, you mentioned taking share. Are you displacing another atherectomy device in these countries? Or is it just additive to the procedure?

It's hard to say. I would say, in many cases, we are displacing other devices. Like I said, we're generally going to well-established clinics and sites. We're not developing new locations. So this isn't market development. In a market like Japan where we're using orbital atherectomy for the treatment of coronary arterial disease, there, I would say, it's probably both where the use of our device in combination with GlideAssist is expanding the market. And the use of our technology makes it more attractive to use atherectomy and to really do the vessel preparation that's required for stent placement. So in a place like Japan, I would say, we're expanding the market. But in most of the rest of the world, we're probably displacing balloons, which is either cutting balloons or a POBA is really the standard of care in most of these markets. And so that's where, I would say, we're taking that market share from.

Okay, that's helpful. And then just back to the U.S. peripheral market. 19% unit growth is a pretty big number, especially given your share. I know you mentioned that you think the market is growing kind of mid-to-high single digits. But do you have any data points that make you think the market grew a little bit faster here in the December quarter?

Actually, the only data point we have comes from the analyst community, and some analysts have suggested that the market grew slower, that it only -- that there was only a 5% increase in peripheral procedures. That seems a bit low to us, but that's really the only data point we have right now. Historically, if you look at this, Jayson, it is a very consistent growth rate in that mid to high single digits. Now we get great clarity a bit late in the process because we have to look back 1 to 2 quarters typically to really get clarity on what happened with market shares. And that's largely because we compete against very large established companies who just don't report at the level of detail of their atherectomy sales. So we have that look-back. We're operating admittedly off of a historical model. But nonetheless, I think you can tell that if over time, that marketplace -- even if it's growing in the mid to high single digits, our growth rate last quarter was 2x that rate or higher.

There are no further questions at this time. I will turn the call back over to Scott Ward for final comments.

All right. Great. Thank you very much. With that, we will conclude today's call. Thank you all for your participation. And of course, as always, we look forward to updating you on our progress. Thank you.

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