Inari Medical Inc (NARI) 2023 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Inari Medical's Second Quarter 2023 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded and will be available on the company's website for replay shortly. (Operator Instructions) And now I will turn the call over to John Chu, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Welcome to Inari's Second Quarter 2023 Earnings Call. Joining me on today's call are Drew Hykes, President and Chief Executive Officer; and Mitch Hill, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which Inari operates; trends and expectations for Inari's products and technology, trends and demand for Inari's products; Inari's expected financial performance, expenses and positions in the market, the impact of COVID-19 on Inari's operations and Inari's customer operations.

These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by the forward-looking statements. Please review Inari's most recent filings with the SEC, particularly the risk factors described in Inari's annual report on Form 10-K for the year ended December 31, 2022, for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Inari undertakes no obligation to update these statements, except as required by applicable law.

Inari's press release with second quarter 2023 results is available on Inari's website, inarimedical.com, under the Investors section and includes additional details about Inari's financial results. Inari's website also has the latest SEC filings, which you are encouraged to review. A recording of today's call will be available on Inari's website by 5:00 p.m. Pacific Time today.

Now I would like to turn the call over to Drew for his comments and second quarter 2023 business highlights.

A: Thank you, John, and thank you, everyone, for joining us today. Our second quarter was successful and highly productive. We generated record revenue driven by crisp commercial execution, with meaningful contributions from new products and our international business. From a profitability perspective, we continued to make steady progress towards our goals, recording essentially neutral operating income and positive net income during the quarter. We announced our commitment to PEERLESS 2, a study enrolling up to 1,200 patients in our third randomized controlled trial. Underlying market growth remains healthy, and there is a growing awareness of and interest in our therapies as frontline treatment for VT patients.

Most importantly, our commitment to patients, our people and solving big problems is unwavering. I could not be more enthusiastic about the health of our business and believe we can and will grow sustainably for many years to come. I will share more details about these developments shortly, but we'd like to start with a patient story that highlights how one of our new products is addressing a large unmet need in a new patient population. In addition, the breadth of Inari tools used in the procedure showcases our ability to effectively treat a broad spectrum of patient presentations. Indeed, we have worked hard to build a VT portfolio that positions us as the first choice in routine cases and the only choice in complex ones.

A 60-year-old man in Connecticut suffered his first deep venous thrombosis in 2009 and was treated with conservative therapy, including anticoagulation. Over the ensuing 14 years, he continued to have bouts recurrent DVT causing progressive debility. Despite multiple failed treatments, including thrombolysis and stenting of his iliac veins through to his IBC, he progressed to post-thrombotic syndrome as his stents became occluded over time. This patient developed chronic swelling with open weeping ulcers and was mostly confined to a wheelchair. As an intervention, his condition would have resulted in continued suffering and could have eventually led to limb amputation.

Encouraged by the release of our revolutionary RevCore system, the first mechanical thrombectomy device for venous stent thrombosis, his referring physician sent him for interventional therapy. In the ensuing procedure, multiple elements of the Inari DVT toolkit were used in concert. RevCore successfully removed the venous stent thrombosis, while Triever aspiration catheters were used to effectively aspirate the liberated thrombus. Protrieve kept the procedure safe by preventing embolization, and FlowSaver allowed minimal blood loss.

The procedure was a resounding success. The patient lost 25 pounds of fluid from his legs and his chronic leg ulcers were completely healed within a month. The quote from referring physicians summarized the incredible outcome. "I want to send every DVT patient for intervention from now on. The result was a miracle. The patient and I are thrilled with the outcome, particularly in light of many failed interventions in the past."

This profound clinical outcome reflects the power of a purpose-built toolkit to address unmet patient needs. Across our 1,300-person team, this is what fuels our work and drives our mission forward. Shifting gears, I'd like to provide a summary of our Q2 financial performance. Revenue in Q2 was $119 million, up 28% year-over-year. Our international business generated revenue of $5.2 million in Q2, up 187% year-over-year and 20% sequentially.

In addition to our top line performance, we also made steady progress during the quarter on our bottom line. Our operating loss narrowed to just $1.5 million, and we recorded positive net income for the first time since 2021. As a management team, we remain committed to our journey to not only invest strategically in the business but also drive operating leverage. As we continue to grow Inari over time, we believe the business has significant profit potential.

We are pleased with how our business performed in Q2, and we are encouraged by the steady progress we're making across all 5 of our growth drivers. Our end markets are large and remain highly underpenetrated, and we continue to see strong momentum in underlying core VT market dynamics. Despite some ongoing trialing, we remain confident in our ability to protect and extend our position as the clear market leader in VTE while also broadening our capability to address significant new market opportunities. Most importantly, we remain laser-focused on the work of developing the VT market for the benefit of patients and continue to view other entrants as potentially additive to those efforts.

With that, I'll turn now to our growth drivers. Our first growth driver is expanding our U.S. commercial footprint. We continue to add head count in Q2 and remain on track to meeting our year-end goal. We are pleased with the operating leverage and productivity gains we are starting to recognize from a more measured pace of territory development.

Continued expansion of our sales organization also results in more focused areas of coverage, positioning us well to introduce new products to the market and to execute on our second growth driver, increasing penetration of existing accounts. VT Excellence is a highly differentiated, comprehensive and repeatable approach to help hospitals establish VT programs and drive deeper penetration of our therapies. The goal of these programs, similar to ones in stroke and MILLION, is a systematic approach that ensures patients are consistently identified, screened and evaluated by a VT expert.

We continue to make progress with VT Excellence. Importantly, we are successfully moving customers along the VT Excellence continuum to more advanced phases of program development, where TAM penetration is 3x to 4x higher than in earlier phases. Our initiatives are building momentum, with increasing top-down traction across several IDN and GPOs, which is quite encouraging. We believe VT Excellence is a critical initiative for us to further develop the VT market and change the standard of care. We also view our approach as a clear differentiator in the market.

Our third growth driver is to increase adoption by building on our base of clinical evidence. In the second quarter, we continued to advance both the quality and quantity of our clinical data, furthering our leadership position in this regard. Over recent months, we've continued to communicate the results of the FLAME study.

As a reminder, this study of high-risk PE patients demonstrated a 90% reduction in mortality when FlowTriever was used compared to historical controls. We are pleased to see physicians taking notice of the FLAME data, which is already beginning to change practice patterns. We envision a day when mechanical intervention with FlowTriever on high-risk patients is first-line therapy. Importantly, we also believe the highly positive results of FLAME in extremely sick patients will be powerful enough to build physician confidence for intervening on less sick intermediate-risk patients, a patient population that is 5x larger.

Turning to an update on our RCTs, enrollment in our PEERLESS 1 RCT, comparing FlowTriever to catheter-directed lytic therapy, remains strong. Last quarter, we passed the halfway mark. We believe that PEERLESS 1 will end the use of lytics in intermediate risk PE. We continue to ramp up enrollment in the DEFIANCE RCT comparing ClotTriever to anticoagulation alone. It will take some time to fully enroll this cohort of patients, but we are pleased with the progress to date. DEFIANCE is designed to establish ClotTriever as the gold standard for DVT treatment.

We've also recently launched PEERLESS 2, an RCT for intermediate risk PE patients, randomizing treatment with FlowTriever to anticoagulation alone. This trial will enroll up to 1,200 patients, easily more than double the enrollment of the next largest PE study. In fact, with over 1,700 patients across PEERLESS 1 and PEERLESS 2, we are set to enroll more PE patients than all other industry and non-industry RCTs combined. Conducting 3 simultaneous RCTs reflects our commitment to generate high-quality clinical data. Each trial aims to study meaningful patient-centric clinical endpoints. Although our efforts are designed to change the standard of care in VTE, while not the goal, they also serve to reinforce Inari's leadership. We are doing the hard work, and we believe each of these studies will succeed.

Our fourth growth driver is to expand our product portfolio. We have several exciting updates to share here as well, starting with RevCore. As you heard in the patient story, this new product is addressing an important unmet need for a large pool of patients. RevCore is the first mechanical thrombectomy device to treat venous stent thrombosis. Patients with this condition represent a subset of the broader chronic venous disease patient population, which is the largest of our new markets. We are thrilled with the initial success and enthusiastic clinical feedback for RevCore. It is the latest example of our commitment to addressing unmet needs within the CVD patient population.

The RevCore launch is supported by several pilots we have underway designed to inform our longer-term CVD market development strategy. In terms of the market opportunity for RevCore, in addition to a significant annual incidence, there's also a large prevalence pool of patients with venous stent thrombosis. Taken together, we believe the addressable market totals nearly 50,000 patients. RevCore is used in tandem with Protrieve and other Inari tools, garnering a procedural revenue of approximately $10,000. We recently also entered full market release with the T16 Curve. This product is an enhancement to our existing 16 French aspiration platform, featuring a pre-shaped curve and improved tractability that allows for targeted clot removal in both PE and DVT cases. T16 Curve generates a significantly greater flow rate than similar sized catheters in conjunction with continuous aspiration.

Next, Protrieve continues to perform well in full market release. As a reminder, Protrieve a sheet designed to trap clot during complex DVT or IVC thrombectomy procedures. In these cases, there's clot extending all the way up into the IVC, creating a much higher risk of clot embolization. Protrieve is used in conjunction with other elements of our product toolkit. It represents an incremental revenue stream at a $4,000 ASP and is generally sold outside of our per-procedure pricing. InThrill is also progressing well in full market release. It is a thrombectomy system design for small vessels, including AV fistulas and veins in the upper extremities and below the knee. A recent indication expansion to include the specific treatment of AV fistula and AV graft thrombosis has helped build momentum. At an ASP of $4,000, InThrill also offers a significant opportunity to generate additional revenue.

Finally, we have 2 products in the ClotTriever family that have initiated limited market release in Q2. Both address unmet needs, and we will share more about each as we move into FMR. Taken together, we expect to have 6 new products fully launched in the second half of 2023, which is a testament to our robust pipeline and commitment to addressing unmet needs with purpose-built tools. Our last growth driver is expansion into international markets. Q2 marked another quarter of record case and revenue production outside of the U.S. Our international business generated revenue of $5.2 million in Q2, up nearly 200% year-on-year and 20% sequentially. Our performance was primarily driven by continued adoption in Europe.

Beyond Europe, during the quarter, we also saw solid case growth in our existing markets in Latin America, Canada and Asia Pacific. We also conducted our first cases in Brazil during Q2. In China and Japan, we are making continued progress in our pursuit of regulatory approvals while also refining our go-to-market strategies. We continue to make outsized investments to build out our international operations. Given the spectacular unmet need internationally, we expect this business could represent greater than 20% of total revenue over time.

And now I'll turn it over to Mitch to discuss our Q2 financial performance in greater detail.

Thank you, Drew, and good afternoon, everyone. Inari's revenues for the second quarter of 2023 were $119 million, up $26.3 million or 28% from $92.7 million for the same period of the prior year. Compared to Q2 of 2022, our revenue growth was due to our continued efforts to open new customer accounts, expand our sales force and deepen our relationships with existing customers. We also significantly expanded both the FlowTriever and ClotTriever product lines by continuing to commercialize the Protrieve and InThrill products while launching RevCore and T16 Curve. The revenue split between product lines was similar year-over-year, with 66% of our revenue derived from the sale of FlowTriever systems compared to 67% in 2022 and 34% from the sale of ClotTriever and other systems compared to 33% in 2022.

Turning to the P&L. Gross margin was 88.4% for the second quarter of 2023 compared with 88.8% in the second quarter of 2022. Operating expenses were $106.7 million in the second quarter of 2023 compared with $91.7 million for the same period of the prior year. R&D expense of $21.1 million in the second quarter of 2023 compared with $18.6 million in the same period of 2022. The $2.5 million increase in R&D expense was primarily driven by an increase in head count. SG&A expense was $85.6 million in the second quarter of 2023 compared with $73.2 million for the same period of the prior year. The $12.4 million increase was primarily due to personnel-related expenses as we increased our head count and secondarily due to higher travel expenses.

Net income for the second quarter of 2023 was $2.1 million compared to a net loss of $10.2 million for the same period of the prior year. The basic and fully diluted net income per share for the second quarter of 2023 was $0.04 and $0.04 based on the weighted average basic and fully diluted share count of 57.2 million and $58.5 million, respectively. These compare with a basic and fully diluted net loss per share of $0.19 based on a weighted average basic and fully diluted share count of $53.2 million for the same period of the prior year.

Before I move on to the balance sheet updates, I'd like to comment briefly on our Q2 P&L performance. We're pleased with our essentially neutral operating income and positive net income. This result reflects our team's commitment to disciplined spending controls while still funding our commercial, clinical and innovation growth drivers. For the second half of 2023 and in early 2024, we may see profitability fluctuations quarter-to-quarter. As we move through the first half of 2024, we remain committed to achieving sustained operating profitability on a going-forward basis.

Moving on to the balance sheet. Our cash and investments at the end of Q2 totaled $337.5 million, consisting of $57.8 million of cash and $279.7 million of short-term investments. For reference, our cash and investments as of the end of Q4 of 2022 were $326.4 million. Our cash flows provided by operating activities were $7.7 million for the second quarter of 2023 compared to cash flows used in operating activities of $12.2 million in the second quarter of 2022.

Lastly, I'd like to address Inari's financial guidance. For the full year 2023, I'd like to announce that we are increasing our revenue guidance to $482 million to $492 million, a $4 million raise relative to our prior range.

Now I'd like to turn the call back to Drew for final remarks.

Thanks, Mitch. In closing, we are pleased with how the business performed in Q2. We generated record revenue and strong growth of nearly 30%, driven by crisp execution across all our growth drivers. Our field team continued to drive patients toward frontline treatment with our therapies while working to support the development of VT programs. We announced our third RCT and built meaningful momentum across new product launches, and we saw another record quarter and strong growth from our international business. Finally, we delivered meaningful operating leverage and approached operating income profitability while continuing to invest in key areas.

Looking ahead to the second half of the year, we see several exciting catalysts coming together, and I could not be more confident about the health of our business and our ability to grow sustainably for many years to come. With that, I'll turn the call back to the moderator for questions. For the Q&A segment, Mitch and I will be joined by Dr. Tom Tu, Inari's Chief Medical Officer.

(Operator Instructions) Our first question comes from Travis Steed of Bank of America.

Maybe we could start, just give a little more color on how Q2 shaped up and how the competitive environment played out over the course of the quarter, the market growth over the course of the quarter in the core market, how much new products played out versus expectations in the core business versus expectations. Kind of curious what parts of the business kind of drove the beat here in Q2 and what you saw as the quarter shaped up.

Thanks for that, Travis. I can get started on that, and Mitch and Tom may want to pile on as well. So look, we were really pleased with how the business performed in the quarter. We did see competitive trialing throughout the quarter as we anticipated, just as we did in Q1 as well. But I think the 28% growth reflects strength in lots of different areas. First and foremost, strength in the core franchise of FlowTriever and ClotTriever here in the U.S. We were pleased with the excitement and enthusiasm around the new products. Still a relatively modest contribution of the overall revenue mix in the quarter from new products, but lots of really good excitement and enthusiasm. We saw some stocking revenue as we do each quarter. And International also had a very strong quarter, record quarter outside the U.S., as well.

So I think all of those elements contributed to the quarter, and I think they give us a lot of confidence looking ahead to the second half of the year in terms of how we're positioned in each of our growth drivers with continued expansion of our field organization, more work underway with program development, certainly more data that we're going to be able to leverage and continue to expand, and a steady cadence of new products with ultimately 6 new products in the mix in the second half. So we like how the business performed in the first half of the year, and we're really confident in how we're positioned here looking ahead to the second half.

And maybe the follow-up question would be just more on Q3, how to think about Q3 modeling. Any color on July? Basically, how much of the raise you [want] going in Q3 versus Q4? Any other color you can provide on stocking and pricing when you look year-over-year sequentially?

Yes. So we saw good momentum throughout the quarter. And I think that has continued pointing ahead here into the second half of the year, stable pricing throughout the quarter. You can see that reflected in the gross margin, which was stable in the 88% range. So I think lots of positives here as we begin the second half of the year. I don't know if Mitch wants to add anything beyond that in terms of the cadence from here.

Yes. I think Travis is with respect to, I think, the Q3, Q4 portion of your question, we'd see probably a more modest pickup in Q3 and then acceleration in the fourth quarter of the year. That's kind of been our pattern for the past few years. And I think that there's a variety of reasons for that, not the least of which has to do with kind of the summer season and the way we expect the business and some of the productivity pickups will accelerate as we move through the year.

The next question comes from Kallum Titchmarsh with Morgan Stanley.

Obviously, a lot of focus here on competition, largely one name in particular, but I'm interested whether you're anticipating any additional players or products to enter the market in the near-term. I think Boston's Wall system might be on the horizon for a launch, but keen to get your thoughts on the market outlook here and anything you're hearing on the ground, given it's a pretty strong space to be in.

So look, this is a $6 billion market that is maybe 6% penetrated with our technologies. And I think we've shown what a huge unmet need exists in this market. We have acknowledged for some time that there are likely going to be new competitive entrants to this market. We really like how we are positioned head-to-head with any and all entrants. We have got, hands down, the best team in the market. Our products do an amazing job of removing not only the acute clot, but the chronic clot as well with minimal blood loss. We have got a mountain of clinical evidence and a commanding lead in evidence generation, and we've got a steady cadence and pipeline of new products coming to address new unmet needs. So we like how we're positioned against any new entrants that may come into the market.

And I think in the same token, new entrants can be additive and constructive in terms of the market development effort, which is really where the real value is and the real opportunity to impact the vast number of patients here is by changing the standard of care towards a new approach to helping these patients. So to the extent new entrants can be helpful on those lines, I think that's going to be constructive for everybody.

The next question comes from Larry Biegelsen with Wells Fargo.

Drew, you've talked about having 6 new products in full market release in the second half of this year. Could you just remind us of those 6 products and how many of those are outside the per-procedure bundle? And how should we think about the revenue contribution from non-per-procedure products in Q2 in 2023?

Yes, I'm happy to do that, Larry, and Tom may want to pile on here as well. I think it's a good sign when you get confused by how many new products we have. That's a nice problem to have. Let me walk through the 6.

So the first 2 we've talked about before, that's Protrieve and InThrill. Protrieve is a sheath designed to trap emboli during complex IVC procedures. That product is priced outside of our PPP price at $4,000 and represents an incremental revenue stream. Likewise, InThrill, completely different system, a brand-new patient population designed to treat small vessel thrombosis, in particular patients with thrombosis related to their AVF fistulas and AVF grafts for hemodialysis access. A completely new patient population, completely new pricing and revenue stream also priced at $4,000. So those are the first 2.

The next 2, we just began full market release during Q2. RevCore, you heard us talk about that quite a bit in the prepared remarks, is out in full market release. Generally speaking, that's used in conjunction with other products and, on a procedure basis, generates about $10,000 in revenue when it's used in conjunction, particularly with Protrieve, for instance. And then the T16 curve, also just launching now in full market release, is an enhancement to our existing 16 French Triever platform, and that would be priced within the PPP bundle.

The next 2 products, the fifth and sixth, are just moving through their limited market release now, and we anticipate transitioning into full market release soon. Those are both within the ClotTriever family, ClotTriever XL. You can probably infer what that product is designed to do. And then the sixth and final is a new enhancement to our ClotTriever Bold platform with some ease-of-use enhancements that go along with that product. So those are the 6 and a quick overview of pricing and revenue and where they are in the launch process.

That's helpful. Just a follow-up on RevCore. It sounds like you're excited about it. The feedback we've gotten is positive. I couldn't tell if that $10,000, Drew, is inside or outside of the PPP. And maybe just how many cases have you done? And how big of an opportunity do you think this is? I know you gave us the TAM, but what do you think the ramp could look like? Any color would be helpful.

I'll tackle this one. So the $10,000 for a typical RevCore case that Drew referred to is in reference to both the price of the RevCore device as well as other ancillary Inari products that might be used, most specifically Protrieve but also some of the PPP aspiration products like was referred to in the patient case. So that's the typical revenue derived for a RevCore case.

I can't be any more excited about the opportunity to treat this really underserved group of patients. Venous stents are commonly placed for venous stenosis. And when those stents caught up, there's really no effective therapy prior to RevCore. And now this offers hope for patients who've been longsuffering. Remember, there's a prevalence pool of these patients as well as the annual incidence of stents that occlude. So I think we've given some metrics around the size of the market. But I can tell you, because there is no other effective therapy, patients are lining up for getting access to this kind of technology.

The next question comes from Bill Plovanic with Canaccord.

First off is just circle back on the competitive. As you kind of look at what's going on out there, just any color or thoughts or what you're seeing in terms of the doctors that may have competitively trialed? Are they sticking? Are they keeping some of it with the competitor? Are they coming back to you? And some of the comments we've received and, I mean, this is the 800-pound gorilla, is they're saying that there's 1,000 cases or accounts in queue that are working through a process that you could see trialing. I'm just wondering if you have any commentary related to what you're seeing in the market competitively, how you're thinking about that plays out through the back half of the year and kind of when we would likely see that fully wash through.

So look, I think in our opinion, in our experience, the most impactful phase of a competitive launch is in the first 6 months. I think that's when you go to your best targets. And I think the lift gets more difficult from there. I think everyone understands that.

We certainly saw a trialing throughout Q2. We saw trialing throughout Q1. And yet, if you look at the first 6 months of the year, we grew 31% in that same period of time. So we feel really confident about our ability to continue to compete and lead in this market. And I think that confidence stems, first and foremost, from the performance of our products, our ability to remove all the clot with minimal blood loss and safe, efficient procedures. I think our confidence comes from our team, our data, our pipeline. I think all of that is reflected in our performance over the last 6 months. I think it gives us a lot of confidence in how we're going to be able to continue to compete and lead in the second half of the year. And I think that's reflected in the 2 consecutive beat and raises that we're now guiding to 27% growth for the year.

Excellent. And then if I could just follow up with Tom, I think you addressed some of this in your prepared comments, but the FLAME data was pretty differentiated, to say the least. Just curious, I mean, you said that you're seeing the doctors take notice of this. Do you think at this time that this will drive adoption beyond the high risk or an intermediate risk? Or do you need that specific PEERLESS data and intermediate risk really to drive it?

Thanks for the question, Bill. So I think the FLAME data is incredibly compelling, as you have stated, a 90% mortality reduction in this very dire disease state compared to historical controls. And so I think that begs the question, is it time to change guidelines? Is it time for FlowTriever to be the first-line therapy for high-risk PE? And I think that's a discussion that's being had currently amongst folks who think about this at an academic level.

As far as the practicality is concerned, if you see these kinds of results in the sickest of the sick, the most challenging patients, doesn't it stand to reason that you can also apply these therapies in a much lower-risk patient population and expect similar safety results and great efficacy? And I think that argument bolsters a lot of the practice patterns that we're already seeing, even before definitive randomized data is available. Now remember, we are committed to generating that high-level randomized data as was discussed in the prepared comments. So we are doing the hard work, but you're going to see practice patterns shift even before that data is available.

The next question comes from Marie Thibault with BTIG.

Congrats on a good quarter, particularly that turning a profit this quarter. Wanted to ask my first here on market penetration and what you think the market has been doing in more recent quarters. I think about a year ago you talked about interventional therapies having a penetration in VTE of about 15% to 20%. Have we seen that start to accelerate? Is it steady as she goes? I'd love to hear the latest on market growth and expansion.

So I think on the highest level, the patient population itself continues to grow in the single-digit range, generally along with population growth. If you looked at the 2 TAMs and the penetration rate of any kind of interventional treatment, both lytic and mechanical, we still think that 15% range is likely where we're at today. Within that interventional segment, I think we are continuing to see a shift away from lytic-based interventions to mechanical thrombectomy as frontline therapy. And obviously, that is driving some of our growth. We're also continuing to convert patients that would have been treated with conservative medical management over to frontline therapy with mechanical thrombectomy. So I think all those same growth drivers are at play. But keep in mind, this is such a massive patient population that, despite our continued growth and traction, there's still so much runway out of head and so much work still to be done to continue to move those numbers in the right direction.

As my follow-up here, I heard mention of the chronic venous disease, the CVD market and some development work that you're doing there. If I recall from Investor Day last year, that was an area you're pioneering, and there was some development and education to be done there. So what's the latest? What are you doing? What's actually happening on the ground there?

Happy to put some more context around that. So CVD is the largest of our new target addressable markets. When you take into account the 1 million patient prevalence pool, this is a $10 billion target addressable market for us, and these patients have spectacular unmet needs. We are building out a purpose-built toolkit to help these patients. ClotTriever Bold and RevCore are 2 examples of that toolkit, and there's more to come.

In parallel to that, we've also begun some work designed to inform our longer-term market development strategy for these patients. These are patients that don't necessarily come in through the door of the ER like our PE and DVT patients. So I'll give you a couple of examples of what that work looks like. One of the things we've done early on here is invest in various third-party data sources to try and identify in some target regions high-volume providers that are caring for these patients, be it wound care centers, podiatry, even general practitioners, and really trying to understand better where these patients are out in the community.

Second thing we've done is hire a small group of market development specialists, a team of folks deployed into some target geographies across the country whose sole focus is on engaging with those high-volume providers and really beginning to raise awareness and educate on new treatment options and some new ways that we can help these patients with RevCore, for instance, for those with chronic venous occlusions in their stents. Last thing we've done in these target geographies is develop a list of chronic venous operators of interventionalists who have designated themselves as ready, willing and able and interested in trying to help these patients so that, once we identify those patients, we can provide that lift, and hopefully that patient will make their way to the interventionalist with a consult for potential interventional treatment.

So along the way, we're learning a lot. We're refining and iterating, and I think it's going to inform the longer-term strategy and help us really begin to unlock the opportunity we see to help that massive group of patients, the same kind of work we've done early on in the VTE market, and now we're applying some of those same competencies to this new patient population.

The next question comes from Adam Maeder with Piper Sandler.

I wanted to start by asking about the international business. I think you did $5 million and change in Q2 international revenue. Is it reasonable to assume that this continues to step up, going forward? Any color on how you guys are thinking about the full year? And then, Drew, I think in the prepared remarks, you said something along the lines that international could be about 20% or greater of total revenue over time, and you're at 4% here in Q2. So maybe just help us bridge that gap over the years and how quickly you can get there.

Yes. Thanks, Adam. I can put a little more context, and Mitch may want to chime in as well. So we had a record quarter internationally. We're continuing to see really nice traction and growth. We've built the foundation now, particularly in Europe, and are beginning to see some really nice growth and momentum, still a relatively small part of the business. But we're seeing really nice sequential growth and certainly spectacular year-on-year growth.

And we anticipate continued growth from international through the back half of this year, certainly. That will continue to be led by Europe. But I think we're also beginning to see some meaningful contributions from some of the other markets where we've established an initial footprint, be it Canada, different parts of Latin America. We're up and running now in Australia, New Zealand. We just began treating patients in Brazil. I think collectively, some of these other markets will also begin to have a meaningful impact on that growth trajectory as well.

So we like the direction we're headed, and we think there's plenty of opportunity there. That's why we continue to point longer-term to the kind of revenue contribution we described in the prepared remarks. That's the kind of unmet need certainly that exists internationally, and we think we're going to continue to go after that over time.

And Adam, just to build on Drew's answer, I think the specific timing of the jump from, let's say, the 4% or 5% range up to the 20% range, obviously it's based on our continued progress in the markets that Drew just mentioned as well as on the regulatory approval and opening for commercial activities essentially of the China market and the Japan market. Those are, as you know, both very significant market opportunities. We're excited about those. As we get closer to that and ultimately achieve regulatory approval, I think we'll have a more specific kind of outlook on the ultimate sort of revenue build internationally and how we'll get to that level of percent of revenue that Drew mentioned.

And just quickly on the follow-up, just wanted to ask for an update on Artix and some of the redesign work there. Not sure if I heard anything in the prepared remarks. Any update on the status there? Are you still targeting 2024 approval?

Yes. Thanks for the question, Adam. And the lack of mention of Artix in the prepared commentary was by no means any intent to convey any lack of interest in this very compelling patient population. As we've said before, acute arterial limb ischemia remains a huge challenge to treat with great unmet needs with current therapies, and we believe we have a differentiated solution. Our approved products to date work, and we've seen incredible safety and good efficacy in this disease state. But we can make them better, and we've committed to refining this product to improve efficiency, elegance, ease of use. And when it is ready, we will release it. We remain committed to the 2024 time frame.

The next question comes from Michael Sarcone with Jefferies.

Just had a follow-up on Marie's question about the chronic venous disease market. Understanding you're still fleshing out the strategy there. But you mentioned wound care centers and possibly podiatrists. Do you think this will require a separate sales force build to really tap the CVD opportunity?

Yes. Thanks for that, Michael. So I think that question is a question we're seeking to answer with some of the pilot work that you heard me describe. We've established this small group of market development specialists to begin engaging with that group of providers and really beginning to help us understand where these patients are and how we can help get them in front of an interventionalist that's aware of our tools and can potentially help with an interventional treatment for those patients.

So that's exactly the kind of question we're seeking to answer. What we do know for sure at this point, that these patients have a different care pathway than what we see with a traditional VTE patient, that the vast majority of them present through the ER or they're in the hospital already. These patients are out in the community suffering with chronic venous disease but being cared for in a different kind of care pathway. So that's what we're trying to understand. And as we learn more, that will inform the broader go-to-market strategy that we'll adopt for those patients.

And my follow-up is just on the ClotTriever Bold platform. Was just hoping to get an update on how utilization for that product has been. Is that tracking to your expectations? And then you talked about a new enhancement to the Bold platform. Do you think that would accelerate uptake from where it stands today?

Yes. So just to level set everybody on Bold, that was an enhancement to the ClotTriever platform. It really features a stronger radial force around the coring element designed to do an even better job of removing chronic wall-adhered clot. ClotTriever Bold over time has achieved the #1 position. It's used in the majority of our cases. It's essentially over time, supplanting the use of ClotTriever, and we're seeing that trend month after month and quarter after quarter, and already it's used in the majority of our cases.

The new enhancement that you heard me discuss is really an ease-of-use improvement and efficiency improvement on the ClotTriever Bold platform, reflects continued iteration and refinement of the platform. Beyond that, I think we'll leave additional commentary for when we move into full market release with that enhancement. We'll describe it more at that point. But suffice it to say, for now, it's designed to improve the ease of use and efficiency of the existing ClotTriever Bold product.

The next question comes from Richard Newitter with Truist.

I was wondering if you could directionally steer us on the new product contribution as a percentage of U.S. revenue or sales. Would you say that, that stepped up meaningfully in 2Q versus 1Q? I think we're modeling a mid-single-digit million dollar amount, $4 million or $5 million. And then, as we look out into the back half, should we think of that stepping up meaningfully on a quarterly run rate basis since you have 6 new products launching there? And same question on stocking. Was stocking revenue flat, up sequentially?

Yes. Let me try that one, Richard. So as Drew mentioned earlier in the Q&A, we saw nice growth from the core business and also from the new products, and as you can tell from the international business when we went from Q1 to Q2. And the growth and essentially and the contribution of the new products is still relatively modest. I won't comment specifically on the number you mentioned. That's captured in ClotTriever and other category in terms of how we've classified the revenue for the company.

As we're thinking about that sort of contribution to Q3 and Q4, it's largely dependent on sort of our success in continuing to roll out the products across our base of active hospital accounts, and that's probably over 1,600 accounts at present. I think you're familiar with the [VAC] approval process and everything that goes on there in order to kind of make those products available, and we're seeing nice progress. Certainly, there's a lot of excitement about the new products, as you heard both from Drew and Tom. But we will kind of decline to comment specifically on where we expect will end up at the end of the year. Some of that's in our control and some of it's not.

From a stocking revenue point of view, we did see an increase in stocking revenue in Q2. I won't comment specifically on what it is. And I think, as we've talked about that in the past, we see fluctuations in stocking revenue kind of quarter-to-quarter based on the cadence of the new product introductions. And again, that's kind of typical for the business. I think as we thought about stocking revenue over the long term for the business, we see it settling kind of in the low to high single digits for the company. So that's kind of an expectation for where this will be as the company continues to mature.

And then just on the trialing comments, now kind of 2 quarters in to your competitor. Where has the trialing been more pronounced or less pronounced between DVT and PE? And I'm curious if one is proving to be stickier or transient than the other.

Yes, Richard, I think the short answer is we've seen relatively consistent and balanced trialing across DVT and PE, and we saw it unfold in Q2, and we saw it unfold in Q1 despite some of the competitive noise in the swirl and the claims. Again, we grew 31% in that 6-month period. So we've seen it relatively consistently and relatively balanced. I'm not sure we'd characterize what we've seen in DVT versus PE any differently.

The next question comes from David Rescott with Baird.

I just want to clarify a comment that you just made on stocking revenue. I think you said it was up. I just want to clarify if that was up year-over-year or up sequentially. And then my first question, actually, just more relating to the guide. I think again, you bumped up the full year outlook somewhat higher than what the beat was in the quarter versus (inaudible) estimates. It's a small dollar amount. I think it's going to be a $2 million delta or so. But I'm just wondering whether or not that incremental bump-up in full year outlook is more related to the underlying confidence you have in the VTE business versus maybe if there's anything new that you've seen at least on the new product or international side.

So I'll let Mitch maybe clarify the stocking comment, and then I can maybe talk about the guidance-related question.

Sure, David. On the stocking question, I think, when we go back to the Q1 earnings announcement, we talked about stocking being the lowest that it's ever been for the company, and it's sort of in our existence as a public company. So my comment relative to Q2 was sort of related to Q1.

And then, David, on the guidance raise, we have now beat and raised 2 consecutive quarters. This quarter was a $2 million beat, $4 million raise. I think the confidence you're seeing is related to how we feel all of the different parts of the business are positioning us here at the front half.

As we enter the back half of the year, we feel very confident in our ability to [continue to] compete and lead with the core VT franchise. We like the enthusiasm and excitement around the new products. We're seeing good traction internationally. I think all of those considerations are reflected in the raise in guidance. That puts us at 27% year-on-year growth at the midpoint. We started the guidance at the beginning of the year with 24% growth. So hopefully, you're clearly seeing our confidence here in how we're positioned relative to the back half of the year.

I guess on gross margins, they've been pretty strong Q2, Q1, first half of this year and compared to last year, too. I think you mentioned that you've seen stable pricing in the business. My guess is maybe that, as new products roll out, international is a bigger portion of the business, that those theoretically could be margin dilutive from a gross margin standpoint. And so, when you consider that with the comments on just stable pricing in the business, I'm wondering where maybe some of the offsets are coming from that are allowing you to, at least on a sequential basis and a year-over-year basis, maintain this pretty strong gross margin profile.

Yes. And I guess I'll get to start on that one, David. So from a gross margin performance point of view, we're very pleased with the company. We have added costs historically to sort of our product offerings through this PPP approach that we have for pricing our products. The pricing has been stable, as Drew mentioned during his comments. And we really focus as a company to price based on value as opposed to price based on cost or anything like that. And we're able to, by offering the PPP and these toolkits that have kind of become larger over time, the toolkit approach has been very effective to us in terms of maintaining price, in some cases taking price.

Additionally, I'd say you mentioned a couple of the factors that will change the gross margin over time; the, let's say, internationalization of the business, and that's something that I think will kind of play out over the course of the next few years. We've been really fortunate to have some nice productivity gains in our manufacturing operations. Even though we face some headwinds, both in terms of raw materials cost and also labor costs, we're seeing some nice offsets there.

And I think, as we talked about the gross margin sort of longer-term for the company, we historically sort of messaged that in terms of kind of a low to mid-80s gross margin profile for the company. And I think we're feeling more and more comfortable with the idea that it could kind of settle in the mid-80s as opposed to something in the low 80s.

And that's something, obviously, that gives us a terrific ability to self-fund our own growth. When we look at the cash position of the business compared to where we were post IPO and post follow-on, we'd essentially internally funded the growth of the company, which I think maybe puts us in a class of 1 of 1 of the MedTechs out there. And we've also been free cash flow-positive for the past 3 quarters, which is, I think, a really nice signal going along with the profitability sort of journey we've been on. And I think all that positions us really well for further investment into some of these opportunities that we've discussed during this call.

The next question comes from Chris Pasquale with Nephron Research.

Curious, with all the new products you guys are juggling at the moment, how you're incentivizing the sales force around the portfolio to prevent the excitement about the new stuff from distracting from the core.

Yes. Thanks, Chris. So good question, and one we've spent a lot of time thinking about ourselves. The last thing we want to do is distract the team with any of the new products or new patient populations distract them from the work underway in the core VTE franchise. So we've been really deliberate about our go-to-market strategy, really deliberate about how we've designed our compensation program to ensure that we've got the right focus and the right execution across the entire portfolio.

I think the other thing we've done very deliberately, as you know, is continue to expand the field organization and to split territories. The result of that, of course, is smaller and smaller territories, smaller and smaller number of accounts, which provides the rep bandwidth then to not only drive penetration under VT excellence, but also have bandwidth to take on work associated with some of these new product launches. So we're trying to be deliberate and thoughtful about all that. We like what we're seeing so far, but we're keeping a close eye on all those considerations, and we'll adjust the strategy on a go-forward basis if we see those trends beginning to emerge.

Makes sense. And then just how should we think about timing for entry into some of the big Asian markets, Japan, China? And do you think you're going to have to do any local clinical trials to get where you'd like to be from a regulatory perspective?

Yes. We've been working close to 2 years in both China and Japan to put ourselves in a position to help treat patients in those 2 respective markets. We'll probably stop short of putting a definitive time line on it today. But rest assured, we've been working diligently in that direction for some time now. I think, even maybe later this year, we'll have some more definitive updates to provide.

In terms of whether or not we're going to need clinical studies, I think that's an open question still across both China and Japan. We've got, thankfully, a mountain of clinical data that we can leverage, generate here in the U.S., starting with, of course, FLASH and CLOUT. So we're certainly going to leverage the data that we do have. And if we do need to do market-specific clinical work in either of those markets, hopefully, it will be more modest in scope given the investment we've already made in high-quality data in FLASH and CLOUT.

And that was our last question. This concludes our conference call. Thank you for attending today's presentation. You may now disconnect.