Penumbra Inc (PEN) 2018 Q2 法說會逐字稿

Good afternoon. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Penumbra's Second Quarter 2018 Conference Call. (Operator Instructions)

I would now like to introduce Mr. Dan Wilson, Director and Head of Business Development for Penumbra. Mr. Wilson, you may begin your conference.

Thank you, Denise, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the second quarter 2018. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com.

During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality, compliance and business trends.

Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-Q for the quarter ended June 30, 2018, which will be filed with the SEC on August 7, 2018, as well as those described in our 10-K for the year ended December 31, 2017 filed with the SEC on February 27, 2018.

As a result, we caution you against placing undue reliance on these forward-looking statements. And we encourage you to review our periodic filings with the SEC, including the 10-Q and 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock. Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise.

We anticipate the prepared comments on today's call will run approximately 13 minutes. Thank you very much. And with that, I would like to turn over the call to Adam Elsesser, Penumbra's Chairman and CEO.

Thank you, Dan. Good afternoon, and thank you for joining Penumbra's Second Quarter 2018 Conference Call. I'm joined today by members of our senior management team.

I will begin our call today with several business updates, and then Sri will provide commentary on our financial results as well as an update on our revenue guidance.

Our total revenues for the second quarter of 2018 were $109.6 million, representing a year-over-year increase of 36% as reported and 33.8% in constant currency. We had operating income in the quarter of $9.3 million compared to an operating loss of $1.3 million for the same period last year.

We had another quarter of exceptionally strong financial results. Both of our major markets in neuro and vascular are continuing to grow well, and we believe that both have long-term durability. Additionally, we continue to have confidence in our capacity to innovate and to add new products that can positively impact patients.

Within our neuro franchise, our growth is being driven by the market in ischemic stroke. We saw steady market growth this quarter, following the strong market growth that we observed in the first quarter. It is important to remind everyone that this growth is not necessarily linear, as the past years have shown.

On our last call, we highlighted several positive market developments in stroke, data on extending the window to treat patients, and the Tennessee state legislation to direct EMS to triage and transport patients to the best stroke center as quickly as possible. Though we see enthusiasm from these developments, we believe they will take time before they translate into market practice.

2 weeks ago, the Society of NeuroInterventional Surgery held their 15th Annual Meeting. I was struck by the ongoing energy and passion of the decisions to improve stroke systems of care. The efforts today are primarily manifested in the local work to bring stroke patients to an appropriate hospital. The discussions around the systems of care give us great confidence in this long-term effort. Additionally, there were broader discussions around additional patient populations where mechanical thrombectomy could bring better clinical outcomes.

Another notable update from the meeting was around direct aspiration. The final results from the COMPASS trial were presented at the late-breaking session on July 25. As you might recall, COMPASS is a randomized control trial that compares direct aspirations to stent retriever as a first-line approach for mechanical thrombectomy. The trial met its primary endpoint of non-inferior clinical outcomes, with direct aspiration arm being numerically higher.

The new data that was presented at the meeting showed an approximate $5,000 per case total cost difference in favor of aspiration when using either list price or supply chain price. These data provide level 1 evidence of non-inferior clinical outcomes and also confirm that direct aspiration has economic benefits versus stent retriever therapy. This evidence only supports the ongoing trend toward aspiration and may further catalyze competitive entry.

We continue to believe that our system's performance is the greatest advantage we provide our customers and their patients. It is clear that physicians in the field are motivated to continue to improve stroke treatment. We believe that Penumbra will play an important role in helping to make the procedure better and faster for patients.

Over the past decade, we have constantly worked to improve our stroke technology. Through our experience in tens of thousands of cases, we are confident that we can make the procedure even better. Until now, when thinking about direct aspiration technique, physicians have generally focused on the aspiration catheter. However, our team has historically focused on both the catheter and the aspiration source.

3 years ago, our development team began a project to design our third-generation aspiration source. This past June, we received FDA clearance for Engine, which represents a major enhancement to the Penumbra System. Our team has combined the science of aspiration with our vast clinical experience to develop an aspiration source with improved vacuum power and ease of use, which we believe can help the system's performance. We are ready to begin rolling out Engine and look forward to educating our physician customers on this latest technology improvement to the Penumbra System.

I would also like to provide a brief update on competition within the stroke market. The current competitive products are consistent with what we have expected. The efforts to market these products began towards the end of the second quarter, and we expect to see it continue in earnest through the third and fourth quarters.

As I have said before, we have great respect for our competitors. However, our development team is up to this competitive challenge. And we believe we can continue to set the standard in providing the best complete product system for direct aspiration. Our amazing commercial team is energized and fully ready to make sure their customers know the true benefits of Penumbra's products.

Moving to our vascular franchise. We saw notably stronger financial growth this quarter in both embolization and thrombectomy. I want to take a moment to commend our commercial team on their incredible focus and execution.

About a year ago, we began investing in efforts to broaden our reach into the vascular surgery community. This past June at the Society of Vascular Surgery meeting, we began to notice real signs of progress from our initial efforts. While it is still early, we are encouraged by the work that we are doing with vascular surgeons to bring better treatment to patients.

I'd like to end my remarks by sharing a brief story that a physician shared with me recently about a patient that was treated with our Indigo System. A woman was admitted to a hospital with a cold leg caused by a blood clot in her artery. The leg was getting worse, so they started to treat her by dripping tPA, which they did for 36 hours. After that therapy, the leg below the knee was still completely impacted. So they scheduled that portion of her leg to be amputated.

Right before the scheduled amputation, the physician decided to try to aspirate the clot with Indigo. It worked. They removed a very large clot. The patient's leg was saved, the scheduled amputation canceled, and according to the physician, she literally walked out of the hospital. Stories like these inspire our entire team, but they also provide huge motivation and a deeper understanding with health care providers involved in these treatments.

I'll now turn the call over to Sri to cover the financials.

Thank you, Adam. For the second quarter ended June 30, 2018, our total revenues were $109.6 million, a year-over-year increase of 36% reported and 33.8% in constant currency.

Our geographic mix of sales in the quarter were 65% U.S. and 35% international. Neuro and peripheral vascular represented 68% and 32% of sales, respectively.

Multiple areas of our business helped drive our exceptional revenue growth in the quarter. Revenue from our neuro business grew to $74.2 million in the second quarter of 2018, a year-over-year increase of 32% reported and 29.4% in constant currency. Our neuro growth was driven by sales of our Penumbra System for ischemic stroke.

We saw procedural volumes steadily grow following the rapid pace of growth which we observed in the first quarter. Through the first half of the year, the stroke market has grown at a faster pace than our expectations. But as we continue to remind investors, we do not expect this pace to continue, and as history has shown, market growth is not linear.

While we did not see competitive aspiration launches begin until late in the second quarter, we expect to see trialing to occur through the third and fourth quarters. Additionally, as we head into the second half of the year, we face tougher year-over-year comparables in neuro.

Revenue from our vascular business grew to $35.4 million in the second quarter 2018, a year-over-year increase of 45.3% reported and 43.9% in constant currency. We saw increased growth across our embolization and thrombectomy products, which was driven by our commercial focus and efforts with the vascular surgery community. As we have observed with our interventional radiology customers, we expect to invest meaningful time with initial customers to fully educate them on Indigo and its possible use cases before we approach additional new customers.

Our gross margin in the quarter was 65.9% of revenues compared to 63.2% of revenues for the same quarter last year. We continue to believe our gross margins will remain range bound in the near term.

Total operating expense for the quarter were $63 million or 57.4% of revenue compared to $52.3 million or 65% of revenue for the same quarter a year ago.

In the quarter, a good portion of our new hires in SG&A came towards the end of the quarter, and thus, we did not see the full impact in the quarter.

Our research and development expenses were $8.2 million for Q2 2018 compared to $8.1 million for Q2 2017. SG&A expenses were $54.8 million for Q2 2018 compared to $44.2 million for Q2 2017. Our spend increased primarily due to increases in headcount and related compensation expense.

We had operating income in the quarter of $9.3 million compared to an operating loss of $1.3 million in the same period last year. We continue to be focused on investing in our business and operations to support our future growth.

With the update of our second quarter results, we are also revising our 2018 revenue guidance range to $420 million to $425 million from our previously stated range of $410 million to $415 million.

As discussed, as we move into the back half of the year, we expect tougher comparables to impact our reported year-over-year growth rates. Additionally, for the third quarter, we expect summer seasonality and competitive trialing to imply a sequential decrease in revenues compared to our second quarter results.

And now I'd like to turn the call back to Adam for closing remarks.

Thank you, Sri. I am incredibly proud to be part of the Penumbra team. The energy, enthusiasm and effort that each one of the employees puts into their jobs every day truly makes a difference in people's lives.

As Penumbra grows, we are constantly pushing ourselves to overcome challenges and become better and better, which helps make our company even stronger. This is the true character of Penumbra. This extraordinary spirit, together with a growing multiproduct portfolio in 2 large under-penetrated markets, gives us a great deal of confidence in the months and years ahead.

Thank you for joining us on the call today, and we will now answer questions.

(Operator Instructions) Your first question comes from the line of Bob Hopkins with Bank of America.

Can you hear me, okay?

Yes.

Congrats on a really strong quarter. I just have a couple of quick things I really wanted to touch on here. One, Adam, was the pipeline. Just want to make sure I heard you correctly. So -- could you just tell me when exactly are you going to be in sort of full launch on the new pump?

And then earlier in the year, I think we had talked about the new Aspiration Catheter as well coming at some point this year. So if there's any update on that, I'd love to hear it. So just a pipeline question to start.

Sure. Let's sort of start with the catheter. I think, to your answer to that question, I said it would come sometime during this year, and we are still on pace with that. It's under submission, and we fully expect that to happen this year.

Regarding the pump that just got approved, we're starting to -- in the initial phases of inventory and getting that rolled out. From what we can tell just in the earliest moments, we're very excited and it does what we want it to do, which provides a real, strong, deep vacuum that we think will show even better results than we've shown before.

And I assume I know the answer to this. But you -- would you be willing to share any of the features of the new catheter that's coming?

No.

Okay. I guessed right. On the competition side that you highlighted here, no surprise to anybody. Just curious what you're seeing from the competitors on pricing. And kind of anything you guys are doing to try to convince your customers to stick with you? But most importantly, in the pricing side, I think just initially, I'm curious about what's going on with pricing, if anything.

Yes. I think that's a great question, Bob. And there's a number of layers to that. So bear with me as I sort of attack each one.

First, as it relates to just catheters, let's remember that most of these catheters have been on the market for some time as guide catheters and have been sold typically at a lower price than our aspiration source. So there's not a new price pressure that we have -- that we're just now seeing. It's been out there in the market for several years.

Second, as you look at pricing, this field has always had sort of a mixture of pricing in the neuro field. And we have always seen that premium products tend to command a premium, and we don't expect that to change sort of philosophically in this field, and I think we will compete well.

On top of that, the third layer relates to the full suite of tools that people offer. And as you know, we have the full suite of tools as well. So as companies try to compete in the aspiration world, we obviously have an awful lot of leeway to compete in the full suite of tools that are potentially used in this procedure. So I think, from a pricing standpoint, we are in very, very good shape going forward.

And then my last question on competition, and I'm sure lot of people will ask about peripheral. But on the competitive side, as you thought about formulating your guidance for the back half of the year, just how many incremental competitors are -- do you think are coming in the back half of the year?

So we, as you know, have a fairly good visibility into that world. I won't say we can't be surprised. But this field is fairly small, and we do know a fair amount that's going on. And I do think we should expect, and I had it in my prepared remarks, that we expect additional competitive entrants into the aspiration world. So we've taken into account a fairly open understanding of what is out there in this field.

Your next question comes from Larry Biegelsen with Wells Fargo.

I'll bite on the peripheral question. So the growth was pretty remarkable this quarter, 44%, the highest we've seen since the beginning of 2016. Adam, can -- a little bit more color on what's driving that and the sustainability of it. Is it really just going more broadly to vascular surgeons? Or is there something else there?

Yes, thanks, Larry, for the question. So if you look back at our growth in peripheral, it's always taken sort of a stepwise fashion. We've had some good growth and we've flattened out for a quarter or so. So that's what's happening here. We have gone into, in earnest, this group of physicians. We've been laying the foundation for that effort for a bit and talking about it for a bit. And we're starting to see that pay off, and that's what we saw this quarter.

We expect this to continue this way, meaning in a stepwise fashion for a while. We'll see this kind of growth. We'll see the flattening out for a bit. We'll see it again. I want to remind you and everyone on the call that the numbers, the potential patients that we can treat in peripheral thrombectomy rival and equal the same numbers generally that we're talking about in the stroke market.

The markets are going to grow differently because the efforts are very different. This is a little more traditional sort of education of physicians. The patients are typically in the hospital as opposed to stroke, where they're not. But there's a lot of work and a lot of opportunity ahead of us. So we expect -- again, it's going to be lumpy, but we expect this kind of growth to continue for some time.

That's helpful. And just last from me. A, could you talk about any shift you've seen to ADAPT based on the COMPASS data and your expectations going forward just in terms of the treatment paradigm? And just lastly, on the new competition in aspiration, have you seen anything unexpected, Adam?

Yes, thanks, Larry. First on COMPASS, and when COMPASS was first presented in -- at ISC in the beginning of the year and then again presented with the final data as well as the cost analysis, I think it's too soon after SNIS, it was just several weeks ago, to have any sort of hard data to support this. It's really anecdotal from what we heard physicians say either to us or to folks who then told us.

But we definitely heard some folks talk about the fact that now with this data, there is a desire to try this procedure. I think you add Engine and some of the techniques that we are educating folks around that and the use of Engine, I think we're going to see a continued sort of interest in it. The cost savings becomes pretty significant. If you think about $5,000 per case, the DRG change all over the country, but that is almost 10% in some places of the whole DRG. And so that's a significant savings.

And as hospitals think about the cost and the investment in providing stroke care and a more comprehensive treatment and neuro ICUs and so on, any kind of savings like that becomes pretty important to the program. So I do think we feel and the sort of mood feels like we're going to see our system given another shot from people who might not have done ADAPT first. You had another question in there.

Just lastly on (multiple speakers) any surprises?

Yes. So far nothing that we have been surprised by. I think I again made that comment in the script. We had expected pretty much what we have seen. And I think we feel fairly comfortable that we're in pretty good shape compared to it.

Your next question comes from Robert Marcus with JP Morgan. Your next question comes from Jason Mills from Canaccord Genuity.

It's actually Cecilia on for Jason. I just wanted to ask on the peripheral side of the business, any updates on your efforts in PE and just the EXTRACT-PE study? And if you could just help frame the potential impact of this study on expanding the TAM going forward?

Yes, thanks, Cecilia. That's a good question. So the EXTRACT, to remind everyone, is a study focused on pulmonary embolism patients. The enrollment is continuing. We had talked about that study reading out sometime in 2019, toward the end of it. That's -- we're still on pace for that. We think it will make a significant delta or a significant impact on the potential patients we can treat.

There are a lot of patients that we know we can help, patients that have either massive PEs or sub-massive PEs that can convert to massive, where we really become one of the only tools that can be used effectively. So it's on track. Obviously, don't know the details and can't reveal that, but we are optimistic about it.

And then just continuing in peripheral, but could you provide any updates on the opportunities you're seeing right now in coronary and just what type of impact we can expect going forward and general timing?

Yes, thanks. That's a good question. So our -- to remind everyone, our coronary product is called -- it's part of the Indigo System called CAT RX. We are continuing to do cases, and the cases are going very well. So we remain optimistic.

The caveat there is, to remind everyone, we're going into an area here with a very, very well-developed and refined procedure that is pretty well done. And we can't mess that up. So as I've said before, we are doing this very carefully, making sure that we understand the role of this product, the benefits that it has and how and when we can be helpful to physicians and their patients.

As we get more information and are able to sort of define that opportunity, we will certainly share that. But at this point, we're still in the -- sort of the earlier stages of learning that.

Great. And If I could just sneak one last one in. Can you just update us on some of the bills running through state legislatures right now? And just when you think we could see these local as well as regional efforts begin to really change the paradigm on the national scale?

Sure. So as we mentioned, Tennessee, the governor did sign the law -- Tennessee law, so that's now in place. On our last call, we talked about Massachusetts and New York. Those efforts are continuing. There's no new sort of particular update other than the, how should I say, sometimes messy state legislative political process unfolding.

And there is some discussion at the SNIS level of what states do, but that's really on their side of the discussion. And when I have more updates, I will have them. But there's -- there does not seem to be a -- any kind of setback or decrease of momentum. And in all the discussions that we are hearing about, and we did meet with the political team at SNIS to get a full briefing, the level of sort of feeling and momentum is, if anything, gaining as opposed to anything else.

So I feel very optimistic. As I've said in the past, I think it's going to take a number of states, maybe a few big states to start to see a real shift and a movement in -- sort of across all other 50 states. But the progress is real here, and I'm really delighted and grateful that the team at SNIS is doing this work.

Your next question comes from Robert Marcus with JP Morgan.

Sorry about before. I appreciate it. Sri and Adam, can you talk about -- we've seen so much growth in adoption of interventional care in the OR. Where do you think the next leg of growth is here? Is it in the OR? Is it in the ambulance? Is it still in getting legislation to drive better utilization outside the hospital? How do you -- where do you see the next leg of growth for this?

Yes, it's a good question. I think the -- there's some -- and I think the question that is sort of getting at, I'm guessing, the idea of is there a diagnostic tool in the -- that we can use in the ambulance to diagnose a large vessel stroke definitively to make sure that patients get to the right place? Or is there some form of actual therapeutic treatment that can be given in the ambulance?

I -- there are a number of people who are trying that. There are a number of efforts underway. There are other efforts to use some really extraordinary software technology to look at imaging in hospitals to help diagnose large vessel strokes.

I think those are great efforts, and I think they all aid the same fundamental principle that we've got to get patients to the right hospital. It is not something that I think is going to likely happen, that we're going to be intervening with a full angio suite in -- in an ambulance anytime soon. So I think the major effort is still getting patients to the right hospital to be treated. So that's really going to the interventional side of the question.

The additional work that we've seen start around time window and increasing the pool of patients, that's continuing. We're now looking at -- and some trials are starting around even expanding that to a different group of patients that have low aspect scores and so on. We'll see how that goes. That's really just adding more to the otherwise large untapped market that we have.

But I think the real effort in the first phase here is to get patients to the right place to be treated so that they have their best shot at making an outcome. I personally think the next phase is what do they do after they're treated and the rehab and recovery and stuff. And I think as you guys know from our past discussion, that's an area that we're starting to do some very early work on, but I'm excited about that too.

Great. Maybe as a follow-up, you guys focus on aspiration, and that's obviously the key driver for you. But you do also have 3D, and it's not something we hear you talk about a lot, even though it has good data to date and it should be able to compete well with the big guys. So can you help us understand what the strategy is with 3D? And how much can you use 3D to help offset some of the upcoming competition in aspiration?

Well, I think you -- your question sort of answers the question. The answer is, philosophically, we have always believed that starting with aspiration is the right thing from a time, cost, ease-of-use perspective. We've always supported the use of stent retrievers as an ancillary adjunct tool in certain cases where it's necessary. And that's why we have it, because we think that they play a role. So we think that's an important part of it.

Is it better for us to have the whole suite of tools as more competition comes to our area where we were generally alone? Absolutely. It's better to have the full suite of tools, and we can use that, I think, effectively. We've shown and the market has accepted that 3D is a really good stent retriever, and it does the work quite effectively. In fact, its somewhat unique design, where you're pulling the clot off the wall as opposed to sort of pushing it against the wall, is quite effective. And sometimes people have responded better to that.

But our sort of mission is to continue this effort. We think that there is much more room for continued improvement for some period of time in aspiration and the science of aspiration, and we've shown that on this call with our launch of Engine. And we think that there is more room to improve all of aspiration and the tools related to it really for a number of years going forward.

Your next question comes from Isaac Ro with Goldman Sachs.

Just want to come back to guidance and the topic of competition and maybe tie the 2 together with. The question is, if we look at the full year update you guys gave us, I think you raised guidance by about $10 million at the midpoint.

And I'm wondering if -- as we think about the back half of the year, aside from the comments that Sri already made, is there any assumption around whether or not competition has an effect on your growth rate this year? And I know, Adam, you said the competition you're seeing is not new. But I'm wondering if, in your assumption, there's an element of that baked in in terms of affecting your growth rate this year.

Isaac, I'll start with that, the question around competition and how we think about it relative to our guidance. I think just 2 thoughts to start. Philosophically, we've always tried to encompass everything when we think about guidance and we lay out the year's guidance at the beginning of the year, market, competition, our products, what we have, what we have out in the marketplace. And we did the same thing this year as we've done the last couple of years.

We started this year in February talking about guidance of roughly 20%. Today's update would suggest a growth rate for the year of something closer to 27%. We obviously feel very strong about both parts of the business and the new areas that we're pursuing. So the momentum across the business is strong.

But what's important, particularly with stroke, it's hard to evaluate it on a short-term basis, on a monthly or quarterly basis. And some people like to characterize it as accelerating or decelerating based on any one particular quarter. This is a market that you -- based on the drivers, you have to look at it on a lengthier basis, and thus the comments.

Through the first half, the growth in the market has been exceptionally strong. But again, in our history and what we've seen, we've not seen that kind of growth persist for more than a couple of quarters, and we've seen it be sort of lumpier -- or not linear, if you will. So that's what's involved in that.

The competition, again, since our IPO 3 years ago, we've been talking about the idea that we believed aspiration as a mechanism would grow, and as that happened, that we would start seeing more competitive entry. That went into the guidance that we started off this year with, and that continues to be our view sort of in our update today.

So it is involved in it. I think there are other factors beyond stroke market competition. There are also comps that are quite impactful when you look at year-over-year growth rates that I know you appreciate, but have to be considered when you compare, if you were to compare the first half to the second half.

And then just a follow-up on the medium vessel occlusion market. I know it's still really early and we're focused on the core opportunity. But curious where that opportunity or that segment of the market falls on to your list of priorities and how you're thinking about the kind of data that you still need to generate as a community to open up that part of the market.

Isaac, when you say -- you cut out just for a second. You said medium. Do you mean like the smaller part -- the vessels in the brain like the M2 and M3 vessel?

Yes. And of course, feel free to expand upon that to the extent you have more nuance you want to touch on. I just want to maybe focus on other areas of the therapeutic pathway that could be available over time.

Yes, okay. I just -- the lines are cut. I want to make sure I got the important part of the question. Stroke is -- we've typically focused as a market and physicians on treating the first segment of the middle cerebral artery. As you go distal to that, those parts have sometimes been harder to get to and less focused on.

I think in the last year or 2, that's starting to change. And I think that's an important part of what we can do therapeutically. We shouldn't be satisfied that we got sort of the big clot out and we left potentially smaller pieces in branch vessels.

So I think the tools are evolving and we certainly have focused on this for some time, and we'll continue to focus on it with tools that can go after clots in more distal branches safely and effectively as best we can. I don't think you're going to -- you're not going to see a large change in the numbers, because there's some overlap in those patients, they are sometimes the same patient. But hopefully, you can see potentially improved outcomes if we're really trying to get as much clot out as possible.

(Operator Instructions) Your next question comes from Joanne Wuensch with BMO Capital Markets.

This is Matt Henriksson in for Joanne. Our first question is with regards to pricing. We talked a little bit about the competitive pricing out there. But what is your pricing strategy with the new Engine pump and when the next-generation catheter comes out? Will the COMPASS data give you more confidence to charge a premium compared to your current-generation devices?

Yes, thanks. It's a good question. So we typically don't talk about our pricing strategy sort of in a public way. That's from a competitive standpoint never been a good strategy. I can tell you that we have been very successful pricing -- this is not the first time we have had either a new catheter or a new aspiration source. This is our third aspiration source.

So we went through a transition from our first to our second very effectively. And I think we know how to do that. So we're going to do that again. And price around the aspiration source is really not a key part of it. There is not a lot of new additional revenue that comes from that.

On the catheter side, we've really been able to maintain price, even in a market where you have seen some decline over time. We don't expect in a highly competitive market to increase price dramatically, but we don't expect to see lot of current price pressure.

Great, that's helpful. And then just my follow-up. For gross margins, I understand the language around range-bound that you discussed earlier. But could you add some color into kind of some of the pushes and pulls with regards to that with your new facility, new product launches, things of that nature?

Thanks, Matt. So what we've talked about with gross margins -- and you saw a slight uptick. But generally, if you look back at the recent several few quarters, we've been in the same kind of range, if you will, at 65%.

The conditions and the dynamics around our business that sort of influence that in the near term, there is 2 large ones. One, we're in a place where we're continuing to launch new products. And that -- obviously, when we do that, those products as they ramp up start with slightly lower yields and improve with time.

The second part, and you captured some of this in your question of new facility -- new facilities, with the growth that we're seeing, obviously a lot of our energy efforts and investment are around some of the expansion in production, in producing our products.

And so we're moving aggressively and getting ahead of that. And that's really a focus area of ours, given that we're in 2 highly growing large markets to be at the forefront of that and to not miss a beat with having enough product.

So we're being pretty aggressive, I'd say more proactive, in getting in front of that to some extent and having sort of the flexibility to capitalize on growth. So you'll see some of that flow through and weigh on the gross margins. But we think that's an important capacity for us to have. As you well know, we make our product here and it's a core competency of ours. So we're going to obviously take full advantage of being aggressive with it.

There are no further questions queued up at this time. Mr. Wilson, I'll turn the call back over to you.

Thank you, Denise. On behalf of our management team, thank you all again for joining us today and for your interest in Penumbra. We look forward to updating you on our third quarter call.

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