Inari Medical, Inc. (NASDAQ:NARI) Q1 2024 Earnings Call Transcript

Inari Medical, Inc. (NASDAQ:NARI) Q1 2024 Earnings Call Transcript May 1, 2024

Inari Medical, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, ladies and gentlemen. And welcome to Inari Medical Inc. First Quarter 2024 Earnings Conference Call. All participants are in a listen-only mode. At the end of the company’s prepared remarks, we will conduct a question-and-answer session. As a reminder, this call is being recorded and will be available on the company’s website for replay shortly. I’d now like to turn the conference over to John Hsu, VP Investor Relations. Please go ahead.

John Hsu: Thank you, operator. Welcome to Inari’s conference call to discuss our first quarter 2024 financial performance. Joining me on today’s call are Drew Hykes, President and Chief Executive Officer; and Mitch Hill, Chief Financial Officer. This call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements related to Inari’s estimated full year 2024 revenue, operating loss or profitability expectations, and the expected operating performance and potential strategic benefits of LimFlow. These statements are based on Inari’s current expectations, forecasts, and assumptions, which are subject to inherent uncertainties, risks, and assumptions that are difficult to predict.

Actual outcomes and results could differ materially from any results, performance or achievements expressed or implied by the forward-looking statements due to several factors. Please review Inari’s most recent filings with the SEC, particularly the risk factors described in our latest Form 10-K 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. On today’s call, we will refer to both GAAP and non-GAAP financial measures in announcing our Q1 2024 results. Please refer to today’s press release for reconciliation of the non-GAAP measures discussed on this call and referred to in the press release.

The press release and the slides accompanying this call are available on our website at inarimedical.com. A recording of today’s call will be available on our website by 5:00 p.m. Pacific time today. With that, I’ll turn our call over to Drew.

Drew Hykes: Thank you, John and thank you for joining our call today. We’re pleased with our performance in the first quarter, achieving record revenue of more than $143 million, reflecting over 23% growth. Our performance was driven by consistent, crisp execution and strong contributions across the Inari portfolio. I would like to thank the team for driving strong adoption of our market-leading PE and VTE therapies, executing on our plans to diversify into sizable new patient populations and continuing to expand internationally. In addition to strong top line growth, we continue to make progress on our path to profitability, and we are reaffirming our expectations to reach sustained operating profitability in the first half of 2025.

As we look ahead, we are as committed as ever to the strategic objectives that support our continued strong growth. These objectives reflect the ethos and goals that have long been core to Inari’s culture and have guided our commercial and operational progress. Our first objective is to continue to scale the adoption of our highly differentiated, purpose-built toolkits across large, attractive markets. This year, this includes our plans to drive deeper adoption within our existing U.S. account base via our VTE Excellence initiative, gain access to new accounts across our emerging therapies portfolio, and expand internationally, including commercially, into Japan and China. In addition, we remain committed to ongoing portfolio expansion to address unmet patient needs in venous and other diseases.

These initiatives have yielded strong growth, as reflected by the rapid adoption in our emerging therapies portfolio in the first quarter. This early success follows years of purposeful investments. We are encouraged by the progress we are seeing across emerging therapies and see huge opportunities to continue to drive meaningful growth. As always, our innovation strategy is to target unmet patient needs with purpose-built tools, and in conjunction with that, to protect our leadership by leveraging our strong and comprehensive IP portfolio. Next, we will continue to lead the way with high-quality, market-impacting clinical data. To that end, we remain on track to showcase our PEERLESS data in the second half of the year. As a reminder, PEERLESS is the first of our three RCTs, and we recently completed the 550-patient enrollment.

The study will evaluate patient outcomes using our FlowTriever device as compared to catheter-directed thrombolysis. PEERLESS will generate high-quality clinical evidence that will move the field forward and further establish FlowTriever as the optimal interventional therapy for intermediate-risk PE patients. Meanwhile, enrollment is progressing well in our two other RCTs. PEERLESS II, comparing FlowTriever to anticoagulation alone, and DEFIANCE, comparing ClotTriever to anticoagulation alone. Our registry data also continues to move the field forward. Last month, Dr. David Dexter presented interim two-year follow-up data from the CLOUT Registry, the largest prospective multi-center data set generated since the ATTRACT trial. These results confirm the excellent safety, low rethrombosis, and effectiveness of the ClotTriever system for the treatment of DVT.

In fact, in the long-term follow-up from CLOUT, patients treated with ClotTriever demonstrated a significant and sustained improvement in post-thrombotic syndrome at rates that were one-third to one-half those seen in historical DVT studies. We continue to believe high-quality clinical evidence is critical to maintaining and expanding our leadership position and growing the market. Indeed, the robust underlying market growth in VTE today is in large part due to the data Inari has already generated and the commitment we have made to developing this market. Our next strategic priority is to continue to leverage our powerful commercial engine. The size, quality, and expertise of our team are meaningful differentiators for our business. We have the largest VTE-focused Salesforce in the industry and will continue to hire reps and split territories at a measured pace to support our growth.

Today, this team is driving VTE Excellence initiatives to increase the use of our solutions within existing accounts. We are also having growing success engaging hospital administrators at the IDN level to facilitate the adoption of VTE Excellence across multiple hospitals within their network from a top-down perspective. Taken together, our efforts are yielding great results. As an example, in some of our most advanced accounts, we are now seeing TAM penetration rates above 50%. This is a testament to the fact that our VTE Excellence program is working to catalyze positive adoption patterns, but much work and opportunity remains. Over time, we are confident this team of experienced professionals can continue to move the needle from our current high single-digit TAM penetration to strong double-digit penetration and beyond.

With the benefit of high-quality data and updated guidelines, we believe mechanical thrombectomy for VTE will ultimately exceed the TAM penetration rate seen today in acute ischemic stroke and could one day approach the TAM penetration of PCI for the treatment of STEMI. We aim to accomplish these strategic objectives while delivering a premium financial profile characterized by strong, durable growth, best-in-class gross margins, and increasing operating leverage. We know that the strength of our financial profile is founded, first and foremost, on the success of our three growth pillars, our VTE franchise, emerging therapies franchise, and our international business. We are market leaders in a $6 billion TAM for venous thromboembolism technologies in the U.S., and we are continuing to drive adoption within this substantial underpenetrated opportunity.

In Q1, our global VTE revenue was $137 million, up 20% versus the prior year, supported by our ongoing commercial expansion, market development, and evidence generation efforts. We continue to see strong underlying growth in U.S. VTE procedures and expect that this market, defined as mechanical thrombectomy alone, can and will continue to grow in the neighborhood of 20%. From a market position standpoint, although we anticipate continued competitive activity in this large and high-growth market, we remain highly confident in maintaining our leadership position and continuing to deliver robust VTE growth. All of this is factored into our guidance, which you’ll hear from Mitch later on. Turning to our global emerging therapies business. In Q1, emerging therapies revenue was $6 million, up 185% versus the prior year.

This segment consists of four distinct patient populations outside of VTE, together comprising a $4 billion TAM in the U.S. alone. In chronic venous disease, RevCore continues to perform well, the first mechanical thrombectomy device to treat venous stent thrombosis. We’re also excited to be executing the limited market release of VenaCore, our second purpose-built tool within the CBD toolkit, which will unlock another portion of this significant TAM. We hope to bring this technology fully to market in the second half of the year, and we’ll have more to share then. As a reminder, we believe the addressable market for CBD includes an annual incidence of approximately 100,000 patients, representing a $1 billion U.S. TAM alongside a substantial prevalence pool.

Turning to CLTI. We have made great progress integrating the LimFlow business into Inari and driving the early U.S. launch. LimFlow offers new hope and new options to the 55,000 patients per year suffering from no-option CLTI, translating into a $1.5 billion U.S. TAM. We’re highly encouraged by the progress we have made to date in accessing this patient population. For LimFlow, we continue to view 2024 as a year of foundation building and remain focused on physician training, VAC approvals, thoughtful patient selection, and deliberate wound care follow-up. We are successfully navigating VAC approvals today, and we have completed an initial and growing series of commercial cases. We are seeing good traction and enthusiasm from physicians and have already completed our first two commercial training programs.

In addition, we’re pleased to highlight that earlier this month, CMS proposed a new technology add-on payment, or NTAP, for LimFlow, as we had anticipated. The proposed NTAP would add up to an incremental $16,000 to the hospital’s existing DRG. We expect to see a final ruling from CMS later this year. The third market addressable by our emerging therapies portfolio is acute limb ischemia, a $600 million U.S. TAM characterized by tremendous unmet needs and a lack of purpose-built tools. We remain on track to initiate a limited market release and commercialize our second-generation Artix system later in 2024. In our fourth and final emerging therapies market, InThrill for the treatment of AV fistula clot continues to effectively address unmet needs in this large and underserved patient population.

We’re working on a second-generation InThrill platform and look forward to bringing it to market next year. Finally, I would like to discuss our international progress. Q1 was a very strong quarter internationally with revenue of $9.5 million, up 120% versus the prior year. Growth in Q1 also reflected the largest sequential dollar increase we’ve ever had in international. Strength was primarily driven by adoption of our solutions in Europe, but we also saw strong performance across Latin America, Canada, and Asia-Pacific. We’re pleased to see the investments we have made over the past several years in establishing our international business begin to translate into meaningful commercial traction in these markets. Although international still represents a relatively small part of our overall patient impact, we continue to expect international sales will count for at least 20% of revenue over time.

Before I turn the line to Mitch, I’d like to share, as always, a story about the incredible impact of our technology on patients. Last month, a 29-year-old postpartum woman was just one day post-op for an emergency C-section at a university hospital in Germany. Due to severe hemodynamic instability, this young mother was put on ECMO, scanned, and diagnosed with a pulmonary embolism. Thankfully, the physicians at this hospital were well-trained to utilize FlowTriever and the entire supporting Inari toolkit. Ultimately, her physician team utilized four of our devices, Intri24, T20Curve, FT2, and FlowStasis to rapidly and effectively treat her condition. The immediate result was substantial clot removal and the return to a normal heart rate. After several days of further improvement, this patient was discharged to her family a newborn baby and made a full recovery.

She is just one of the many thousands of European patients whom we have been able to serve with our technology in the three years since we introduced our toolkits to the region. We’re honored to help such patients return to their families. Such patient stories motivate us to continue our efforts to offer Inari products throughout the world. In closing, we’re pleased with our Q1 performance and confident in our outlook into the remainder of 2024 and beyond. We often say that we are just getting started at Inari, and despite being several years into our commercial journey, this remains more true today than ever. With that, I will turn the call over to Mitch.

Mitch Hill: Thanks, Drew. Turning to our first quarter 2024 results, Inari’s revenue for the first quarter of 2024 was $143.2 million, up 23.3% over the same period of the prior year. This represents sequential growth of over $11 million. Global VTE revenue in the first quarter was $137.2 million, up 20.3% over the same period of the prior year. Global emerging therapies revenue in the first quarter was $6 million, up 184.5% over the same period of the prior year. International revenue of $9.5 million was up 120% compared to the prior year. Our best-in-class gross margin was 86.8% for the first quarter of 2024 compared to 88.2% in the prior year period. The year-over-year change was due to increasing internationalization of the business, ramp-up costs associated with new products, and product mix.

Operating expenses were $141.5 million in the first quarter of 2024 compared with $107.8 million for the same period in the prior year. R&D expense was $26.9 million in the first quarter of 2024, up 21.8% compared with $22.1 million for the same period of 2023. The increase in R&D expenses was primarily due to increases in materials and supplies related expenses, clinical and regulatory expenses, and personnel related expenses in support of our growth drivers to support new products and build the clinical evidence base. SG&A expense was $103.1 million in the first quarter of 2024, up 20.3% compared with $85.7 million for the same period of the prior year. The increase in SG&A expenses was primarily due to increases in personnel related expense as a result of increased headcount, increased commissions due to higher revenue, professional fees, and travel costs.

In the first quarter of 2024, the change of fair value adjustment of our contingent consideration liability was $6.3 million. Acquisition related expenses were $2.8 million, and amortization expense related to our acquired intangible asset was $2.5 million. There were no expenses related to these three items in the prior year quarter. Inari recorded a GAAP operating loss of $17.2 million in the first quarter of 2024 compared with a GAAP operating loss of $5.3 million for the same period of the prior year. On a non-GAAP basis, which excludes acquisition related expenses, acquired intangible asset amortization, and changes in the fair value of contingent consideration, the first quarter operating loss was $5.6 million. The non-GAAP adjustments had no impact on the first quarter of 2023.

Net loss was $24.2 million for the first quarter of 2024 compared to a net loss of $2.2 million for the same period of the prior year. The basic and fully diluted net loss per share for the first quarter of 2024 was $0.42 on a weighted average basic and diluted share count of 57.9 million. This compares with a basic and fully diluted net loss per share of $0.04 on a weighted average basic and diluted share count of 54.8 million in the same period of the prior year. As we execute against our goals of driving strong growth and leverage within the business, we are also maintaining a thoughtful approach to managing our balance sheet. In the first quarter of 2024, our cash flows used in operating activities were $12.3 million compared to approximately $2 million in the same period of 2023, primarily due to investments in our product portfolio, including LimFlow.

At the end of the first quarter, we had a healthy balance of cash and investments totaling $102 million. We remain confident in our ability to self-fund our business and strategic objectives with current cash and access to liquidity. We anticipate our cash balance will remain at approximately $100 million for the rest of the year. Turning to 2024 outlook. We are raising our full year 2024 revenue guidance from prior guidance of $580 million to $595 million to $592.5 million to $602.5 million. This updated guidance reflects growth of approximately 20% to 22% over 2023. Our guidance reflects contributions from all three of our growth pillars, VTE, emerging therapies, and international. For 2024, from a phasing perspective, we continue to expect strong performance in the back half of the year.

By way of reference, in 2023, we saw modestly higher revenue in Q2 versus Q1. We expect to see this typical seasonality again in Q2 2024. As a result, we expect Q2 revenue to be flat to slightly up sequentially. Lastly, I would like to comment on Inari’s progress towards profitability. We are continuing to invest in our strategic objectives to drive growth while positioning the business to achieve sustained operating profitability in the first half of 2025. On our last call, we mentioned that we expect to see greater operating losses in the first half of 2024 versus the second half. We continue to hold this expectation today. With that, I’ll turn the call back to the moderator for questions. For the Q&A segment, we will be joined by Dr. Tom Tu, Inari’s Chief Medical Officer.

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Larry Biegelsen with Wells Fargo. Please go ahead.

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Q&A Session

Unidentified Analyst: Hi, it’s Leigh calling in for Larry. Thanks for taking our question. Just a question regarding the growth in Q1. So we backed into U.S. core VTE sales of about $128 million, and that’s up about 16% year-over-year. Can you just confirm if our basic math is correct? And if that is correct, how do you bridge that against the 20% market growth that you are alluding to? And I have a follow-up. Thank you.

Drew Hykes: Yeah. Thanks, Leigh. This is Drew. I can get started on that. Mitch may want to chime in as well. So relative to VTE, we’re pleased with how that part of the business performed in Q1. We saw 20% growth across VTE globally, a little faster than that. Internationally, albeit off a small base, a little slower than that. Here in the U.S., obviously off a much larger base. In terms of the underlying market growth, historically, you’ve heard us characterize the growth in this market, which we define as mechanical thrombectomy for VTE, as growing in the neighborhood of 20%. Call it 18% to 22%. I think when the dust settles on Q1, you’re going to see the same kind of robust underlying market growth. We have every expectation that that robust market growth will continue as we look ahead.

In terms of our position in that market, we remain the clear market leader. So despite competitive dynamics, despite the potential for modest share fluctuations back and forth, we remain the clear market leader in this market. And we’re confident in continuing to be the market leader as we move forward. And that confidence is built on our purpose-built solutions, high-quality data, the strength of our commercial engine, all those things taken together. And I think as a result, we continue to expect robust growth from VTE. And that’s exactly what you saw as we moved through 2023. That’s what you saw most recently here in Q1. And that anticipation of robust growth from VTE is also reflected in the updated guidance.

Mitch Hill: Yeah. And maybe, Leigh, for just to add to Drew’s comments, as you know, we don’t aggregate the data at the U.S. VTE level. So I think I can sort of follow your math, because the O-U.S. side is growing faster. So the U.S. side is growing a little bit slower. I think Drew did a nice job addressing the market growth versus how we feel about it. One of the things I look at that I’m very pleased with for the business is just the dollar growth of the business, sort of quarter-over-quarter, if you look back over the past year. And as I look at the growth of the business, for example, from Q2 to Q3, and then from Q3 to Q4, and Q4 to Q1, the Q4 to Q1 time period with 10.5 million of sequential growth is actually the highest that we’ve had, look back over the course of the past year. So we’re really pleased with the progress the business is making. And for the reasons that Drew mentioned during the prepared remarks, we feel like we’re still just getting started.

Unidentified Analyst: Great. That’s helpful. And then just as far as the subsegments within VTE, can you comment more specifically around DVT versus PE market share? Based on, [indiscernible] we’ve done, sounds like you’re holding on to the PE share, perhaps a little better than the DVT share. Just any call you can provide around that. Thanks again for taking questions.

Drew Hykes: Yeah. We saw robust growth in VTE across both PE and DVT. Balanced growth across both of the two franchises. We see competitive dynamics at play across both of the franchises, but robust growth in both areas. And that was clearly evident in the Q1 results.

Mitch Hill: Yeah. Leigh, I mean, we continue to feel like we’re the clear and dominant market leader in the PE side of the business, probably a four to one lead there. I think on the DVT side of the business, consistent with where we were maybe back in the second half of 2023, kind of a one and a half to two to one lead there. I guess I’d just like to comment though that this concept of share dynamics or share shifts is something that’s very dynamic and it’s something that kind of changes, depending on who the treating physicians are. It’s not a one way street, by any means. And we’re in there definitely competing for share. We’re in there working with the treating physicians, working with the non-interventional physicians as well, in our program building and everything else to try to help make sure that patients get the best possible care.

Operator: The next question comes from Stephanie Piazzola with Bank of America. Please go ahead.

Stephanie Piazzola: Hi, thanks for taking the question. I wanted to ask about the guidance raise. It looks like you raised the guidance at the midpoint by more than the beat in the quarter. So maybe if you can expand on where the guidance raise is coming from, how much of it is from U.S. core versus O-U.S. and emerging therapies. Thanks.

Drew Hykes: Yeah. Thanks, Stephanie. I’ll get started on that. Mitch may want to follow on. So it’s about a $5 million beat and about a $10 million raise at the midpoint. And I think that reflects the strength, the momentum that we saw across all three parts of the business as we exited a strong 2023 and made our way through Q1. We saw a strengthened VTE. We saw robust growth across emerging therapies. And we saw another strong quarter of crisp execution and growth from the international part of our business. And I think all of those considerations are factored into the increase in guidance by $10 million at the midpoint.

Mitch Hill: Yeah. And just to add to that, Stephanie, as I said there at the end of the prepared remarks, from the point of view of sort of the trajectory of the beat, if you will, we’re seeing a greater acceleration in the business in the second half. So we would expect to see some increase there. The flat to slightly up comment is something that we’re kind of thinking through as it relates to our Q2 number. And we saw some seasonality, as Drew mentioned, in the past couple of years, actually, in the business. And so we would expect to see that again here in 2024. First couple of weeks of April, we saw lots of spring break activity and things of that kind in the business. So no surprise and no different than other companies are experiencing. But we just wanted to be confident in terms of the number we put out there for Q2. And that’s hopefully helpful to your question.

Stephanie Piazzola: Yeah. Thank you. That’s really helpful. And then maybe just as a follow up. I wanted to ask about, a competitor recently launched a next generation version of their product. And there are some other new entrants expected in the market here soon. I know you mentioned that this is reflected in the guidance, but maybe if you could elaborate on that a little bit more, if you’re seeing any early disruption from that and kind of what you expect for the rest of the year. Thank you.

Drew Hykes: Yeah. I don’t think we’ve changed. We’ve seen any big changes in the competitive landscape. We see continued competitive dynamics, continued entrance to this market. Not surprising. This is one of the most attractive end markets in MedTech. And despite those dynamics, again, we remain the clear market leader and are confident and continue to be the market leader. You heard us describe what that confidence is based upon. This is a market that we built, and we’re not going to sit by and idly, passively allow folks with inferior technology and inferior data have unfettered access to this market. So we’re going to compete. We’re going to compete aggressively. That’s what you’ve seen us do in the past. That’s what we would expect going forward as well.

To the extent we do have new entrants, I think they can be constructive from a market development standpoint. And after all, that’s where the real value creation opportunity is, the real opportunity to impact patients and change the standard-of-care. So alongside competing head to head, we’re also going to continue to focus on the investments we’re making to help develop the market. High quality data, market development, program development, continue to expand our commercial engine, all of those investments designed over time to continue to develop this market.

Operator: The next question comes from Marie Thibault with BTIG. Please go ahead.

Marie Thibault: Good afternoon, and congrats on a very nice quarter start to the year. Wanted to shift gears here a little bit and talk about international. International remains strong in addition to U.S. VTE, and I caught mention of international expansion. Are you in new countries? What does the coverage landscape look like today? And what can you tell us about in China and Japan? I think that’s still set for this year.

Drew Hykes: Yeah. Thanks for the question, Marie. So we had another strong quarter of growth internationally, $9.5 million, the largest sequential increase, absolute sequential increase we’ve had international. That continues to be led first and foremost out of Western Europe, where we’ve got kind of the longest head start of our international effort. We’ve got a well-established commercial footprint at this point and are seeing robust growth continue to be driven out of Western Europe. Alongside that, we’re also seeing some more meaningful contributions from 12, maybe 15 other markets outside of Western Europe, countries in Latin America, Canada, Brazil, Argentina, also across Asia-Pacific and Australia and New Zealand and Singapore.

Some of those markets were not as far along as we are in Europe, but nonetheless, they are now at the point where they’re contributing more meaningfully alongside the growth being driven out of Western Europe. And then finally, we remain on track for putting ourselves in a position to help patients in both China and Japan later this year. And I think as we get closer to those milestones, we’ll have more to share, respectively, on our go-to-market strategies in both China and Japan. But that work continues and we continue to expect treating patients in both those markets by the end of the year.

Marie Thibault: Okay, very good. And then I wanted to ask about the second half of ’24 PEERLESS data readout. What impact are you seeing at this point right now on utilization from doctors maybe anticipating that data? And how impactful do you think it can be to guidelines? We’ve seen some — what seemed to be some more positive shifts toward mechanical thrombectomy in the guidelines, but we’d like to hear maybe from Dr. Tu a little bit on his thoughts on guideline impact.

Tom Tu: Thanks, Marie. Appreciate the question. And we are, of course, very excited about PEERLESS. It represents the first in a cadence of randomized controlled trials that we’ve invested in. We’re leading the way in terms of data generation for VTE. As a reminder, PEERLESS is an RCT randomizing FlowTriever to catheter-directed thrombolysis for intermediate risk PE. And, of course, despite the obvious drawbacks to a lytic-based therapy, including unwanted risk of bleeding and increased costs, we still see that therapy being used in a portion of patients treated for PE. And I think this data set, certainly a positive, is going to go a long way in terms of shifting the — kind of holdouts supporting that therapy towards what we believe is a superior form of treatment.

Now, as far as impact to guidelines are concerned, of course, an RCT carries a higher level of weight than some of the data we’ve generated to date. But I don’t want to discount the value of the largest ever prospective registry in PE, which is the flash data, as well as the flame data, which is the largest contemporary study of mechanical thrombectomy for high-risk PE. And I think taken together, these are going to start shifting the guidelines towards specific mention of mechanical thrombectomy and, indeed, FlowTriever as the source of the generation of all of this important data.

Operator: The next question comes from Kallum Titchmarsh with Morgan Stanley. Please go ahead.

Kallum Titchmarsh: Yeah. Thanks a lot for taking the question. Just on the reshuffling of the sales leadership, I wanted to get a bit more color on what’s going to change under Tim. Should we anticipate adjustments in the way incentives are structured or maybe some initiatives to drive better productivity? Just keen to hear why you think now is the right time for a new direction here and whether this impacts your rep numbers. Thanks.

Drew Hykes: Yeah. Thanks for the question, Kallum. So back in October of last year at our national sales meeting down in San Diego, our former sales leader in the U.S., John Burrell [ph] announced his retirement to the team. John actually joined Inari alongside myself about seven years ago and has been a fantastic leader for us, but was ready to downshift and basically exit a full-time operating role. So we announced that back in October, two months even before the CID was received, and we began a search for a new leader, ultimately landing on Tim Benner, who joined here during Q1. I think the short-term strategy is status quo. The commercial model that we have followed has obviously been very, very effective for us, and I think Tim is certainly respectful of all the success we’ve had and respectful of that model.

He is settling into his new role. I think like any new leader, I’m sure he’ll have some proposals and some recommendations on changes to make, but I would not anticipate any radical change in our commercial strategy or tactics or execution. He’s six or eight weeks into his new role at this point. In terms of the last part of your question on new rep adds, we’re going to continue to add additional sales professionals each quarter as we move through this year. That’s been a part of our model from the get-go. Those new adds are tampering a bit, tapering a bit at this stage of the rollout, but we continue to see opportunities to split territories and expand the commercial footprint, and I think that will be the same strategy under Tim’s leadership as what we’ve followed historically.

Kallum Titchmarsh: Got it. Thanks a lot. And then one more, if possible. I think I know you said it will take a number of years to conclude, but just checking if there’s any progress on the DOJ inquiry since the Q4 call.

Drew Hykes: Yeah. So no update other than we are continuing to cooperate, and we’ve not seen any impact commercially from the investigation from the CID, nor do we anticipate seeing any impact commercially. So we’re continuing to cooperate, but I think to your point, if you look at the precedent examples here, this is likely a process that’s going to be measured in quarters and quarters, if not years.

Operator: The next question comes from Bill Plovanic with Canaccord. Please go ahead.

William Plovanic: Yeah, great. Thanks, and thanks for taking my questions. I’d like to kind of shift the topic to LimFlow. Just help us understand, how do you think about commercialization? When do you go beyond trial centers? How does NTAP going into effect in October at the proposed rate? How would that impact your commercial strategy, and kind of how much of a contribution was it to the quarter?

Drew Hykes: Yeah, great. Thanks for all those, Bill. I’ll try and remember each of them. I think, in general, so far so good with LimFlow. We feel really good, first and foremost, on the work that we’ve completed on the integration. We’re well over half of the way completed with the integration. We’ve wrestled to the ground some of the most complicated parts of that process and feel really good about the progress we’ve made in integrating LimFlow into Inari. We’ve got the team now defined and established, and we feel good about the remaining work ahead to complete the integration. On the commercial side, we’re also seeing some really nice initial traction with LimFlow. As you’ve heard us describe in the past, this is a year focused on foundation building as opposed to significant revenue contributions.

We’re focused on training and in-servicing, on navigating back approvals, on strengthening and stabilizing the supply chain, on getting the NTAP established. And we hit an important milestone recently with CMS including the NTAP in their proposed rule. Every expectation we have is that that will come online as anticipated in October and will provide up to $16,000 in incremental reimbursement. That will certainly support a broader economic value proposition for LimFlow and will certainly be a key part of the foundation that we’re going to build off of as we move into 2025. I think that’s the timeframe for us really beginning to flex the commercial effort on LimFlow and really begin to ramp with significant expansion in accounts and cases that go along with it.

Last point I’d make, keep in mind this is going to be a more focused commercial effort than what we’ve had to undertake in VTE, focused on a smaller number of sites and as a result a much more narrowly scoped commercial infrastructure that we’re going to need to build to service these patients compared to what we’ve had to undertake in VTE.

William Plovanic: And then if I could, I know the commentary on the guidance for especially the direction on Q2 of flat to up. Looking back, you haven’t been flat to up since COVID in 2020. Is there something specifically you’re seeing that you’re concerned about? Is there anything changes in pricing? Is there any changes in any part of your business? Was there a lot of stocking internationally? I’m just kind of curious of the conservatism and given the strength of the quarter and the guide for the year, but the second quarter, that’s not a historical pattern for you. Thanks for taking my questions.

Drew Hykes: Sure, Bill. I can get started on that. Mitch may want to pile on as well. As you heard Mitch describe, we have seen some seasonality in Q2 the last couple years. We’re not sure we fully understand all the dynamics at play, but there appears to be some underlying seasonality to the incidence of VTE in Q2. If you go back in time, we’ve certainly been transparent about talking about that in previous years. We wanted to be thoughtful about that dynamic as we signal the cadence of revenue build for the remaining three quarters here in 2024. There’s nothing else at play other than that consideration. I think as you look into Q3 and Q4, we do see some really nice catalysts shaping up across all three different parts of the business that we believe are going to lead to an acceleration as we exit the second half of the year.

Mitch Hill: Bill, just to quickly add, even a flat quarter in Q2 would be 20%-plus growth year-over-year. So we’re pleased that continues to be consistent in reinforcing of the guide for the year as a whole, which with our revised numbers is 20% to 22%.

Operator: The next question comes from Chris Pasquale with Nephron Research. Please go ahead.

Chris Pasquale: Thanks for taking the questions. I wanted to start with emerging therapies. I was hoping you could talk a little bit about the VenaCore product, what that adds to that business, and how it differs from the use case for RevCore.

Tom Tu: Thanks for the question, Chris. This is Tom here. So very excited about VenaCore. It is the second element in our purpose-built toolkit for chronic venous disease. This is a very large population with unmet need whose standard-of-care right now is really just compression stockings and watchful waiting. We’re really excited about the performance of this product in its early limited market release. And as always, we’ll have a lot more to share about the product and the go-to-market strategy once we move into full market release, which will be in Q3.

Chris Pasquale: Okay. I guess we’ll wait for details then. And then, Mitch, just a detail on the income statement. There was a large tax provision this quarter. Was that a cash charge? Was that part of the burn here in 1Q? And what was the reason for that?

Mitch Hill: Yeah. The cash burn issue, Chris, is more a function of working capital changes. If you look at the cash flow statement, you’ll see some increase in our accounts receivable and some increase in inventories. So that was really more what was going on there. The tax expense item wasn’t a current cash issue, but it is reflective of the fact that the U.S. business is something that is — I think as I’ve said before the U.S. business at this point is profitable and growing. And what comes along with that, unfortunately, is taxes. So we’re dealing with it, and we’re doing our best to sort of plan for those. But that wasn’t a current cash issue for us in Q1.

Operator: The next question comes from David Rescott with Baird. Please go ahead.

David Rescott: Great. Thanks. Hi, guys, and congrats to the strong start to the year. Thanks for taking the questions. Mitch, I wanted to follow up on some of your comments about the second half of the strong performance in the back half of the year. I’m just trying to reconcile if you said whether or not there’s acceleration in the back half. And when we specifically look at this, and the U.S. VTE number, I’m kind of getting to up mid-teens in Q1, or so a little bit above mid-teens. Does that number kind of hold steady into the back half, or is more of the better guide of stronger growth in the back half more based on emerging therapies and the international segment?

Mitch Hill: Yeah. I mean, Chris — sorry, David. Again, we’re not providing the guidance at that level of detail. We are seeing the global VTE number continuing to grow sort of along the lines of what we experienced here in Q1, if not a little bit better. We are excited about the growth prospects for the international business, and then our emerging therapies business is going to continue to build out this year. Tom just talked about the VenaCore product, which is going to add to the CBD portfolio. And then later in the year, we’ll have the Artix product. So we have some nice catalysts there to help us continue to build out kind of a multi-product platform opportunity for the company. Overall, I would comment on the market growth issue versus our specific growth in global VTE, and just say that it’s kind of not a straight line.

There’s going to be some puts and takes each quarter. Overall, as Drew mentioned during the prepared remarks, we are super excited about the opportunity to expand the interventional penetration rate into the treatment of VTE diseases. We think it could be two to three times the size it is currently. So that is just a really terrific opportunity for us, and we feel like we’re just getting started with that. It’s going to be a little bit of ebbs and flows quarter to quarter as we move forward. But if we picture where the business can be, sort of in the three to five to seven-year timeframe, including the readouts of multiple RCTs and guideline changes and things like that, we’re super excited about the prospects.

David Rescott: Okay, great. Thanks. And maybe that’s a good segue to my next question, just specifically on the two-year kind of cloud data, specifically on the lower PTS rate than we saw in some of the prior trials. I’m curious if the data that you’ve seen there is enough at this point or has been enough to drive maybe incremental conversions of some physicians who may have been more hesitant to switch over to a thrombectomy, specifically on the PTS kind of readout there, and whether or not longer term, if and once this goes into guidelines, whether or not you think these results would benefit the thrombectomy category as a whole, or whether or not this is more specific to what you’re seeing from ClotTriever alone. Thank you.

Drew Hykes: Great. Thanks for the question, David. So I’ll answer them in reverse order. The ClotTriever system has a unique mechanism of action, and we believe that’s the only device that has led to the kind of fantastic clinical results that we presented most recently in the CLOUT’s two-year interim data. I think the top line readout of that data set shows that mechanical thrombectomy with ClotTriever is the best at removing thrombus, and that translates into the best short-term safety results, as well as long-term safety and efficacy in prevention of post-thrombotic syndrome. And we’re very happy about that data set and pleased to report it. I think as far as the commercial impact of the data set, you’re going to see this affect two different physician populations, right?

Of course, those that are still kind of mired in conservative therapy or old-fashioned therapy for DVT certainly have more reason to believe in ClotTriever. And then folks who perhaps have chosen alternative means to treat DVT now recognize the superior safety profile and efficacy of this device with better data than anything else that’s out there.

Operator: The next question comes from Michael Sarcone with Jefferies. Please go ahead.

Michael Sarcone: Hey, good afternoon, and thanks for taking my question. Tom, maybe we can keep you in the hot seat. Just a follow up on the PEERLESS II commentary. And I believe you had mentioned the data set, if positive, could help catalyze more uptake of mechanical thrombectomy. What would you characterize or what are you looking for to define success or a positive read on that trial?

Tom Tu: Sure. So, Michael, just for clarification, I believe you might be referencing PEERLESS I, which is our RCT of FlowTriever versus catheter-directed thrombolysis for PE patients. That’s the one whose enrollment is complete and whose data set we will anticipate presenting in a major clinical meeting in the second half of this year. I think what you’re going to see there is a strategy kind of endpoint, not to go into too much of the details, but it’s a win-ratio analysis of FlowTriever versus catheter-directed thrombolysis with important clinical as well as resource utilization metrics, things such as mortality, bleeding, clinical deterioration and bailout, as well as hospital ICU utilization. And I think all of those are known benefits for our therapies over CDT, and we anticipate that this data, if positive, is going to reiterate those benefits and drive more people towards our therapy.

Michael Sarcone: Got it. Thanks, Tom. And then maybe one for Mitch. Can you just talk about how you’re thinking about the cadence of gross margin for the balance of the year?

Mitch Hill: Sure. Happy to do that. I think the 86.8% margin in Q1, as I mentioned, there were some fluctuations there due to product mix and due to some ramp-up for the new products and the internationalization. As we think about that for the remainder of the year, it looks like it’ll be fairly flat or fairly consistent with that number, so not a significant fluctuation in that as we move through the rest of the year.

Michael Sarcone: Got it. Thank you, Mitch.

Mitch Hill: Yep. Thank you.

Operator: The next question comes from Mike Matson with Needham. Please go ahead.

Unidentified Analyst: Hey, guys. This is Joseph on for Mike. Just another one on gross margin. Maybe the reason why it was down this quarter, or I guess, was pricing a factor this quarter. What’s the pricing been like? Has it generally been stable?

Mitch Hill: Yeah. I’m happy to help you with that. And the pricing, we’re happy to report, has been very stable to even up for Inari. We’ve been successful, working with our customers. As you know, historically, we had the VTE. PPP is something that’s kind of come into the picture over the past year or two. Starting out from a couple of years ago, it was just kind of the PE, price per procedure, and then the ClotTriever was sold on an SKU basis. And now we’ve kind of been able to offer a package to many hospitals so that the treating physicians are able to avail themselves of really all of the tools. It’s particularly useful in the complex DVT cases, which are probably around 15% to 20% of those, where they can use the sort of the coring element of the ClotTriever to remove clot that’s well adherent.

And they can also use the aspiration of the FlowTriever to remove clot that may be up around the IBC, the IBC filter parts of the anatomy. So the pricing has been very stable to up for us. And we are continuing to work with hospitals to expand the concept of that kind of that pricing package.

Unidentified Analyst: Okay. Yeah, that’s helpful. Just to reiterate, did you say 15% to 20% of the complex cases, those customers are opting for the package deal?

Mitch Hill: I’m sorry. 15% to 20% of the VTE procedures are complex in nature, meaning that the physicians would benefit from using both the ClotTriever family of products as well as the aspiration tools that are a part of the FlowTriever family. So this idea of bundling together all of the products in kind of a larger toolkit is something that they really love.

Operator: The next question comes from Adam Maeder with Piper Sandler. Please go ahead.

Adam Maeder: Hi, good afternoon. Thank you for taking the questions here. I wanted to start on Artix. I believe you were previously targeting a mid-2024 relaunch. I just wanted to see if that still holds or if that’s kind of shaping up to be a little bit later in 2024 and what’s needed, I guess, from a clinical regulatory standpoint to get that product launched again in the States and then a follow-up. Thank you.

Tom Tu: Adam, this is Tom. Thanks for the question. We’re really excited about Artix. As you know, we’ve been in the market with the first generation product. We’re really happy to see a pristine safety profile, excellent efficacy, which really offers a better option for patients who, in this mature market, really have had suboptimal choices. With Artix Generation 2, what we’re bringing is increased ease of use as well as even better thrombectomy efficacy. And we are still targeting a mid-year launch of that 2.0 product. So we’re just getting the finishing touches, and we’ll have more to say as we make further progress.

Adam Maeder: Thanks for the color, Dr. Tu. And one other question, and it’s a bigger picture question on innovation. Inari clearly has been very innovative in recent years, and you’ve launched a lot of different products and have more coming down the pike. One question that I sometimes get from investors is around FlowTriever and ClotTriever. Any plans for future iterations of those technologies and any specific ways that you think that those products could be further improved? Thank you for taking the questions.

Tom Tu: Yeah, absolutely. So as our flagship products and as the core driver of our mission as well as our growth, we are very much interested in continuing to invest in what is currently fourth generation FlowTriever and ClotTriever products. And we continue to solicit feedback from physicians to look for areas where we can improve safety and efficacy, and we’ll see continued investment in developing and introducing those concepts into our products. I think as far as the safety and efficacy profile that we now see becoming documented in high-level clinical data, I anticipate that we are reaching diminishing returns in terms of improvements there, but can always improve elegance, form factor, and ease of use.

Operator: The last question today is Richard Newitter with Truist Securities. Please go ahead.

Richard Newitter: Hi, thanks for taking the questions. I have two. The first one just on the profit comments in the first half of ’25. I think you guys said you continue to expect profitability in the first half of ’25. I’m just curious if that’s meant to be read as the first quarter is probably still in a loss situation and the second quarter is positive and the net of those two is breakeven to slightly positive. Is that the right way to look at it, or are you turning the corner, you think, as early as the 1Q and then follow up?

Mitch Hill: Yeah, Richard, it’s Mitch. Happy to try to address that question. In Q1 of each year, we have a reset that happens with the ERISA taxes and also some of the company matched in the 401(k), and it’s a larger number than you might imagine. And so that particular — that actually, if you look at the Q4 to Q1 walk that we’re currently reporting, you can see some of that appearing in the numbers. So that’ll happen again as we move from Q4 of ’24 to Q4 of ’25, and we would expect currently to see a loss in Q1 of 2025, but then we would go into the operating profit sort of profile in Q2 of 2025 and thereafter. So that’s kind of the commentary we have about the first half of the year. And that’s just something that’s kind of all companies deal with in terms of the calendar year tax issues.

Richard Newitter: Okay, thanks for that color. And then maybe just on the — you guys have referred to competitive dynamics a couple of times as — potentially explaining the delta between your U.S. Venus growth rate and the underlying market rate. I guess, a year ago, you had a competitor launch, you talked about some trialing, and you expected that to be transient. I guess, can you characterize the competitive dynamics as we’re now kind of moving into a second year or anniversarying the launch of the main competitor and some new ones are coming on? What exactly is the competitive dynamic that’s occurring, and why or why shouldn’t we expect that to be transient going forward?

Drew Hykes: Yeah. I can try and answer that, Richard. So we are going to see competitive entrance in this market. It’s a large, attractive market, high growth market in the earliest stages of penetration and inflection from conserved medical management to frontline therapy with mechanical thrombectomy. That competitive dynamic is factored into our guidance. That’s not a new part of our business. We obviously faced those same dynamics as we moved through 2023 and delivered 28% growth. We saw those same competitive dynamics play out here most recently in Q1, and we grew 23%, including 20% in VTE. So all of that, I think, underscores our confidence in continuing to be the market leader in this market despite new entrants coming in. And again, to the extent they can help from a market development standpoint, I think there’s real value and real constructive work they can do alongside Inari to develop the market over time.

End of Q&A:

Operator: This concludes our question-and-answer session and concludes the conference call. Thank you for attending today’s presentation. You may now disconnect.