ShockWave Medical, Inc. (NASDAQ:SWAV) Q2 2023 Earnings Call Transcript

ShockWave Medical, Inc. (NASDAQ:SWAV) Q2 2023 Earnings Call Transcript August 7, 2023

Operator: Good afternoon and welcome to Shockwave’s Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host, Debbie Kaster, Vice President of Investor Relations at Shockwave for a few introductory comments.

Debbie Kaster: Thank you all for participating in today’s call. Joining me today from Shockwave Medical are Doug Godshall, President and Chief Executive Officer; Isaac Zacharias, President and Chief Commercial Officer; and Dan Puckett, Chief Financial Officer. Earlier today, Shockwave released financial results for the quarter ended June 30th, 2023. A copy of the press release is available on Shockwave’s website. Before we begin, I would like to remind you that management will make statements during this call that includes forward-looking statements within the meaning of Federal Securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call other than statements of historical fact are forward-looking statements.

All forward-looking statements, including without limitation, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations, reimbursement proposals, future product development and approvals and the integration of Neovasc and its technologies into our business are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events such as the COVID-19 pandemic that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our annual report on Form 10-K on file with the SEC and available on EDGAR and in our other reports filed periodically with the SEC.

Shockwave disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. This conference call contains times sensitive information and is accurate only as of the live broadcast today August 7th, 2023. And with that, I will turn the call over to Doug.

Doug Godshall: Thanks, Debbie. Good afternoon, everyone, and thank you for taking the time to join us to review Shockwave’s results for the second quarter of 2023. Our businesses continued to experience solid growth across the board in the US and internationally in both peripheral and coronary franchises. Second quarter revenues of $180.2 million represented a 49% increase from the second quarter of 2022. We are pleased with the continued acceptance and penetration of our products and are particularly encouraged by the traction we’re seeing with our two newly released lease products, the L6 Peripheral product in the US and C2+ Coronary product internationally. In both cases, the enhanced capabilities of these new designs have resonated with customers are a testament to the ability of our organization to understand customer needs and work together efficiently to design and launch products that successfully address those needs.

This past quarter, we closed our acquisition of Neovasc and we quickly got to work integrating the Reducer product and team into Shockwave. The lean resource profile and creative financing structure at Neovasc made for a complex integration process and was a heavy workload for our team. But they did a stellar job on our first set of projects together and approved they were up to the top. Over the last few months, we have begun to infuse additional resources into the Reducer program, which we’re confident will help up-regulate performance and execution, much of the future value of Reducer hinges on clinical data generation, particularly the COSIRA-II study. We have overhauled the effort to clinical operations and are adding resources to existing to the existing team, which should lead to a tightly executed study as we have become accustomed to Shockwave.

Our principal focus right now will be to activate more sites, since having more shots on goal is a critical component of enrollment. As a reminder, COSIRA-II is a sham-controlled, double-blind randomized IDE trial to evaluate the Reducer system for safety and effectiveness in patients with refractory angina due to obstructive coronary disease that is not amenable to conventional revascularization. The study will include approximately 380 patients and up to 50 centers. The primary endpoint is change in exercise tolerance testing time. Now that we have begun to get our arms around the clinical and regulatory program, we are projecting US approval in 2027. Sticking with the subject, the Reducer for the moment. The energy we saw around this product at EuroPCR was rather remarkable as evidenced by a standing-room-only symposium and multiple very well-attended training sessions.

The strong global interest in Reducer is even more enthusiastic about this acquisition and further increases our confidence, the Reducer is well-positioned to address a significant unmet need and has great potential to become a meaningful contributor to our business once COSIRA-II data is available. EuroPCR was a fantastic conference for us across the board. Many of our customers referred to it as the Shockwave Congress. We had our official international launches at C2+. And at the same time, we celebrated the five-year anniversary of our initial commercial launch of coronary IVL at PCR 2018. The IVL presentations at PCR consistently highlighted the outcomes achieved with IVL in real-world environments including data presented from Eli Lilly and replica registries from France and Spain respectively that together included almost 1,000 patients and strongly reinforced the safety and efficacy of coronary IVL.

It is remarkable that in just five years, we have transitioned from IVL being a relative unknown to becoming a standard of care. The follow includes several strong conferences for Shockwave. And we are particularly looking forward to TCT in October in San Francisco, where we have many events including several symposia, more real-world evidence and one of our favorite events, the TopShock competition which will focus on best practices with IVL and in eccentric and nodular calcium. We had roughly 100 submissions from our global customers this year. And of course, we are looking forward to the US launch of C2+ at TCT and to our Investor Innovation Day on October 23rd. Our IVL clinical work continues to ramp up after a quieter 2022. In last quarter, we were pleased to announce the first enrollment in our groundbreaking Empower study which is the first of its kind All Female study assessing the performance of IVL in a population that is almost always underrepresented in cardiovascular research.

Our BTK study is enrolling at a healthy pace, and we anticipate the last patient will be enrolled by the middle of 2024. We have a full pipeline of other studies in the very near future, which we’ll discuss at our Innovation Day. Overall, our investment in IVL clinical studies will be roughly 50% higher in the second half of this year than it was at the same period last year. Regarding US reimbursement, we continue to make great progress and are very encouraged by how we see CMS transitioning coronary IVL from temporary innovation programs like the NTAP to more permanent reimbursement structure such as those — as those programs it conclude. As you may recall, the duration of the NTAP program for coronary IVL is two years and is set to expire on September 30th at the end of CMS’ fiscal year.

Consistent with their procedures, CMS analyze the relevant data collected on coronary IVL under the NTAP program in order to determine how to best structure and pay for coronary IVL going forward. In April, CMS proposed the creating — proposed creating three new MS-DRGs for coronary IVL is being the most appropriate long-term structure coming out of NTAP. We are extremely pleased to see that the final inpatient rule issued last week, confirmed the creation of the three new DRGs for coronary IVL. This is a watershed event because this is the first time CMS has created new DRGs in the field of PCI in over 20 years. We think this is good for the field of interventional cardiology and for patients suffering from complex calcified coronary artery disease.

The new DRGs capture the use of coronary IVL, whether it’s with or without a stent. The vast majority of corner IVL cases involve stent implantation. So I’d like to focus on those DRGs which will pay on average $20,785 or to $28,987 if major complications or comorbidities are present. For comparison, the other PCI DRGs involving stent implantation without IVL will pay $12,767 and $20,187 respectively. So, in summary, effective October 1st, 2023, payments for coronary IVL in the new DRG structure will be approximately $8,000 more than non-IVL PCI procedures and $4,000 more than was paid by end NTAP program. We believe this will help alleviate economic pressures on hospitals and enable physicians to make the best clinical decisions for their patients.

On the hospital outpatient front, the transitional pass-through program will continue through June 30th, 2024 . And well CMS has not given any early signs of how they plan to transition from temporary to permanent. We remain very optimistic about our prospects of landing in the highest APC. As you’ve seen in the hospital inpatient side with the conclusion of the coronary IVL NTAP, CMS follows the process and we remain confident in what we’re seeing from the data. To-date, additional remuneration for physicians, via professional fees or RVUs have not been available for any of our therapies. We are excited to report that this will change as of January 1st, 2024 , but a new Category I CPT add-on code will go into effect. We will not know the amount of — that physicians will receive starting in 2024 until the final calendar year 2024 physician fee schedule is released in November.

We’re pleased with CMS’ 2024 draft schedule issued last month, which proposed up to 30% additional remuneration for physicians when coronary IVL has performed. Turning now to operations. We continue to make significant investments to support and sustain our growth. We are accelerating our investment in Costa Rica, where we have a strong leadership team in place and have hired over 50 employees, many of whom are spending significant time in Santa Clara for training to ensure that the new site starts operating at a high level from day one. Based on our global momentum and pipeline, we believe we will need even more capacity in the future than our combined Santa Clara and Costa Rica facilities will be able to provide. So we have exercised an option for a second phase in Costa Rica earlier than we initially planned, which will nearly triple our cleanroom space there by 2025.

Our strategy of using Costa Rica as our primary production location and Santa Clara as our innovation centers coming to fruition as we had hoped. Our intention is to develop new designs and therapies in Santa Clara, pilot them to optimize processes and then transfer most of them to Costa Rica in order to make room for the next wave of innovations. Next year, we’re anticipating having seven products and pilot production, which is a considerable step up and would once again leave us out of space. So we have also exercised an option on a fourth building in Santa Clara, which we will occupy towards the middle of next year. We are fortunate that we have the bandwidth and financial wherewithal to expand our commercial footprint, continue ramping R&D and clinical activities, forward invest in a high-quality margin expanding production facility and layer in a very promising future growth stimulus and Reducer.

These investments should bear fruit for years to come. We now anticipate top-line revenue in the range of $725 million to $730 million for the full year of 2023 representing growth of 48% to 49% from 2022. This number includes less than $5 million of Reducer sales for the full year 2023. With that I will turn the call over to Isaac to provide more detail on the commercial front. Issac?

Isaac Zacharias: Thank you, Doug. I am pleased with the team’s efforts and results in Q2. Our US peripheral business grew 13% sequentially from Q1 and 65% compared to the prior year, driven by increased usage across all sizes of catheters and strength from our newly-launched L6 Catheter. We were pleased to be able to showcase the L6 at several conferences, including multiple live cases in the quarter, which generated a lot of energy and enthusiasm. Customers love the device in the power profile of L6 and see it as the ideal treatment for Iliacs and large common femoral arteries. Our customers believe L6 provides improved angiographic results due to larger sizes and power profile. During the quarter, we launched L6 and more than half of our peripheral accounts and we are seeing solid reorder patterns.

We’re also encouraged that approximately two-thirds of the L6 sales were in the 9, 10 and 12 millimeter sizes. These are cases that would likely have not been IVL cases with the 8 millimeter M5+. We plan to get the vast majority of our remaining peripheral customers launched on L6 in Q3. US coronary revenue grew 9% sequentially from Q1 and 37% compared to the prior year, driven primarily by increased penetration in our existing accounts, as we continue to see healthy same-store sales growth. Nearly all of our revenue in Q2 came from accounts that were open in prior quarters. While new account growth has slowed, units per account are increasing and we are seeing solid growth in high volume accounts. We are on plan to grow the US sales force to over 110 territories by the end of this year and we’ll have about two clinical specialists per territory.

With the growing sales team, we are looking forward to the launch of C2+ in Q4 coupled with the tailwind of the improved inpatient reimbursement starting in October, any additional physician fee for coronary IVL starting in January. On the international side, we posted record revenue that was up 20% from last quarter and it was over 70% higher than the year-ago quarter. The headline of the quarter was Germany where the increased reimbursement that took effect in January drove a doubling of coronary IVL revenue from a year ago. We expanded from 6 to 10 territories in Germany during Q2 of 2023 and expect to add more salespeople in the second half of the year to support increased demand. In Japan, the team posted great results in Q2. The revenue in Q2 more than doubled from Q1 and the momentum is increasing in the current Q3.

We are encouraged by the physician response and are exceeding our expectations for penetration in the launched accounts. We expect that Japan will become a significant contributor to our global revenue in the coming years. We were pleased to see peripheral sales account for nearly 20% of our international sales in Q2. We’ve been adding headcount and focus to our peripheral efforts outside the US and have expanded peripheral marketing programs and our KOL network in Europe. It is nice to see the hard work of the team payoff and bolster our non-US peripheral business. We also transitioned from distributor-to-direct sales in Canada, Spain and Portugal during the second quarter. Our distributors in those countries were good partners. But as we have typically seen, our direct teams can drive increase penetration due to their ability to focus exclusively on Shockwave products.

While these changes caused some small disruptions in revenue and an increase in operating expense, we have seen that the investment quickly generates higher penetration in gross margin, more than offsetting the increased costs. We will transition to a direct sales model in Italy in Q4 of this year. On the Reducer side, we made good progress to rationalize the distribution network with the intent to focus resources on countries and centers that can both afford the product and build a solid practice treating underserved refractory angina patients. While the revenue contribution of reduce will be relatively small this year, we are more optimistic than ever that we can build a sustained business. That said, we will do so methodically and are not in a hurry to generate revenue.

We prefer at this point to continue building clinical evidence and partnering with centers of excellence in those countries to learn how to establish patient care pathways and achieve excellent outcomes for those patients. With that, I will turn the call to Dan to review the financials.

Dan Puckett: Thank you, Isaac. Good afternoon, everyone. Shockwave Medical’s revenue for the second quarter ended June 30, 2023 was $180.2 million, a 49% increase from $120.7 million in the second quarter of 2022. US revenue was $144.9 million in the second quarter of 2023, an increase of 45% from $100.1 million in the second quarter of 2022. Coronary products contributed $99 million to US revenue in the second quarter of 2023, an increase of 37% from $72.1 million in the second quarter of 2022. US revenues from our peripheral products was $45.7 million in the second quarter of 2023, an increase of 65% from $27.7 million in the second quarter of 2022. US generated revenues $0.2 million in the second quarter of 2023. The growth in US revenue during the quarter reflects increased utilization of existing accounts, new account adoption of IVL and continued sales force expansion.

International revenue was $35.2 million in the second quarter of 2023, representing a 70% increase from $20.7 million in the second quarter of 2022. Coronary products contributed $26.7 million to international revenue in the second quarter of 2023, an increase of 70% from $15.7 million in the second quarter of 2022. International revenue from our peripheral products was $6.6 million in the second quarter of 2023, an increase of 57% from $4.2 million in the second quarter of 2022. Revenue from our Reducer product, which we acquired through the Neovasc acquisition that closed in April this year contributed $1.2 million to international revenue in the second quarter of 2023. Generators contributed $0.7 million to international revenue in the second quarter of 2023.

The increase in international revenue over the prior year period reflects continued geographic expansion, including China and Japan. The increased productivity of our direct selling teams in Europe and the strength of coronary sales in Germany. Looking at product lines. Our peripheral products, Shockwave M5, shockwave M5+, Shockwave S4, and Shockwave L6 accounted for $52.3 million of total revenue in the second quarter of 2023 compared to $31.9 million in the second quarter of 2022, a 64% increase. Our coronary products, Shockwave C2 and Shockwave C2+ accounted for $125.8 million of total revenue in the second quarter of 2023 compared to $87.8 million in the second quarter of 2022, representing a 43% increase. Revenue from our Reducer product accounted for $1.2 million of total revenue in the second quarter of 2023.

The sales of generators contributed $0.9 million in revenue in the second quarter of 2023. Gross profit for the second quarter of 2023 was $155.7 million compared to $104 million in the second quarter of 2022. Gross margin was 86.4% for the second quarter 2023, which was slightly above the gross margin of 86.1% for the second quarter of 2022. Total operating expenses for the second quarter of 2023 were $123.3 million, a 66% increase from $74.4 million in the second quarter of 2022. Sales and marketing expenses for the second quarter of 2023 were $56.7 million compared to $40.5 million in the second quarter of 2022. The increase was primarily driven by sales force expansion. R&D expenses for the second quarter of 2023 were $36.8 million compared to $20.8 million in the second quarter of 2022.

The increase was primarily driven by headcount growth, higher clinical related expenses and facility expansion to support R&D. General and administrative expenses for the second quarter of 2023 were $29.7 million compared to $13.2 million in the second quarter of 2022. The increase was primarily driven by higher headcount to support the growth of the business in legal and other acquisition-related expenses associated with the acquisition of Neovasc. We do not expect that the full-year operating expense from Neovasc will exceed our prior full-year forecast of approximately $32 million despite the higher-than-expected upfront, non-recurring spend in Q2 of 2023. We expect to continue to make significant investments to support and sustain our growth and anticipate full year 2023 operating margin in the range of 20% to 22%.

Excluding Neovasc, our operating margin range is expected to be 24% to 26%. Net income for the second quarter of 2023 was $28.9 million compared to a net income of $25.6 million in the second quarter of 2022. Basic net income per share for the period was $0.79, diluted net income per share for the period was $0.76. We ended the second quarter of 2023 with $258.6 million in cash, cash equivalents and short-term investments. At this point, I’d like to turn the call back to Doug for closing comments.

Doug Godshall: Thank you, Dan, and thank you all for joining us today. We had a great quarter at Shockwave as we continue to execute and grow our existing businesses, while at the same time, paving and exciting path for our future. With that, I will open the call to questions.

Q&A Session

Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Bill Plavonic with Canaccord Genuity. Please proceed with your question.

William Plavonic: Great. Thanks for taking my questions. Doug, I was wondering if you could help us understand just you gave us some general timelines, but maybe some processing key dates as we look at the OPPS reimbursement and kind of how that kind of next things to look out for there. And then just any other color on the Investor Day at TCT kind of major themes or topics you may cover. Thanks.

Doug Godshall: Sure and I’ll — thanks, Bill, and I’ll tag team with Rob Fletcher who is also on the call, and who I think you guys are all familiar with now. So, OPPS, there will be a final rule out this fall. We are not anticipating that IVL will — this would be any change or mention of IVL in the final rule. We think it’s more likely that we’ll see something in the proposed rule next summer. So that will go from transitional pass-through sunsetting in at the end of June. And then early in July, we’d see a — how we would map to what we believe will be APC-5194 starting in January of 2025. And Rob, I don’t know if you want to add color on that.

Robert Fletcher: Well said, Doug. The next thing from CMS bill that we’ll see as Doug stated was on November 1st, and the final of OPPS for calendar year 2024 is on approximately November 1st.

Doug Godshall: And then for Investor Day, we will see obviously the spectrum of our pipeline, peripheral coronary structural heart, and the Reducer should see several new products that we’ve not — we’ve not talked about previously. And putting forward to folk’s participation, we’re excited about our pipeline. Our customers are incredibly excited about our pipeline. And hopefully, our investors are too once they get a glimpse of it. It will truncate it to things that we think are appropriate to share at this time. We have some very interesting things under the covered, but no need to preview things for our competition that we wouldn’t be launching until sort of after 2026. So, we’re still going to keep it to a reasonably near-term pipeline other than things that have already been disclosed previously such as our structural heart platform.

William Plavonic: Great. Thanks. Then on guidance, just what are you contemplating in the high-end — in the low-end of that range that you’re giving. And then, just I don’t know how if Dan wants to say how many one-time costs kind of we saw in that quarter that won’t be reproduced kind of in Q2 and Q3 and operating. And thanks for taking my questions and we’ll see this week at our conference.

Doug Godshall: So, Dan, we can go back and forth. As we look to the back end of this year, obviously, you’ve got as we have expanded our footprint and our over 1,500 cath labs in the US and obviously lots of cath labs internationally. We’ll — we feel seasonality in the summer in the Northern Hemisphere as other companies do. And as Isaac elucidated, we are continuing to add accounts, but at a — not at the same clip as we did a couple of years ago obviously. So, we’ll — we see the year progressing with substantial growth in the back-half but weighted more in the fourth quarter. And Dan I don’t know if you want to add to that?

Dan Puckett: Sure . It was about $6 million non-recurring for Neovasc and that was mainly changing control severance.

William Plavonic: All right.

Doug Godshall: Thanks, Bill.

Operator: Our next question is from Travis Steed with Bank of America. Please proceed with your question.

Travis Steed: Hey, just wanted to follow up on the margin question. The $6 million non-recurring because that in G&A because I was going to ask about the $10 million step-up in G&A. And then the op margin guidance for the year. I just wanted to be clear, it looks like it was 22% to 23% at the beginning the year and now you’re guiding to 20% to 22%, you’ve got Neovasc in there. So let’s see what else changed in the full-year op margin guide versus three months ago and how to think about margin expansion, kind of beyond that in ’24. If it should be closer to a couple of 100 basis points of margin expansion are not going to continue to expand margins. Thanks for the question.

Dan Puckett: Sure. So, most of that, $6 million non-recurring was in G&A. We’re still expecting about $32 million in OpEx for Reducer. As I noted earlier, it was most — We had a bigger chunk than expected in Q2. So if you looked at the combined margin, it’s at 18%. If we look just at the base business, the operating margin is 25.6%. So, a slight improvement over Q1 even with our kind of pickup in investments that Doug alluded to. As far as this year we did give — in the past we had given like 26%, 27% without Neovasc. So we’ve knocked that down to 24% to 26%. We’re feeling very good about some R&D programs. So, the decrease is really kind of driven by probably a little more spend in R&D programs, a little more spend in clinical.

We’re accelerating some Costa Rica activities to get that plant up and running, which will help our margin down the road. And I said in R&D right now and we also increased the footprint. So, we’ve always said, we’re going to spend what we need to spend to grow the business, near and long term. So, that’s where you get a little bit of 100 basis points, 200 basis points of potential hit to the margin from what we said three months ago. But I think it’s smart money. Longer-term, we expect we’d like to say, this is a big investment year. ’25, ’26 will be back up. We absorb and get some scale and be back to where we’ve kind of always guided which was the upper 20s.

Travis Steed: Great. And Doug on the six-month gap scenario. Just curious if your customers are talking about that yet or it’s too early in your willingness to kind of help customers through that and how you think about the impact on kind of the overall revenue if any at all. Thanks, thanks a lot.

Doug Godshall: Yeah. Now customers are just now becoming aware of the inpatient reimbursement. Barely aware of the reimbursement — reimbursement because it’s not — it’s not even coming into fruition here for a few months. So that would be the next order of business is making sure they’re aware of that, then comes physician, the physician fees, which will be finalized in the fall and then go into effect in January. The outpatient transition from NTAP to permanent is so far in the future that’s not really getting any airtime. And at this juncture, we are — as we’ve said before, we think the — assuming the transition is from that July till January, we’re not really anticipating. And impact on our business, you’ve got the other two very favorable outcomes on the reimbursement side between physicians and outpatient, physician-fee and outpatient and inpatient.

And there is so much momentum — clinical momentum behind our device. So we’re not anticipating a change in utilization rates.

Travis Steed: Great. Thanks a lot.

Operator: Our next question is from Adam Maeder with Piper Sandler. Please proceed with your question.

Adam Maeder: Hi. Good afternoon. Thank you for taking the questions. I wanted to start with one on the top-line guidance. Healthy guidance raised here, I think $17.5 million at the midpoint, it would be Q2 by $6 million and change. So maybe just talk about kind of what’s giving the confidence to raise by the larger amounts. Are you able to kind of bridge us with specific components in that guidance increase and what’s being contemplated for Reducer in that updated number? ? And then I had a follow-up.

Doug Godshall: Yeah. Adam, may I’ll let Isaac just chime in a little bit on sort of what you’re seeing in the market that gives us confidence. On Reducer, we’re — as we said on our last call, in aggregate, it’s going to be less than $5 million for the year, we did one, two last quarter. We’re very focused on understanding the model, how you impact referrals for these patients. And we’re focusing on a small handful of countries as we transition from the former Neovasc team, many of whom will — will stay with us on the commercial side and others. We’ll be adding to in some countries. But the focus is not on taking that 1.2 and making it to. The focus is how do we take that commercial experience, so that we are poised. Once we have COSIRA-II data, which we think will be helpful, whilst necessary for US approval, but incredibly helpful for driving global adoption.

We want to really understand the model, well, which is what we’re working on now. And then Isaac maybe a bit of what you’re seeing in the field.

Isaac Zacharias: Yeah, sure. I think if you look at what we see for revenue in the second half and the increased guidance, where Q3 will be seasonal as it is for everybody. We’ll still be able to grow through that, but probably modest growth quarter-on-quarter in Q3 versus Q2, particularly with the international business really — really being much more seasonal in Q3. And then as we go into Q4, we’ll have, Japan, we expect obviously quarter-on-quarter growth throughout the year, but you’re getting a bigger contribution from Japan in Q4 and we’re pleased with what we saw in Japan in Q2 compared to what our expectations were. We will have the US coronary business in particular, with a new product launch of C2+ in the fourth quarter.

And that will be coupled with the story for our customers on the inpatient reimbursement that’s taken effect in October. And then generally with the international businesses, we’ve seen some really strong performance this year. We’ll have a nice tailwind in Germany that is going to continue to build. We’ll have direct selling organizations now in Spain and Canada, which would be nice contributors incrementally as they go and then we’ll have Italy going direct in Q4. So we think there’s a nice — a nice momentum going into the second half and that kind of builds on itself as we come out of the seasonal Q3 with the growth drivers mentioned in Q4.

Adam Maeder: Great color.

Doug Godshall: We also — you have two additional stimuli in the US in the fourth quarter with the C2+ launch and then inpatient reimbursement. So we’re and I think we’re — we continue to see building momentum and benefit from the physician education investments we’ve done this year, which is quite substantial relative to prior years, and the work we’ve done to continue building out our sales and clinical specialist team. So that continues to bear fruit — bear fruit. Last quarter, it will bear through the end of this year.

Adam Maeder: Very helpful color. Thank you for that. I guess, just one quick clarification. So in the previous guidance range, were you assuming roughly $5 million for Reducer? I guess, I want to understand that or is that added into the updated guidance this go round? And then I had a follow-up.

Doug Godshall: Yeah. So beginning of the year obviously, no Reducer because we didn’t have it. But — but as we looked in our last commentary, Reducer was incorporated into our expectations, not everybody’s model on the street incorporated Neovasc into either the spend or the revenue. So there’s a little bit of a mixed bag on the street. But we did included.

Adam Maeder: Okay, perfect. Thank you for that. And then for the follow-up. Doug, both you and Isaac touched on it in your last response, but C2+. Just was hoping to get a little bit more color in terms of the US launch in terms of pricing strategy. How quickly will that rollout and I guess how much of potential growth lever is this for that business? Thanks for taking the questions.

Doug Godshall: Yeah, go ahead, Issac.

Isaac Zacharias: Sure. Yeah, good question. So in the US, we will — we will bring C2+ with price parity on C2, so same price point. The launch strategy is really coupling the message of the improvements that you can get with C2+ compare to C2. And then we feel very good about those based on what we’ve seen with the launch in the international markets. A couple that message with an in-service and the reimbursement message for inpatient change in October 1st. So we’ll launch kind of a typical. We’ve got more territories that we have in the past. So I expect this launch will go more quickly than prior launches, that the product, C2+ compared to C2, it’s reasonably simple to explain. You can basically get 50% more power, more pulses and oh, by the way, you’re now getting this incremental reimbursement that did not exist before on the inpatient side of your business.

And we kind of do a — we’re still — we’re still contemplating the specific tactics, but I expect the launch to go reasonably quickly and kind of roll it up in the next, probably two quarters. So kind of be through most of the launch by the end of Q1 of ’24. And then the part of the reason for that is — part of reason for that is we need to, as we launched two products a year, we need the teams kind of clearing the launch in roughly six months, so they can get ready for the next launch.

Adam Maeder: Thanks.

Operator: Our next question is from Michael Polark with Wolfe Research. Please proceed with your question.

Michael Polark: I will continue the threat on C2+ maybe ask a very specific question. From the Europe launched thus far the analogy there, kind of, what have you seen in same-store sales impact from C2+, kind of how much more productive does it make these accounts, would you hazard a number of frameworks?

Doug Godshall: That’s a good question. I don’t have a good number for you, Matt, right at this moment. I think — we do think there is any incremental uptick. It’s a little hard to divorce that from just the base momentum. If we — if you didn’t put C2+ and we were still growing same-store sales at a pretty good clip. At least to the extent we can see the same-store sales in our direct selling markets. But we do think there is from an anecdotal perspective, if you — when do you pull IVL versus something else or take your shot without using IVL. And I think C2+ with the additional pulses addresses some of those some — some of those anecdotal question marks that customers have about when to use IVL and that’s longer more diffused lesions where they don’t want to — they want go to treat the whole lesion with one catheter.

We think, C2+ is a benefit for that and that’s what our customers are telling us, as we’ve launched internationally. And then also for nodular and eccentric calcium, and we’ve done a lot of good work on the publication, clinical trial and publication standpoint on that this year, educating on how IVL works in those really difficult nodular or eccentric coronary lesions. And we think the additional pulses help that story and help the results in those lesions even more. So I think kind of — both of those aspects are where our customers are telling us they’re getting better results and they feel more comfortable pulling IVL with the 120 pulse catheter than the 80 pulse catheter.

Michael Polark: For the follow-up question on Reducer and maybe my note on this was sufficiently squishy such that that’s the answer, but I had a wide range for potential US approval 2025, 2026, 2027. I heard on the prepared remarks, Doug, 2027 now is the target. So kind of, you know to the extent that was a range in your mind as well before, why the back-end of the range. What have you learned that kind of once you position a little more runway there before it could come to market?

Doug Godshall: Yeah. Neovasc had been publicly saying 2025. And when we inherited it, we inherited a trial that has really slowed down to a crawl at best, which we are now switching from crawl to walk and then probably run next year. And so we — we weren’t sure when we bought it how quickly we’d be able to stimulate enrollment. So we were cautious about sort of being — leaning into heavily on when we — how long we expect the trial to take to enroll and now is now that we understand that it’s — it’s a fascinating sophisticated complex trial in terms of enrollment and so we think we would have a significant impact, but there is sort of only so much we can do with from where we stand today and so we thought better to make sure everybody understands that it’s going to take a bit of time to enroll.

And we didn’t want to have models still sort of landing in 2025 approval because we don’t think that’s at all likely, and hard to even imagine how we could get that enrollment done fast enough to get that 2025 approval. There are — on the back end, there are things that might offer some — upside on approval timelines like do you or do you not have a panel, but we think it’s to just assume in 2027 approval at this juncture.

Michael Polark: Thank you so much.

Operator: Our next question comes from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Lawrence Biegelsen: Good afternoon. Thanks for taking the question. A couple of quick ones from me, Doug. The Investor Day, TCT, is there a plan to give any kind of long-term financial guidance or any kind of anything directional?

Doug Godshall: We will let you know when we get that, Larry. We’re calling an Innovation Day, we want to focus on technology. But we appreciate that a lot of — a lot of these Investor Days that folks are looking for a bit of a view into the future. So we’ll be thoughtful about what we share for sort of future financial outlook.

Lawrence Biegelsen: That’s helpful. And I was also surprised by the Reducer 2027 dates. I wanted to just understand what that assumes, Doug. So, Gregg Stone said, they had 42 patients enrolled last year at TCT, they hope to complete by the end of ’23 enrollment. It’s an adaptive design. So what are you assuming, is the first interim analysis at 380 and you can roll up to 760, just help us understand kind of what you’re assuming to get to that 2027 US approval. Thanks.

Doug Godshall: Yes, so you’ve got to get one of the ways that the trial had been characterized in the past was focusing on enrollment. What really matters is randomization. So, they didn’t have 40 some-odd randomized and that’s what we need 380 randomized. And so where we stand today with sort of less than half of the sites. Well, Frank, fewer than 20 had been initiated — had been activated when we bought the company out of the 50 that will eventually get to. So we’re now adding sites — activating sites at a better clip. And yet enrollment, you got to get the site activated for the randomizations to happen, et cetera. So we’re anticipating that the final randomized patients will be sometime in 2025, probably back half of 2025, based on what we’re seeing and the trajectory so far, which then you got to follow the patients, submit, et cetera, which is how we kind of realistically landed in 2027.

Lawrence Biegelsen: Got it.

Isaac Zacharias: I’ll just add on to that, Larry. That where we’ve landed is not, Frankly, it’s about right where we thought we would land. As we looked at this and peel it back after the acquisition. We were sort of have a — what we thought were overly rosy and optimistic expectations from previous management on that trial enrollment. We were hopeful that they were right. But as we’ve integrated and spent the last three, four months, get our arms around it and put new plans in place. It’s landing about where we thought it would. So, that’s sort of the bid-ask, I think is, what the previous management think and what’s that realistic compared to what we think now.

Lawrence Biegelsen: Okay, thank you.

Operator: Our next question is from Imron Zafar with Deutsche Bank. Please proceed with your question.

Imron Zafar: Hey, good afternoon. Thank you very much for taking my question. I wanted to focus on the international business first. It sounds like the launches in all the big three OUS markets, China, Japan and Germany are all going play well. I was just wondering if you can talk about the relative growth contribution from those three geographies in the back half and especially in 2024.

Doug Godshall: Yeah, we anticipate —

Imron Zafar: Go ahead.

Doug Godshall: Yeah. I mean, we — we anticipate they all are going to continue to be healthy growth. If from a — from a dollar growth perspective, I haven’t really scrubbed down 2024 yet, but if you just based on what and we’re two quarters in Japan. So it’s pretty early and we are two quarters into the improved reimbursement situation in Germany, which is already having a substantial effect on revenue growth compared to the last four years that we’ve had in Germany. So, I would expect that as we go through this year and into next year, you’re going to see kind of largest dollar growth coming out of Japan and then Germany and China, a little early to tell yet for Germany but Germany is looking strong right now.

Imron Zafar: Okay. And then on this top of the relative growth rates, it looks like the Street is looking for pretty similar growth in 2024 for coronary and peripheral, sort of the mid-20s. Is that — is that consistent with your thinking for next year.

Doug Godshall: We’ve not — we certainly expect next year to be a very strong growth here, but we’ve not characterized what we think. We think top-line is going to be. So, I think I’ll shy away from that until we — until we have a chance to put a number out there.

Imron Zafar: Fair enough. Thank you very much.

Operator: Our next question is from Mike Matson with Needham & Company. Please proceed with your question.

Mike Matson: Yeah, thanks. Just a couple on the peripheral business. So just wondering if you could maybe compare kind of what you’re seeing in terms of adoption trends, customer objections et cetera in peripheral versus what you’ve seen in coronary. And then just the international peripheral business you commented, I know it’s small, but maybe just talk about where you’re seeing some traction there, I guess, with countries.

Doug Godshall: Yeah. So, Isaac, I’ll tag team this one, too. The peripheral market and the coronary market, obviously dramatically different. The sort of sales model in peripheral across the industry, not just Shockwave is a little bit more labor-intensive. And we think one of the real benefits that we’re — we’re seeing from the expansion of our clinical specialist team is that we have better wherewithal the both, support our coronary business. But more importantly, support the sort of the case coverage that is expected and from which sales benefit on the — in the peripheral lab. There is certainly I think we do benefit from the peripheral coronary synergy in our bag because we have one team in the territory that consults to the cardiologists who does — who both practices peripheral and coronary interventions in a very high percentage of our customers do both, which is very high.

One of the reasons a very high percentage of our hospitals use both coronary and peripheral. But we also will have a larger portfolio as we already do on peripheral with L6, M5+, as far and a couple of our next product launches are also going to be in peripheral. So we’ll have a more complex and more sophisticated bag because you’re covering a much broader spectrum of vessels versus in coronary we got C2 and then we’ll have C2+. In the future, we’ll have two or three coronary products that will be selling simultaneously, but for now it’s a little bit more sort of targeted with the C2 version depending on where you’re selling. And Isaac I don’t know if you want to jump in on the international aspect.

Isaac Zacharias: Sure. Yeah, the international — international privilege you mentioned, it’s a small number, but it’s we’ve started as we’ve gone and had more focus in some of the large European countries with the direct sales force. That sales force and some marketing horsepower that we put behind it has really done a nice job of really introducing the peripheral product to many customers because the distributors — with a lot of work and relatively a lot of effort and for a relatively small juice for the distributors to focus on peripheral internationally. But our teams is guiding on it, would get this is the nice — nice incremental growth driver. And we’re seeing good patterns of vascular surgery primarily, vascular surgery adoption in the European countries.

Mike Matson: Okay, got it. Thank you.

Operator: We have reached the end-of-the question-and-answer session. I’d now like to turn the call-back over to Doug Godshall for closing comments.

Doug Godshall: Thanks, everybody for your time and attention, and continued interest in Shockwave. We’re obviously incredibly enthusiastic about the next six months and multiple years ahead of us. Thanks for your time everybody.

Operator: This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.