Robert Fletcher: Yes, I think the — so as part of normal course of business, we do get on CMS’ calendar as they start to make — they get into their rule-making cycle. And so certainly, we have met with CMS, again, about this issue and the issue of the transitional pass-through and so on and so forth. So, I think your first question was what’s the normal course of business and the sort of things that happen. And the first thing that happens is that you sort of talk with CMS prior to them making the rule, drafting the rule about your issue at hand. And so that’s happened. I think the things that we see from here, yes, I would mainly point the next sort of public available information is likely going to be the proposed rule, which happens in early July.
So, we won’t, so we see or hear much in the public domain between now and then. So, hopefully, Mike, that got that part of the question. I think your second part of the question, or your second question was just around the mechanism that would proceed here. And I think you’ve identified it correctly that here, what we’re talking about as a complexity adjustment that’s based on an add-on code, a procedure add-on code, and that’s the normal vehicle by which if you have an add-on code in structure, that’s how you get increased payment is then you then sort of qualify certain combinations of code qualify for complexity adjustment, and that’s exactly sort of what we’re looking at here. And as for on this call and others, this is where we have a very large volume of data associated with that.
We have sort of strong confidence in these combinations of codes and then qualifying for complexity adjustment.
Michael Polark: Follow-up. Yes, I know that was a great Rob on both fronts. And the brief follow-up is maybe back to Doug, I think, Doug, on several instances, you’ve suggested maybe 95% confident confidence in the outcome here of kind of achieving 5194 in 2025 and beyond is 95% still how you feel about this?
Doug Godshall: I do not feel less confident. I wish, I wish CMS when Rob met with them said, you’re right, we’re going to do it. But they don’t say those things. They just look blankly at Rob. And every time we meet, and usually, we get a good outcome. And this time, I think the facts are pretty clearly point in the direction of moving to 5194.
Michael Polark: Helpful. Thank you.
Operator: Our next question comes from the line of Mike Kratky with Leerink Partners. Please proceed with your question.
Mike Kratky: Hi everyone. Thanks for taking our questions and welcome Renee. You called out 2% penetration in Germany. Can you just give us a sense of where you are in terms of penetration within the accounts? And what have you seen in terms of how utilization has scaled early on? And what procedure volumes look like in some of the top accounts?
Isaac Zacharias: Sure. We have, I think even in the top accounts in Germany, the penetration is still relatively low. What happens in Germany when there isn’t sufficient payment to cover the cost of a product. There’s a very tight linkage between the hospital administration and the physician’s behavior in Germany tighter than I think anywhere else except Japan. The — so what happens is the physicians will use the product until the administration tells them to stop and then they stop. So, you’d get the cyclical account using the product, and then it would just turn off in September. Or they’d use the product and then the administration will come back the next year and say, hey, you use 50, you only get 25 this year. And so the product utilization will get curtailed, and then at smaller accounts, it would essentially be zero because they just didn’t have enough money within the hospital system to cover these extra costs and the administration would clamp down.
So, we really have a lot of headroom in Germany, not just gaining adoption in smaller accounts, which is kind of a zero base in those accounts but then really driving appropriate use and adoption at the larger accounts where it was being curtailed by the administration. Does that answer your question?
Mike Kratky: Yes, it’s perfect. I mean just one separate follow-up. It looks like out of C2 the cc.gov is giving you a primary completion date of June 2024. But I just wanted to double check on how we should think about the timing there? And when we could see those results?
Doug Godshall: Yes, we need to update.
Isaac Zacharias: I don’t think I touched that since the acquisition, so that was not a realistic timeline ever.
Doug Godshall: Yes. That was the prior company’s time line. Yes. Right now, if you recall, we — we’re forecasting approval in 2027. You got to back up from there for submission and review of PMA, and then that puts your enrollment completion somewhere second half of 2025 is a much more realistic time line. And the team is doing a really exceptional job of getting sites up. There was a paucity of sites that had been started and many of those sites weren’t really probably the right sites to choose to get rapid enrollment. So, our team once we took over, have gotten the trial on the rails, but it’s a sham-controlled trial with a really rigorous enrollment criteria, inclusion criteria which is why every time we show clinicians the trial design, they universally say when if, and we would say when, when that study is successful, it’s, it will be irrefutable that that device works.
So, rigorous trial makes it hard to enroll a rigorous trial also results in much more valuable data for market creation and inclusive of reimbursement.
Mike Kratky: That’s super helpful. Thanks very much.
Operator: Our next question comes from the line of Mike Matson with Needham & Company. Please proceed with your question.
Mike Matson: Yes, thanks. Just a couple on the new peripheral products, to E8 and JAVELIN, I can’t remember if you had said anything about the pricing on those products that the Investor Day did in the fall. But, can you give us any sense there on where those things would be priced? And then with JAVELIN, I mean, am I thinking about it the right way that that’s something that could drive more revenue per procedure? Because they would likely use that to kind of cross lesion and then you follow that up with one of the regular catheter or sorry, balloons?
Doug Godshall: We — if we said anything about price, it would have been something along the lines of we will determine the price when we get closer to launching the product, and that would still be what I would say now. Thus far, we try to make sure that we deliver really clinically meaningful new devices to our customers and price them in a way that we think is, enables the customers to have a good financial outcome and for us to reflect the value of the technology. In terms of JAVELIN, there likely will be some cases where you use JAVELIN+, JAVELIN+ E8, JAVELIN M5+, but we, what witnessed thus far is that the power of the lithotrips shock waves is not just cracking in sort of forward effect to get you through the difficulty cross lesions, but it also has a radial effect, which enables you to then follow JAVELIN with standard balloon angioplasty.
And so our expectation is that the vast majority of cases will be JAVELIN plus POBA versus JAVELIN plus another IVL product. At some juncture, you start to get yourself in a challenging situation with your customers if you load too many IVL products into a single procedure. It just becomes a less economically attractive for them. So, we’re — our expectation is that for the most part, JAVELIN is going to be a JAVELIN+ other JAVELIN plus balloon.
Mike Matson: Okay. That makes sense. And then just as far as Costa Rica goes, I understand that there’s some kind of start-up costs and whatnot in the near term. But, is that something that you expect to have a material benefit to your gross margins over time?
Doug Godshall: We have chosen to date to manufacture in one of the highest cost places in America in Santa Clara. So, we do expect that our cost of goods will come down in Costa Rica. So, we’ve not forecast how many points will pick up out of Costa Rica, but cost of doing business there in every respect is going to be lower than other the material cost is going to be lower in every respect than what we have right now in Santa Clara.
Isaac Zacharias: Just important to remember, though, that for 2024, the product we sell will be manufactured in Santa Clara, so we won’t see any benefit to gross margin in 2024.
Doug Godshall: Yes. We’ll put product into inventory this year, but it won’t hit customers until 2025.
Mike Matson: Yes, I understand. So, there’s definitely be a benefit yet to be quantified, I guess, so. For 2025 and beyond.
Doug Godshall: Do you agree?
Renee Gaeta: Correct. Yes, I would certainly expect gross margins to be steady for this year. And then in the long run, you will see an improvement given the structure setup.
Mike Matson: Okay, great. Thanks.
Doug Godshall: That was Mikes in a row. Mike, Mike, Mike.
Operator: Our next question comes from the line of Imron Zafar with Deutsche Bank. Please proceed with your question.
Imron Zafar: Hey good afternoon. Thanks for taking my question. First, on Japan, I’m wondering if you can just sort of give us any sort of metrics on where you are in that launch in terms of what percentage of the 1,200 or so cath labs there that you’re in now at this stage of the [indiscernible]?
Isaac Zacharias: Sure. So, the — again, very, very good year for the team in Japan. It’s a relatively small team, and they were incredibly productive in 2023. And based on the guidelines that we worked with, the Shockwave worked with CVIT, the cardiovascular society in Japan to establish, we are currently limited to hospitals that do a certain number of atherectomy procedures. So, those tend to be larger hospitals, obviously, with surgical backup. There’s also some limitations on, because of the way the trial data we have, we don’t have trial data of ShockWave followed by de novo DCB and de novo DCB is approved in Japan. We don’t have trial data of ShockWave after atherectomy, RotaShock, for instance. So part of the work we’re doing it started last year and we’ll be going on in earnest this year and the following years is to create clinical data to support the use of ShockWave with de novo DCB to support the use of RotaShock, ShockWave with atherectomy.
