Good day, and thank you for standing by. Welcome to the Inari Medical First Quarter 2022 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Caroline Corner with Investor Relations. Please go ahead..

Thank you, operator. Welcome to Inari's First Quarter 2022 Earnings Call. Joining me on today's call are Bill Hoffman, President and Chief Executive Officer; and Mitch Hill, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which Inari operates; trends and expectations for Inari's products and technology, trends and demand for Inari's products, Inari's expected financial performance, expenses and position in the market; and the impact of COVID-19 on Inari's operations and Inari's customers' operations.

These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by the forward-looking statements.

Please review Inari's most recent filings with SEC, particularly the risk factors described in Inari's annual report on Form 10-K for the year ended December 31, 2021, for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today.

Inari undertakes no obligation to update these statements, except as required by applicable law. Inari's press release of first quarter 2022 results is available on Inari's website, www.inarimedical.com, under the Investors section and includes additional details about Inari's financial results.

Inari's website also has the latest SEC filings that you are encouraged to review. A recording of today's call will be available on Inari's website by 5:00 p.m. Pacific Time today. Now I'd like to turn the call over to Bill for his comments on first quarter 2022 business highlights..

Thank you, Caroline, and thank you, everyone, for joining us today. Our first quarter was again productive and successful. We treated a record number of patients and executed crisply across all of our growth drivers.

And you may have seen also that we successfully raised additional capital to support our increasingly aggressive mission to address unmet patient needs. We'll share some detail about all of this shortly, but we'd like to start now as we always do with a patient story.

Early this year, a man in his mid-60s presented to a vascular surgeon who runs a vein clinic in Arizona and treats chronic DVT. The patient, previously a very active man in his mid-60s, was nearly immobilized and using strong narcotics to control pain caused by a large open wound on his leg from which he's been suffering for more than a year.

The patient was struggling with post-thrombotic syndrome or PTS, from a DVT that was treated only with anticoagulation. He had been told by multiple physicians, there is nothing that can be done for chronic DVT and yet the physician was able to use ClotTriever BOLD to extract a large volume of chronic clot in a very short procedure.

After suffering for over a year with an open wound, the ClotTriever BOLD procedure resulted in his wound healing completely in just 2 months. He is walking now without pain and without pain medication. PTS is caused by persistently high pressure in the legs as a result of deep venous scarring due to clot that remains after ineffective DVT treatment.

About 50% of all patients whose DVT is treated with conservative medical management will develop PTS. It is a progressive disease with early symptoms ranging from heaviness, swelling and pain, leading them to pigment changes and scaly dry skin with cabs, and finally, the venous ulcers that sometimes necessitates amputation. It is horrendous.

Quality of Life scores for these patients suffering from PTS are similar to or lower than those of patients burdened with cancer and heart failure. We believe removing even some chronic clot increases the lumen inside the vein, which decreases the pressure that is the cause of these symptoms.

BOLD is important because it is purpose-built to remove chronic clot. It is the first tool in a broader toolbox we are committed to develop and introduce targeting this terrible disease over the coming several quarters. We are steadfast in our mission to transform the lives of our patients in the most extraordinary ways.

We increasingly sense responsibility, not merely opportunity, as we develop new solutions for complex disease states and unmet patient needs. We love this work and we appreciate your continued support. I'd like now to turn our attention to Q1 financial performance.

Our revenue in Q1 was $86.8 million, up $29.4 million or 51% from the same quarter last year and up $3.6 million or 4% from Q4 2021. Procedure growth was robust. Our physician customers performed approximately 8,800 procedures, including an increase, but still a modest number of cases from Europe.

Procedure count was up from 7,700 cases or about 14% from Q4. The difference in growth rates between procedures and revenue is based largely on the timing of new product introductions and the associated stocking orders. Average selling prices were unchanged.

Please note that we are no longer providing information about COVID-associated procedures as we no longer believe this metric is useful. COVID has infected so much in the general population that a current or previous diagnosis is now as often incidental as positive to any given procedure.

Going forward, we also intend to discontinue our historical practice of sharing procedure volume of any kind. There are 2 reasons for this change. First, we intend to introduce multiple new products this year.

Many will have different average selling prices, launch strategies, stocking plans and so there will no longer be a simple link between revenue and procedures as we've seen historically. Second, we believe sharing procedure information in an increasingly competitive space is counterproductive.

We note that none of our competitors provide such information perhaps for similar reasons. I'd now like to share with you recent progress we have made on all of our growth drivers. Our first growth driver is the expansion of our sales organization. The size of our core TAM is large and our penetration remains under 5%.

We're going to need a lot more sales professionals. We committed to at least 275 territories by the end of 2022 and we are on pace to achieve this goal. These increasingly smaller territories position us to execute our second growth driver, which is driving deeper adoption at existing hospital customers.

Most VTE patients continue to be treated with anticoagulation alone, and in fact, many of these patients never even see a physician who is a VTE expert. Our goal is to establish patient pathways that are similar to those seen for heart attack and stroke, so that patients are consistently triaged to VTE experts.

We refer to the various parts of our approach collectively as VTE excellence. The more constructive post omicron hospital operating environment has been conducive to these efforts, as we are more consistently able to access and educate noninterventional physicians and administrators who are critical to the development of these programs.

An increasing number of hospitals have now installed VTE coordinators as a direct result of our VTE excellence efforts. We have begun training VTE coordinators via full-day programs delivered regionally throughout the country.

We are committing significant resources to VTE excellence and we'll have a lot more to share with you as we make further progress. Our third growth driver is to build upon our base of clinical evidence. We have exciting and timely news here.

We recently announced at the Annual Meeting of the American Venous Forum, the results of a sub-analysis of the cloud registry focusing on clot age. This study conducted on the first 250 patients enrolled shows that the clot in one-third of patients treated was chronic.

This fact alone is remarkable as this patient population has historically been excluded from all thrombectomy trials because other thrombectomy devices cannot remove chronic clot. Conversely, the data on our patients looks fantastic. ClotTriever showed complete or near complete clot removal in 84% of these patients.

More important, 6-month follow-up data shows that fewer than 10% of these patients suffer from moderate-to-severe post-thrombotic syndrome, down from 52% at baseline. ClotTriever is the first thrombectomy device shown to be effective at treating chronic DVT.

We believe BOLD, which is now a full market release, will be even more effective for patients with older clot and more severe symptoms as per the patient anecdote we shared a bit earlier. Our fourth growth driver is to expand our product portfolio. We have several developments to share here as well.

First, we recently received FDA clearance of our Intri24 sheets. In fact, we have already completed the successful limited market release and have entered full market release. The Intri is a sheath used to introduce our FlowTriever devices.

It is purpose-built for use within RA devices and it increases their effectiveness, especially in the most challenging cases. It eliminates the need for third-party sheaths and the ongoing back orders that have challenged our customers and our field team for years.

We believe it will be used in nearly every FlowTriever procedure and because it is included in our per procedure pricing, it removes cost from the procedure for our customers, it increases the value of the Inari solution and further separates us from competition. Next, perhaps you saw that we recently obtained FDA clearance for Artix in March.

This product is a peripheral thrombectomy device designed to address unmet needs in a new patient population. It is the first component of a broader toolbox we are developing. We look forward to sharing more after we've completed our limited market release. These new products are a result of the robust R&D engine that we have developed.

You can expect multiple additional product introductions this year. We have committed to even more aggressive investments moving forward. Our last growth driver is expansion into international markets. We saw steady progress in our European business in Q1 with case volumes up more than 40% sequentially.

We expect continued momentum as hospitals in Germany, our largest European market, begin to benefit from enhanced reimbursement. Beyond Europe, we are pleased with our progress all over the world with continued growth in Canada, Latin America and the Asia Pacific region.

As we've noted previously, international will not be a material component of our overall revenue mix in 2022. Finally, I appreciate always the opportunity to remind you that we remain committed to a mission and to impacting human life in the most beautiful ways.

Our markets are large, patient needs are significant, and we are serious about our responsibility to do better for these patients. I'll close by saying thank you so much for your support of our recent capital raise. We intend to continue to invest wisely, responsibly and even more aggressively in all of our growth drivers.

We believe we can and will grow sustainably for many quarters to come. With that, I'd like to turn things over to Mitch..

32% of our revenue was derived through the sale of ClotTriever products during the first quarter of 2022 compared with 35% in the first quarter of 2021 and 68% was derived from the sale of FlowTriever during the first quarter of 2022 compared to 65% in the first quarter of 2021. During Q1, the vast majority of our revenues came from procedures.

Our stocking revenue related to the opening of new accounts was consistent with prior performance. We did experience some fluctuation in stocking revenue due to the timing of our new product introductions and this resulted in a decrease in stocking revenue during Q1 compared to the prior quarter.

Gross margin was 88.5% for the first quarter of 2022 compared with 91.9% in the first quarter of 2021.

The decline was primarily due to a decrease in our operating leverage as we completed our move into a much larger manufacturing facility in the fourth quarter of 2021, coupled with the addition of new products to our FlowTriever per procedure pricing model.

Operating expenses were $79.9 million in the first quarter of 2022 compared with $45.1 million for the same period of the prior year. R&D expense was $16.1 million in the first quarter compared with $8.2 million for the same period of 2021.

The $7.9 million increase in R&D expense was primarily driven by an increase in headcount, as well as product development and clinical evidence development costs. SG&A expense was $63.7 million in the first quarter of 2022 compared with $36.9 million for the same period of the prior year.

The $26.8 million increase was primarily due to personnel-related expenses because of increased headcount across our organization, higher travel expenses compared to unusually low levels of travel in Q1 of '21, higher facility-related costs and higher marketing costs.

You'll note that operating expenses in the quarter nearly doubled compared to Q1 of 2021. We believe the company's progress in all 5 of our growth drivers is a direct result of these investments. As we've shared in prior quarters, we intend to continue investing aggressively and productively going forward.

Net loss for the first quarter of 2022 was $3.1 million compared to net income of $7.5 million for the same period of the prior year. The basic and fully diluted net loss per share for the first quarter of 2022 was $0.06 based on the weighted average basic and fully diluted share count of 51 million.

These compared with a basic and fully diluted net income per share of $0.15 and $0.13 based on a weighted average basic and diluted share count of 49.3 and 55.7 million respectively for the same period of the prior year. Moving on to the balance sheet.

Our cash and investments at the end of Q1 totaled $338.7 million, consisting of $186.6 million of cash and $152.1 million of short-term investments. Cash and investments as of the end of Q4 of 2021 were $180.1 million. The follow-on offering of $174.4 million is the primary reason for the sequential increase.

With respect to the follow-on, we issued 2.3 million shares of common stock at an offering price of $81 a share. Our cash flows used in operating activities were $9.1 million for the first quarter of 2022 compared to cash flows generated by operating activities of $8.8 million in the first quarter of 2021.

I'll close my comments by addressing Inari's financial guidance. For the full year 2022, we are increasing our guidance by $10 million from the original guidance of $350 million to $360 million in revenue, up now to $360 million to $370 million in revenue. With that, I'd like to turn the call back to the moderator for questions.

For the Q&A segment, Bill and I would be joined by Drew Hykes, Chief Operating Officer; and Dr. Tom Tu, Chief Medical Officer..

[Operator Instructions] Our first question is from Travis Steed with Bank of America..

Congrats on a good quarter. I know you guys don't really want to talk a lot about Artix, but I'd love to see if you can give a little more color on when the product will launch when you have the full bag put together.

And is it something you're going to go to market where they can compete with better outcomes or on price? Any strategic color on how you're going to compete with that? And is something that's going to require a new sales force..

Okay. Yes, there's a few things wrapped up there, Travis. I've got a bit of ADD. And so, if I miss any of this, you can remind me. So we probably won't provide a whole lot more commentary on the nature of the device. And as for the timing, it's a little tricky. We always want to make sure that we don't overpromise and under-deliver.

We've learned from previous experience that you really need to be thoughtful about the limited market release. These products may or may not be 100% ready for prime time by the time they get FDA cleared. That's why we do limited market release. This product is a combination product. There's more than one product in the bag.

You've seen this sort of toolbox approach for the products we have on the market already. And so we want to make sure both components in the early going here, there'll be more components later, but both of the early components here are ready for prime time. So, we think later on this year.

I think I'd be hesitant to offer much more guidance than that, but we are really excited about this. I think you asked about pricing. We're not going to share specifics on pricing, but it's not our -- it's not -- we don't think of things in terms of pricing advantages, it either provides value and it addresses unmet needs or it doesn't.

So this will not be priced. We won't be trying to win a pricing war here. We assess market opportunities not based on whether we can get in and compete, but whether there's an unmet need that seems like something we can address.

So, we believe there's an unmet need here that we can address in a pretty successful way and the devices will be priced appropriately. In all likelihood, our early assessment suggests this probably is not a second sales organization. It probably fits relatively nicely into the bag of the sales organization that we've already developed..

Okay. All right. That's fair. I guess, we'll wait till the Analyst Day and get a little more color from that.

Mitch, I know you're not going to talk about COVID on impact of the business anymore, but I would love to see, are you assuming a headwind year-over-year in the guide for COVID? And any other assumptions and kind of how to build the year out on quarterly progression.

Just anything you'd like to talk about in terms of the guidance that you guys?.

Happy to. We are obviously pleased that we're able to have a nice speed and increase by more than our beat. So that feels good for us. As we think about the rest of the year, we're just continuing to sort of work through the -- hopefully, the latter stages.

Sometimes we wonder where we are in the whole COVID disruption thing and some of the staffing shortages and other things that have impacted the business. So, we'd probably be looking at a more kind of a flattish Q2, maybe up a bit. And then we'd see some acceleration in the growth of the business as we look at Q3 and Q4 of 2022.

So hopefully, that's a little bit of additional color that would help in terms of how we're thinking about how the business would track towards that guidance we provided of the $360 to $370 million of total revenue..

Travis, if I may just add one additional thing there. So, I would reiterate what Mitch says, but we are coming off of 2 quarters in a row of 15% growth in procedures and 14% growth in procedures. And so the comparables are just high and the base is getting bigger as well.

But I think we've been able to perform pretty well through COVID surges and troughs.

We like the post-COVID operating environment here, the post-pandemic, perhaps we're in a post pandemic phase, but certainly, the operating environment has been much more conducive to the sorts of things that we wanted to do all along, which is develop these programs, STEMI, stroke-like programs that will more successfully, consistently identifying triage patients that simply are not -- they're not even seeing the right patient -- right physicians for a consult at the moment.

So, we like what we're seeing, but I think to Mitch's point, maybe a little bit up here in Q2, but not -- we don't want to get over the tips of our skis.

And then we have new products coming down the line in the back half of the year that likely will be a little more -- little bit more heavily weighted toward the back half of the year for that guidance number..

Our next question comes from Cecilia Furlong with Morgan Stanley..

I wanted to start with Intri24 sheath that you talked about.

Can you just frame the economic benefit as you think about it for centers, including in the per-procedure pricing? And then just kind of tied in with that as well, the impact on your gross margin going forward? Is that adopted across the greater portion of procedures?.

Cecilia, it's Drew. I'd be happy to tackle the first part of that, and I think Mitch might want to comment on the gross margin impact. But first of all, this product not only offers economic benefit, but it's really been purpose-built to be optimized for our procedure, in particular, our PE procedures using the FlowTriever system.

It uses the same hemodynamic valve that we use on our other products and it's really been designed from the ground up to fit into our overall procedural approach. We have now just started the FMR. We got really good feedback during the limited market release of that product and we're now rolling it out broadly across the entire account base.

From an economic standpoint, it will be a component of our per procedure price system. We will have some revenue associated with it as we initially stock that product and the hospitals gain access to that product for the first time. But on a go-forward basis, it will be part of the PPP.

It certainly offsets costs that they're currently using for other sheaths that they've had to pay for other vendors. So from that standpoint, it represents a savings to them and I think underscores the value of that per procedure price model that we've rolled out now across the entire account base. So, hopefully, that answers your question.

And I don't know, Mitch, if you want to comment on the gross margin impact and how that ties in..

Yes. As Drew just mentioned, Cecilia, it's a really attractive opportunity for the hospitals because they actually -- they're to the good, potentially by adopting the Intri24. From our point of view, the product has a cost of goods sold that's sort of in the low hundreds of dollars.

And so if you look at our gross margin and you think about the fact that the FlowTriever PPP is typically sort of in that $10,000 price range, you can see that it just has a very small impact on our blended gross margin as a company.

And so again, I think it hopefully underscores the theme that you hear from us time and time again that we want to do what's best for the patients and what's best for the treating physicians, and we want to package the product offering in a manner that offers the best possible clinical outcomes.

And we think that's the right way for us to basically compete on the value of the product offering..

Great.

And if I could follow up, a bit of a multipart question, just on your clinical pipeline right now, clinical trials, but could you just provide an update both for PEERLESS, as well as FLAME on enrollment? What you're seeing specifically in PEERLESS? And then just the CLOUT sub analysis that you mentioned too, how you're thinking about really leveraging the takeaways from that, the data to really push these and change perspective around the use of thrombectomy in more chronic clots..

Celia, it’s Tom here. Thank you so much for the question about our clinical efforts. So, maybe in reverse order, speaking about CLOUT, I think the CLOUT sub analysis presented at American Venous Forum, really highlights the utility of our devices in a broad spectrum of clot age.

Historically, only acute thrombus has been a candidate for mechanical thrombectomy. And I think we have excellent data suggesting excellent utility across acute, subacute and even chronic DVT. In addition to that, we’ve completed 500 patients in the CLOUT Registry. You’ll see an additional data release later on this year regarding that.

We have completed 800 patients in our FLASH registry for pulmonary embolism, which will be presented later on this year as well. And then to answer your question specifically about FLAME and PEERLESS, FLAME doesn’t get the attention that I think it deserves.

It’s really a groundbreaking trial, the largest contemporary investigation of patients with massive PE. These are the most critically old patients. Enrollment has been excellent and we anticipate completion of this study later on this year, hopefully, with the data release concurrently.

And then PEERLESS, of course, is our first in a series of randomized studies and nrolment in this study has been quite brisk. I think this is a head-to-head study of catheter-directed thrombolysis versus mechanical thrombectomy with FlowTriever.

And I think these are serious important questions that our physicians want answers to and therefore, nrolment has reflected that. So, we’re very excited about that as well..

Our next question from Larry Biegelsen with Wells Fargo..

Congrats on a nice quarter here. A couple for me, Bill. Just if you could talk about the recent raise you did, the timing, how you plan to use the proceeds. And last year, you mentioned transforming just related to that -- transforming the company.

How is that process going? And when is that going to become more visible to investors? And I had a follow-up..

Yes. So thanks, Larry. I think we shared quite a bit of this concept during the fundraise. And probably, I'll reiterate some of those same themes.

So, we've been very pleased with the growth that we've seen in -- not just in revenue, but in terms of the number of patients being treated, and I think that goes for not only any gains we might make against other types of advanced therapies from lytics to other thrombectomy devices, but maybe more importantly, expanding the market, putting more patients into the queue here, so that they actually see the right physicians.

And so we like the idea of just a much more aggressive investment. If you take a look at the R&D spend, which, of course, includes product development and clinical trials, we more than doubled that from year-over-year. We nearly doubled our entire spend year-over-year.

And I think that's yielded real results for patients and for -- hopefully, for value for our shareholders as well. I think there's a lot of conviction here at the company that we want to be even more aggressive and that's what we've communicated during the fundraise and we continue to communicate that to anybody who will listen.

And I think the transformation, Larry, is already underway. I mean if you take a look at the total number of sales professionals, we're going to be at more than -- at least 275 by the end of this year.

The investments we've made in our VTE excellence, our second growth driver have been really -- there's a lot, right? We're committing to health economics and market analysis access team, field-based, embedded in the field what we call our Inari Solutions Group, and other group of non-quota-carrying, non-sales carrying commercial sales professionals designed to help implement and install these VTE coordinator systems.

And then our national accounts team helping to communicate this story from a value and economics perspective. You've seen what we're doing with our clinical trials.

We'll be running perhaps by the end of this year even multiple randomized controlled trials with absolutely no regulatory purpose whatsoever, simply because it's the right thing to do, right? There's a basic responsibility our physicians should know.

They should know what kind of outcomes they can expect and who they should be treating when they use our devices, and we're committed to that. And you take a look at the total number of products.

We've hinted at some of the things, you've seen some things already, but there's a very, very robust product pipeline in the queue, and that extends well beyond 2022. So we'll have more to say about that, but we're investing very, very aggressively.

And I think that transformation is already beginning to emerge here just based on the total number of products you're seeing. And then, of course, we've made heavy investments in our European and the rest of the world in terms of our international efforts. And I think that's going to materialize here at some point.

We continue to communicate that the revenue in 2022 will not be material, but we expect it will be at some point here and we're investing as aggressively as we can there as well. So, I really believe transformation is underway.

And hopefully, you're beginning to see that again, 15% procedure growth and 14% procedure growth in 2 consecutive quarters on a base that we have, I think, it is suggested that we're maybe on the right track..

That's helpful. And for my follow-up, and I'm sure Tom is pleased to hear that you're going to -- he's going to get the funding for doing multiple randomized controlled trials. But for my follow-up here, on ClotTriever BOLD, you highlighted a PTS patient at the beginning of this call. That's -- you've given those numbers. It's a big market opportunity.

But my understanding is, and correct me if I'm wrong, that it's not typically -- it's not that -- it's undertreated.

So, my question is, what are you doing to develop that market?.

Yes. Thanks, Larry. So we're probably a little bit early in this discussion. We are definitely seeing some of these patients being treated right now. We're very, very encouraged because these patients are not included in the TAM. As we've defined our DVT TAM currently, these patients are not included in that. These are not acute patients.

These are patients who have suffered from DVT in the past. And this is a very large market, as you can imagine, not just from terms of the incidents, but in terms of the prevalence, the patients who were not treated last year and the year before and so forth.

So there's a very, very large number of these patients, their quality of life scores are, as I suggested, quite horrendous, and it's a terrible unmet need. We're developing a toolbox. It's not just one product. The ClotTriever BOLD is the first, but certainly not the last.

And we believe there will be a kind of -- these products will work in conjunction with each other, and you'll start to see those products later on this year and into next year, but we're committing very, very aggressively. I think what you're getting at also, Larry, there is a commercial component to this.

These are not patients who are stumbling through the emergency department because they have a wound on their leg, for example. These are patients who have been told over and over, there's nothing you can do. So, there is a patient pathway component to this that we're committing very aggressively.

Again, part of the fund raise, part of where we believe we should be committing resource aggressively is in identification of these patients. It's a fundamentally different patient pathway despite the fact that the procedures themselves are similar in some ways to the procedures that are done on more acute patients.

So, again, a lot of things going on here. It's a little bit early to give any detail, but we're really excited about this because if ever there was a responsibility, that's one. There's just not much been done for these poor patients..

Our next question comes Bill Plovanic with Canaccord Genuity..

It's [John] on for Bill. I just wanted to talk first on international.

Can you talk about the infrastructure that's in place so far? What progress needs to be completed this year to set up for '23? And should we expect material revenues in '23? And can you also talk about that updated reimbursement that you've touched on in the call commentary in Germany?.

Sure, John. This is Drew. I can get started on those. So, maybe just to talk about it by market that may be one way to organize the response here. So, in terms of Europe, at this point, we've established an initial commercial footprint across the entire European market.

That includes direct sales professionals, that includes training, people that include some back-office infrastructure, it includes in some markets people that are working alongside third-party distributors.

So we feel like over the last year and a half, we've made the investments to have that initial commercial footprint established across the European market. We are seeing sequential growth quarter after quarter. We certainly saw that in the first quarter here in Europe.

One of the things that's driving that progress in Europe, specific in Germany, which is our largest market in Europe is the awarding of a NUB earlier this year, and that provides hospitals with a pathway to enhanced reimbursement for FlowTriever procedures.

So that's still in process of being established, but already accounts have line of sight to that reimbursement. And as such, it's beginning to pay dividends in terms of uptake and traction in the market. So that is the current status in Europe.

Looking ahead in Europe, we still got some work to do on reimbursement in some of the other markets to establish broad-based, market-based reimbursement. Some of that will require us to do some clinical work in some of those markets.

Between now and then, we will have and continue to have access to those markets with regional level reimbursement and hospital level budgets, but we do have some more work to do over the coming quarters in some of the markets to get to broad-based reimbursement based on some clinical evidence that we're going to need to generate.

So that's the overview in Europe. Relative to the other international markets in Asia Pacific, we've described we've got work underway over the last year and a half in both Japan and China.

Those markets will be longer pathways to get approval in, but we are making steady progress in both of those large markets relative to the approvals and are actually beginning -- at least relative to China beginning to think more deliberately and intentionally about what the go-to-market strategy will look like in China and what some potential partnership dynamics might look like in that market.

And then relative to Latin America, the last of our major international geographies, we've begun to do cases in some of those markets, Chile, for instance, and are gradually building out primarily in that market, a network of third-party distributors that we'll establish, so that we can continue as we move through the rest of this year, opening up new markets and accessing new patients.

Taking all of that together, as you heard Bill here just a moment ago, we clearly do not anticipate that the international business will be a material contributor in 2022. To answer the last part of your question relative to whether or not it achieves that hurdle in 2023. Hard to say.

It's obviously kind of a race between how quickly the international franchise grows relative to the U.S.-based franchise. So, hard to predict exactly when that happens. And obviously, the auditors and the SEC regulations play a factor in that determination. So, we'll keep you guys posted as we move towards that.

But clearly, we like what we're seeing, and we think longer term, there's a huge potential there for us to impact patients internationally, just like we've done here in the U.S..

Really appreciate that color. That's helpful. And then just for my follow-up. I know in the past, you've detailed a little bit about the 3 steps, I believe, of the VTE centers of excellence.

Can you talk about how many accounts to date you've gone through those 3 steps? And what you're seeing in terms of utilization from those accounts versus accounts that get to complete that center of excellence program?.

Yes. So I can help walk through some of that and others may want to jump in as well. But I think the way to start thinking about that is that all of our accounts, we believe, are in some stage of working towards becoming eventually a center of excellence. That's our ultimate goal across all of our accounts.

We believe each and every one of our accounts can emerge down the road as a center of excellence, systematically treating and caring for these patients, just like you've seen take place with stroke and MI. The vast majority of our accounts are still in the very early stages of that evolution. The first phase that we call the engage phase.

And that's really focused on establishing the foundation, getting the initial training and in-servicing completed, making sure the account understands the appropriate billing and coding and reimbursement dynamics. and really establishing a solid foundation of clinical outcomes.

As a result, the penetration, the TAM penetration in that first phase of VTE excellence is in the low single digits in most of those accounts. And again, that's where the majority of our accounts are.

The second phase, we began focused much more on spreading awareness across not only the interventionalists at the account, but also the non-interventionalist that care for these patients, the pulmonologists, the emergency room physicians, the hospitalist.

And we spend a lot of time in that second phase, ensuring that the administration understands the economic value proposition of our technologies, but it's really about beginning to raise awareness and drive deeper penetration in a very specific and intentional way.

The TAM penetration in that middle group, in that middle phase, is probably in the double digits in most of our accounts. We call that the empower phase. And then the final phase are a group of accounts that are emerging as centers of excellence or at least beginning to have many of the attributes that you'd expect in a center of excellence.

That's still a very small number of our accounts, call it a dozen, maybe 2 dozen of our accounts. And those are accounts that have identified VTE patients as a specific patient population that they want to invest in, very specifically their marketing internally and externally.

There's broad-based buy-in across not only the interventionalists but the non-interventionalist.

There's active investment by administration into the program, and there's an intentional programmatic approach to ensuring that the care pathway is organized in such a way that every one of those patients is identified and risk-assessed and presented for care to a group of patients and physicians that really understand the disease in a deep way.

So, the TAM penetration, that final account, we have some accounts that are up north of 50% of penetration in the TAM. So, still plenty of runway even in that third and final group, but it does give us some confidence here.

We're moving in the right direction and that the significant investment that we're making in this overall VTE excellence programmatic approach is beginning to pay dividends and we're on the right path..

Yes. I would add only one thing – I would just say one other thing. This is – there is not one single activity that we engage in the field that is not related to this. Everything that we do is part of this VTE excellence. It’s very purposeful in the intent to move people toward this excel phase, last phase, centers of excellence, as Drew described.

And we don’t see really any – there’s no Plan B. This is it. This is the way forward.

And we could wait 10 or 20 years until all of the randomized controlled trials are finished and the guidelines are changed, New England Journal of Medicine is published, CMS weighs in and gives bonuses for people who do things right and penalties for those who don’t or we can dive in now and try to figure out what are the challenges that we need to overcome for these patients much sooner.

And we’ve decided we are committing 100% to this concept. So, everything that we do is with the intent to move patients – I’m sorry, move our customers toward VTE centers of excellence. So I can get there more quickly, others will be more slow, which is kind of natural, but that’s our intent..

Our next question comes from Marie Thibault from BTIG..

Congrats on a strong first quarter.

I wanted to ask, I know we're not going to get a whole lot more on procedure metrics going forward, but I hope that we can get some qualitative commentary here on how staffing shortages and other headwinds like that affected the Q1 result? Obviously, a very strong result, so just curious to get kind of cadence throughout the quarter for both ClotTriever and FlowTriever if you can?.

Yes. So a few things wrapped up in there, Marie. Thanks for the question. So I think we've communicated in the past that our procedures were the beneficiary of some good fortune here, and we've been able to execute as well. But the disease states that we're targeting are generally high acuity disease states. These aren't patients who really can wait.

And so they -- there's a prioritization there. These procedures also require very limited resources, right? These are simple procedures, relatively simple procedures. One physician, one nurse, one tech, that sort of thing, about an hour, both for ClotTriever and FlowTriever procedures. And so they consume very limited amount of resource.

And the economic profile is favorable. Now that's the sort of story that will play very well anytime.

But I think on a relative basis, when there's staff shortages and some patients and procedures are going to be prioritized, I think it's really benefited us in the -- in this COVID era -- in this post-COVID era -- this post-pandemic era where we're still trying to recover from the staff shortages and that sort of thing.

So, I think we're seeing exactly the same sorts of things that every other company has -- every other med tech company has endured. And again, we've been able to execute crisply for a number of reasons, including some of the ones I just mentioned, just as characteristics of these procedures and disease states.

I think we've executed consistently in both COVID waves and COVID troughs. The waxing and waning of COVID over time. Hopefully, we're in a post-pandemic phase, but we'll see. We kind of deal with the -- we play the -- the cards were dealt, so to speak.

I don't know that there's any real trends that we want to highlight here, but we are very encouraged that the operating environment is conducive to VTE excellence now in ways that it never was in all of 2021. And that's really encouraging. So, we'll see what that might mean as we get further along with our efforts there..

Okay. Very good. Very good to hear. I guess I'll ask my follow-up here on the sales team expansion, certainly know that's a large area of investment going to 275 at least by the end of the year.

How are the latest reps coming on board? Are you able to find the type of talent you like? Are they ramping at the pace you would like? Just sort of a status update on the hiring front?.

Sure. I can help with that, Marie, it’s Drew. So, we just brought on board the first group of new hires that we’ll have this quarter. And we saw a very strong – probably the strongest group we’ve had to date.

The candidate pools themselves are getting both broader and deeper, I think primarily because of the success and the impact that we’re having, the kind of patient impact that I think is becoming more and more well known.

I think the other thing that is helping with that expansion of the candidate pool is that our own training and education program has now become much more sophisticated and robust to the point that we’re able to bring on as we see fit candidates that don’t necessarily have deep prior vascular experience, folks that have orthopedics or spine or robotics or ENT.

And because of our training program at this point, we’re able to get those folks up to speed with our technologies and our procedures. And I think that has also helped broaden the candidate pool. So, we feel really good about the path we’re on.

We’re going to continue to add aggressively as we move through the rest of this year, each and every quarter as is our cadence. And we, as you heard Bill talk about, are on pace I feel comfortable with that goal of at least 275 sales territories by the end of this year..

Our next question comes from Danielle Antalffy with SVB Securities..

This is Priya on for Danielle. Congrats on a strong start to the year. I guess my first one is also on the sales force expansion. And as you target those 275 sales territories, could you talk to some of the growth trends recently? And if you're seeing growth driven primarily from new centers coming online, first increase adoption at existing centers.

And as it relates to continued OpEx spend throughout the year, where do you expect to see the highest priority in terms of incremental spend? Is it R&D pipeline expansion related or sales force expansion? And then one follow-up, if I can..

Sure. So Priya, I can get started on the first several of those questions. I think Bill can chime in on the broader OpEx part of your question.

Historically, we've pointed to about 2-thirds of our growth coming from taking share within the existing modest interventional segment of the market and the remaining third of our growth coming from expanding the market and putting new patients on the table, as a result of our purpose-built solutions.

I think clearly, as time progresses, we're seeing more and more of our growth be driven out of that first bucket -- sorry, out of the second bucket, out of the market expansion bucket and out of our ability to really change the standard of care over time.

All of our new sales professionals at this point in time are coming into some type of territory split.

And the reason we're splitting those territories is to position both the new rep and the legacy rep into smaller and smaller territories, so that they can do the kind of work associated with our VTE excellence that is designed at its core to drive penetration and adoption.

And I think we're beginning to see that play out and we're beginning to see more and more of our growth be contributed by market expansion as opposed to just taking share. Maybe I'll pass things over to Bill on the broader OpEx side of the question..

Yes. So thanks, Priya. So this question, it's almost like you're asking us to choose our favorite child. And as you know, there is no favorite children. I think we're investing pretty aggressively and we're not limiting our investments based on some sort of received quota. This growth driver gets X amount, this one gets Y amount.

We are investing as aggressively as we think we can execute responsibly and successfully. So, we've been pretty aggressive, as you pointed out, with regard to new territories, just the total commitment in terms of sales territories.

We've already talked about the investments we're making in multiple non-sales type roles on the commercial side to execute our VTE excellence program. We've talked quite a bit about clinical trials and product development. I think we -- again, we've shown an ability to execute across all of these growth drivers.

And at this point, where we continue to ask ourselves, why would we not be more aggressive? We're sitting at 5% penetration in a very, very large TAM already. There's multiple new TAMs, that's the business term, the term that most patients would use is suffering patients, right? There's a lot of unmet need.

The patients really, really suffering from disease states that have been poorly addressed because they're complex disease states. They're hard to tackle. But we've been pretty good at that. And I think we want to continue to be really aggressive with that. So, again, our determination as to how much we invest across those 4.

Drew has already talked about international investment. It's not really -- we're not really rationing those investments, so much as just determining where we think we can execute on that sort of spend and these aggressive plans effectively. And we don't want to be irresponsible with this.

So, we try to be wise and thoughtful in the way that we go about this, but we are being aggressive across all 5 growth drivers..

And Priya, maybe I can just add. The -- as you know, the actual spend for SG&A in Q1 was just over $63 million compared to the $16 million of total spend for R&D. So, the absolute dollar growth, if you look at Q2, Q3, Q4 in 2022, associated with the SG&A spend is quite a bit larger than it is in the R&D area.

As Bill mentioned, both areas are going to grow very aggressively. But from an absolute dollar point of view, just because you're starting out with a much larger number, the SG&A spend is increasing at a greater rate..

Okay. Understood. That was super helpful. And if I could just squeeze one more in.

I guess, at a higher level, how are you guys thinking about the competitive outlook evolving over the next few years with recent acquisitions by larger players? And how do you guys view the competitive moat that you're building?.

Yes. Thanks, Priya. We haven't had a competition question for a while. So, thank you for that.

Again, I think sitting in a market that's so underpenetrated, I think that the entry of high-quality rivals, people that really know what they're doing and have excellent sales and marketing capacity is really useful for driving awareness and hopefully putting more patients into the queue, right, putting more patients into the line of sight for a consult for physicians, putting aside whose device gets used and who should get treated, who shouldn't get treated, that sort of thing.

That's a really useful thing, right? Just the awareness and the ability to get these patients to a physician who really understands VTE is important. And so that's, I think, is highly, highly positive. We've had these questions now. We used to get them a little bit more frequently, I think.

And you can see that the market continues to expand even while competition or because competition is entering. That said, I think, again, this VTE excellence concept is valuable to hospitals.

We're having discussions at the highest levels of the hospital and -- with the CEOs, CMOs, Chief Operating Officers, VPs of service lines, that sort of thing and these program developments, these growth initiatives are important to the hospital.

I think the data that we're accumulating, we will be releasing later on this year, 800 patients, the largest prospective data set ever in pulmonary embolism. The largest data set, 500 patients in our cloud registry will be communicated or presented later on this year. And we don't do these things to create moats.

But I think there's no question they do create moats. The Intri sheath represents the ninth, it's the ninth product in the per procedure pricing in our PE toolbox. It's not because we just want to add more stuff to reduce our gross margins, it's because these tools really matter. They really matter.

And I think someone bringing a new widget into that sort of environment where we've had these sorts of relationships at the administration level, we have the sort of data that's emerging now in really compelling ways. We have a toolbox that's filled with solutions to all sorts of unique presentations of these diseases.

I think it gets more and more difficult for someone just selling a widget, a brand-new widget to be really successful. So we'll see. But the bottom line is, I think, anyone trying to get into this space at this moment, the more the merrier because it really does help to expand the awareness and hopefully expand the market..

And I'm probably showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect..