Good day and welcome to Inari Medical Incorporated Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the end of the company's prepared remarks, we will conduct a question-and-answer session.

As a reminder, this call is being recorded and will be available on the company's website for replay shortly. And now I will turn the call over to John Hsu, Vice President of Investor Relations. Please go ahead..

Thank you, operator. Welcome to Inari's conference call to discuss our third quarter 2023 financial performance and the acquisition of LimFlow. Joining me on today's call are Drew Hykes, President and Chief Executive Officer; and Mitch Hill, Chief Financial Officer; and Dr. Tom Tu, Inari's Chief Medical Officer.

This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements related to Inari's estimated full year 2023 revenue, anticipated closing of the LimFlow acquisition, potential strategic benefits of the LimFlow acquisition, expectations regarding our proposed acquisition of LimFlow, and potential operating performance of LimFlow.

And are based on Inari's current expectations, forecasts, and assumptions, which are subject to inherent uncertainties, risks, and assumptions that are difficult to predict.

Actual outcomes and results could differ materially from any results, performance or achievements expressed or implied by the forward-looking statements due to a number of factors.

Please review Inari's most recent filings with the SEC, particularly the risk factors described in Inari's annual report on Form 10-K for the year ended December 31st, 2022 and subsequent quarterly reports on Form 10-Q 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.

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

Thank you, John and thank you, everyone for joining us today. We're pleased with our third quarter performance. We generated record revenue and executed crisply across all our growth drivers.

First and foremost, growth was driven by continued strength in our core VTE business, along with meaningful contributions from our international business and new products. Indeed, our end markets are large and remain highly underpenetrated, and we continue to see healthy procedure volume underlying the VTE market.

From a profitability perspective, we continue to make steady progress, returning to positive operating income for the first time since Q4 of 2021. We also generated positive net income for the second consecutive quarter.

We continue to build on our significant base of clinical evidence, making progress across our three RCTs, while publishing the FLAME study results. As our Q3 results demonstrate, we remain the clear market leader in VTE and our future growth prospects have never been more compelling.

Building on this strength, we are opportunistically broadening our capabilities to address significant new market opportunities via the LimFlow acquisition, which we will discuss later in the call. Most importantly, LimFlow is aligned with our patient-first philosophy.

This will be reflected in a story highlighting the impact LimFlow can have on the significant unmet need of no-option patients with chronic limb-threatening ischemia or CLTI. Back to the quarter, I'd like to start with a summary of our Q3 financial performance. Revenue in Q3 was $126.4 million, up 31% year-over-year.

Our international business generated revenue of $6.5 million in Q3, up 151% year-over-year and 26% sequentially from Q2. In addition to our topline performance, we also made steady progress during the quarter on our bottom-line and returned to operating profitability for the first time since 2021.

This achievement underscores our commitment to invest strategically in the business, while also driving operating leverage with revenue growing at double the rate of OpEx in the quarter. During Q3, we also made progress across our five growth drivers. Our first growth driver expanding our US commercial footprint.

We added more headcount in Q3 and remain on track to meet our year end goal. We continue to generate operating leverage and productivity gains from a more measured pace of territory development.

Our broad commercial footprint and methodical approach to expansion results in focused areas of coverage, positioning us well to introduce new products to the market and to execute on our second growth driver, increasing penetration of existing accounts.

VTE Excellence is a highly differentiated, comprehensive, and repeatable approach to help hospitals establish VTE programs and drive deeper penetration of our therapies.

We remain in the very early innings of market penetration and we continue to see tremendous value and a programmatic approach to ensure patients are consistently identified screened and evaluated by a VTE expert.

We continue to make progress and are successfully moving customers along the VTE Excellence Continuum to more advanced phases of program development, where TAM penetration is three to four times higher than in earlier phases.

Our third growth driver is to increase awareness and adoption for Inari's products by building on our broad base of clinical evidence. In the third quarter, we continued advancing both the quality and quantity of our clinical data.

First off, as we anticipated, the FLAME study was published on October 17th in the Journal Circulation Cardiovascular Interventions. With the recent publication, we expect to see further awareness of this important study and physicians taking notice of the FLAME data, which is already beginning to change practice pattern.

We believe the highly positive results of FLAME in extremely sick patients is powerful enough to build physician confidence for intervening on less sick intermediate risk patients, spilling over into a patient population that is five times larger.

Turning to an update on our RCTs, patient enrollment in our PEERLESS 1RCT comparing FlowTriever to catheter directed lytic therapy remains strong and has eclipsed the three quarter mark during Q3. We anticipate a data readout in 2024.

For PEERLESS 2, the RCT for intermediate risk PE patients randomizing treatment with FlowTriever to anticoagulation alone, we remain focused on site activations and expect patient enrollment to commence in early 2024. Lastly, we continue to ramp up enrollment in defiance, the RCT comparing ClotTriever to any coagulation alone.

Executing three simultaneous RCTs, which will collectively enroll up to 1,700 patients, clearly reflects our commitment to generating high quality clinical data. We will leverage these data to change the standard-of-care for VTE. Our fourth drivers to expand our product portfolio.

We continue to make progress across the six products that are in full market release in the second half of 2023. Three of these products REVCORE, InThrill, and ProTrieve add direct incremental revenue opportunities.

We've gained good initial traction and are receiving excellent clinical feedback across all three products, and we still see tremendous opportunity to keep building awareness and usage across our customer base.

The other three products, which are now in FMR, enhance our existing purpose-built tool kits, demonstrating continued innovation in our core VTE portfolios. Those products are T16 Curve and the two products that have most recently entered FMR, ClotTriever XL, and the Generation 2 version of ClotTriever Bold.

ClotTriever XL extends the treatment range of the ClotTriever platform, which together can now target a range of clot chronicity from the vena cava to the popliteal vein. The Gen 2 ClotTriever Bold delivers the same stellar performance for clot clearance with greater ease of use and procedural efficiency.

These six products in FMR are testament to a robust pipeline and commitment to addressing unmet needs with purpose built tools. Our last growth drivers expansion into international markets. Q3 marked another quarter of record case and revenue production outside of the US.

Our performance was driven primarily by increased adoption in Western Europe, complemented by solid case growth in our early stage markets in Latin America, Canada, and Asia-Pacific. We continue to make good progress in both China and Japan and anticipate beginning to treat patients in both of these markets in 2024.

We will have more to share on our go-to-market strategies in these two important markets over the coming quarters. Given the spectacular unmet need, we expect our international business could represent greater than 20% of total revenue over time. And now, I'll turn it over to Mitch to discuss our Q3 financial performance in greater detail..

Thank you, Drew and good afternoon, everyone. Inari's revenues for the third quarter of 2023 were $126.4 million, up 31% over the same period as prior year.

The revenue split between product lines is similar year-over-year, with 68% of our revenue derived from the sale of FlowTriever Systems compared to 69% in 2022 and 32% from the sale of ClotTriever and other systems compared to 31% in 2022.

In addition to our strong commercial execution in the quarter, we recently signed a lease to expand our operations footprint with a facility in Costa Rica. Although it will take some time to develop the location, we expect this investment to provide additional manufacturing capacity, while also supporting our premium gross margin profile.

Turning to the P&L, gross margin remained flat at 88.5% for the third quarter of 2023 and the third quarter of 2022. Operating expenses were $109.8 million in the third quarter of 2023 compared with $94.9 million for the same period of the prior year.

R&D expense was $21.5 million in the third quarter of 2023 compared with $19.1 million for the same period of 2022. The $2.4 million increase in R&D expense was primarily driven by an increase in material and supplies expenses and secondarily, due to higher personnel-related expenses as we increased our headcount.

SG&A expense was $88.3 million in the third quarter of 2023 compared with $75.8 million for the same period at the prior year. The $12.5 million increase was primarily due to personnel-related expenses as we increased our headcount and secondarily, due to higher expenses related to professional fees.

Operating income was $2.1 million in the third quarter of 2023 compared with a $9.8 million operating loss for the same period in the prior year. This performance reflects our team's commitment to discipline spending controls, while fully funding our commercial, clinical, and innovation growth drivers.

Net income for the third quarter of 2023 was $3.2 million compared to net loss of $10.2 million for the same period in the prior year. The basic and fully diluted net income per share for the third quarter of 2023 was $0.06 and $0.05 based on weighted average basic and fully diluted share count of 57.4 million and 58.6 million, respectively.

These compare with a basic and fully diluted net loss per share of $0.19 based on a weighted average basic and fully diluted share count of 53.5 million for the same period of the prior year.

Moving on to the balance sheet, our cash and investments at the end of Q3 totaled $351.3 million, consisting of $89.2 million of cash and $262.1 million of short-term investments. This compares with cash and investments as of the end of Q4 of 2022 of $326.4 million.

Our cash flows provided by operating activities were $15.9 million for the third quarter of 2023 compared to cash flows used in operating activities of $13.1 million in the third quarter of 2022. Lastly, I'd like to address Inari's financial guidance.

For the full year 2023, I'd like to note that we are increasing our revenue guidance to $490 million to $493 million, an increase of $4.5 million at the midpoint relative to our prior range. Now, I'd like to turn it back to Drew to discuss our acquisition of LimFlow..

Thanks Mitch. We are thrilled to discuss Inari's acquisition of LimFlow, a pioneer in limb salvage for patients with CLTI, which is one of the most significant unmet needs in all vascular medicine. We made a minority investment in LimFlow and became a board observer in early 2022.

We have long respected the LimFlow team and their progress in transforming the treatment paradigm of CLTI. We're looking forward to welcoming LimFlow to the Inari family. Most importantly, the acquisition aligns with Inari's mission of addressing large unmet patient needs.

LimFlow's novel purpose-built technology has full FDA approval, is supported by high quality clinical data and is commencing launch into a significant incremental TAM. We're confident we can leverage the core competencies we've developed in VTE to make LimFlow a success and can do so without distracting ourselves from our ongoing work in PE and DBT.

For all these reasons, we view the acquisition as a great strategic fit for our business. We'll discuss each of these elements in greater detail. Executing this transaction is a significant milestone for Inari.

It reflects the rock solid performance of the core business, has enabled us to capitalize on this compelling opportunity from a position of strength. Our business is thriving and our relentless focus on execution allowed us to deliver robust revenue growth in Q3, alongside disciplined OpEx control.

Further, we're announcing this transaction on the foundation of a robust balance sheet. Since our IPO, we've been focused on maintaining a strong cash position, while being good stewards of capital. That discipline has put us in a position to pursue this acquisition.

Despite the exciting opportunity to enter the CLTI market, I also want to emphasize that we remain fully committed to our mission to improve outcomes of VTE patient and firmly believe we can continue our work in VTE, while also taking on this acquisition.

Our team's tireless efforts and dedication to this mission have positioned us to pursue this acquisition with a partner that is equally committed to creating innovative solutions to address unmet patient needs.

Before diving into a more detailed look at LimFlow, I'd like to share, as well with you, a patient story that underscores the dramatic improvement that this technology delivers. In 2019, a 70-year old man had to have his right leg amputated due to CLTI because there were no other options available to him.

A short time later, he also developed pain and gangrene of his left foot and geography demonstrated highly occluded and calcified peripheral arteries with no suitable anatomy for bypass or intervention. Facing a second amputation, he was desperate for a better option.

This patient's interventionist provided him with a new treatment option, performing a novel transcatheter arterialization of the deep veins, or TADV with the LimFlow system. The simple percutaneous procedure rerouted arterial blood to the patient's intact venous system, restoring healthy perfusion to his foot.

Post-procedure is ischemic pain resolved and over time his foot healed completely. Thanks to LimFlow, he was able to keep his leg and avoid the extremely dire prognosis associated with being wheelchair bound. LimFlow quite possibly saved this patient's life.

The profound clinical impact from one of the first patients treated with this novel technology underscores the ability of a purpose-built toolkit to address a tremendous unmet patient need.

The story also highlights common themes with Inari's core VTE platforms, a differentiated solution utilized by our same physician call point that delivers an effective and life-changing improvement for the patients being treated.

As I just outlined in the patient story, living with CLTI is quite challenging and the most advanced stages of disease carry significant morbidity and mortality burden. CLTI is a global health care crisis impacting more than 1.5 million patients each year globally, approximately 560,000 of which patients are in the US.

There are approximately 150,000 non-traumatic ischemia related amputations annually in the US, which lead to high mortality rates, repeated hospitalizations, and significant medical costs. With no other options currently available, LimFlow was designed to provide a solution for these patients.

In terms of sizing the opportunity for Inari, of the 560,000 patients suffering from CLTI in the US each year, we estimate approximately 55,000 patients have disease that has progressed to the point where they have no treatment options other than amputation.

These 55,000 patients have approximately 70,000 limbs that are immediately addressable with the TADV system. Applying our target ASP against this figure results in a $1.5 billion TAM. Beyond this immediate no-option US addressable market, we believe there are two opportunities that offer the potential for significant expansion.

First, we see opportunities to target US patients with less severe disease, which we believe will expand the TAM by about $500 million. We also agree there is a significant opportunity to commercialize LimFlow's device internationally, which we believe would further expand the TAM by $2 billion.

By pursuing these additional growth avenues, longer term, we see a path to upside expansion of LimFlow's nodes global TAM to over $4 billion. Next, I'd like to provide an overview of the purpose-built technology that is enabling his game-changing TDAV procedure.

The LimFlow system consists of multiple purpose-built components, including specialized catheters to enable the below the knee artery to vein crossing, a differentiated push value at home and covered stents.

In the TADV procedure, the toolkit is used to reroute arterial blood into the healthy venous system to deliver oxygenated blood back into the foot. The technology has been proven to save limbs by healing wounds and preventing amputation.

LimFlow has generated compelling clinical evidence across multiple trials to demonstrate the safety and effectiveness of its treatment. Of note, the landmark PROMISE II study was published in the New England Journal of Medicine in March of 2023.

This trial demonstrated 76% of no-option CLTI patients were able keep their leg and experience progressive wound healing, with many having significant pain relief during the time following LimFlow treatment. Now, I'd like to go over the compelling strategic rationale underpinning this transaction.

Our ethos and mission are focused on addressing significant unmet needs and thinking big. LimFlow is equally committed to these same important ideals, in perfect alignment with Inari's mission. LimFlow has several attractive attributes from a regulatory, IP, and reimbursement standpoint.

The system is fully PMA-approved and the only on label device for no-option CLTI. As the first mover in the market, LimFlow has a robust IP portfolio, and there are significant barriers to entry for new entrants. The key elements of reimbursement are in place, with an established path to enhanced payment in multiple sites of services.

The transaction expands our total addressable market with significant revenue and profit potential. Building on this foundation, LimFlow is a natural fit with our specific commercial expertise, clinical capabilities, market development playbook, and ability to iterate new products.

We believe that leveraging Inari's core competencies will make a meaningful impact on LimFlow's trajectory and ultimately allow us to treat more patients faster. Importantly, we are confident we can integrate and execute on the LimFlow opportunity, while maintaining the same momentum and focus on VTE.

LimFlow will be commercialized using an independent sales organization, completely separate from VTE. This team will pursue a narrow and deep commercial strategy, focused on a relatively small number of high-volume CLTI centers.

Following FDA approval in September, we believe LimFlow became a must add technology for all limb salvage centers of excellence, capable of differentiating and growing these programs.

Despite the largely independent sales effort, we believe there are significant similarities between LimFlow and the market development work Inari does every day in the chronic unit disease space. We also anticipate synergies when we reenter the acute limb ischemia market with Artix next year.

Taken together, LimFlow will offer compelling additional growth opportunity for Inari, and has the potential to be an important component of our overall revenue mix. Framing the opportunity, one could use our commercial ramp in VTE as an analog.

After seven years of commercial effort, we have currently reached approximately 7% penetration in our $6 billion US VTE market. No-option CLTI is a similarly large underpenetrated $1.5 billion US TAM, with equally compelling unmet needs. We believe over the medium term, we can achieve similar penetration in CLTI as to what we have accomplished in VTE.

In fact, we're optimistic that we may be able to ramp faster in CLTI given the more concentrated customer base, the no-option nature of these patients, and the high quality published evidence we will be able to leverage right from the start of the launch. LimFlow is commencing its US commercial ramp.

Sales reps are hired, fully trained, and beginning to sell. LimFlow's TADV toolkit offers a clear first-mover niche as a fully FDA-approved product and the only on label device for no-option CLTI. The team will be able to efficiently drive adoption given the concentration of procedures among a relatively small number of CLTI centers of excellence.

In conclusion, We are excited to bring LimFlow's clinically differentiated technology in house. The acquisition aligns with our mission to address unmet patient needs, offers an additional growth driver and a significant incremental TAM, and leverages the core competencies we honed in our successful commercial ramp in the VTE market.

We believe LimFlow will make an incredibly positive impact, not only on patients, but also our business. I'll now turn it back over to Mitch to discuss the deal terms and financial considerations..

Thank you, Drew.

Starting with the deal terms, our agreement to acquire LimFlow includes a payment of $250 million paid in cash at close, which is expected to occur in the fourth quarter of 2023, plus additional contingent consideration of up to $165 million in cash based on the achievement of certain reimbursement and commercial milestones with the potential to be paid over the next three years.

The earliest potential milestone payment under the agreement is due in 2025. Inari closed Q3 with just over $350 million of cash and cash equivalents and currently has access to $75 million in liquidity from an asset based credit facility.

Our strong cash position has allowed us to be nimble as it relates to various strategic opportunities, and will enable us to fund our acquisition of LimFlow.

As Drew mentioned earlier, one of the core elements of our strategy since the IPO has been to operate with a strong balance sheet and we will continue to evaluate opportunities to further strengthen it. Turning to the financial highlights of the transaction, you heard Drew describe, we believe LimFlow has significant revenue growth potential.

We anticipate initial operating support for LimFlow's commercial launch approximately 2 million to 3 million per month. As LimFlow's revenue begins to ramp throughout 2024 and into 2025, we believe it will increasingly cover its expenses reducing the impact on our operating income.

Regarding profitability, we will continue to invest in our growth drivers in a disciplined manner while leveraging our commercial infrastructure. As a reminder, at our September 2022 Analyst Day, we committed to achieving sustained operating income by the first half of 2024.

We continue to take this commitment seriously and based on our Q3 results, we are a bit ahead of schedule. On a pro forma basis with the acquisition of LimFlow, we now expect to reach sustained operating profitability in the second half of 2025.

In summary, we're pleased that Inari is in a financial position to move forward with the acquisition of this important technology. And with that, I'll hand the call over to the moderator for Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Kallum Titchmarsh from Morgan Stanley. Please go ahead..

Yes, thanks guys for taking the question.

Could you maybe help us if you can understand how much of the growth seen in the quarter came from high utilization levels in existing accounts versus new account additions? And then any color on how you think these two drivers could shape up into 2024 as the competitive pressures relax, I guess, on a relative basis? Thanks a lot..

Yes, thanks for that, Kallum. Most of the growth almost entirely comes from existing accounts at this point. We're in 1,500, 1,600 active accounts. We continue to open some new accounts each quarter, but that's certainly plateaued compared to years ago.

As a result, the growth -- the case volume is coming from existing accounts and that trend will only continue to tilt in that direction going forward.

That by the way, is exactly what our VT Excellence program is designed to focus on, is driving penetration and adoption of existing accounts at developing a programmatic, systematic approach to these patients. So, we feel well-positioned to continue to drive that even faster than what you've seen up to this point..

Great. And just one follow-up if I may. I know a competitor in the field released some data early last week illustrating that a certain CDP platform could potentially offer a superior safety profile compared to flow treatment in PE patients.

I was wondering whether maybe, Tom, you could provide some of your thoughts on this data set and then any doc feedback you've had, if any? Thanks a lot..

Thanks for the question, Kallum. I think, firstly, if you look at CDT utilization rates over time, they've done nothing, but decreased quarter-after-quarter for the past several years. That's because the market has already decided that it's time to move on from lytic based therapies to mechanical thrombectomy.

The datasets that was provided really wasn't a trial. It was a retrospective analysis. A lot of questions about selection bias. Even supporters of that technology asked a lot of very challenging questions of the validity of that data set, mostly because the conclusion was something that's completely, unlike our clinical experience.

No other technology does the lytic-based platform provide less bleeding than a non-lytic based platform. So, I think we've seen incredible skepticism from, our customers so far..

Great. Thanks for the color..

The next question comes from Larry Biegelsen from Wells Fargo. Please go ahead..

Good afternoon. Thanks for taking the question. Congrats on the acquisition. The clinical data for LimFlow is quite impressive. So, a lot to ask here, Drew. I can't just I just want to confirm here the penetration of 7% That's by year seven. So, $15 million or $100 million call it in year seven $15 million per year.

Including 2024, maybe just top level setups and make sure I heard, everything correctly, please?.

Yes, so what we were trying to point out, Larry, in the prepared remarks there, were to frame what we see as the medium term revenue potential for LimFlow.

And we were using the penetration that we've achieved over the last six or seven years in VTE, which now stands at 7% as a proxy for what we believe we'll be able to achieve as we begin launching into the CLTI TAM of 1.5 billion. In some ways, we think we're going to be able to potentially go faster than we've been able to drive penetration VTE.

That's because, after all, these patients are no option. They literally have no option other than amputation. It's a much more concentrated account base of high volume centers than what we faced in VTE.

And on top of that, we're going to have high quality clinical evidence that we did not have available to us in VTE right out of the gate published in the New England Journal of Medicine. So we think that's a good proxy for the kind of revenue potential that we see with LimFlow.

And over the medium term, we think we're going to be able to drive the penetration, if not to the same levels we've achieved in VTE, north of that..

With 15 million in 2024, is that the right way to think about it?.

Yes. No, I don't think that's the right way to think about it. So we're just commencing the U.S. launch right now, the LimFlow team is. I think in many ways, 2024 will be a year of foundation building. It'll be a year of training, a year of establishing back approvals of getting the foundation established for the broader launch.

We have not put a revenue number for LimFlow in 2024. I think as we roll out our formal 2024 guidance, presumably early next year, we'll try and put some more context around where we see LimFlow contributing. But I think it'll be a relatively modest contribution here in this first year of their full commercial launch..

Thanks. And then, Tom, just one follow-up on LimFlow for you. So, what we've heard is that it's a relatively long procedure, call it two hours, and a relatively long recovery time. So my question for you is, do you guys see, would you agree? And do you see opportunities to improve that over time? Thanks for taking the questions..

Thanks for the question, Larry. Absolutely. I think one other statistic about the procedural aspects worth mentioning is the 99% technical success that's achieved in early users' hands.

So although procedure time is something that will definitely come down with training, education, more experience, as well as perhaps technical improvements, we're very pleased to see right out of the gate early users can achieve the kind of fantastic results that were demonstrated in the New England Journal article..

All right. Thanks, guys..

Thanks, Larry..

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

Great. Thanks. Good evening. And congratulations on the quarter and the deal.

In terms of the core business, I think the question we're all asking is, and it seems like the quarter is telling us is, is trialing over? What are you seeing in the field from trialing today? Kind of are we past that from that competitive standpoint? And then just on a more granular level is, you gave us the international, but was the core business up sequentially or was that all driven by new products in international?.

Yes. Thanks for the question, Bill. So we did see some trialing kind of spill over into Q3. But as we had anticipated, I think much of that activity is behind us at this point. And the business performed really well. We saw strength across the business. We saw strong procedural growth in both PE and DBT in the U.S.

that obviously continues to make up the bulk of the growth and the bulk of the revenue. We saw strong growth in that area.

We saw continued contribution from new products and new TAMs, InThrill and ProTrieve and REVCORE, all contributing to the quarter, but certainly much more modest compared to the core VTE, and then another strong quarter of growth internationally across the board, again, led by Western Europe.

So we saw strength across the board that all contributed to a really nice solid Q3, 31% growth on the top line, and next to that, some really nice continued progress on our path to profitability and our disciplined approach to OpEx investment..

Sure. And then on the guidance is, fourth quarter guidance is flushing out at about 22% year-over-year. You've been running hot at 30%, for the year roughly, if all three quarters combined and, up and down, but right around there.

Why -- what's the reasoning or thought process behind that deceleration as we head into the fourth quarter?.

I think, Bill, we just want to make sure that we're very confident in the guidance that we provide for Q4. And there's obviously some fluctuations here as we reach the end of the year, and there's some holiday time and some of the things that factor into our thinking about that.

But primarily, it's just one of wanting to feel comfortable, with the numbers we provide to the street..

And I'd be, last question, I promise remiss not to ask on LimFlow. Just, I think a couple of times you've mentioned the reimbursement. What's the wood you need to chop on the reimbursement side to kind of get that all settled out? And thanks for taking my questions..

Thank you. Yes, thanks, Bill. So, LimFlow does have established reimbursement, both inpatient as well as outpatient. So, that's in place today. There's DRG codes inpatient where we believe the majority of procedures will occur here. That was certainly the case, for instance, in their Promise II study here in the U.S.

So, that's in place and will allow a foundation for us to build on. We do have a line of sight to enhanced reimbursement inpatient via the potential for an NTAP, which would take effect late next year, as well as line of sight to enhanced reimbursement in an outpatient via the potential for a New Tech APC.

So, both of those would be additive on top of the existing reimbursement that's already established in those two respective sites of service..

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

Good evening. Congrats on a great quarter and congrats on the LimFlow deal as well. I wanted to ask here a little bit more on the LimFlow side. You mentioned operating support, 2 million to 3 million per month.

Do you expect that to ramp throughout 2024? So, is that just sort of a starting point? And can you remind us of the margin profile on that device based on, existing sort of ASPs and reimbursement assumptions?.

Hey, Marie. I appreciate the question. The 2 million to 3 million a month that we mentioned is actually a number that we expect would decline as we move throughout 2024. The exact pace of that drop, we're not quite sure. As Drew mentioned earlier, we're still putting together and working on the revenue sort of plan for 2024.

But that's a number that we would expect. Ultimately, they'll begin to kind of cover some of their own costs and then that number would decline in 2024 and into 2025. From a margin profile point of view, I think it's best to kind of think about that in terms of the overall blended gross margin of Inari.

So, this would be inclusive of the LimFlow product. And that's the one that I can tell you we're still comfortable kind of guiding to that mid sort of 80s percent gross margin for the company.

So, as we did 88.5% in the current quarter, we expect the gross margin of Inari as a consolidated entity will decline a bit over time primarily due to the international growth of the business. So, the new product kind of additions to it have some effect but not a significant effect..

Okay. That's really helpful, Mitch. Thank you. And then a second question here on sort of the core business and the OpEx outlook. You've done a very nice job of controlling spend there. How are you thinking about sales force on the core market? You've got a lot going on with both DVT and PE and some of the new products.

Are you nearing sort of what you view as peak salesforce levels? Is there a lot more expansion to do cutting up of territories? How do you think about that holistically?.

Yes, Marie. I think we continue to see runway out ahead of us to continue to add to that team. We've certainly added each and every quarter in 2023. And I think we would anticipate adding as we move through 2024 as well. I do think the pace of those ads are beginning to slow at least relative to some of the huge classes we've added historically.

So, I do think we're modulating the pace of those ads.

But given the penetration we're currently at and the runway out ahead and the need to not only focus on VTE, but also begin doing work around some of these other new TAMs, be it within InThrill and AVF or the work we've begun doing in chronic venous disease with REVCORE, looking over the horizon the next year, reentering the arterial market with Artex.

All that I think also points to the need for continued ads to the field team..

Sure. Sounds like you'll be very busy. Thank you so much..

Thank you..

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

Hi, guys. Good afternoon. And thank you for taking the questions here. Congrats on the quarter and the deal. I want to start on LimFlow and was actually hoping to get some more detail on the salesforce that you're bringing over, how many reps are, I guess, coming on board.

How much overlap is there with your existing customer base? It feels like it's a good fit with the existing call point, but was hoping you could expand on that. And then lastly, why not, let the core sales team also offer the LimFlow product? And then I had a follow-up or two. Thanks..

Yes. Thanks for that, Adam. So to start, LimFlow just got FDA approval, PMA approval back in September. They've got an initial team that has been recruited and trained and onboarded, fully trained, and they are commencing the U.S. launch as we speak. That number is something in the neighborhood of a dozen sales professionals.

Right now on the team, we obviously would anticipate adding to that group as we go forward. The overlap with the call point, I think you're absolutely right. There is a significant amount of overlap across the folks we anticipate performing the LimFlow procedure with our historical call points in DVT and PE.

It's a combination of vascular surgeons and IRs and ICs, the exact same group we've been focused on historically. So there is some nice overlap there. To answer the last part of your question, we believe out of the gate here that this technology deserves the kind of focus and dedication of a dedicated field organization.

It's a non-emergent procedure, and it's also a fairly concentrated group of high-volume CLTI, limb salvage centers of excellence. So I think a dedicated sales organization, we can have it be a pretty manageable in scope and still get the job done.

So I think for now, we're anticipating this will stay a separate sales organization focused on LimFlow, will keep the mothership sales organization focused on VTE.

I do think there's some really interesting potential synergies and efficiencies with some of the work we've begun doing from a market development standpoint relative to chronic venous disease.

You've heard us talk in the past about the market development specialist team that we've deployed to begin to understand how to identify chronic venous disease patients who are out being cared for in wound care centers, and in some cases, primary care, podiatry.

Those are the same places where we believe many of these no-option CLTI patients are also being cared for. So you can imagine some obvious synergies in some of that work, which I do think will cross over between the two sales organizations..

That's great color, Drew. Thank you for that. And I guess for my second question, I'm going to actually sneak in a third here. Just one clarification, the DVT and the NTAP that came up, I guess I wanted to clarify that.

Have you or the LimFlow team submitted for those, and you think there's a good likelihood of those being accepted and going into effect next year? I just wanted to clarify that. And then for the follow-up question, just any kind of early thoughts on the VTE market as we look ahead to 2024 and potential pace of growth for the category. Thanks again..

Yeah, so on your first question on TPT, yes, the LimFlow team has submitted for both NUTEC [ph], APC, as well as NTAP. So those submissions are underway. They would take effect here most likely next year in 2024. We're confident or optimistic that those will come through, but until you actually get the approvals, there is some uncertainty there.

Keep in mind, they do have established reimbursement already, and those would be additive or incremental on top of that. In terms of your second question on the underlying growth rate, I think the market is as healthy as we have seen it.

Really robust growth, increased awareness, lots of really good traction, momentum from an overall market standpoint. And obviously, we think our efforts on VTE Excellence and clinical data are driving some of that market growth. No reason for us to expect any change in that as we look out from here.

As we roll out our formal 2024 guidance, we'll certainly put some context around the market. But as we exit at Q3 here, really nice, healthy market backdrop..

Thanks, Drew..

Thanks, Adam..

The next question comes from Mike Sarcone from Jefferies. Please go ahead..

Hey, good afternoon, and thanks for taking my question. I've got two follow-ups on the LimFlow acquisition. You know, the 12 reps to start, you mentioned you anticipate adding to the group going forward. I was just wondering, what is a sufficient amount of reps to address that initial $1.5 billion U.S.

opportunity? And is that $2 to $3 million of cost that you expect to decline over time, does that incorporate, you know, the expectation for additional reps for LimFlow?.

Yeah, the $2 to $3 million certainly incorporates our anticipated investment in the field organization. Like I said, we're someplace in the neighborhood, or LimFlow is someplace in the neighborhood of 12 reps today. Keep in mind, this is a much more concentrated market landscape than what we've faced in VTE.

We think there's maybe a couple hundred high-volume limb-salvage CLTI centers of excellence in the US, and these are non-emergent cases. So, as a result, I don't think we would anticipate needing to build anywhere near the size of the channel that we have established in VTE.

Hard to put a, you know, number on it this early in the process, but I think some of those dynamics are certainly worth considering, and I think it will certainly be much smaller in scope to what we've established and built on the VTE business..

Got it. Thank you.

And just to follow up on, you know, not to get ahead of ourselves here, but the incremental opportunities for less severe CLTI patients and the OUS opportunity, what do you think about timing on those efforts, and, when could we hear more, start to see contributions on that front?.

Yeah, I think those are both likely longer-term opportunities for us. The expansion to less sick, you know, less severe CLTI would likely involve a study and likely another PMA path regulatory approval into Rutherford IV patients.

Some of that may happen on its own, off-label, but for us to get an on-label indication for that would require some additional clinical work and navigating back through a regulatory path.

Likewise, international, certainly a spectacular unmet need with the same population as we look internationally, but work to do there, certainly from a reimbursement standpoint, first and foremost.

So, you know, we will assess and begin work likely in both of those areas, but I think pragmatically speaking, both of them are likely a longer-term opportunity for us over time..

Okay. Thank you. Thank you..

The next question comes from Richard Newitter from Truist Securities. Please go ahead..

Hi. Thanks for taking the questions, guys. A couple for me, maybe just starting with LimFlow, congrats on the deal. I may have missed it, I've been juggling calls.

Did you mention anything about how this will impact the profit profile dilution and, modest revenue, I think I heard, modest revenue contribution in 2023, but what about on the profitability?.

Sure, Richard. It's Mitch. Appreciate the question. We previously, as you know, talked about operating profitability in the first half of 2024. This is for Inari, and I'm not sure if you caught it, but we actually reported an operating profit here in Q3, so we feel like we're a little bit ahead of schedule.

We may have some fluctuations in Q4 and Q1 of upcoming, but that's kind of been the game plan for the core business.

When we layer the LimFlow acquisition on top, you know, because of this 2 million to 3 million a month of cash support that you've heard about a couple times during this call, we need to move the sort of the operating profit target for the combined business out into the second half of 2025.

That's our sort of the current outlook for it, so hopefully that's helpful to your question..

Okay. Yeah. No, that's very helpful. And then just, you know, I think there's been some confusion out there with, how the pricing models work with what's in your bundle, what's not, as you've, you know, started to add a number of new products to the portfolio.

I was just wondering, if you could maybe help clarify for investors how, what the different pricing models are and which of the new -- the newer, more recently launched products are factoring into the bundle that are outside of the bundle.

I just think that could benefit the investment community, hearing a little bit more about the mechanism of pricing and those new products fitting into the procedure pricing model. Thanks..

Sure, Richard. So I think you likely understand in the FlowTrevor part of our business, that has always been under historically a per procedure price model that covers essentially the entire FlowTrevor toolkit.

On the ClockTrevor side, the majority of our ClockTrevor accounts are still on a SKU-based approach where we're pricing the ClockTrevor sheath and the ClockTrevor catheter separately. Some of the new products, I think this is where some of the confusion or questions come from, some of our new products straddle both.

So RevCore, for instance, can be a SKU-based account from a pricing standpoint. In some other accounts, it can be included in one of our PPPs. So ProTree would be the same kind of example where it can be in some accounts as a SKU based pricing and in others as part of a PPP bundle.

So I think some of the questions come from the fact that these new products are straddling both of the two pricing strategies..

Okay. And then –.

Oh, go ahead. Yeah, sorry..

Just to quickly follow up on that, that's really a customer accommodation or convenience that we've developed, VTEPPP. We've had – we have a lot of cases, probably 15% or more of our DVT cases which are complex, meaning there can be clot up around the IVC part.

And we'll sometimes use the ClockTrevor to remove the -- kind of the DVT portion of the clot and then a FlowTrevor to remove the clot up around the IVC.

And rather than charge the hospital basically for a ClockTrevor on a SKU basis and then for the FlowTrevor PPP, we have developed the idea of a VTEPPP, which is at a much lower price than the two would be separately. And that's something that we really did in response to customer feedback, and it's been very well received and accepted..

And yeah, and it sounds like you're doing the same thing for some of the recently launched products.

I'm just curious, on those combo DVT and PE procedures, what percentage of the mix is that? Is that 15%, 10%, 20%?.

Yeah, it's a pretty modest part of the overall patient presentation. I think 10%, 15% is a pretty good ballpark estimate..

Okay. Thanks a lot, guys..

Thank you..

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

Hey, guys. Thanks for taking the questions. Congrats on the acquisition and the quarter here. First question from us, just on some of the comments around the midterm or medium-term expectations for the contribution from LimFlow as well as that 2025 or midpoint, or second half 2025 margin profitability.

Do those assume that there are any either revenue, kind of cross-selling synergies associated with the acquisition, or are a lot of these more of the kind of bare-bones assessment based on maybe what the prior even LimFlow expectations could have been? Or are there any type of synergies that you're accounting for when you're calling out this midterm contribution and 2025 profit?.

Yeah, David, let me get that started, and Drew may want to pile on. But essentially, our thinking about the revenue, for example, we've yet to really craft the 2024, you know, kind of revenue guidance for Inari, and then how that will kind of be layered with the LimFlow acquisition.

You know, Drew mentioned we are extremely excited about the opportunities for the business, and, you know, you've got a sense for how we feel that can grow over kind of an intermediate term period of time.

From my commentary about the cash flow support and also the profitability goal in terms of shifting out by a year, those are really under the kind of the construct of having the Inari core business continue to grow and develop as is, and essentially having the LimFlow business with its separate sales force.

And then we'll kind of look for a lot of opportunities in other support services in terms of, opportunities to provide support for LimFlow. Obviously, there's a lot of G&A and, you know, other type capabilities that we already have as a part of the Inari company that we can provide to LimFlow.

So there are opportunities there to be efficient, but those businesses are essentially intended to be very focused and kind of grow at their own pace, essentially, based on the market opportunities which we're able to develop and the market development, you know, efforts that we make..

Okay. That's helpful. And then, you know, I know you guys have talked in the past about, you know, your confidence that this underlying VTE market or thrombectomy market and VTE has been growing, I think, 20%, you know, 20% or so, and have talked about as the market leader expecting to, you know, grow above that level.

So just wondering if that still is your belief and or if the acquisition here signals any, hesitancy in either that or new product growth expectations that you have. And I just did want to make sure that I heard the ARTX2024 comments appropriately? Thank you..

Yeah, you did hear the ARTX reentry in 2024 correctly. To answer the first part of your question, I think we've never been more confident in the strength of the core VTE franchise. We saw great momentum here in the first nine months of this year. We're seeing strong case growth across both PE and DBT.

We like what we're seeing in the VTE market development work that we're doing. We are leveraging the clinical data and looking ahead that'll be in the form of RCT data. We're seeing nice traction and pickup from some of our new products and some of our new TAMs, and international is continuing to show some nice traction and strong sequential growth.

So taken together, we feel really confident in how the core franchise is performing and all that, of course, is against the backdrop of a really healthy market setup as well. So I think all that is reflected in our confidence to undertake an acquisition and add LimFlow into the portfolio.

I think that reflects the strength and the confidence we have in the core franchise..

All right. Great. Thanks and congrats again..

Thank you..

[Operator Instructions] The next question comes from Chris Pasquale from Nephron Research. Please go ahead..

Thanks. Congrats on the deal. Seems like a great fit. I had one question on LimFlow and then one on the existing business.

On LimFlow, as you think about the potential to move up the curve to Rutherford for patients, what's happening with that population today? Are those patients getting surgery or other endovascular therapies? Just trying to understand what you'd be looking to displace in that population..

Thanks for the question, Chris. So just to be clear, LimFlow is a technology that's really appropriate for what we call no option patients. These are patients who don't have any option for traditional revascularization, angioplasty, surgery, anything like that. The Rutherford class is the level of current symptomatology of the patient.

So the added opportunity in Rutherford for our patients who are somewhat less symptomatic but still are no option in terms of their revascularization. So what we would be displacing is simply conservative therapy, watchful waiting, and amputation..

That's helpful. Thanks for clarifying that. And then on the existing business, REVCORE seems like it's off to a strong start.

I'm curious whether you think you're picking up cases there that you would not otherwise be involved in, or if it's just providing a better solution in procedures that you would have been in already, trying to understand how incremental that product really is..

Yeah, so I'll tackle that one as well. I think the REVCORE product is completely incremental to our VTE business. These are patients who have occluded venous stents. There is currently no approved option for treatment of those patients other than for REVCORE.

I think what those patients might be getting in an off-label fashion prior to REVCORE is conservative therapy or angioplasty and relining with stent, which we know is a terrible solution from a lot of other disease states. So I think all of the RebCorp business that we're doing is incremental..

Great. Thank you..

There are no more questions in the queue. This concludes our question-and-answer session, and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.