Adam Elsesser - Chairman and CEO Sri Kosaraju - CFO Dan Wilson - Director and Head of Business Development.

Mike Weinstein - JPMorgan Bob Hopkins - Bank of America Larry Biegelsen - Wells Fargo Jason Mills - Canaccord Genuity Joanne Wuensch - BMO Capital Markets.

Good afternoon. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra’s Second Quarter 2017 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.

I would like to introduce Mr. Dan Wilson, Director and Head of Business Development for Penumbra. Mr. Wilson, you may begin your conference..

Thank you, Davin, and thank you all for joining us on today’s call to discuss Penumbra’s earnings release for the second quarter 2017. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, can be viewed under the Investors tab on our company Web site at www.penumbrainc.com.

During the course of this conference call, the company will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality, compliance, and business trends.

Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-Q for the quarter ended June 30, 2017, which will be filed with SEC on August 8, 2017, as well as those described in our 10-K for the year-ended December 31, 2016, filed with the SEC on February 28, 2017.

As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with the SEC, including the 10-Q and 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock.

Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. We anticipate the prepared comments on today’s call will run about 15 minutes. Thank you very much. And with that, I would like to turn over the call to Adam Elsesser, Penumbra’s Chairman and CEO..

Thank you, Dan. I’d like to welcome you to Penumbra’s second quarter 2017 conference call. I’m joined today by members of our senior management team. I will begin today’s call with a few business updates from the second quarter, and then I will turn the call over to Sri to cover the detailed financials.

Our total revenues for the second quarter of 2017 were $80.6 million compared to $65.1 million for the second quarter of 2016, an increase of 23.8% as reported and 24.6% in constant currency. We had an operating loss in the quarter of $1.3 million compared to an operating loss of $670,000 for the same period last year.

We saw strong sequential growth in the quarter, which we attribute to our growing markets, the impact of our innovative products and the tireless efforts of our talented team at Penumbra. I would like to begin today’s call with a few perspectives on our neuro and peripheral markets.

And following that, I will share several updates within our product portfolio. Starting with ischemic stroke. We see the increase in the number of mechanical thrombectomy procedures continuing to progress as we expected. We saw strong sequential procedure growth in the second quarter.

However, it is very important to reiterate that at this stage, the growth may be uneven between quarters. What is actually much more important to us are the major initiatives that will help drive market growth for the next several years.

This past month, at the Society of Neurointerventional Surgery meeting in Colorado Springs, many of the formal presentations and informal conversations contained consistent themes about triaging patients to the appropriate hospital; and once there, streamlining the stroke service to reduce door-to-treatment times.

These themes were centered on improving outcomes and increasing the number of patients who could be treated. Other important updates at SNIS were about the Get Ahead of Stroke initiative.

As a reminder, the goal of this initiative is to improve care for stroke patients with large vessel occlusions by focusing on the rules and legislation to ensure that appropriate stroke patients get to the right hospital to be treated.

The progress since last year’s meeting has been meaningful in setting up preliminary state models, increasing awareness and exposure and developing broader support. We are at the beginning of starting to see some sign of early movement.

As an example, in Arizona, one of the first states targeted within the initiative, the state regulatory review council adopted a new rule that just took effect on August 6, updating the emergency stroke protocols by changing the way first responders triage and treat stroke patients.

With this new rule, first responders will be trained to identify large vessel occlusions and then be allowed to transport patients to the appropriate facility to treat them. In the past, they were required to take them to the nearest hospital, regardless of capability to perform interventional procedures.

Now turning to the peripheral thrombectomy market. We continue to be optimistic about the opportunity for new patients to be helped by the immediate removal of blood clot compared to the less immediate mechanisms that dissolve or macerate clot.

As we pass the first full quarter following the presentation of the ATTRACT trial, it is still early for us to see a direct impact in patient referrals for DVT treatment. However, the results of that study have not yet been published.

We anticipate there could be some near-term marketing headwinds once that occurs, given that the trial did not meet its primary endpoint. We will continue to provide further updates. But we at Penumbra are continuing to move aggressively forward on our strategy in this area. Our peripheral thrombectomy efforts today are focused on two key areas.

First, we are continuing to introduce our Indigo technology to a broader group of physicians; second, we are beginning our own clinical trials to support the development of this market. As an example, Penumbra recently received an IDE approval to conduct a trial with the Indigo System for patients with pulmonary embolism.

We expect the first patient to be enrolled this fall and for the trial to complete enrollment in late 2019. If the trial is successful, we believe it could add important data to our effort to immediately remove embolisms from the pulmonary arteries.

Alongside the critical work that is being done to develop our major markets, we continue to stay focused on developing our product portfolio. Last quarter, we provided updates on several new products. As a further update, late in the quarter, Penumbra initiated a voluntary field recall action of four lots of our 3D revascularization devices.

We are very early into our U.S. launch of 3D. And while we had feedback of very successful cases, we saw a small number of instances of device breakage, which we had not seen in our prior history of producing 3D for the European markets. Our investigations attributed the cause to a raw material issue, which we have now addressed.

The recalled products have all been accounted for and we have now resumed shipping the 3D device. I would like to finish our update on our product portfolio by talking about another new product for which we obtained FDA clearance in the second quarter.

CAT RX is a dual-lumen, rapid exchange aspiration system that is an example of Penumbra thinking outside of our current areas. This product represents two new developments for Penumbra. First, it was designed with new catheter technology that took us a few years to develop internally.

Second, while this product is part of our Indigo family, its FDA clearance covers the removal of blood clots in both the peripheral and coronary vasculature. It is important to be very clear here. This expansion of indication does not immediately translate to commercial opportunity.

We know there are a great many patients that have a large thrombus burden in their coronary arteries and we may be able to offer a better solution with CAT RX. However, similar to our efforts with our neurosurgical tool for hemorrhage, this effort will take time and most likely involve meaningful clinical work before we can see commercial success.

I’d like to close out my opening remarks by sharing the story of a very lucky man. This gentleman, 65 years old and recently retired, lives in Virginia. Recently, he had a large basilar stroke. This type of stroke has traditionally had very bad outcomes. He was first taken to the closest local hospital.

Once triaged, he was transferred by helicopter to Sentara Martha Jefferson Hospital, which had recently added a helicopter pad in large part to help open their stroke service to the surrounding area. He arrived with an NIH stroke scale of 36, which is extremely high. In fact, he was comatose. Within 20 minutes of arrival, the procedure was underway.

Within 10 minutes of starting the procedure using just Penumbra’s ACE68, all of this patient’s clot was sucked out. And here is the remarkable part. With the speed of transferring him and the speed of the procedure, he made an almost complete recovery back to normal.

When he was discharged several days later, he had an NIH stroke scale of 1 and a modified Rankin score of 0 at his 90-day follow-up. I had the honor of speaking to this patient recently and he expressed his gratitude for his doctor, Dr.

John Gaughen and the entire stroke team at Sentara Martha Jefferson Hospital for their amazing work that allowed him to get back to his life as it was before the stroke. This story highlights two important things. First, that Penumbra’s technology continues to make a huge difference in the speed and ability to remove clot.

And second, the importance to patient outcomes of taking on the challenges of getting patients to the right centers. With that said, we cannot rest until everyone has the same chance to be treated as this fortunate gentleman. This treatment should be a matter of policy and not chance. I’ll now turn the call over to Sri to cover the financials..

Thank you, Adam. For the second quarter ended June 30, 2017, our total revenues were $80.6 million, an increase of 23.8% reported compared to the second quarter of 2016 or 24.6% in constant currency. Our geographic mix of sales in the quarter were 66% U.S. and 34% international.

Neuro and peripheral vascular represented 70% and 30% of sales, respectively. We saw strong sequential revenue growth across both businesses. Revenue from our neuro business grew to $56.2 million in the second quarter of 2017 from $45.4 million in the same period a year ago, an increase of 23.9% reported or 24.8% in constant currency.

Our neuro growth was primarily driven by sales of our Penumbra system for ischemic stroke. We observed increased sequential growth mainly due to increased procedural volumes. While we continue to see the same underlying trends behind the market’s growth, it is worth noting that the quarterly progression of growth may not be linear.

As we look forward to the remainder of the year, we expect to see seasonality in our neuro business in the third quarter. Additionally, as we reminded you last quarter, in the back half of the year, comparisons will include the launch of our SMART COIL in Japan.

Revenue from our peripheral vascular business grew to $24.4 million in the second quarter 2017 from $19.7 million in the same period a year ago, an increase of 23.5% reported or 24.1% in constant currency. Our growth in peripheral was driven by our Indigo family and peripheral thrombectomy as well as our Coil portfolio in peripheral embolization.

As we discussed on our last earnings call, this quarter’s comparison includes the impact of last year’s SIR meeting, which fell in the second quarter. Our growth in the quarter included additional users. However, as Adam had mentioned, at this point, it is still early to discern any impact from the ATTRACT trial or its upcoming publication.

Our gross profit in the quarter was $50.9 million or 63.2% of revenues compared to $41.5 million or 63.7% of revenues for the same quarter last year. As is consistent with our history, we would expect our gross margins to be pressured in periods of new product introductions. Now moving to our operating expense.

Total operating expense for the quarter was $52.3 million or 64.8% of revenue compared to $42.1 million or 64.7% of revenue for the same quarter a year ago. Our spend increased primarily due to increased compensation expense related to growth in headcount and increased clinical trial expense.

Our research and development and SG&A expenses were 8.1 million and 44.2 million for the quarter, respectively, compared to 6.3 million and 35.9 million for Q2 2016, respectively. We had an operating loss in the quarter of $1.3 million compared to an operating loss of $670,000 for the same period last year.

As we think about our spending and investments, we will continue to be focused on IT infrastructure projects and business development initiatives, which we believe will help support our scale and future growth. Finally, as it relates to our revenue guidance.

While we are not changing our revenue guidance range, we do feel comfortable at the top end or slightly above our previously stated 2017 revenue range of $312 million to $317 million. We expect to see seasonality in the summer and thus would expect our third quarter revenues to be sequentially below our second quarter.

And now, I’d like to turn the call back to Adam for closing remarks..

Thank you, Sri. As we have grown, Penumbra has been able to help physicians positively impact a great number of new patients. I would like to close out my remarks this quarter with a short review of the work ahead at Penumbra.

As Sri mentioned, we have undertaken the investment in building the infrastructure and capabilities to continue to handle our growth. We continue to push ourselves to innovate our products and add new products to our portfolio. All of these efforts require hard, challenging and sometimes unglamorous work.

I want to acknowledge the entire Penumbra team for taking on these critical challenges so that Penumbra can help – keep helping more and more patients. Over the years, I have witnessed many extraordinary efforts at Penumbra. And during this time, one trait has emerged constantly and that is the tenacity of the almost 1,700 great people at Penumbra.

This tenacity helps us compete, to overcome challenges and to continue to pursue our mission of helping patients with serious medical conditions. Thank you for your attention. We’ll now open it up for questions..

[Operator Instructions]. Your first question comes from the line of Mike Weinstein with JPMorgan. Your line is open..

Thanks for taking the questions and congratulations on another strong quarter, guys. If I look at this quarter just relative to the first quarter, probably the number one takeaway was that the neurovascular business accelerated and appeared to be the principal driver relative to Street expectations.

You commented that just felt like a stronger quarter for procedure growth.

Anything in particular within your portfolio outside of just stroke volumes that you could point to?.

Mike, good question. I don’t think that we can point to any particular item that happened this quarter versus other quarters.

As we’ve said for several years, this is not going to be a linear process as efforts happen throughout the country, whether it’s the local efforts like I referred to in Virginia at the Sentara Martha Jefferson Hospital with adding a helipad to treat more stroke patients or some of the other efforts throughout the country done at a local level.

We’re starting to see more and more momentum, and I think that’s evidenced by the rule change in Arizona. But I wouldn’t pin this particular growth to one of those items.

I think the overall energy that is being put on this is reaching an all-time high and it’s – we’re going to see the real benefit coming in several years when some of these all come to fruition. But we were obviously able to see a big growth this quarter..

And how would you characterize the 3D launch from here? So the good news on the call was that you resumed shipping.

What are your plans in terms of putting the product back out in the marketplace now?.

Yes, thank you. Really nothing has changed from our initial strategy that we talked about. We’re particularly proud of the product. We’re going to market it and try to get folks when they need a stent retriever, if aspiration alone isn’t successful to use it. That has certainly been one of the things that have started to happen in the earliest days.

The product is working well in those situations and we’re proud of it. I don’t think anything has fundamentally changed from our strategy that we believe that it is a really good adjunct tool as we believe all stent retrievers are, but this is a particularly good one for the use in conjunction with aspiration..

Last one on my end, Adam. Could you talk a little more about the EXTRACT-PE [ph] which you touched on briefly in your prepared remarks? It’s a single-arm study.

Can you just talk a little bit about the design and what you hope to show in the trial?.

So we – there’s been several studies, or one study that has been out with another company for PE. We’re somewhat modeling on that. The FDA has sort of put some parameters around that single arm study and basically showing the LV/RV ratios between them.

And in this particular case, we’re focusing on submassive patients where we think those that are at risk, we can get the most benefit to..

So you’re showing a reduction from baseline in RV/LV volumes, is that right?.

Yes..

Okay, perfect. Okay, great. Congrats again, guys. Thank you..

Thank you, Mike..

Thanks, Mike..

Your next question comes from the line of Bob Hopkins with Bank of America. Your line is open..

Thanks very much. And I’m on a cell phone, so I apologize.

Can you hear me okay this afternoon?.

Yes, we can..

Terrific. Thank you. So a couple of things and congrats on the momentum on the neuro business especially, really strong quarter. My first question is on peripheral and your comments on the ATTRACT study. I guess a couple of quick things. Like, when do you expect it to publish? And I’m just curious as to why you’re commenting on it at this time.

I was wondering like – have you learned something new about the potential impact since the data was first released. Just kind of curious for the rationale for the incremental comment here..

No, I think that’s a valid question and I’m glad you asked it. We do not know when it’s going to publish. I’ll be honest. I think most of us have been surprised, given that was presented a while ago that it hasn’t published yet.

So in part, I think we are just reminding folks that it hasn’t published because there’s been enough time that has gone by between its presentation and publication and making sure that we make everyone remembers that the effect of it being published is still somewhat unknown, and we just want to call that out.

As I have said, though we’ve many times seen the movement continue toward immediate clot removal, which is to our benefit in terms of the Indigo product. And we certainly have not seen any fundamental change today in any of the referral patterns. We obviously don’t know what happens when it publishes.

We certainly don’t expect to see anything from what we hear in our customer base. But until that happens, we can’t be definitive about that..

Okay, that’s helpful background. Thank you. Just wanted to make sure we were clear on that. And then one other thing, Adam, that I wanted to ask you about is with 3D coming back, I know with the initial launch, you were very particular about the way you describe the product to us and position the product in the marketplace.

I’m just curious if you think this kind of early setback means that our expectations should be reduced relative to the original set of expectations we had, or is this setback being perceived as really not [Technical Difficulty]?.

Yes. I don’t – did you cut out – you might have cut out right at the end. I don’t think anything has fundamentally changed. I think the recall has been pretty short lived. Obviously, it’s frustrating for everyone when we have something like that, but I was particularly proud of the way we handled that.

The reaction from the physician community was incredibly positive for just taking the action and making sure that things were done the right way. So I don’t think there’s any negative reaction at all from that. And I think we’re back where we had hoped to be on 3D..

Your next question comes from the line of Larry Biegelsen with Wells Fargo. Please go ahead. Your line is open..

Hi, guys. Thanks for taking the question and congrats on a good quarter. Let me just ask Adam about the acceleration in neuro again. And obviously, we saw the DAWN trial results earlier this year. We have heard anecdotally that it is helping the market.

What do you think the impact has been? Do you agree that it’s helping? And what do you think it does from this point going forward?.

Yes. As we’ve said in the past, we certainly were delighted with the results of the DAWN study. It I think has been certainly another positive momentum-building effort.

I don’t know if I could be definitive in that statement that it is because of that versus all of the tireless efforts at local hospitals to get ready and have the stroke teams out there making sure patients get to the right place and all of those efforts versus the DAWN study. I think they all add up to the kind of momentum that we’re seeing.

And again, we’re going to see that in an uneven way for the next year or two, as we build towards some of the larger sort of initiatives that are underway..

Thanks. And then for follow-up. You commented on the cardio indication I think for the product you’re calling CAT RX, if I heard it correctly. But it’s part of the Indigo family I think you mentioned.

Can you talk – is that a signal, Adam, that you’re going to pursue more organic and inorganic growth opportunities in cardio? And can you talk a little bit more about what you need to do to take advantage of the commercial opportunity for CAT RX? You talked about it being a long road, something along those lines, but what are the next steps here? Thanks for taking the questions..

Yes. So thank you for the – appreciate the questions. So CAT RX is something we’re particularly proud of. We are taking our existing aspiration technology that uses, as you know, power aspiration. That’s new in – really in the coronary field. They’ve used sort of more modest handheld technology.

And we think that there is a real role from that, from everyone that we’ve talked to and some of these patients that have a particularly high burden of thrombus. But as you know, in the coronary field, there is a very strong rigor around scientific data and doing clinical work and we’re going to go and pursue that.

It would be premature for us to be thinking beyond that right now. That’s our goal to focus on that particular product and see if we can make a significant clinical difference with that before we start looking past that to anything else..

In terms of the inorganic and organic growth opportunities in cardio, that part of the question, Adam?.

Yes..

Got it. Thank you..

Sure..

Your next question comes from the line of Jason Mills with Canaccord Genuity. Please go ahead. Your line is open..

Thanks, guys.

Can you hear me okay, Adam?.

Yes, I can..

Because I too am on a cell phone. Congratulations on another great quarter. To start, Adam, a two-part question on the stroke market. I guess first, I wanted to take a step back and I wanted to see if you could provide maybe your updated perspective on the market.

The one – well one of many questions we get from investors is just looking at the number of ischemic strokes in large vessels that occur every year in the United States. While growth has been outstanding, you benefited – in part driven that – the penetration is still relatively low.

So your commentary over the last couple of quarters and even more acute today with respect to the initiatives that are starting to see some early signs of movement are interesting, insofar as they seem like they may begin to open up what has been notwithstanding good growth frustratingly low penetration for a lots of – hundreds of thousands of patients that aren’t treated.

So I’m wondering if you could comment just from a market perspective, where we are now from a penetration standpoint and what these initiatives over the course of maybe the next two or three years could do.

Could we in fact – I guess the bottom line question is, could we in fact see a trend of accelerating procedure growth that you benefit from in sort of a tide lifting all boats? And I guess the second question more specific to you in the stroke market, the cost-benefit sort of analysis, if you will.

And at the SNIS, I think there were some discussions about some hospitals adding a second biplane, but looking for cost savings elsewhere and they’re finding it perhaps and going with the aspiration-first strategy given the AST differential between ACE and stent retrievers.

I’m wondering if you could comment on benefits you’re seeing from that trend as well?.

Yes, Jason, great question. And let me sort of – maybe I’ll work backwards with the questions. The first question around our cost benefit, I certainly think that we have known and certainly talked about the cost benefit of starting with direct aspiration first for some time. There have been papers published.

I think there is additional papers that are coming out. There were presentations at SNIS, as you alluded to, where really cost savings centers were able to use that money – that savings to expand in the second rooms and be able to help more people. So I think that’s pretty well documented.

And for those physicians and hospitals that are open to an amenable to understanding and taking advantage of that, I think there has been some huge benefit not only to their practice but to their entire area that – because their capacity has gone up.

As it relates to sort of the growth of the market over the next several years, I think we were pretty careful in our prepared remarks and I want to reiterate it again. Do not translate this one quarter into sort of a quarterly expectation.

We will see a bit more of a rocky quarter-by-quarter growth for the next year or two, as some of these initiatives take hold. And then – and that’s just natural.

If you think about what it takes, you’re relying on your – literally hospital-by-hospital or region-by-region addressing these issues and sometimes that happens and it benefits – in a quarter sometimes it happens and doesn’t happen over a month or two period. And you see a quarter where you don’t have that benefit.

So just like last quarter, where we didn’t have quite the same stroke growth and we said the same thing, we want to caution you this quarter where we did have it not to read too much into it. I think that’s really important.

I think we are keeping our eye focused on the period of time several years from now where all of these collective efforts will show that kind of growth coming..

Okay. And just a follow up on that, Adam. Just put hard numbers to it. At least in our model sort of looking out to 2020, if we were looking at maybe about quarter of the patients who are applicable to mechanical thrombectomy intervention, you’re talking about maybe 45,000, 50,000 procedures. Again, that’s 25% penetration.

Is there something else, or is it just a combination of all of these initiatives that will eventually collude to drive that significantly higher? I just – the number that sticks out is the inverse of that 25%, the 75% of patients who still in 2020 in our model won’t get the benefit of mechanical thrombectomy.

And I’m wondering – and I think investors are wondering sort of what gives in terms of when those patients also benefit.

If there are other things afoot that you can talk about or if it’s just we have to be patient and things happen over time?.

Jason, I think that is a great question. And I think the best way to answer that is the work that needs to be done where patients are triaged at the ambulance level or at the emergency service level and taken to the appropriate center, people know how to do that now. That is well discussed and can be implemented.

It just requires an awful lot of rules, whether it’s a local county rule or a state rule to change. And there are some folks who aren’t sure that that rule should be changed. There are lots of competing economic interests. And when that happens, things aren’t always as linear and clear.

What I have heard and what I have witnessed is that there’s very little disagreement or arguments around the clinical need and the patient benefit to do this. So the rest becomes a little more difficult to talk about loudly and openly because they tend to be more financially motivated reasons. But all of that just takes some time.

When we can sort through that and when we can get past a big enough hurdle, it seems fairly obvious that everything would start to fall into place.

Because from a clinical standpoint, those of us who are actively involved in this really haven’t heard a legitimate clinical argument not to be triaging the patients and making sure they get to the right place..

That’s helpful. I appreciate that. Just on the PT side, and I’ll back in queue. Interesting trial, the EXTRACT-PE study.

I’m wondering have you considered or will you consider a trial looking at iliofemoral DVT, which in the ATTRACT study as we remember from when that trial was published, it actually showed a trend towards mechanical thrombectomy being advantageous.

And you’ve decided to at least initially go after the PE – submassive PE market, which as I understand it is quite large. So it makes sense. But how are you thinking about developing the part of the DVT market that seem to show some positive trends in the ATTRACT study? That’s the first part of the question.

And then on the CAT RX side, I’m old enough to remember a trial in AMI with another device that obviously doesn’t seem to be very good, but didn’t do well. And I’m just curious – that was a very large study.

I’m curious if that’s the kind of study that you think would be necessary to drive fairly significant utilization of CAT RX in the coronary vascular eventually..

Well, great two questions. Let me start with the first one and deal with the question of DVT in iliofemoral. The answer is we feel very confident that over time we can and will do clinical work.

We think it would be prudent for us to wait and see and have the ATTRACT study both published and have the other parts, not just the primary endpoint but the other endpoints published because that will help everyone in the field be able to sort of tease out the right pathway to design additional clinical work, so that really becomes an issue.

As it relates to CAT RX and doing a study, if you’re referring to the I believe total study, that was a very – I think very different study where they were looking at really all comers, whether or not they had a large thrombus burden or not.

And our focus really is on patients in which we can be very purposeful and help and that would be patients with large thrombus burden. So I think it’s a little premature for us to be focusing on that scale of a trial.

If I misunderstood that you were talking about the total study and in fact you were talking about the AMI study, obviously it’s very different type of product and we think that just removing a clot will be very much different than that study..

Yes. Thank you. Thanks, Adam..

Your next question comes from the line of Joanne Wuensch with BMO Capital Markets. Please go ahead. Your line is open..

Good afternoon and very nice quarter.

Could we spend a couple more minutes on the CAT RX product that you’re talking about, and what the pathway is to bringing that to the market?.

Sure. It’s sort of – I’ve sort of tried to say we obviously have to do clinical work. We first of all have to do cases, make sure that our theory is accurate that we can remove clot effectively and safely and the product’s sort of all ready to go. That will take a little bit of time.

And then we’ll start to – based on how that goes, start to see and feel and understand the use of the product, the ability to use it in what kind of cases and then begin to start thinking about what clinical work would be necessary to show a benefit in cases. So there is a series of steps ahead of us that we’ll start to pursue.

We’ll obviously keep you updated as we pursue them and whether or not those are going well or not..

Okay. And my second question is, in keeping your guidance at the top end or somewhat above would imply a significant slowdown in the second half of the year into the mid-teens.

Why is this going to slow down that much? And how do you define somewhat above?.

Right. Thanks, Joanne, for the question on the guidance. I think everything you heard today, obviously things are going with great momentum and very much the way we had expected. So the guidance update while we didn’t change the range, the commentary around guidance is updated.

And to talk about at the high end or slightly above is a progression of commentary that we haven’t discussed before. If you look at sort of the numbers as you are breaking down, the second half implies a sequential increase over the first half. There are a couple sort of nuances in that to comment on.

You’ll recall last quarter we spent a good amount of time trying to detail the Japan SMART COIL launch and really trying to proactively get in front of the reported growth rates in the back half of the year that would be impacted because of that launch, which we had late last year.

So I think that will help answer a lot of your questions on sort of the reported growth rates that you’re implied to be seeing. But I just want to come back to the point of the sequential growth that we see in the back half is actually – is quite meaningful and not to underestimate or downplay that. I also want to comment on our second quarter.

I think everyone sort of had nice comments to say about the quarter. But to put into perspective, it’s a 10% sequential increase that we experienced in Q2. And for our neuro business, since we’ve been public over the last eight quarters, we haven’t had a sequential increase in neuro of this magnitude.

So it is really an extraordinary quarter and credit to our team and everything going in the right way in the markets. But that’s just helpful to kind of put into context how we’re talking about the rest of the year..

Okay. Thank you very much..

[Operator Instructions]. Your next question comes from the line of Bob Hopkins with Bank of America. Please go ahead. Your line is open..

Yes, sorry about previously. The second question I wanted to ask is just on – following up on 3D.

And I guess the way I’d phrase the question is, do you think doctors are any less enthusiastic about 3D given the initial setback, or do you think they’ll take this recall in stride, and our expectations for 3D shouldn’t really change outside of being off the market for a few months?.

Yes, Bob, I think it’s a great question. Look, there is always going to be one or two doctors who may have that negative reaction. The reaction that I’ve been privy to and most of the team has heard has been nothing but compliments and a great respect for how we handle this and how quickly we did it.

And I think in the long run, it shouldn’t have a fundamental impact on the device itself..

Okay, that’s encouraging. Thank you..

Thank you..

There are no further questions at this time. Mr. Wilson, I turn the call back over to you..

Thank you, Devin. On behalf of our management team, thank you all again for joining us today and for your interest in Penumbra. We look forward to updating you on our third quarter call..

This concludes today’s conference call. You may now disconnect..