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Edited Transcript of CSII earnings conference call or presentation 29-Oct-19 8:30pm GMT

Q1 2020 Cardiovascular Systems Inc Earnings Call

ST. PAUL Nov 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Cardiovascular Systems Inc earnings conference call or presentation Tuesday, October 29, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey S. Points

Cardiovascular Systems, Inc. - CFO

* John E. Nielsen

Cardiovascular Systems, Inc. - VP of IR & Corporate Communications

* Rhonda J. Robb

Cardiovascular Systems, Inc. - COO

* Scott Raymond Ward

Cardiovascular Systems, Inc. - Chairman, President & CEO

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Conference Call Participants

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* Christopher Thomas Pasquale

Guggenheim Securities, LLC, Research Division - Director and Senior Analyst

* Danielle Joy Antalffy

SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Analyst

* David Joshua Saxon

Needham & Company, LLC, Research Division - Associate

* Frank James Takkinen

Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst

* Jayson Tyler Bedford

Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst

* Malgorzata Maria Kaczor

William Blair & Company L.L.C., Research Division - Research Analyst

* Mathew Justin Blackman

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Cardiovascular Systems, Inc., Fiscal 2020 First Quarter Earnings Conference Call. (Operator Instructions)

I would now like to turn the call over to your speaker today, Jack Nielsen, Vice President, Investor Relations and Corporate Communications. Thank you. Please go ahead.

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John E. Nielsen, Cardiovascular Systems, Inc. - VP of IR & Corporate Communications [2]

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Thank you, Chris. Good afternoon, and welcome to our fiscal 2020 first quarter conference call. With me today are Scott Ward, CSI Chairman, President and Chief Executive Officer; Rhonda Robb, Chief Operating Officer; and Jeff Points, Chief Financial Officer. Hopefully you've had an opportunity to review today's press release. We will discuss our first quarter results in detail on today's call.

During this call, we will make forward-looking statements. These forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding CSI's future financial and operating results or other statements that are not historical facts. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results.

I will now turn the call over to Scott Ward.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [3]

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Thank you, Jack. Good afternoon, everyone, and thank you for joining us today. I am pleased to report that the momentum in revenue we experienced throughout fiscal '19 has continued into fiscal '20. In Q1, CSI produced double-digit growth for the sixth consecutive quarter with revenue of $64.5 million, representing a 15% increase compared to last year. Worldwide revenue increased -- worldwide peripheral revenue increased over 10% to $45.5 million led by 12% unit growth in our domestic orbital atherectomy business with strong performance in the OBL and the hospital site of service.

Worldwide coronary revenue increased over 26% to $19 million led by 10% unit growth in our domestic orbital atherectomy business, increased sales of our procedure support products and continued adoption of orbital atherectomy in Japan. ASPs for both peripheral and coronary were stable and better than forecast. Gross margins remained above 80% for the quarter. Q1 also represented a new high point for case coverage with CSI reps and clinical specialists present in 70% of our cases when orbital atherectomy was used. Our increasing presence in cath labs not only assures great customer support, it also allows our sales reps to effectively introduce procedure support products to more physicians.

Sales of the 1-millimeter Sapphire balloon to Teleport Microcatheter, peripheral guidewires and our radial support products are continuing to gain traction and grew meaningfully in Q1. With the approval of our Nitinol Coronary ViperWire in September, we are now able to offer physicians Diamondback and a full complement of coronary procedural support devices. We also launched the exchangeable atherectomy system in September, and this novel device will allow the use of multiple crowns to enable complete leg revascularization in a single intervention.

Finally, the commercial launch of orbital atherectomy in international markets continues to produce solid results. We achieved $3 million in international revenue driven by strong adoption in Japan and market expansion in Asia, the Middle East and Europe. In summary, CSI delivered a very strong first quarter. We are executing on our key growth initiatives. We continue to grow above market. We've sustained strong gross margins, and we are making progress in expanding our product portfolio. Rhonda will provide further detail regarding our commercial progress and R&D pipeline in just a few moments, but first, Jeff will provide you with additional information regarding our first quarter results. Jeff?

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Jeffrey S. Points, Cardiovascular Systems, Inc. - CFO [4]

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Thank you, Scott, and good afternoon. As Scott mentioned, first quarter revenue of $64.5 million represented a 15% increase compared to last year. In total, we sold over 21,000 orbital atherectomy devices during the quarter, representing a 17% increase compared to last year. Worldwide peripheral revenue increased 10% to $45.5 million. Domestically, peripheral unit volumes increased 12% as our strategies are driving attractive growth in both the OBL and hospital sites of service.

ASP decline was in the low single digits, slightly better than our expectations and recent trends. Worldwide coronary revenue increased 26% to $19 million. Domestic coronary revenues grew 17%, primarily driven by increased unit volumes and increasing sales of our procedure support products. Coronary ASPs, again, declined modestly and consistent with expectations. The revenue generated in the U.S. and international markets was as follows. Total U.S. revenue increased 12% to $61.5 million. Domestic peripheral revenue increased 10% to $45.3 million, and domestic coronary revenue increased 17% to $16.3 million.

International revenue totaled just under $3 million. We continue to forecast fiscal '20 international revenue of $10 million to $11 million. For your models, we anticipate Q2 international revenue of $2 million to $2.5 million. As we have indicated previously, timing of shipments to our distributors will cause modest fluctuations in our international revenue on a quarter-to-quarter basis. In Q1, gross profit margin remained strong at 80.4%. Operating expenses of $57.8 million increased $8.9 million or 18% compared to last year. R&D expenses associated with investments in new product development and increase in enrollment in the ECLIPSE clinical trial increased $3.4 million or 46%.

As we shared with you at our recent pipeline update meeting at TCT, we are accelerating our investment in R&D to broaden our product offering, expand the use of orbital atherectomy and drive long-term value. SG&A increased 13% due to increased investments in clinical specialists along with physician training and medical education investments to support our international expansion. Finally, you'll notice that our P&L now includes a line for amortization expense. This is primarily related to our recent acquisition of the WIRION Embolic Protection device. For modeling, you should anticipate incremental amortization of approximately $275,000 per quarter related to this transaction.

As I mentioned on the call in August, Q1 traditionally represents our lowest revenue and highest net loss of the fiscal year. First quarter net loss was $5.8 million. Adjusted EBITDA was a loss of $1.1 million. We anticipate sequential increases in revenue and improving profitability throughout the remainder of the fiscal year. We ended the year with $105 million in cash and marketable securities. The decrease in our cash position from Q4 was expected and was primarily related to 3 items: initial cash consideration related to the WIRION acquisition, payroll taxes on stock vesting in August and year-end bonuses and commissions.

That concludes my comments on our Q1 financial results. Our solid first quarter keeps us on track to deliver fiscal '20 results consistent with our original guidance. We continue to anticipate revenues in the range of $278 million to $283 million, representing annual revenue growth of 12% to 14%; gross profit margin of 79% to 80%; net income of approximately breakeven, excluding approximately $1 million of intangible asset amortization; and an additional $1 million of direct expenses related to the WIRION acquisition; and positive adjusted EBITDA.

Rhonda will now discuss our commercial developments. Rhonda?

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Rhonda J. Robb, Cardiovascular Systems, Inc. - COO [5]

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Thank you, Jeff. As you just heard, our first quarter revenue growth of 15% was driven by strong commercial execution and momentum in 3 of our key growth drivers. We saw core domestic atherectomy unit growth of 12% fueled by key product launches that we'll highlight today; strong sequential and year-over-year growth in the sale of procedure support devices; and international revenue of $3 million representing 121% growth.

Starting in coronary, our worldwide revenue grew 26% in Q1. As we've shared with you previously, the strength and stability in coronary comes from several strategies that we've been executing now for over a year. First, as our patients increasingly aggregate at coronary centers of excellence across the country, we directed resources to enable an increased number of dedicated coronary sales representatives and clinical specialists to support physicians in these facilities and drive growth. And during fiscal '20, we plan to double the number of dedicated coronary representatives to 40. Expanding on our coronary channel positions us for the anticipated completion and readout of the ECLIPSE results in fiscal '21 and portfolio expansion beyond.

In addition to providing a high level of service during the treatment of a very challenging patient population, our presence in the cath lab allows us to introduce new novel technologies that improve the quality of care and increase our revenue per procedure. In Q1, we launched our new Nitinol Coronary ViperWire Advance Wire with Flex Tip. When combined with the GlideAssist feature on our coronary atherectomy device, the Sapphire 1-millimeter balloon and the Teleport Microcatheter, we now offer our physicians a compelling selection of tools for the treatment of their most difficult cases. We believe this offering will allow us to drive deeper penetration into complex cases and higher revenue per coronary procedure in the future.

On the international front, we've also seen success of combining orbital atherectomy with procedure support products in Japan. Recall that we launched our coronary OAS with GlideAssist and the Nitinol ViperWire in January. Since then, we have experienced an acceleration in adoption and procedure growth in Japan resulting in CSI capturing 20% market share in Q1. In addition, demand from international markets remains robust. In Q1, we certified a total of 79 new physicians, including 57 in Japan alone.

So turning now to peripheral. Our worldwide business grew over 10% in Q1, driven by 12% unit growth in the core domestic peripheral atherectomy business. Our ability to drive above-market growth comes not only from strong case support and producing best-in-class long-term medical evidence, but also continued innovation on our core technology. We are committed to developing low profile tools that deliver full leg revascularization and give physicians the option to use alternative access sites such as pedal, tibial and radial. Our continued above-market growth rates in peripheral validate that innovation in this space is valued and that CSI is advancing the therapy standard to treat severely calcified and long lesions.

A few key developments to highlight. First, since launching in Q1, we are experiencing strong reception for our new peripheral exchangeable platform with GlideAssist. This device was designed to serve up to 50% of the peripheral patients that have multivessel disease throughout their leg. The exchangeable system consists of a single handle along with the crown. The handle enables the use of up to 3 crowns, where the second and third crowns are sold separately. When a physician encounters the patients with multi-level disease, the first crown in the system can be removed and a second crown of a different size can then be attached to the handle. With exchangeable, physicians now have the ability to provide full leg revascularization with 1 device.

The exchangeable system sells at a premium, and additional crowns are sold as a separate line item, where the sale of a second crown is significantly more affordable than purchasing an entire second system providing a more economical solution where more than 1 crown is needed in a case. We are encouraged that some of our customers see this value and are transitioning their entire peripheral line to exchangeable. And as a result, our physicians are treating more lesions with the system and were generating more revenue per case. And going forward, this platform will provide even greater flexibility as we develop a broader selection of crown sizes to treat smaller and larger vessels throughout the leg.

Second, our radial device further positions CSI as a valued procedural partner in cath labs by offering physicians minimally invasive atherectomy tools that can serve a spectrum of vascular access routes, including pedal, tibial, radial or traditional femoral access. Alternative access points have been associated with lower complication rates, faster time to ambulation and greater patient satisfaction. With 5 French access, we offer the lowest profile atherectomy product in the market, which now enables a radial approach for treating above-the-knee lesions.

As physicians seek to safely treat a very difficult patient population, our low profile device provides CSI with a sustainable competitive advantage. And in the near term, we will support increased adoption of our radial device with medical evidence through our REACH peripheral radial study. We have now enrolled over 60% of the patients in REACH and are on track to complete enrollment later this fiscal year. As a reminder, this study will prospectively evaluate acute clinical outcomes of orbital atherectomy using radial access for the treatment of peripheral arterial disease. We believe this study will demonstrate many of the known benefits of radial access such as low complication rates, high cost effectiveness and shortened time to ambulation.

The benefits of orbital atherectomy are widely known and supported by the medical evidence shared in key scientific venues. In our first quarter at AMP, the 3-year outcomes of our LIBERTY 360 study were presented as a late breaker. Most notably, the OAS sub-analysis indicated durable outcomes with high freedom from major amputation and no additional amputations reported after the 2-year visit. Of the 1,200 patients enrolled, nearly 700 were Rutherford 4, 5 and 6 patients. And the Rutherford 4 and 5 patients were 95% free of amputations at 3 years. Rutherford 6 patients candidates for amputation had 89% freedom from amputation. Developing long-term clinical data supporting the short and long-term safety and efficacy of our technology sets CSI apart from all of our competitors.

The incredible outcomes presented from LIBERTY 360 demonstrate that using orbital atherectomy, even on the most challenging patients, can result in high freedom from amputation. This data provides further support of our leadership position in the study and care for patients suffering from peripheral arterial disease in critical limb ischemia. Finally, in light of the reduced usage of paclitaxel for the treatment of peripheral arterial disease, we continue to experience a modest uplift in our peripheral business. I'll remind you that this benefit is isolated to above-the-knee lesions in the hospital setting, perhaps 30% of our peripheral business.

However, in the absence of an anti-restenosis therapy and when treating calcified lesions, physicians are turning to the best core technology for vessel preparation, orbital atherectomy. In conclusion, a productive and successful start to our fiscal '20. Our strategies to innovate, drive more revenue per procedure and expand internationally are working and making a difference in the treatment of our patients. Looking ahead to Q2, we look to build on our momentum in coronary. We will have the full market release of the new Nitinol ViperWire Advance with Flex Tip and introduction of an expanded offering of coronary angioplasty balloons, including larger sizes up to 5 millimeters, and are expected to help drive coronary revenue.

International, we will continue to drive adoption with targeted physician training in several new markets and deepen penetration where we have already launched. In peripheral, we will be introducing the next-generation peripheral OAS with GlideAssist on our 1.25-millimeter models of both Stealth and Diamondback. The GlideAssist feature has been exceptionally well received by physicians treating calcified lesions in tortuous coronary arteries. Given the similarly difficult vasculature below the knee, we believe physicians will find they are able to access and effectively treat challenging lesions with GlideAssist on these next-generation peripheral devices. Before I turn the call back over to Scott, I will also mention that CSI is now on Twitter. So please follow us @csi360.

That concludes my prepared remarks. Scott?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [6]

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Thank you, Rhonda. Well, as you've heard this afternoon, we achieved many great successes in Q1, and the consistent execution of our strategy now positions CSI to achieve our objectives, not only in this fiscal year, but well beyond. In our first quarter, our strong revenue growth was supported by each of our 3 key growth drivers, and we reached over 21,000 patients worldwide. We continued to grow above market, based upon the strength of our core atherectomy business.

The Diamondback Orbital Atherectomy System is the safest and most studied atherectomy system with real-world data on more than 5,700 patients and more than 135 peer-reviewed publications. Exceptional manufacturing and quality operations continued to lower our cost of goods sold at a rate faster than ASP erosion. We increased our investments in new product development, medical evidence and physician education to accelerate our growth in the years ahead. We enrolled the 1,000th patient in our landmark ECLIPSE study, and we remain on pace to enroll 1,500 patients by fiscal year-end.

And finally, we updated you on our product pipeline, and we reiterated our plans to achieve $435 million to $500 million in revenue in our fiscal '23. Guided by our mission to save limbs and save lives, our exceptional team continues to make meaningful progress on our efforts to transform CSI into a multiproduct company with global reach. Thank you for your interest in CSI. We look forward to updating you on our progress in the days and months, quarters ahead.

We'll now take your questions. So Chris, if you would please repeat the instructions, we can proceed to Q&A. Thanks.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Chris Pasquale with Guggenheim.

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Christopher Thomas Pasquale, Guggenheim Securities, LLC, Research Division - Director and Senior Analyst [2]

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Congrats on a nice quarter. Scott, I just wanted to circle back to Rhonda's comments around the impact of paclitaxel was having on your business. I'm curious what the above versus below mix was in the quarter. And whether you'd seen maybe any shift in the business because of that particular dynamic?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [3]

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Yes. I think I'm going to let Jeff address the mix in the quarter. But let me just talk to you a little bit about the dynamic and what we see. As Rhonda said, the reason it's really limited to that above-the-knee segment that is in the hospital, you'll recall that roughly 60, maybe 60-40, probably 2/3 of our business is below-the-knee. And then about 25% of our revenue comes from the OBL segment. And drug-coated balloons are generally not reimbursed in the OBL segment. So as a result, our below-the-knee and the OBL segment of our business generally isn't influenced by the presence or absence of drug-coated balloons. So the above-the-knee segment is really the portion of our business that's available to be influenced. And we do see physicians there who are preferentially using atherectomy to improve their ability to treat these lesions without generating any dissections. If they can access the lesion, atherectomize the lesion, balloon and get out without any form of dissection, they can have some confidence in particular with primary lesions that they may not need an anti-restenosis treatment. When there are secondary treatments, in other words, when a patient has restenosed and they are coming back in, I think that's where we continue to see now an increased utilization of drug-coated balloons, and that's not unexpected. But Jeff, do you want to just quickly highlight what the segmentation was?

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Jeffrey S. Points, Cardiovascular Systems, Inc. - CFO [4]

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Yes. Thanks for the question, Chris. We've historically seen kind of a 60-40 split of 60% of our peripheral business below-the-knee and 40% above-the-knee. We saw a little bit of a change to that in Q1. We're kind of looking at 59-41 now, so just a slight tick up above-the-knee, but it was actually pretty consistent, just moving by 1 percentage point in Q1, so.

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Christopher Thomas Pasquale, Guggenheim Securities, LLC, Research Division - Director and Senior Analyst [5]

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That's helpful. And then just following up on the pipeline. Nice to see a point there where you feel like you've got the whole bag in place on the coronary side, and it feels like you're already starting to see some decent traction there. Just remind us of the time line to get to a similar point in peripheral where you feel like you've got all the products that you want to really go after that additional revenue per case.

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Rhonda J. Robb, Cardiovascular Systems, Inc. - COO [6]

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Yes. Thanks, Chris, for the question. We started with the launch of our ZILIENT wires, and those have been used with our peripheral cases. And then really starting in our next fiscal year, in FY '21, we will be expanding that considerably with the radial toolkit, with peripheral balloons and additional guidewires as well. So really early next fiscal '21.

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Operator [7]

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Your next question is from Danielle Antalffy with SVB Leerink.

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Danielle Joy Antalffy, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Analyst [8]

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Congrats on another strong quarter. I was hoping to follow up on the OBL segment and get a sense of how growth fared in that segment this quarter. And also just to get a sense of how durable you think that growth. I think it's been in the mid- to high 20% range. As we look forward, how durable is that growth trajectory for that segment?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [9]

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So Jeff will give you the kind of the details on OBL, Danielle. But in terms of durability, we think the growth there is very durable. The summer months are always a little bit slower in any of these segments. But as we look at the OBL segment, we believe that -- it's not that we believe. There is an epidemic underway in the United States in peripheral arterial disease. And these patients have to be cared for and treated. It's -- we're just -- there just isn't capacity in hospitals and elsewhere. So we do think that the leveraging these office-based labs and these alternate treatment sites is going to continue to be a trend, not only in peripheral arterial disease, but probably in other areas of complex care and medicine. So we do expect that OBL segment to continue to expand in terms of the number of accounts. And also we expect it to expand in terms of the treatment of increasingly more complex cases there. So Jeff, do you want to comment on the indication?

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Jeffrey S. Points, Cardiovascular Systems, Inc. - CFO [10]

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Yes. Absolutely. So Danielle, we actually had another strong quarter in the OBLs, as you mentioned. In the prior 3 quarters, we had grown that 25-plus percent. We ended up at 16% growth in the OBLs, still very attractive growth. And on the flip side, we actually grew our hospital business even more in Q1 than we had in the previous several quarters. That was in the high single digits. So a very strong quarter in both sites of service.

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Danielle Joy Antalffy, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Analyst [11]

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Got it. And just a quick follow-up on the coronary segment and what you're seeing from a pull-through perspective. It sounds like you're seeing a lot of success there. Just curious what, sort of, I don't know if you want to call the attach rate is for selling ancillary support products into these cases at this point?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [12]

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Yes. We continue to have good progress there. The -- our ability to penetrate accounts continues to grow. And we are really pleased with that. With the launch now of the Nitinol, the ViperWire, our Nitinol coronary guidewire, as Chris had indicated earlier, we now have this full product offering out there. And so I think what we're seeing is an increased adoption across the full spectrum, mainly because we now can offer everything from the Teleport Microcatheter, the balloons, wires, and then we have, of course, GlideAssist and all of the improvements of those combined really gives us the synergy now to not only accelerate growth but increase the penetration. So we are seeing an increased penetration and feel good about where that's headed down.

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Rhonda J. Robb, Cardiovascular Systems, Inc. - COO [13]

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As we said at TCT, about nearly half of our coronary accounts are now using our ISDs.

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Operator [14]

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Your next question is from Frank Takkinen with Lake Street Capital.

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [15]

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Just a couple for you here. First on the REACH study, I believe I heard you say complete by the end of this year. I assume that was by the end of this fiscal year?

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Rhonda J. Robb, Cardiovascular Systems, Inc. - COO [16]

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Correct.

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [17]

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Enrollment that is. Okay. And then could you provide us any anecdotal feedback you've heard from physicians in the field regarding getting them over the tipping point with that specific data? What they might be looking for to get more of the tipping point moving their practice over to the radial side more?

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Rhonda J. Robb, Cardiovascular Systems, Inc. - COO [18]

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Sure. I mean I think there's a significant evidence body on the coronary side. And so I think kind of the concept of radial is very intuitive for physicians to use it. But the reality is that this has really never been done before in the peripheral space. And so as we reach out to physicians and started talking about the access route, I think that there's a general acknowledgment and feeling that there's going to be lower complications, greater patient satisfaction, faster ambulation, but we just want to produce some initial data to take a look at that. We'll get the readout from that in FY '21 and then make a determination if we want to collect more. But it's really building that first foundational evidence that just does not exist today in the peripheral space, because it's never been able to be done before.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [19]

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So Frank, I think that's -- key is getting that evidence and making it available. The other thing that's been key and we've talked about this over the past several quarters is just getting that full product offering out there, the balloons, wires and catheters. And you may know that Terumo recently released their MISAGO stent, which is also important. And so having that full product offering does make a difference because physicians, for example, if they have a complication, they will want to be able to drop a stent, if they need to, to treat a dissection and so on. So having the full product offering is key, and that will probably be the most important factor in driving radial adoption.

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [20]

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Great. And then second, looking a little bit further out to your fiscal year '23 guidance between the $435 million and $500 million, can you share with us your different puts and takes between the low end and the high end of that, given it's such a large range?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [21]

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Yes, it is. So I guess when we look out that far, I don't consider it to be that large of a range. But it would be difficult to provide all of the puts and takes that kind of build into that. We have a very broad and extensive portfolio of growth drivers, including a variety of new products. We're bringing forward, of course, additional medical evidence in our ECLIPSE clinical trial and PVI radial trial and additional peripheral trials in the future. We also, of course, have our international expansion. And all of these are -- they form a great basis, a strong portfolio of growth opportunities. But to kind of go through how they all might play out against each other would be quite an extensive exercise. So I'll just say that across that portfolio, we remain confident that we can land in that $435 million to $500 million range.

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Operator [22]

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Your next question is from Mathew Blackman with Stifel.

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Mathew Justin Blackman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [23]

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If I could start with a housekeeping question for Jeff. I may have missed it, but did you quantify the contribution from the procedure support portfolio in the quarter?

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Jeffrey S. Points, Cardiovascular Systems, Inc. - CFO [24]

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No, I did not in my comments. It was around $1.8 million, Mat, in total for procedure support products in Q1.

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Mathew Justin Blackman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [25]

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Okay. I appreciate that. And then just a couple of quick questions. The stable pricing commentary, particularly in PAD, was a nice surprise. How sustainable is that trend as we think about the remainder of the year? And is there something specific driving that? And I've got 1 quick follow-up.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [26]

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Well, Mat, we've always said that we anticipate that kind of mid-single-digit price erosion in peripheral. And I think we continue to expect to see that going forward. We operate in a competitive marketplace there in peripheral. And the continued increased utilization in OBLs, I think, will continue to drive that. So I think you -- I would stay with our original guidance as it being probably more like the mid-single digits.

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Mathew Justin Blackman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [27]

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Okay. I appreciate that, Scott. And then the last question. How should we think about the dedicated coronary sales force expansion relative to coronary franchise growth? Is it sort of a growth sustaining move? Or could that potentially accelerate the growth we've been seeing in that segment?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [28]

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So I guess my answer to that would be yes. The -- in the near term, it certainly is intended to help us sustain our growth and contribute to the growth of our business as we currently stand. But if you look at our portfolio over the course of the next, let's say, 3 to 5 years, with the introduction of ECLIPSE and the ECLIPSE results and then the launch of our PVAD device late in that period, we will dramatically expand our offering to our coronary call point. And really, over time, we'll be transforming our coronary business from being a business that focuses on atherectomy to being a company that focuses on the care of complex coronary patients. So you can expect to see us just continue to build that franchise in a responsible way, but in a way that allows us to sustain our growth today, but also prepare for the future.

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Mathew Justin Blackman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [29]

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Congrats on another strong quarter.

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Operator [30]

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Your next question is from Mike Matson with Needham & Company.

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David Joshua Saxon, Needham & Company, LLC, Research Division - Associate [31]

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This is David on for Mike. First, I just wanted to quickly follow-up on one of Danielle's questions. On the OBL growth at 16%, was the reason for the slowdown solely due to seasonality? Or were there any other dynamics at play?

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Jeffrey S. Points, Cardiovascular Systems, Inc. - CFO [32]

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No. Keep in mind, the 16% is year-over-year, so seasonality would have existed in both periods. I mentioned earlier that we grew 25-plus percent over the last 3 quarters. So we were comparing against kind of the time that we were really ramping up that revenue in OBLs 4 quarters ago. So 16% were still really attractive growth with nominal ASP erosion that we mentioned.

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David Joshua Saxon, Needham & Company, LLC, Research Division - Associate [33]

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Okay. And then -- so you have 20% share in Japan. So just wanted to see how you're thinking about the pace of market share gains, just given the training dynamics there. And then I have 1 quick follow-up.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [34]

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Yes. I think we expect that to continue to grow. I mean we still are actually quite early in our launch there. And as I've said before, our launch in Japan is really dependent on peer-to-peer training. And so we have been expecting and forecasting for some time that as we continue to make progress in peer-to-peer training and the opening of new accounts that we would see continued growth over time. So we're now just kind of coming into the portion of our growth curve where we do expect to see that continue to accelerate. So we are very confident in our business in Japan. The Japanese interventional cardiology community is a heavy adopter of imaging, and they make strong use of atherectomy and orbital atherectomy now to prepare vessels prior to the placement of stents and to remove calcium to modify plaque. So we are -- we continue to be confident in our business in Japan and believe that we'll continue to see strong growth there.

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David Joshua Saxon, Needham & Company, LLC, Research Division - Associate [35]

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Okay. And then just lastly, can you give some more color on the reasons why you discontinued the laser atherectomy program?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [36]

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I will tell you -- yes, thank you very much. I'll hand this off to Rhonda in a moment. But this is principally an effort on our part to continue to manage our portfolio and to assure that we're investing in products that are going to drive the growth of our company and provide the best return on investment. Rhonda, I'll let you comment on the combination or the competition with this device versus other products.

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Rhonda J. Robb, Cardiovascular Systems, Inc. - COO [37]

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Yes, sure. It was really just a horse race between the laser and our directional atherectomy system. And as we've discussed earlier, the ATK peripheral segment is sizable. And we felt that with the progress that had been made technically with regard to the novel cutting mechanism that our engineers have developed, the onboard aspiration system, being able to serve a broad vessel range, broad sites of service with the structure of that program, it just made the most sense to invest in that technology. We obviously looked at the markets -- the market sizes for each of those capital equipment expenses and just felt it was the best financial decision for CSI.

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Operator [38]

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Your next question is from Margaret Kaczor with William Blair.

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Malgorzata Maria Kaczor, William Blair & Company L.L.C., Research Division - Research Analyst [39]

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First one for me is just a little bit of a follow-up on the clinical specialists, which you referred to in the press release, and then the coronary reps, which I think you guys said on the main call, are going to double this year. So how should we think about rep productivity from some of these incoming groups? Where are they focused on at? And just I guess how much of a hiring do you guys trying to keep up with the growth that you're seeing, which has been exceptionally strong versus more offenses based on the opportunities you're seeing?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [40]

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Okay. So a lot of good observations and questions there, Margaret. Thanks. So first of all, as you know, we've been adding clinical specialists for some time now. We started that actually a couple of years ago. And as we reported last year, we do think that the addition of our clinical specialists has improved the productivity of our sales channel, largely because we get great case coverage. And as I said in my opening comments, we now are -- have a sales rep or a clinical specialist present in about 70% of our cases, which is remarkable. And we think that is really an important competitive advantage for us. Having clinical specialists cover those cases, we have the ability to introduce an individual to our customer that has very deep clinical acumen. These clinical specialists usually come out of cath labs themselves, and they're able to contribute very quickly to assure that we get great outcomes and to support cases and support physicians and staff that's present. So the presence of our clinical specialist makes an important difference in enhancing sales rep productivity.

In terms of our coronary addition, we're still a bit nascent there. We're moving from 20 to 40. So it's not like we have a really large channel at the present time. And as a result, there's a lot of opportunity across the country to dedicate these reps where we know we have large accounts that we're currently not providing sufficient support to or where we're just not present. So as we look at really the high-volume accounts in the United States, where patients are aggregating to receive care for really complex calcified lesions, in many cases, we just don't have strong enough coverage. So by being very thoughtful and deliberate about where we position these sales reps by hiring reps that already have expertise in this space, we can bring reps in and rapidly get them up to productivity.

It is a -- as you've heard us talk about in the past, it is a difficult market. So the time to productivity here is slow. It takes some time for these reps to ramp up. But over time, they -- our experience is that they have, and we have been pretty careful about this. We rolled out the first 20. We learned a lot about that. And then now we're adding 20 more, and we'll continuously learn and improve our targeting and our placement of these reps, so that over time we'll see continuous improvement in sales rep productivity. So where I think we'll really see some dramatic improvement is as we release our ECLIPSE results and then, of course, this is the channel, as I said earlier, that also we'll be looking after complex patients when we launch our hemodynamic pump program. So that's really how all of that rolls together. I hope that answers your question.

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Malgorzata Maria Kaczor, William Blair & Company L.L.C., Research Division - Research Analyst [41]

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You got all 3 of them in there. I mean I guess the only follow-up specific to that line of questioning was in terms of kind of the ratio of true reps relative to clinical specialists. Are you guys in a good spot right now? Or do you think it's not really a ratio game? This is an account coverage counted together again.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [42]

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Well, I think it's actually a case coverage. That's what we're really trying to achieve is case coverage. We're trying to be present when our physicians are caring for our patients. When that patient that has a complex coronary or peripheral lesion is in a cath lab, our customer is present, we want to be there to support that case, to enhance pull-through of our other products and to assure that we get great outcomes. So that really is the essence of our strategy because we're focused on this. We don't necessarily sell a bundle. So the way we break the bundle is to assure that our customers know us as the company that provides the best support in the market. And that's what we're trying to do, and I think we're doing a good job at that. So right now, I think we have about 130 clinical specialists in the field. And we have right around maybe 200 now -- 200-plus sales reps. So that gives you an idea of our ratio. It's a little over 2 reps to 1 clinical specialist. I think we'll continue to see that ratio increase over time or decrease, I guess. We'll probably move towards that 1:1 type ratio over time. And we'll probably do that as our different territories grow and increase in size and warrant that type of additional support.

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Malgorzata Maria Kaczor, William Blair & Company L.L.C., Research Division - Research Analyst [43]

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Great. And then just a question on Japan, and I'll hop off. But I wanted to follow-up because I think in the opening comments, you guys said that you saw you had 20% share gains in Japan already, which -- and correct me if I'm wrong, I think that was the original guidance for the year. Meanwhile, you're training more and more docs. So why shouldn't we see an increase in guidance for that for this year?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [44]

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Well, it's early in the year. And so we aren't increasing guidance right now. We have a number of different factors that are going very well for us right now. But at this point in time, we feel like our guidance range remains appropriately placed. And -- but that said, you're correct. We did indicate that we thought we'd have 20% share by the end of the year, and we're progressing ahead of schedule in Japan. So our Japan business, our international business continues to do quite well, and we're pleased with the progress we're making there.

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Operator [45]

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Our last question comes from Jayson Bedford with Raymond James.

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Jayson Tyler Bedford, Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst [46]

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Great. Just a few questions. Maybe just to follow up. In terms of the 20 new coronary specialists that you're adding this year, how many have you added to-date, roughly?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [47]

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We've added about 10 so far this year, Jayson.

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Jayson Tyler Bedford, Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst [48]

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Okay. Yes. Just getting back to the benefit from the drug-coated balloon shake up there, is it in the form of increased market share? Or is it more of a general rise in atherectomy procedures because there's fewer DCBs being used?

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [49]

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Yes. So this is -- as we have said, we said this kind of last quarter. What we're seeing is not necessarily some dramatic rise in utilization of atherectomy because of the issues of drug-coated balloons. What we are seeing -- if you went out and talk to our sales reps or if you talk to customers, they'd say yes, no, probably not, maybe. But if they are doing 1 or 2 more per month and we have 200 sales reps out there, you could tell that you're going to see an increase in utilization of atherectomy at a macro level, perhaps not at a micro level. So that's really what we're seeing. It is in a small segment of the business, but we are seeing increased adoption. And where that I think is coming from is that physicians are returning to what they were originally trained on which is to access that lesion, to remove calcium from the lumen, to prepare that lesion to treat the calcium that is in the medial portion of the vessel, to do all of that without creating dissections or injury, balloon it and then try to get out and leave nothing behind. With a primary lesion, they still are doing that, and that's where we're seeing kind of the increased utilization of our device. I think that we're seeing that because we have the safest atherectomy device out there. And as a result, that's why physicians are probably beginning to utilize this device more often in those primary cases. We're still early days. This kind of started in March. We've reported it first at the end of our fourth quarter, and we're just now kind of reporting that we continue to see that benefit flow through our peripheral business at this time.

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Jayson Tyler Bedford, Raymond James & Associates, Inc., Research Division - Senior Medical Supplies and Devices Analyst [50]

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Okay. That's helpful. Maybe just the last one, Scott. You mentioned growing above market in atherectomy. Obviously, this certainly seems to be the case in peripheral. But in coronary -- and I realize this was a tough comp, but is 10% really market growth? Or is the market growing faster? And just any comments on the competitive landscape in coronary would be helpful.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [51]

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Yes. I think as we've said -- I mean I think this is above-market growth. And we feel, in particular, on the overall business that it certainly is above market. As you know -- and we've talked about this before, getting very detailed and specific information about each and every quarter in both coronary and peripheral atherectomy is difficult because most of our competition does not report at that level of detail. Based on the information we have, we believe that this is above-market growth in both coronary and peripheral. So yes, we continue to feel pretty good about that. Our coronary business growth was strong. And as you look on a global basis, obviously, it was very strong. So we're confident in our coronary business at this time.

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Operator [52]

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Ladies and gentlemen, this does conclude the Q&A period. I'll now turn it back over to Scott Ward for any closing remarks.

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Scott Raymond Ward, Cardiovascular Systems, Inc. - Chairman, President & CEO [53]

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Okay, very good. So with no further questions, we'll conclude today's call then. Thank you all for your participation. And we look forward to updating you on our progress next quarter. Thanks, everyone.

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Operator [54]

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Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.