Inari Medical Inc

NASDAQ:NARI

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and thank you for standing by and welcome to the Inari Medical Inc. Q1 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Caroline Corner of Investor Relations. Please go ahead.

[Caroline Corner, Westwicke Partners, LLC]

Thank you, operator. Welcome to Inari's first quarter 2021 earnings call. Joining me on today's call are William Hoffman, President and Chief Executive Officer, and Mitchell Hill, Chief Financial Officer. For the question-and-answer session, we will also be joined by Drew Hykes, Chief Operating Officer, and Dr Tom Tu, Chief Medical Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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

These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from any results, performance, or achievements expressed or implied by the forward-looking statements. Please review Inari's most recent filings with the SEC, particularly the risk factors described in Inari's S1 filing and in Inari's quarterly report on Form 10-Q for the first quarter ended March 31, 2021, for additional information.

Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Inari undertakes no obligation to update these statements except as required by applicable law. Inari's press release with the first quarter 2021 results is available on Inari's website www.inarimedical.com under the Investors section and includes additional details about Inari's financial results.

Inari's website also has the latest SEC filings which you are encouraged to review. A recording of today's call will be available on Inari's website by 5:00 PM Pacific Time today.

Now, I would like to turn the call over to Bill for his comments on first quarter 2021 business highlights.

[William Hoffman, President & Chief Executive Officer]

Thank you, Caroline, and thank you, everyone, for joining us today. Our first quarter was highly productive and successful, as many of you might have anticipated, based on the revenue range to which we guided during our last earnings call. We treated a record number of patients and reported revenue above our guidance. We are again excited to share some additional detail about our progress, including an update on all five of our growth drivers. But we would like to start first as is now tradition with a patient story, but we'll remind you of the profound impact our devices have on the lives of our patients.

On March 11, 2020, a woman in her late '50s recently retired, and a brand new grandmother, was preparing her morning coffee and getting ready for her daily walk in her neighborhood in Florida. Without any shortness of breath or illness or any warning of any sort, she collapsed suddenly in a bedroom. When she awoke scared and confused, she called her boyfriend who immediately called 911. She was diagnosed a short while later at the hospital with a saddle pulmonary embolism, in which a large blood clot straddles the left and right main pulmonary arteries. Her low systemic blood pressure, the volume and location of the clot, and the fact that she had suddenly collapsed all pointed to the high-risk nature of her diagnosis and the need to urgently address the PE.

Fortunately the cardiologist on call had recently begun using FlowTriever for pulmonary embolism and rushed her to the cath lab for a thrombectomy procedure using FlowTriever. Within a few minutes, he was able to extract a large volume of clot which caused immediate and significant on table improvement in the patient's hemodynamic condition. Her heart rate, pulmonary artery pressure, and systemic blood pressure all improved markedly while she was still on the table and she was discharged from the hospital just a few days later.

We consistently see results like this in our FlowTriever cases and we have recently validated the clinical impact with data from the FLASH Trial. This patient's story has one additional chapter. I received a personal email from this patient a couple of weeks ago and it read in part. I'm 13 months post my event, and I have to tell you a day doesn't go by that I don't stop and realize how grateful I am. I'm totally back in the game, feel absolutely no limitations to the things I enjoy and the physical ability to do them. This is nothing short of a miracle. Massive pulmonary embolism defined not by clot volume, but by the unstable nature of the patient presentation, as with this patient, thankfully represents just 5% to 10% of all PE diagnoses, but is really important, because it carries the mortality rate of up to 50%, even when treated aggressively with the current standard of care which is a large bolus of thrombolytic drugs.

We believe we can do much better. Last year for example, Dr. Catalin Toma at the University of Pittsburgh Medical Center, and several peers reported retrospective data on 34 massive PE patients treated with FlowTriever at four different centers. Remarkably, there was just one patient death which is especially notable, again, given the 50% mortality rate that I just mentioned. Last month we announced the first two patient enrollments into our Flame Trial for massive PE. Flame is a prospective, multicenter two-arm trial designed to evaluate the effectiveness of FlowTriever to prevent death in massive PE patients compared to other alternative treatment. It is the largest and most significant trial of this patient population ever designed or even attempted. It further confirms our commitment to this patient population to the space more broadly and producing evidence to prove that large volume clot removal via FlowTriever makes the important impact on patients' lives that we see consistently in real-world experience. We are gathering evidence to answer the biggest and most important questions in this space. We remain committed to our mission of saving and transforming the lives of our patients in ways that are profoundly important to us.

I'd like to turn our attention now to our Q1 financial performance, Our revenue in Q1 was $57.4 million, up $30.4 million or 113% from the same quarter last year and up $8.8 million or 18% from Q4. During Q1, our physician customers performed approximately 5,500 procedures, up about 130% from the same quarter last year and up about 20% from Q4. As in the past, the vast majority of revenue in the quarter came from replenishment of inventory after procedures while the balance came from stocking orders, which include inventory for new customers, increases in inventory levels as customers grow, and new product introductions.

Moving now to a few comments on the pandemic, the decline in COVID hospitalizations late in February and continuing today has resulted in the easing of some of the restrictions and challenges we saw in January and throughout 2020. While recent developments are encouraging, we continue to believe that some caution in the short and intermediate-term is prudent. We have noticed for example some hospitals are full of non-COVID patients as they return for treatment that was deferred during the pandemic. This return to normalcy may lower the visibility of VTE and reduce availability of access to our procedures. At the same time, some hospitals have reported staff shortages, perhaps as a result of COVID burn-out, on top of the return of much-needed staff and physician vacations. It's difficult to know the net impact of these developments. But we will be monitoring all of it and we will be transparent as always in sharing what we see.

I'd like to turn now to our key growth drivers and to the progress we have recently made on each. First, we continue to expand our sales organization to target new hospitals and physicians. As a reminder, we estimate the size of our US target addressable markets is more than 460,000 patients annually, representing a $3.8 billion market potential. Our performance in Q1, strong as it was, suggests that we treated fewer than 5% of all patients who we believe can benefit from treatment with our devices.

We remain very early in our efforts to penetrate our core markets and the effort will require a lot more sales professionals. We continue to believe that when fully built out, our sales organization will rival in size the largest interventionally focused sales organizations in the market today. We began Q1 with 130 territories and we began Q2 with approximately 150 territories. We have historically stated our intent to add an average of 10 territories per quarter. However, based on our consistent success to date and our scalable approach to commercial expansion, we now believe we can be more aggressive with our hiring plan. We are currently targeting 180 to 200 total territories by the end of 2021. We believe that increased density of our sales organization and the resulting smaller and smaller territories provide opportunity to more effectively address our second growth driver which is building awareness and driving deeper adoption at existing hospital customers.

As we have discussed in the past, we believe the vast majority of our target PE and DVT patient populations are currently treated with anticoagulation alone. While changing this paradigm is a complex challenge, our approach is simple and straightforward. First, we will continue to educate and train the non-interventional positions, such as emergency department physicians, pulmonologists, intensivists, and hospitalists, who are often responsible for treatment decisions for these patients. Central to this effort, we'll be continuing to leverage our online training and education platform called Clot Warrior Academy as we've described in the past. We will also communicate directly with these physicians at the local level as we do with our interventional physician customers. Smaller territories are especially useful for this effort.

Second, we will work with our hospital customers to establish systematic processes to identifying triage, our target patients, to the physicians who are experts in these disease states. Our ultimate goal is to establish a scalable model for the development of VTE centers of excellence in which VTE patients are identified, triaged, treated, and followed up in a systematic and consistent manner, similar to the ways patients with other thrombotic diseases, like MI and stroke are addressed. We are excited about our recently announced partnership with Aidoc. We believe their purpose-built PE software solution can be helpful in developing this scalable and repeatable VTE center of excellence model. We are committing heavily to these and other ideas and programs, and we've seen important progress. We will have more to share about these ideas in future calls.

Our third growth driver is to continue to build upon our base of clinical evidence. We shared earlier in the call the initiation and first enrollment into our Flame high-risk PE Trial. We are planning to enroll up to 250 patients in this trial because the inclusion criteria are very strict, designed to identify and treat exclusively the very sickest of PE patients. Enrollment is likely to take some time and we're not yet in a position to estimate the completion date.

We have some important news on the FLASH Registry as well FLASH as many of you know, is our 500 patient registry to study the impact of FlowTriever on a battery of hemodynamic variables both immediately and over time in a real-world patient population. FLASH, as we reported previously, has yielded pristine best-in-class safety data and not just meaningful improvements in hemodynamics, but on table normalization of these vital signs in many patients.

We have enrolled our 500 patients into FLASH and are pleased to announce we have recently expanded the study to 1000 patients, allowing us to add several additional sites here in the US in addition to several European sites as well. We have also added a non-treatment or anticoagulation only arm so that we can understand more clearly the immediate and longer-term differences between FlowTriever treated patients and anticoagulation only patients.

Finally, we have introduced a monitoring component utilizing a smartwatch to the follow-up of a subpopulation of patients. The watch will allow us to measure over the longer term several important variables that will help us understand how these patients do over time such as heart rate, blood oxygen levels, and the frequency and intensity of physical activity. It will also allow us to conduct exercise tests, such as the six-minute walk test, more often, and more simply than traditional approaches to clinical surveillance.

We are not just producing excellent data about the impact of our devices on our patients. Our studies are asking increasingly interesting and useful questions that we believe will move the understanding of the entire disease state forward. We believe that these studies, the questions we are asking, and the more sophisticated and valuable metrics we are collecting will set the bar by which all devices and therapies in the VTE space will be measured. Finally, we believe the data we are generating and the insights we are gaining will be critical inputs into the design of future definitive clinical studies.

Our fourth growth driver is to continue to expand our product portfolio. During our last earnings call, we announced the limited market release of our T20 Curve, which has been FDA cleared for clot in transit, as well as our flows basis venous closure system. Both devices are now in full market release and enjoying brisk adoption. Looking ahead, we remain very excited about the robust lineup of new products and innovation in our pipeline.

Our fifth and final growth driver is expansion into adjacent and international markets. We continue to make progress early in our European launch. During our last earnings call, we shared that we had completed our first ClotTriever cases in Germany and had just obtained CE Mark for FlowTriever. We are now pleased to share that we have completed multiple ClotTriever and FlowTriever cases in three additional countries. While enthusiasm remains strong as many physicians in Europe have heard about ClotTriever and FlowTriever from their American colleagues and counterparts and have seen various presentations and publications of clinical results, the operating environment for new product introductions remains challenging. The most recent pandemic surge has caused new lockdowns, limiting travel and hospital access, but even with these headwinds we are seeing case volumes steadily increase, and we remain optimistic about our European opportunity as we look forward to an improved COVID environment.

We are excited about several opportunities beyond our core DVT and PE markets. We are actively working on multiple ideas to address significant unmet needs in these adjacent markets and we're looking forward to discussing them in upcoming calls. As always, I'd like to close by reminding you that we have committed to a cause and to a mission to doing our very best to impact the lives of our patients in important and highly positive ways. Inari represents our life's work. We're honored to do this work and we are so thankful for your support. We believe we are in the earliest phase of our mission and that we can and will grow sustainably for many years to come.

With that, I'd like to turn things over to Mitch.

[Mitchell Hill, Chief Financial Officer]

Thank you, Bill, and good afternoon everyone. Inari revenues for the first quarter of 2021 were at $57.4 million compared to $48.6 million for the prior quarter and up $30.4 million or 113% from $27 million for the same period of the prior year. This year-on-year increase was driven by the continued expansion of our sales force, the opening of new accounts, and deeper penetration of our products in existing accounts.

Revenue was split between our two products as follows: 35% of our revenue was derived from the sale of ClotTriever products during the first quarter of 2021 compared with 37% in the first quarter of 2020 and 65% was derived from the sale of FlowTriever during the first quarter of 2021 compared to 63% in the same period in the prior year.

Gross margin was 91.9% in the first quarter of 2021 compared with 90% in the first quarter of 2020. Gross margin increased due to a modest 2% increase in revenue per procedure year-over-year as well as positive operating leverage in our manufacturing facility due to continuous improvement initiatives.

Operating expenses were $45.1 million in the first quarter of 2021 compared with 19.4 million for the same period of the prior year. R&D expense was $8.2 million in the first quarter compared with $3 million in the same period of 2020. The $5.2 million increase in R&D expense was primarily driven by an increase in headcount, as well as product development and clinical evidence development costs

SG&A expense was $36.9 million in the first quarter of 2021 compared with 16.4 million for the same period of the prior year. The 20.5 million increase was primarily due to personnel-related expenses as a result of increased headcount across our organization and public company compliance costs.

Net income for the first quarter of 2021 was $7.5 million compared with a net income of $4.1 million for the same period of the prior year. The basic and fully diluted net income per share for the first quarter were $0.15 and $0.13 respectively and the weighted average basic and diluted share counts were $49.4 million and $55.7 million respectively, compared with a basic and fully diluted net income per share of $0.64 and $0.09 respectively and a weighted average basic and diluted share count of $6.4 million and 45 million respectively for the same period of the prior year. The number of shares last year is significantly lower because of the conversion of preferred stock and additional common shares issued as a result of the IPO.

I'd like to move on to a few balance sheet updates. Our cash of $102.9 million and short-term investment balance of $71.2 million at the end of Q1 totaled 174 million compared to $164.2 million at the end of the 4th quarter of 2020. We have not yet utilized our $30 million revolving credit facility although we ended Q1 with borrowing capacity under the credit line of approximately $22 million.

Our cash flows from operating activities were $8.8 million in Q1 compared to cash used in operating activities of $0.7 million in Q1 of 2020. As I've mentioned in previous quarters, our intent is to grow sustainably and we expect to continue to invest heavily in our growth drivers, as described by Bill. The variability of our investments will lead to quarterly fluctuations in cash flow. Our intent is not to maximize cash flow but to invest in growth.

I'd like to now turn to guidance. While we continue to experience COVID-related challenges and uncertainties, we are comfortable providing forward-looking guidance as follows. For the full year 2021, we are guiding to $240 million to $250 million in revenue.

With that, I would like to thank you for your attention, and I'll now turn the time over to the operator for your questions.

[Operator]

[Operator Instructions] And our first question comes from Cecilia Furlong from Morgan Stanley. Your line is now open.

[Cecilia Furlong, Morgan Stanley]

Great, thanks for taking our questions. I guess I just wanted to start off on COVID recovery and really what you've seen, just from a mix of new store versus existing accounts coming online, just really how that's evolved over the past quarter versus what you saw previously with COVID and just any line of sight in terms of just new accounts versus existing accounts coming back online?

[Mitchell Hill, Chief Financial Officer]

I'll get started with that. We have Drew here as well to provide some additional color. Hello Cecilia, so the operating environment is considerably improved since Q4 and probably even since our last earnings call, which was not so long ago, so the decline in hospitalizations and the decline in COVID diagnoses all have allowed hospitals to ease up on restrictions. The challenges, value analysis committees are meeting their functional, they're never efficient or fast, but they're meeting and so I don't think there is any COVID related headwinds to bringing on new customers. We continue to expand our activities with non-interventional stakeholders, again that's pulmonologists, hospitalists, intensivists, and of course ER physicians, restrictions for our sales professionals to be in other departments, that's eased up as well. So that's all very favorable, and as we said in our prepared remarks, Cecilia, I think there are some post-COVID developments that we just need to keep an eye on. There's a lot of patients in the hospital. We've even seen some diversions actually, not because of COVID but because there's so many patients who have deferred treatment that are in the hospital now and being treated for all the right reasons. So we want to keep an eye on that. But generally speaking, the environment is clearly a different and a more functional environment than it's been in some time.

[Andrew Hykes, Chief Operating Officer]

I'll just give you couple of other quick comments for additional context. During the quarter we added about 140 new accounts, which brings us just up to about 1,000 active accounts. Keep in mind, only about 60% of those accounts are using both technologies. So we've still got some runway left to pull in the second technology in about 40% of those accounts.

In terms of where the cases came from across that account base, similar to previous quarters, the vast majority of cases came from existing accounts. About 90% of our cases in fact came from existing accounts and over two-thirds of our case growth came from existing accounts and from penetration. So although we're adding new accounts, we continue to see the majority of the growth coming from driving deeper penetration at the existing account base.

[Cecilia Furlong, Morgan Stanley]

Great, thank you for the color. And I guess just to turn also to the recent launches, if you could just give an update on clot in transit T20 curve, just what you're seeing just from adoption trends to date, and then just on FlowStasis as well, if I could ask on that, just where are you seeing that used today and how you're thinking right now about expansion beyond kind of your core venous cases? And thank you.

[Mitchell Hill, Chief Financial Officer]

So let's start with the T20 curve, that's been really fantastic. Now, but we keep in mind the total number of patients that would qualify that that market looks like to us, a little difficult to measure, but it looks like about 20,000 patients. It is not a spectacularly large market. But certainly, we are seeing more cases being done now than we did before we had the curve, and before we had clot in transit, and just anecdotally is incredibly exciting, because these are some of the sickest patients we see that clot in transit, as we've communicated in the past, is one of the most lethal presentations of venous clot and so it's incredibly exciting and the on table results and the imaging results are really dramatic. So that's gone very, very well and we're pleased with the performance there, or progress. FlowStasis, we are exploring opportunities beyond, as you suggested, Cecilia, beyond our core DVT and PE business, and we like AV fistula, we like electrophysiology, there's a number of procedures, a number of specialties and sub-specialties in which venous closure is, we think the FlowStasis will be highly useful for venous closure. Keep in mind, we're in the early phases here, it's a $200 device, so we are trying our best not to be distracted from our core business, but we like what we're seeing.

[Cecilia Furlong, Morgan Stanley]

Great. Thank you.

[Operator]

Thank you. And our next question comes from Larry Biegelsen from Wells Fargo. Your line is now open. One moment. I apologize. One moment, please. Having trouble with the Q&A. Larry, your line is now open.

[William Hoffman, President & Chief Executive Officer]

Hey, Larry.

[Larry Biegelsen, Wells Fargo Securities, LLC]

Bill, can you hear me?

[William Hoffman, President & Chief Executive Officer]

We can hear you.

[Larry Biegelsen, Wells Fargo Securities, LLC]

Oh good. I apologize if it was a problem on my end. Thanks for taking the question. Glad you can hear me. So Bill, can you talk about your case mix trends, it looks like PE is becoming a bigger part of the mix. Where do you see that going and is there any chance that DVT was a little softer in Q1 because of less COVID patients being treated? And I did have a follow-up.

[William Hoffman, President & Chief Executive Officer]

Yeah, I think that's a pretty good way to frame it, Larry. So our messaging remains consistent between the two. We were rock solid, I think, as we've reported in the past, in terms of the mix between PE and DVT patients treated. I think we saw in Q1 growth a little bit more robust in PE than we saw in DVT and I think that is probably exclusively a result of COVID. Those patients that were most urgent were the ones that get attention in a pandemic, the biggest surge that we saw.

So I think that's probably what's behind the slight increase in the mix of PE compared to DVT I will point out that both DVT and PE procedures did grow. So we're not seeing a shrinking of DVT, what you saw, relative increase in PE compared to DVT

[Larry Biegelsen, Wells Fargo Securities, LLC]

That's helpful. Bill, I'd love to hear your updated thoughts about how you're thinking about adjacencies within venous and outside of venous such as arterial and just Mitch lastly, the cadence, the guidance, how should we think about the cadence through the year? I assume you're assuming sequential increases in sales each quarter. Thanks for taking the questions guys.

[William Hoffman, President & Chief Executive Officer]

Mitch, do you want to take the guidance question?

[Mitchell Hill, Chief Financial Officer]

Happy to. Larry, we are kind of thinking through how we will make it through Q2, obviously, and thinking about the second half of the year, we wanted to be comfortable and sort of confident in our guidance. Just as a reminder, the IPO is about a year ago right now, and we've not yet had sort of a COVID free quarter as a company. So we're still trying to understand exactly what that's going to look like and I think as a result of that we are seeing obviously an improving business environment in the second half of the year, but we wanted to continue to be very confident and comfortable with the guidance, and we think the numbers we provided at the 240 to 250 sets us up in that territory or that range.

[William Hoffman, President & Chief Executive Officer]

Yeah, I'll just add, Larry, that to amplify Mitch's point, we went public almost a year ago, and it was just the beginning of the pandemic. I think maybe we had three quarters of commercialization prior to the pandemic and prior to our IPO and the company was very different back then. So we really don't have anything to compare. We don't have a pre-COVID normal. We don't know what that means. So we just wanted to be thoughtful, I think we'd like to stay away from intra-quarter trends. We'd like to stay away from sequential trends and commentary on that. We feel very good and we always will when we provide a number, we feel very confident in our ability to hit that number.

So moving on to your other question, which was adjacencies, yeah look, we feel good about the adjacencies beyond DVT and PE. I think it's a little bit premature. We did learn a very good lesson, Larry, as we stepped in it right out of the shooting Q1 by telling you all about FlowSaver which you asked about. We still love FlowSaver but it's not FDA-cleared yet, and I think we want to make sure to not comment too aggressively or too specifically on new products and/ or adjacencies at this point, but we like a number of adjacencies to be on DVT and PE.

[Larry Biegelsen, Wells Fargo Securities, LLC]

All right guys, thanks for taking the questions.

[William Hoffman, President & Chief Executive Officer]

Thank you, Larry. Did we lose you guys or were there technical difficulties?

[Caroline Corner, Westwicke Partners, LLC]

This is Caroline, I think the operator is having trouble with moving the queue. The next person to ask a question will be Danielle, and I think he is opening her line.

[Operator]

And Danielle Lastly from SVB Leerink. Your line is now open.

[Danielle Lastly, SVB Leerink]

Hey, good afternoon, everyone. Can you guys hear me?

[William Hoffman, President & Chief Executive Officer]

We hear you loud and clear, Danielle.

[Danielle Lastly, SVB Leerink]

All right, great, thanks so much. Thanks for taking the question. So my first question is on the Flame Trial. Congrats on getting that started, and I guess my question there is, there's a ton of opportunity within PE and I guess as we think about you guys have done a lot of work so far, but it still seems like just relative to the total, still only 10% of these patients are getting interventions, for example, there's still a lot of work to be done. Once we have some data coming out of Flame, should we be thinking about that as sort of an inflection driver like a light switch or how do we think about the impact of the building clinical evidence here? I know still a little ways off, but just curious about how we should be thinking about it and the trajectory between now and then? Thanks so much.

[William Hoffman, President & Chief Executive Officer]

Danielle, Tom will dive in on that one, if that's all right.

[Thomas Tu, Chief Medical Officer]

Great. Thanks, Bill, and thanks for the question Danielle. First off, I want to point out that massive PE or high-risk PE depending on the terminology remains one of the most mortal cardiovascular events with death rates as high as 20% to 90% depending on what cohort and true to the mission of Inari Medical, we really want to try to change the standard of care for patients suffering from this horrific disease and that's the impetus behind the Flame Study. The body of data for massive PE prior to Flame was quite scant and we think it's a great opportunity in trying FlowTriever as a standard of care for this highest risk disease state.

Now, of course, our clinical efforts won't stop there. I think, as you pointed out, there is still a huge unmet need in terms of patients who are suffering from pulmonary embolism that doesn't happen to be in the massive category, and of course, we have multiple studies ongoing, as well as plan for the future to address those questions as well.

To answer your question specifically about inflection points, however, I think what you see is that there is rapid commercial adoption of this technique even in the absence of the clinical data, and I don't anticipate that the results of this trial are necessary to continue the growth trajectory of this company.

[Danielle Lastly, SVB Leerink]

Okay. So just think about it as sort of more standard blocking and tackling as you go along in the data just additive to that versus some sort of bolus post of the data?

[William Hoffman, President & Chief Executive Officer]

I think that's right Danielle. I think just generally speaking, that's true for our entire plan. There are no product or clinical developments, so just as an inflection point of any sort that we can see. Everything is contributory. This is for better or worse, as we've shared in the past, it's an execution play and we'll hopefully be able to keep our eye on the ball and execute.

[Danielle Lastly, SVB Leerink]

Okay. And if I could ask just one follow-up question on competition, I mean I'm in the camp that believes this is obviously not a zero-sum game here, but just curious about what you're seeing in the competitive landscape, if you're seeing competitors get more aggressive, whether it's from a sales and marketing standpoint or from a pricing perspective, just given the success that you're having, would love to get your thoughts there. Thanks so much

[William Hoffman, President & Chief Executive Officer]

I'll let Drew dive in on that one.

[Andrew Hykes, Chief Operating Officer]

So, Danielle, I think on the competitive front, no big changes in Q1 compared to what you've heard us describe previously. So a lot of the same kind of dynamics. We do see trialing of competitive products out in the market, but we continue to very much like our own chances when we're competing head-to-head with the other devices, we have not seen any changes on the pricing dynamics. You heard Mitch describe a modest year-on-year increase in ASPs. Our average revenue per procedure is pretty stable, if not modestly above year-on-year in that $9,200 to $9,300 range, I think that underscores the broader economic value proposition that continues to resonate with customers.

So we've been able to maintain if not hold those pricing levels and get modest uplift along the way. So all that I think speaks to the purpose-built solutions, our ability to differentiate both products out in the market and we continue to like our chances from a competitive standpoint

[Danielle Lastly, SVB Leerink]

Thank you.

[Operator]

Thank you. And our next question comes from Bill Plovanic from Canaccord. Your line is now open.

[Bill Plovanic, Canaccord]

Okay, great, thanks. Good evening, and thanks for taking my questions. The first question is on international, you did provide us some color and thank you for that, is as we think about kind of Europe through the balance of the year in roll-out into other countries and then in Asia-Pac with Japan and China, I was wondering if you could put a finer point on that, and just how should we think about one, the rollout, and then, commercially, and then two, the financial impact, And in our modeling and just next year, 2, 3? And then I have follow-up question. Thank you.

[William Hoffman, President & Chief Executive Officer]

We'll let Drew dive in on that one as well.

[Andrew Hykes, Chief Operating Officer]

Yes. So Bill, I can give you a little more color on Europe and then some of the other international markets, Europe was really in Q1, kind of a tailwind/headwind kind of story. As you heard Bill describe in the commentary, we have gotten started now with cases with both platforms in multiple markets. We obviously have now 510 K clear our CE Mark approval for both products, we have figured out a way to navigate the training and proctoring challenges that COVID has presented and we've gotten some really good outcomes from that initial group of cases. The docs are enthusiastic. Many of them are aware of the technologies from their American colleagues and from social media. They're appreciating what they're seeing now in their own cases firsthand so all that's really positive. On the headwind side, as you may know, it is a very difficult operating environment still in Europe and the pandemic is still a significant impediment, access to hospitals, there's lots of restrictions still, multiple countries with broad-based lockdown still in place, so a pretty tough environment still for getting two new technologies launched, and that we anticipate will continue to be the case here, even as we move through the rest of the summer. We're hopeful that as we get into the fall and get the summer period behind us that some of that operating environment will improve. From a financial standpoint, as you've heard us describe in the past, I think the rest of this year and even into 2022 will continue to be a building year where we will be able to see measurable contribution from Europe, but nothing that approaches anywhere close to material contribution to the broader commercial franchise and I think that's still a pretty good way to think about Europe in the short to medium term. Relative to some of the other markets, we are underway from a regulatory standpoint in both China and Japan, but those are going to be much longer roads for us to navigate. Those regulatory approvals will be measured in years candidly even beyond quarter. So we're excited to get started on that, but those are going to be longer-term paths for us to navigate before we're able to get started with cases in either of those two large Asia Pacific markets.

[Bill Plovanic, Canaccord]

Great, that's very helpful. Thank you. And then just for Mitch. How do we think about kind of these new products that are coming in that are lower price, you don't know the margins on those, and then I think you have some new space or manufacturing facility coming on and how does that kind of flow into the gross margins? I mean 92% is pretty stellar and yeah, I'm just wondering if there are some headwinds we should be thinking about as we head into the rest of the year?

[Mitchell Hill, Chief Financial Officer]

Sure. Thank you, Bill. The new products, many of them have been added to the price per procedure for the FlowTriever which is kind of the tool-kit approach that we've taken for our physicians to be able to use them into best employee whatever tools are necessary to help their patients with pulmonary embolism, and to some degree, those products that are being added to the FlowTriever price per procedure are going to have a bit of a drag on the gross margin of that particular product, and so that's something that will, I think, have a noticeable, but fairly small effect on the gross margin for the product. I think the new facility, which we're moving into hopefully here in probably the Q3 timeframe and be operational kind of in Q3, Q4, a much larger production facility that we have currently. it's also in Irvine, California, which is where we are speaking to you from today and that's something that could have again some drag on the gross margin for the business in the second half of the year. Eventually, we will move out of our existing facility here at 9 Parker in Irvine and be fully kind of up and running in the new facility. I would expect because of the larger facility and kind of a larger overhead associated with that, we could see some drag on the company's overall gross margin in the second half of this year and potentially into next year, but as the business continues to grow, as we've kind of seen over the past year here at 9 Parker, we think we can amortize those sort of fixed and overhead costs over the production base of the business and kind of get our gross margin to some degree back where it is right now.

I think longer-term, as you've heard us talk about the business and this partially relates to the international topic there we were just touching on with Drew, we're seeing Inari as having kind of a low to medium 80% gross margin type business and some of the products that we're developing will be added to the price per procedure. We are also looking at a variety of products for new disease states and new addressable markets, which will be independently priced. And so this is something we'll be able to share with you more as time goes on.

[Bill Plovanic, Canaccord]

Great, thank you.

[Operator]

[Operator Instructions] And our next question comes from Marie Thibault from BTIG. Your line is now open.

[Marie Thibault, BTIG]

Hi, Bill, Mitch, Drew, Dr Tu, thanks for taking the questions this evening. I'd like to start I guess with the expansion of salesforce territories. Can you tell us a little bit more in terms of where you're adding territories, are you splitting territories that are already highly productive, how are you thinking about some of that? I'm trying to consider how productive these new territories might be to start.

[William Hoffman, President & Chief Executive Officer]

I'll get started and if we need, we can have Drew fill in the detail. So, Hello, Marie. So first of all, almost all territories at this point were at 150 as we shared in the prepared statement, so almost exclusively now these are split territories. And we have seen productivity increase just a little bit of our overall sales organization because new sales professionals are starting with just a little bit of a base of business and I suspect that will continue. Everybody is going to start with some base of business here. Our goal here is increasingly on increasing our sales organization so that we can drive deeper adoption. Smaller territories allow us to communicate more effectively with non-interventional stakeholders, communicate with administration, about the development of real programs to more systematically identify PE and DVT patients and triage them to physicians who have the skill sets to actually intervene if appropriate. So yes, I think we'll see increasingly or almost exclusively from this point forward territory splits rather than new greenfield territories.

[Marie Thibault, BTIG]

All right. That's really helpful. Maybe I can ask my follow-up then on Aidoc, very interesting to see your work there with that team and the focus on kind of triage notification products. Having listened to the webcast that you invited us to, it strikes me as it's going to be kind of a learning curve for these hospitals to figure our workflow and kind of finesse the product if you will to fit their communication protocols and things like that. How do you envision Aidoc fitting in with Inari and maybe you can tell us why you chose Aidoc over some of the other competition that's out there, if you will. Thanks.

[William Hoffman, President & Chief Executive Officer]

Tom, you want to dive in on that one?

[Thomas Tu, Chief Medical Officer]

Sure, happy to, Marie, so thanks for the question. I think our partnership with Aidoc fits into a larger plan of really trying to systematize the identification and triage of patients with venous thromboembolism, a goal that, despite all of the attention that this disease has received, really is still quite far from reach, even in areas that have established Pert teams and things like that. We've actually funded research that suggests that even hospitals with established Pert teams don't even get activated over 50% of the time when they should. And so Aidoc is one such tool among many efforts to try to help hospitals develop systems and processes so that patients don't get missed and I think when you surface those patients to the attention of physicians that care and know a lot about pulmonary embolism, patient care improves. We chose Aidoc specifically because of their advanced work in this pulmonary embolism space, I think not just from the artificial intelligence aspect of automating the RV to LV ratio calculation, but also in their communication ability, once the patient has been identified and to be able to activate the appropriate physicians who can then make a rapid decision about patient triage, I think this will be a very fruitful partnership with the patients being the ones that benefit the most.

[Marie Thibault, BTIG]

That's really interesting. Thanks for the time.

[Operator]

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