Inari Medical Inc

NASDAQ:NARI

Earnings Call Transcript 2024-Q1

[Operator]

Good day, ladies and gentlemen, and welcome to the Inari Medical, Inc. First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded and will be available on the company's website for replay shortly.

I would now like to turn the conference over to John Hsu, VP, Investor Relations. Please go ahead.

[John Hsu, executive]

Thank you, operator. Welcome to Inari's conference call to discuss our first quarter 2024 financial performance.

Joining me on today's call are Drew Hykes, President and Chief Executive Officer; and Mitch Hill, Chief Financial Officer.

This call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. including statements related to Inari's estimated full year 2024 revenue, operating loss or profitability expectations and the expected operating performance and potential strategic benefits of inflow. These statements are based on Inari's current expectations, forecasts and assumptions, which are subject to inherent uncertainties, risks and assumptions that are difficult to predict. Actual outcomes and results could differ materially from any results performance or achievements expressed or implied by the forward-looking statements due to several factors. Please review Inari's most recent filings with the SEC, particularly the risk factors described in our latest Form 10-K 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. On today's call, we will refer to both GAAP and non-GAAP financial measures in announcing our Q1 2024 results. Please refer to today's press release for a reconciliation of the non-GAAP measure discussed on this call and referred to in the press release. The press release and slides accompanying this call are available on our website at inarimedical.com. A recording of today's call will be available on our website by 5:00 p.m. Pacific Time today.

With that, I'll turn the call over to Drew.

[Andrew Hykes, executive]

Thank you, John, and thank you all for joining our call today. We're pleased with our performance in the first quarter, achieving record revenue of more than $143 million, reflecting over 23% growth. Our performance was driven by consistent crisp execution and strong contributions across the Inari portfolio.

I would like to thank the team for driving strong adoption of our market-leading PE and DVT therapies, executing on our plans to diversify into sizable new patient populations and continuing to expand internationally. In addition to strong top line growth, we continue to make progress on our path to profitability, and we are reaffirming our expectations to reach sustained operating profitability in the first half of 2025. As we look ahead, we are as committed as ever to the strategic objectives that support our continued strong growth. These objectives reflect the Ethos and goals that have long been core to Inari's culture and have guided our commercial and operational progress. Our first objective is to continue to scale the adoption of our highly differentiated purpose-built toolkits across large attractive markets. This year, this includes our plans to drive deeper adoption within our existing U.S. account base via our VT Excellence initiative, gain access to new accounts across our emerging therapies portfolio and expand internationally, including commercially into Japan and China. In addition, we remain committed to ongoing portfolio expansion to address unmet patient needs in venous and other diseases. These initiatives have yielded strong growth as reflected by the rapid adoption in our emerging therapies portfolio in the first quarter. This early success follows years of purposeful investments. We are encouraged by the progress we are seeing across emerging therapies and see huge opportunities to continue to drive meaningful growth. As always, our innovation strategy is to target unmet patient needs with purpose-built tools. And in conjunction with that, to protect our leadership by leveraging our strong and comprehensive IP portfolio.

Next, we'll continue to lead the way with high-quality market impact in clinical data. To that end, we remain on track to showcase our PEERLESS data in the second half of the year. As a reminder, PEERLESS is the first of our 3 RCTs, and we've recently completed the 550 patient enrollment. The study will evaluate patient outcomes using our FlowTriever device as compared to catheter-directed thrombolysis. PEERLESS will generate high-quality clinical evidence that will move the field forward and further establish FlowTriever as the optimal interventional therapy for intermediate-risk PE patients. Meanwhile, enrollment is progressing well in our 2 other RCTs. PEERLESS II current FlowTriever to anticoagulation alone and DEFIANCE comparing ClotTriever to anticoagulation alone.

Our registry data also continues to move the field forward. Last month, Dr. David Dexter presented interim 2-year follow-up data from the cloud registry, the largest prospective multicenter data set generated since the ATTRACT trial. These results confirm the excellent safety, low re-thrombosis and effectiveness of the ClotTriever system for the treatment of DVT. In fact, in the long-term follow-up from CLOUT, patients treated with ClotTriever demonstrated a significant and sustained improvement in post-thrombotic syndrome at rates that were 1/3 to 1/2 those seen in historical DVT studies. We continue to believe high-quality clinical evidence is critical to maintaining and expanding our leadership position and growing the market. Indeed, the robust underlying market growth in VTE today is in large part due to the data Inari has already generated and the commitment we have made to developing this market.

Our next strategic priority is to continue to leverage our powerful commercial engine. The size, quality and expertise of our team are meaningful differentiators for our business. We have the largest VTE focused sales force in the industry and we'll continue to hire reps and split territories at a measured pace to support our growth. Today, this team is driving VTE Excellence initiatives to increase the use of our solutions within existing accounts. We're also having growing success engaging hospital administrators at the IDN level to facilitate the adoption of VTE Excellence across multiple hospitals within their network from a top-down perspective. Taken together, our efforts are yielding great results. As an example, in some of our most advanced accounts, we are now seeing TAM penetration rates above 50%. This is a testament to the fact that our VTE Excellence program is working to catalyze positive adoption patterns, but much work and opportunity remains. Over time, we are confident this team of experienced professionals can continue to move the needle from our current high single-digit TAM penetration to strong double-digit penetration and beyond. With the benefit of high-quality data and updated guidelines, we believe mechanical thrombectomy for VTE will ultimately exceed the TAM penetration rates seen today in acute ischemic stroke and could 1 day approach the TAM penetration of PCI for the treatment of STEMI.

We aim to accomplish these strategic objectives while delivering a premium financial profile characterized by strong durable growth, best-in-class gross margins and increasing operating leverage. We know that the strength of our financial profile is founded, first and foremost, on the success of our 3 growth pillars, our VTE franchise, Emerging Therapies franchise and our international business. We're market leaders in a $6 billion TAM for venous thromboembolism technologies in the U.S., and we are continuing to drive adoption within the substantial underpenetrated opportunity.

In Q1, our global VTE revenue was $137 million, up 20% versus the prior year, supported by our ongoing commercial expansion, market development and evidence generation efforts. We continue to see strong underlying growth in U.S. VTE procedures and expect that this market, defined as mechanical thrombectomy alone, can and will continue to grow in the neighborhood of 20%.

From a market position standpoint, although we anticipate continued competitive activity in this large and high-growth market, we remain highly confident in maintaining our leadership position and continuing to deliver robust VTE growth. All of this is factored into our guidance, which you'll hear from Mitch later on.

Turning to our Global Emerging Therapies business. In Q1, Emerging Therapies revenue was $6 million, up 185% versus the prior year. This segment consists of 4 distinct patient populations outside of VTE, together comprising a $4 billion TAM in the U.S. alone. In chronic venous disease, RevCore continues to perform well, the first mechanical thrombectomy device to treat venous stent thrombosis. We're also excited to be executing the limited market release of Venacor, our second purpose-built tool within the CBD toolkit, which will unlock another portion of this significant TAM. We hope to bring the technology fully to market in the second half of the year, and we'll have more to share them. As a reminder, we believe the addressable market for CBD includes an annual incidence of approximately 100,000 patients, representing a $1 billion U.S. TAM alongside a substantial prevalence pool.

Turning to CLTI. We have made great progress integrating the LimFlow business into Inari and driving the early U.S. launch. LimFlow offers new hope and new options to the 55,000 patients per year suffered from no option CLTI, translating into a USD 1.5 billion TAM. We are highly encouraged by the progress we have made to date in accessing this patient population. For LimFlow, we continue to view 2024 as a year of foundation building and remain focused on physician training, VAC approvals, thoughtful patient selection and deliberate wound care follow-up. We are successfully navigating back approvals today and we have completed an initial and growing series of commercial cases. We are seeing good traction and enthusiasm from physicians and have already completed our first 2 commercial training programs. In addition, we are pleased to highlight that earlier this month, CMS proposed a new technology add-on payment or NTAP, for LimFlow as we had anticipated. The proposed NTAP would add up to an incremental $16,000 to the hospital's existing DRG. We expect to see a final ruling from CMS later this year. The third market addressable by our emerging therapies portfolio is acute ischemia, a $600 million U.S. TAM characterized by tremendous unmet needs and a lack of purpose-built tools. We remain on track to initiate a limited market release and commercialize our second-generation Arctic system later in 2024. And our fourth and final emerging therapies market, intro for the treatment of AV fistula clock continues to effectively address unmet needs in this large and underserved patient population. We're working on a second-generation intro platform and look forward to bringing to market next year.

Finally, I would like to discuss our international progress. Q1 was a very strong quarter internationally with revenue of $9.5 million, up 120% versus the prior year. Growth in Q1 also reflected the largest sequential dollar increase we've ever had in international. Strength was primarily driven by adoption of our solutions in Europe, but we also saw strong performance across Latin America, Canada and Asia Pacific. We are pleased to see the investments we have made over the past several years in establishing our international business begin to translate into meaningful commercial traction in these markets. Although international still represents a relatively small part of our overall patient impact, we continue to expect international sales will account for at least 20% of revenue over time.

Before I turn the line to Mitch, I'd like to share, as always, a story about the incredible impact of our technology on patients. Last month, a 29-year-old postpartum woman was just 1 day postop from an emergency C section at a University Hospital in Germany. Due to severe hemodynamic instability, this young mother was put on ECMO, scanned and diagnosed with the pulmonary embolism. Thankfully, the physicians at this hospital were well trained to utilize FlowTriever and the entire supporting in our toolkit. Ultimately, her physician team utilized 4 of our devices Intri24, T20 curve, FT 2 and FlowStasis to rapidly and effectively treat her condition. The immediate result was substantial clot removal and returned to a normal heart rate. After several days of further improvement, this patient was discharged to a family in newborn baby and made a full recovery. She is just one of the many thousands of European patients whom we have been able to serve with our technology in the 3 years since we introduced our toolkits to the region. We're honored to help such patients return to their families. Such patient stories motivate us to continue our efforts to offer our products throughout the world.

In closing, we're pleased with our Q1 performance and confident in our outlook into the remainder of 2024 and beyond. We often say that we are just getting started at Inari, and despite being several years into our commercial journey, this remains more true today than ever.

With that, I will turn the call over to Mitch.

[Mitchell Hill, executive]

Thanks, Drew.

Turning to our first quarter 2024 results. Inari's revenue for the first quarter of 2024 was $143.2 million, up 23.3% over the same period of the prior year. This represents sequential growth of over $11 million. Global VTE revenue in the first quarter was $137.2 million, up 20.3% over the same period in the prior year. Global Emerging Therapies revenue in the first quarter was $6 million, up 184.5% over the same period in the prior year. International revenue of $9.5 million was up 120% compared to the prior year. Our best-in-class gross margin was 86.8% for the first quarter of 2024 compared to 88.2% in the prior year period. The year-over-year change was due to increasing internationalization of the business ramp-up costs associated with new products and product mix. Operating expenses were $141.5 million in the first quarter of 2024 compared with $107.8 million for the same period in the prior year. R&D expense was $26.9 million in the first quarter of 2024, up 21.8% compared with $22.1 million for the same period of 2023. The increase in R&D expenses was primarily due to increases in materials and supplies related expenses, clinical and regulatory expenses and personnel-related expenses in support of our growth drivers to support new products and build the clinical evidence base.

SG&A expense was $103.1 million in the first quarter of 2024, up 20.3% compared with $85.7 million for the same period in the prior year. The increase in SG&A expenses was primarily due to increases in personnel-related expense as a result of increased headcount, increased commissions due to higher revenue, professional fees and travel costs. In the first quarter of 2024, the change of fair value adjustment of our contingent consideration liability was $6.3 million. Acquisition-related expenses were $2.8 million and amortization expense related to our acquired intangible asset was $2.5 million. There were no expenses related to these 3 items in the prior year quarter. And I recorded a GAAP operating loss of $17.2 million in the first quarter of 2024 compared with a GAAP operating loss of $5.3 million for the same period of the prior year. On a non-GAAP basis, which excludes acquisition-related expenses, acquired intangible asset amortization and changes in the fair value of contingent consideration, the first quarter operating loss was $5.6 million. The non-GAAP adjustments had no impact on the first quarter of 2023.

Net loss was $24.2 million for the first quarter of 2024 compared to a net loss of $2.2 million for the same period of the prior year. The basic and fully diluted net loss per share for the first quarter of 2024 was $0.42 on a weighted average basic and diluted share count of 57.9 million. This compares with a basic and fully diluted net loss per share of $0.04 on a weighted average basic and diluted share count of 54.8 million in the same period of the prior year. As we execute against our goals of driving strong growth and leverage within the business, we are also maintaining a thoughtful approach to managing our balance sheet.

In the first quarter of 2024, our cash flows used in operating activities were $12.3 million compared to approximately $2 million in the same period of 2023 and primarily due to investments in our product portfolio, including limbo. At the end of first quarter, we had a healthy balance of cash and investments totaling $102 million. We remain confident in our ability to self-fund our business and strategic objectives with current cash and access to liquidity. We anticipate our cash balance will remain at approximately $100 million for the rest of the year.

Turning to 2024 outlook. We are raising our full year 2024 revenue guidance from prior guidance of $580 million to $595 million to $592.5 million to $602.5 million. This updated guidance reflects growth of approximately 20% to 22% over 2023. Our guidance reflects contributions from all 3 of our growth pillars, VTE, Emerging Therapies and international.

For 2024, from a phasing perspective, we continue to expect strong performance in the back half of the year. By way of reference, in 2023, we saw modestly higher revenue in Q2 versus Q1. We expect to see this typical seasonality again in Q2 2024. As a result, we expect Q2 revenue to be flat to slightly up sequentially.

Lastly, I would like to comment on Inari's; progress towards profitability. We are continuing to invest in our strategic objectives to drive growth while positioning the business to achieve sustained operating profitability in the first half of 2025. On our last call, we mentioned that we expect to see greater operating losses in the first half of 2024 versus the second half. We continue to hold this expectation today.

With that, I'll turn the call back to the moderator for questions. For the Q&A segment, we will be joined by Dr. Tom Tu, Inari's Chief Medical Officer.

[Operator]

[Operator Instructions] The first question today comes from Larry Biegelsen with Wells Fargo.

[Unknown Analyst]

It's Lei calling in for Larry. Just a question regarding the growth in Q1. So we backed into U.S. Core VTE sales of about $128 million, and that's up about 16% year-over-year. Can you just confirm if our basic math is correct? And if that is correct, how do you bridge that against the 20% market growth that you were alluding to? And I have a follow-up.

[Andrew Hykes, executive]

Yes. Thanks, Lei. This is Drew. I can get to start on that, Mitch may want to chime in as well. So relative to VTE, we're pleased with how that part of the business performed in Q1. We saw 20% growth across VTE globally a little faster than that internationally, albeit off a small base, a little slower than that. here in the U.S., obviously off a much larger base. In terms of the underlying market growth, historically, you've heard us characterize the growth in this market, which we define as mechanical thrombectomy for VTE as growing in the neighborhood of 20%, call it, 18% to 22% I think when the dust settles on Q1, you're going to see the same kind of robust underlying market growth where we have expectation that, that robust market growth will continue as we look ahead. In terms of our position in that market, we remain the clear market leader. So despite competitive dynamics despite the potential for modest share fluctuations back and forth, we remain the clear market leader in this market. and we're confident in continuing to be the market leader as we move forward. And that confidence is built on our purpose-built solutions, high-quality data, the strength of our commercial engine, all of those things taken together, and I think as a result, we continue to expect robust growth from VTE. And that's exactly what you saw as we moved through 2023. That's what you saw most recently here in Q1 and that anticipation of robust growth from VTE is also reflected in the updated guidance.

[Mitchell Hill, executive]

Yes. And maybe, Lei, for -- just to add to Drew's comments, as you know, we don't aggregate the data at the U.S. VTE level. So I think I can sort of follow your math because the OUS side is growing faster. So the U.S. side have grown a little bit slower I need you to did a nice job addressing the market growth versus how we feel about it. One of the things I look at that I'm very pleased with for the business is just the dollar growth of the business sort of quarter-over-quarter. If you look back over the past year and as I look at the growth of the business, for example, from Q2 to Q3 and then from Q3 to Q4 and Q4 to Q1, the Q4 to Q1 time period with $10.5 million of sequential growth is actually the highest that we've had looked back over the course of the past year. So we're really pleased with the progress the business is making. And for the reasons that Drew mentioned during the prepared remarks, we feel like we're still just getting started.

[Unknown Analyst]

Great. That's helpful. And then just as far as the subsegments within VTE. Can you comment more specifically around DVT versus PE market share based on the calls we've done. It sounds like you're holding on to the PE share perhaps a little better than the DVT share. Just any color you can provide around that.

[Andrew Hykes, executive]

Yes. We saw robust growth in VTE across both PE and DVT. Balanced growth across both of the 2 franchises. We see competitive dynamics at play across both the franchises, but robust growth in both areas, and that was clearly evident in the Q1 results.

[Mitchell Hill, executive]

Yes. And then, I mean, we continue to feel like we're the clear and dominant market leader in the PE side of the business, probably a 4:1 lead there. I think on the DVT side of the business, consistent with where we were maybe back in the second half of 2023, kind of a 1.5 to 2:1 lead there. I guess I'd just like to comment, though, that this concept of share dynamics or share shifts is something that's very dynamic and it's something that kind of changes depending on who the treating physicians are. It's not a one-way street by any means, and we're in there definitely competing for share. We're in there working with the treating physicians, working with the non-interventional physicians as well in our program building and everything else to try to help make sure that patients get the best possible care.

[Operator]

The next question comes from Stephanie Piazzola with Bank of America.

[Stephanie Piazzola, analyst]

I wanted to ask about the guidance raise. It looks like you raised the guidance at the midpoint by more than the beat in the quarter. So maybe if you can expand on where the guidance raise is coming from? How much of it U.S. core versus OUS and emerging therapies?

[Andrew Hykes, executive]

Yes. Thanks, Stephanie. I'll get started on that. Mitch may want to follow on. So it's about a $5 million beat and about a $10 million raise at the midpoint. And I think that reflects the strength and momentum that we saw across all 3 parts of the business as we exited strong 2023 and made our way through Q1. We saw strength in VTE. We saw a robust growth across emerging therapies. And we saw another strong quarter of crisp execution and growth from the international part of our business. And I think all of those considerations are factored into the increase in guidance by $10 million at the midpoint.

[Mitchell Hill, executive]

Yes. And just to add to that, Stephanie, as I said there at the end of the prepared remarks from the point of view of sort of the trajectory of the beat, if you will, we're seeing a greater acceleration in the business in the second half. So we would expect to see some increase there. The flat to slightly up comment is something that we're kind of thinking through as it relates to our Q2 number. And we saw some seasonality as Drew mentioned, in the past couple of years actually in the business. And so we would expect to see that again here in 2024. First couple of weeks of April, we saw lots of spring break activity and things of that kind in the business. So no surprise and no different than other companies are experiencing, but we just wanted to be confident in terms of the number we put out there for Q2, and that's hopefully helpful to your question.

[Stephanie Piazzola, analyst]

Yes. That's really helpful. And then maybe just as a follow-up, wanted to ask about a competitor recently launched a next-generation version of their product, and there are some other new entrants expected in the market here soon. I know you mentioned that this is reflected in the guidance, but maybe if you could elaborate on that a little bit more if you're seeing any early disruption from that and kind of what you expect for the rest of the year.

[Andrew Hykes, executive]

Yes. I don't think we've changed -- we've seen any big changes in the competitive landscape. We see continued competitive dynamics, continued entrants to this market, not surprising. This is one of the most attractive end markets in medtech. And despite those dynamics, again, we remain the clear market leader and are confident and continuing to be the market leader you heard us describe what that confidence is based upon. This is a market that we built, and we're not going to sit by and idly passively allow folks with inferior technology and inferior data have unfettered access to this market. So we're going to compete. We're going to compete aggressively. That's what you've seen us do in the past. That's what we would expect going forward as well. To the extent we do have new entrants, I think they can be constructive from a market development standpoint. And after all, that's where the real value creation opportunity is the real opportunity to impact patients and change the standard of care. So alongside competing head-to-head, we're also going to continue to focus on the investments we're making to help develop the market, high-quality data, market development, program development to continue to expand our commercial engine, all of those investments designed over time to continue to develop this market.

[Operator]

The next question comes from Marie Thibault with BTIG.

[Marie Thibault, analyst]

Congrats on a very nice quarter start to the year. I wanted to shift here a little bit and talk about international. International remains strong in addition to US VTE. And I caught mention of international expansion. Are you in new countries? What does the coverage landscape look like today? And what can you tell us about in China and Japan? I think that's still set for this year.

[Andrew Hykes, executive]

Yes. Thanks for the question, Marie. So we had another strong quarter of growth internationally, $9.5 million, the largest sequential increase, absolute sequential increase we've had international. That continues to be led, first and foremost, out of Western Europe, where we've got kind of the longest head start of our international effort. We've got a well-established commercial footprint at this point and are seeing robust growth continue to be driven out of Western Europe. Alongside that, we're also seeing some more meaningful contributions from 12, maybe 15 other markets outside of Western Europe countries in Latin America, Canada, Brazil, Argentina, also across Asia Pacific and Australia and New Zealand and Singapore. Some of those markets were not as far along as we are in Europe, but nonetheless, they are now at the point where they're contributing more meaningfully alongside the growth being driven out of Western Europe. And then finally, we remain on track putting ourselves in a position to help patients in both China and Japan later this year. And I think as we get closer to those milestones, we'll have more to share respectively, on our go-to-market strategies in both China, Japan, but that work continues, and we continue to expect treating patients in both those markets by the end of the year.

[Marie Thibault, analyst]

Okay. Very good. And then I wanted to ask about the second half of '24 PEERLESS data readout. What impact are you seeing at this point right now on utilization from doctors may be anticipating that data? And how impactful do you think it can be to guidelines? We've seen some what seemed to be some more positive shifts toward mechanical thrombectomy in the guidelines, but we'd like to hear maybe from Dr. Tu a little bit on his thoughts on guideline impact.

[Thomas Tu, executive]

Thanks, Marie. Appreciate the question. And we are, of course, very excited about PEERLESS. It represents the first in a cadence of randomized controlled trials that we've invested in. We're leading the way in terms of data generation for VTE. As a reminder, PEERLESS is an RCT, randomizing FlowTriever to catheter-directed thrombolysis for intermediate risk PE. And of course, despite the obvious drawbacks to analytic-based therapy, including unwanted risk of bleeding and increased costs, we still see that therapy being used in a portion of patients treated for PE. And I think this data set certainly a positive is going to go a long way in terms of shifting the kind of hold outs supporting that therapy towards what we believe is a superior form of treatment. Now as far as impact to guidelines are concerned, of course, an RCT carries a higher level of weight than some of the data we've generated to date. But I don't want to discount the value of the largest ever prospective registry in PE, which is the FLASH data as well as the FLAME data, which is the largest contemporary study of mechanical thrombectomy for high-risk PE. And I think taken together, these are going to start shifting the guidelines towards specific mention of mechanical thrombectomy and indeed FlowTriever as the source of the generation of all of this important data.

[Operator]

The next question comes from Kallum Titchmarsh with Morgan Stanley.

[Kallum Titchmarsh, analyst]

Just on the reshuffling of the sales leadership, I wanted to get a bit more color on what's going to change under TAM, should we anticipate adjustments in the way incentives are structured or maybe some initiatives to drive better productivity? Just keen to hear why you think now is the right time for a new direction here and whether this impacts your rep numbers.

[Andrew Hykes, executive]

Yes. Thanks for the question, Kallum. So back in October of last year, at our national sales meeting down in San Diego, our former sales leader in the U.S., John Barrel announced his retirement to the team. John actually joined an alongside myself about 7 years ago and has been a fantastic leader for us, but was ready to downshift and basically exit a full-time operating role. So we announced that back in October, 2 months, even before the CID was received. And we began a search for a new leader ultimately landing on Tim Benner, who joined here during Q1. I think the short-term strategy is status quo. The commercial model that we have followed has obviously been very, very effective for us. And I think Tim is certainly respectful of all the we've had and respectful of model. He is settling into his new role. I think like any new leader, I'm sure he'll have some proposals and some recommendations on changes to make, but I would not anticipate any radical change in our commercial strategy or tactics or execution. He's 6 or 8 weeks into his new role at this point. In terms of the last part of your question on new rep adds. We're going to continue to add additional sales professionals each quarter as we move through this year. That's been a part of our model from the get-go. Those new ads are tempering a bit, tapering a bit at this stage of the rollout, but we continue to see opportunities to split territories and expand the commercial footprint. And I think that will be the same strategy under Tim's leadership is what we've followed historically.

[Adam Maeder, analyst]

Got it. And then 1 more possible. Just I think I know you said it will take a number of years to conclude, but just checking if there's any progress on the DOJ inquiry since the Q4 call?

[Andrew Hykes, executive]

Yes. So no update other than we are continuing to cooperate, and we've not seen any impact commercially from the investigation from the CID, nor do we anticipate seeing any impact commercially. So we're continuing to cooperate. But I think to your point, if you look at the precedent examples here, this is likely a process that's going to be measured in quarters and quarters, if not years.

[Operator]

The next question comes from Bill Plovanic with Canaccord.

[William Plovanic, analyst]

I'd like to kind of shift the topic to LimFlow. Just help us understand how do you think about commercialization. When do you go beyond trial centers? How does NTAP going into effect in October at the proposed rate, how would that impact your commercial strategy? And kind of how much of a contribution was it to the quarter?

[Andrew Hykes, executive]

Great. Thanks for all those, Bill. I'll try and remember each of them. I think in general, so far so good with LimFlow. We feel really good, first and foremost, on the work that we've completed on the integration. We're well over half of the way completed with the integration. We've wrestled to the ground some of the most complicated parts of that process and feel really good about the progress we've made in integrating LimFlow into Inari. We've got the team now defined and established, and we feel good about the remaining work ahead to complete the integration. On the commercial side, we're also seeing some really nice initial traction with LimFlow. As you've heard us describe in the past, this is a year focused on foundation building as opposed to significant revenue contributions. We're focused on training and in-servicing on navigating back approvals on strengthening and stabilizing the supply chain on getting the NTAP established, and we hit an important milestone recently with CMS, including the NTAP in their proposed rule every expectation we have is that, that will come online as anticipated in October and will provide up to 16,000 in incremental reimbursement that will certainly support a broader economic value proposition for LimFlow and will certainly be a key part of the foundation that we're going to build off of as we move into 2025. And I think that's the time frame for us really beginning to flex the commercial effort on LimFlow and really begin to ramp with significant expansion in accounts and cases that go along with it. Last point I'd make, keep in mind, this is going to be a more focused commercial effort than what we've had to undertake in VTE, focused on a smaller number of sites. And as a result, a much more narrowly scoped commercial infrastructure that we're going to need to build to service these patients compared to what we've had to undertake in VTE.

[William Plovanic, analyst]

And then if I could, I know the commentary on the guidance for especially the direction on Q2 of flat to up. Looking back, you haven't been flat to up since COVID in 2020. I'm just -- is there something specifically you're seeing that you're concerned about? Is there anything changes in pricing? Is there any changes in any part of your business? Was there a lot of stocking internationally? I'm just kind of curious of the the conservatism and given the strength of the quarter and the guide for the year, but the second quarter, that's not a historical pattern for you.

[Andrew Hykes, executive]

Sure, Bill. I can get started on that. Mitch may want to pile on as well. As you heard Mitch described, we have seen some seasonality in Q2, the last couple of years. We're not sure we fully understand all the dynamics at play, but there appears to be some underlying seasonality to the incidence of VTE in Q2. If you go back in time, we've certainly been transparent about talking about that in previous years. We want to be thoughtful about that dynamic as we signal the cadence of revenue build for the remaining 3 quarters here in 2024. There's nothing else at play other than that consideration. And I think as you look into Q3 and Q4, we do see some really nice catalysts shaping up across all 3 different parts of the business that we believe are going to lead to an acceleration as we exit the second half of the year.

[Mitchell Hill, executive]

And Bill, just to quickly add, even a flat to up quarter in Q2 would be 20-plus percent growth year-over-year. So we're pleased that, that sort of continues to be consistent in reinforcing of the guide for the year as a whole, which is with our revised numbers is kind of 20% to 22%.

[Operator]

The next question comes from Chris Pasquale with Nephron Research.

[Unknown Analyst]

I wanted to start with emerging therapies. I was hoping you could talk a little bit about the Vencore product, what that adds to that business and how it differs from the use case for ReVCore.

[Thomas Tu, executive]

Thanks for the question, Chris. This is Tom here. So very excited about VenaCord. It is the second element in our purpose-built toolkit for chronic venous disease. This is a very large population with unmet need whose standard of care right now is really just compression stockings and watchful waiting. We're really excited about the performance of this product in its early limited market release. And as always, we'll have a lot more to share about the product and the go-to-market strategy once we move into full market release, which will be in Q3.

[Unknown Analyst]

Okay. I guess we'll wait for details then. And then Mitch, just a detail on the income statement. There was a large tax provision this quarter. Was that a cash charge? Is that part of the burn here in 1Q? And what was the reason for that?

[Mitchell Hill, executive]

Yes. The cash burn issue, Chris, is more a function of working capital changes. If you look at the cash flow statement, you'll see some increase in our accounts receivable and some increase in inventories. So that was really more of what was going on there. The tax expense item wasn't a current cash issue, but it is reflective of the fact that the U.S. business is something that is -- I think as I've said before, the U.S. business at this point is profitable and growing and what comes along with that, unfortunately, is taxes. So we're dealing with it, and we're doing our best to sort of plan for those, but that wasn't a current cash issue for us in Q1.

[Operator]

The next question comes from David Rescott with Baird.

[David Rescott, analyst]

Great congrats on the strong start to the year. Mitch, I wanted to follow up on some of your comments about the second half of the strong performance in the back half of the year. I'm just trying to recognize if you said whether or not there is acceleration in the back half and when we specifically look at this and the U.S. VTE number, I'm kind of getting to up mid-teens in Q1 or so a little bit above mid-teens. Does that number kind of hold steady into the back half, or is more of the better guide or the stronger growth in the back half more based on emerging therapies and the International segment.

[Mitchell Hill, executive]

Yes. I mean, Chris -- sorry, David. Again, we're not providing the guidance at that level of detail. We are seeing the global VTE number continuing to grow sort of along the lines of what we experienced here in Q1, if not a little bit better. We are excited about the growth prospects for the international business and then our emerging therapies business is going to continue to build out this year. Tom just talked about the VenaCore product, which is going to add to the CBD portfolio. And then later in the year, we'll have the Arctic product. So we have some nice catalysts there to help us continue to build that kind of a multiproduct platform opportunity for the company. Overall, I would comment on the market growth issue versus our specific growth in global EG and just say that it's kind of not a straight line. There's going to be some puts and takes each quarter overall, as Drew mentioned during the prepared remarks, and we are super excited about the opportunity to expand the interventional penetration rate into the treatment of ETE diseases. And we think it could be 2 to 3x the size it is currently. So that is just a really terrific opportunity for us. And we feel like we're just getting started with that. And it's going to be a little bit of ebbs and flows quarter-to-quarter as we move forward. But if we picture where the business can be sort of in the 3- to 5- to 7-year time frame, including the readouts of multiple RCTs and guideline changes and things like that. We're super excited about the prospects.

[Adam Maeder, analyst]

Okay. Great. And maybe that's a good segue to my next question. Just specifically, on the 2-year kind of cloud data specifically on the lower TS rate than we saw in some of the prior trials. I'm curious if the data that you've seen there is enough at this point or has been enough to drive maybe incremental conversions of some physicians who may have been more hesitant to switch over to term become specifically on the PTS kind of readout there. And whether or not longer term, if and once this goes into guidelines, whether or not you think these results would benefit the thrombectomy category as a whole or whether or not this is more specific to what you're seeing from ClotTriever alone?

[Thomas Tu, executive]

Great. Thanks for the question, David. So I'll answer them in reverse order. The ClotTriever system has a unique mechanism of action, and we believe that's the only device that has led to the kind of fantastic clinical results that we presented most recently in the cloud 2-year interim data. I think the top line readout of that data set shows that mechanical thrombectomy with ClotTriever is the best at removing thrombus and that translates into the best short-term safety results as well as long-term safety and efficacy in prevention of post-thrombotic syndrome. And we're very happy about that data set and pleased to report it. I think as far as the commercial impact of the data set, you're going to see this effect 2 different physician populations, right? Of course, those that are still kind of mired and conservative therapy or old-fashioned therapy for DVT, certainly have more reason to believe in ClotTriever. And then folks who perhaps have chosen alternative means to treat DVT now recognize the superior safety profile and efficacy. of this device with better data than anything else that's out there.

[Operator]

The next question comes from Michael Sarcone with Jefferies.

[Michael Sarcone, analyst]

Tom, maybe we can keep you in the hot seat. Just a follow-up on the PEERLESS II commentary. And I believe you had mentioned the data set a positive could help catalyze more uptake of mechanical thrombectomy, what would you characterize or what are you looking for to define success or a positive read on that trial?

[Thomas Tu, executive]

Sure. So Michael, just for clarification. I believe you might be referencing PEERLESS 1, which is our RCT of FlowTriever versus catheter-directed thrombolyses for PE patients. That's the one whose enrollment is complete and whose data set we will anticipate presenting in a major clinical meeting in the second half of this year. I think what you're going to see there is a strategy kind of endpoint, not to go into too much of the details, but it's a win ratio analysis of FlowTriever versus capture directed thrombolysis, with important clinical as well as resource utilization metrics, things such as mortality, leading, clinical deterioration and bailout as well as hospital ICU utilization. And I think all of those are known benefits for our therapies over CDC, and we anticipate that this data, if positive, is going to reiterate those benefits and drive more people towards our therapy.

[Michael Sarcone, analyst]

Got it. And then maybe 1 for Mitch. Can you just talk about how you're thinking about the cadence of the gross margin through the balance of the year?

[Mitchell Hill, executive]

Sure. Happy to do that. I think the [ 86.8% ] margin in Q1, as I mentioned, there were some fluctuations there due to product mix and due to some ramp-up for the new products and the internationalization. As we think about that for the remainder of the year, it looks like it will be fairly flat or fairly consistent with that number. So not a significant fluctuation in that as we move through the rest of the year.

[Operator]

The next question comes from Mike Matson with Needham.

[Unknown Analyst]

This is Joseph on for Mike. Just another one on gross margin. Maybe the reason why it was down this quarter? Or I guess was pricing a factor this quarter? What's the pricing been like? Has it generally been stable?

[Mitchell Hill, executive]

Yes. Happy to help you with that. And the pricing, we're happy to report has been very stable to even up for Inari that we've been successful working with our customers. As you know, historically, we had the BT PPP is something that's kind of coming to the picture over the past year or 2, starting out from a couple of years ago, it was just kind of the PE price per procedure. And then the core was sold on an SKU basis. And now we've kind of been able to offer a package to many hospitals so that the treating physicians are able to avail themselves of really all of the tools is particularly useful in the complex DET cases, which are probably around 15% to 20% of those where they can use the sort of the coring element of the clot treat were to remove clot this wallet here and they can also use the aspiration of the FlowTriever to remove clot that may be up on the IBC the IVC filter parts of the anatomy. So the pricing has been very stable to up for us, and we are continuing to work with hospitals to expand the concept of that of that pricing package.

[Unknown Analyst]

Okay. Yes, just to re-iterate that's helpful. And just to reiterate, did you say 15% to 20% of the complex cases, those customers are opting for the package deal?

[Mitchell Hill, executive]

Sorry, 15% to 20% of the VTE procedures are complex in nature, meaning that the physicians would benefit from using both the the ClotTriever family of products as well as the aspiration tools that are part of the FlowTriever family. So this idea of bundling together all of the products and kind of a larger toolkit is something that they really love.

[Operator]

The next question comes from Adam Maeder with Piper Sandler.

[Adam Maeder, analyst]

I wanted to start on Arctics. I believe you were previously targeting a mid-2024 relaunch. Just wanted to see if that still holds or if that's kind of shaping up to be a little bit later in '24? And what's needed, I guess, from a clinical regulatory standpoint to to get that product launched again in the states? And then I have a follow-up.

[Thomas Tu, executive]

Adam, this is Tom. Thanks for the question. We're really excited about Arctics. As you know, we've been in the market with the first generation product. We're really happy to see a pristine safety profile, excellent efficacy, which really offers a better option for patients who in this mature market really have had suboptimal choices. With Arctic Generation 2, what we're bringing is increased ease of use as well as even better thrombectomy efficacy. And we are still targeting a midyear launch of that products. So we're just getting the finishing touches, and we'll have more to say as we've made further progress.

[Adam Maeder, analyst]

And 1 other question, and it's a bigger picture question on innovation. Inari clearly has been very innovative in recent years, and you've launched a lot of different products and have more coming down the pike. One question that I sometimes get from investors is around FlowTriever and ClotTriever. Any plans for future iterations of those technologies? And any, I guess, specific ways that you think that those products could be further improved.

[Thomas Tu, executive]

Yes, absolutely. So as our flagship products and as the core driver of our mission as well as our growth, we are very much interested in continuing to invest in what is currently fourth-generation FlowTriever and ClotTriever products. And we continue to solicit feedback from physicians to look for areas where we can improve safety and efficacy, and we'll see continued investment in developing and introducing those concepts into our products. I think as far as the safety and efficacy profile that we now see becoming documented in high-level clinical data, I anticipate that we are reaching diminishing returns in terms of improvements there, but can always improve elegant form factor and ease of use.

[Operator]

The last question today is Richard Newitter with Truist Securities.

[Richard Newitter, analyst]

I have 2. First one just on the profit comments in the first half I think you guys said you continue to expect profitability in the first half of '25. I'm just curious if that's meant to be read as the first quarter is probably still in a loss situation in the second quarter is positive and the net of those 2 is breakeven to slightly positive. Is that the right way to look at it, or are you turning the corner, you think, as early as the 1Q? And then I have a follow-up.

[Mitchell Hill, executive]

Yes, Richard, it's Mitch. Happy to try to address that question. In Q1 of each year, we have a reset that happens with the Arititaxis and also some of the company match in the 401(k). And it's a larger number than you might imagine. And so that particular -- and that actually, if you look at the Q4 to Q1 walk that we're currently reporting, you can see some of that appearing in the numbers. So that will happen again as we move from Q4 '24 to Q4 of '25, and we would expect currently to see a loss in Q1 of 2025, but then we would go into the operating profit sort of profile in Q2 of 2025 and thereafter. So that's kind of the commentary we have about the first half of the year. And that's just something that's kind of all companies deal with in terms of the calendar year tax issues.

[Richard Newitter, analyst]

Okay. And then maybe just on the -- you guys have referred to competitive dynamics a couple of times as potentially explaining the delta between your U.S. venous growth rate and the underlying market rate. I guess, a year ago, you had a competitor launch? You talked about some trialing, and you expected that to be transient. I just -- can you characterize the competitive dynamics as we're now kind of moving into a second year or anniversarying the launch of the main competitor and some new ones that are coming on. What exactly is the competitive dynamic that's occurring? And why or why shouldn't we expect that to be transient going forward?

[Andrew Hykes, executive]

Yes, I can try and answer that, Richard. So we are going to see competitive entrants in this market. It's a large, attractive market, high-growth market in the earliest stages of penetration and inflection from conservative medical management to frontline therapy with mechanical thrombectomy. That competitive dynamic is factored into our guidance. That's not a new part of our business. We obviously face those same dynamics as we moved through 2023 and delivered 28% growth. We saw the same competitive dynamics play out here most recently in we grew 23%, including 20% in VTE. So all of that, I think, underscores our confidence in continuing to be the market leader in this market despite new entrants coming in. And again, to the extent they can help from a market development standpoint, I think there's real value and real constructive work they can do alongside Inari to develop the market over time.

[Operator]

This concludes our question-and-answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.