Inari Medical Inc

NASDAQ:NARI

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, thank you for standing by. And welcome to the Inari Medical Inc Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be question and answer session. [Operator Instructions].

I would now like to turn the conference over to your speaker today, Caroline Corner, Investor Relations. Please go ahead, Ma'am.

[Caroline Corner, Investor Relations]

Thank you, operator. Welcome to Inari's second quarter 2020 earnings call. Joining me on today's call are Bill Hoffman, President and Chief Executive Officer, and Mitch Hill, Chief Financial Officer.

This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act 1995. All statements made on this call that do not relate to matters of historical facts, should be considered forward-looking statements, including statements regarding the market in which Inari operate, trends and expectation for Inari's products as technology, trends and demand for Inari's products and Inari's expected financial performance, expenses and position in the market and the impact of COVID-19 on Inari's operations and Inari's customer's operation.

These statements are neither promise nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially for any results, performance or achievements express or implied by the forward-looking statement.

Please review Inari's most recent filing with the SEC, particularly the "Risk Factors" described in Inari's S-1 filing and in Inari's quarterly report on Form 10-Q for the second quarter ended June 30, 2020 for additional information.

Any forward-looking statement 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 expect as required by applicable law.

Inari's press release for second quarter 2020 results is available on Inari's website www.inarimedical.com under the investor section and include additional help about Inari financial results.

Inari's website also have the latest SEC filings which you are encourage to reveal. A recording of today's call will be available on Inari's website by 5.00 p.m. specific time today.

Now, I would like to turn the call over to Bill for his comments and second quarter 2020 business highlights.

[Bill Hoffman, President & Chief Executive Officer]

Thank you, Caroline. And thank you everyone for joining us today on this our first earnings call as a new limited company. I'm looking forward to updating you on our performance this quarter. But since many of you are new to our story, I'd like to start by giving you an overview of Inari Medical. Who we are? What we do? And most important, why we do it?

Inari Medical is a commercial-stage medical device company focused on developing products to treat and transform the lives of patients suffering from venous diseases. Our initial product offering consist of two minimally invasive, novel catheter-based mechanical thrombectomy devices.

We purpose, build our product for this specific characteristic to the venous system and the treatment of the two distinct manifestations of venous thromboembolism or VTE, namely deep vein thrombosis and pulmonary embolism.

Our ClotTriever product is used to treat patients suffering from Deep Vein Thrombosis or DVT, while our FlowTriever product was the first thrombectomy system, FDA cleared for the treatment of pulmonary embolism or PE.

We believe removing the clot makes an important difference for our patients both in the immediate term and long term outcomes. And if you've seen images of our clot removed by our devices, we believe most people find their self evident, removing the clot matters. And our devices remove a lot of plot.

Our ClotTriever and our FlowTriever devices have been shown in clinical trials to be safe and effective in treating DVT and PE patients respectively. The devices are easy to understand and simple to use for the physician and we offer a compelling economic opportunity for our hospital customers.

Our procedures qualify for a robust reimbursement while at the same time removing costs from the health care system by eliminating expensive thrombolytic drugs and the consequent ICU stay.

Now that you know a little bit about what we do. I'd like to share an example of why we do it. A couple of weeks ago, one of our sales professionals from Arizona was called just before midnight to cover a procedure on a very sick pulmonary embolism patient.

When she arrived she found a very somber cath lab, a 74 year old man who had presented to the emergency department a couple of hours previously, was desperately short of breath. A CT angiogram showed a very large blood clots straddling the left and right main pulmonary arteries and extending deep into both vessels.

The patient's blood pressure was very low and unstable, and blood tests showed elevated cardiac enzymes, all of which suggested the blood clots were severely impacting the heart's ability to deliver blood through the lungs and through the body. This is called a massive or high risk PE and it carries a very high mortality rate.

The physician told the patient that removing the blood clot quickly was his only chance to live. But there was a strong chance that he might not survive the procedure. The patient's wife was actually called to the cath lab to say goodbye to her husband.

This man and his wife came to terms with his mortality in real time as the procedure started. Minutes later, our FlowTriever system was introduced through the growing into his pulmonary arteries.

After two whooshes with our T 20 device, along with the use of our FlowTriever disks designed to disrupt firm and wall-adhered clot, two large blood clots were removed. The patient's heart rate and blood saturation levels returned to normal before he left the cath lab.

The physician told our sales professional, I'll remember this for a long time. Thank you. Our devices and our people, all of them in partnership with our physicians have a most spectacular impact on human life.

We are committed to a cause and to our mission in ways that are bigger than ourselves and way bigger than business. We are thankful for this opportunity and for the responsibility entrusted with us.

The patient I described is by no means unique. Our markets are large and the unmet need is spectacular. In the United States alone, there are approximately 200,000 patients who present each year with intermediate to high risk PE, whom we believe would benefit from the treatment with our FlowTriever device. And another 240,000 patients who present each year with DVT in the iliofemoral region, which is roughly between the mid thigh area to the belly button, who we also believe would benefit from our ClotTriever device.

At our current average selling prices, the combined market represents $3.6 billion in total addressable market. Despite our strong growth in the first eight quarters of commercialization, we have penetrated less than 2% of this market. We have a great deal of opportunity in front of us and we sense a strong responsibility and urgency to address the needs of these patients.

With that, I'd like to turn now to our quarterly performance. Many medical device companies -- for many medical device companies, Q2 was a challenging quarter as it was for Inari Medical due to the ongoing pandemic. Our Q2 revenue was $25.4 million, up over 150% from the same quarter last year, but down sequentially from our Q1 revenue, which was $27 million.

Internally, we pay strong attention to procedure volume as this metric more closely than any other aligns with our mission to treat patients. In overtime, we believe it correlates strongly with revenue.

We completed approximately 2500 procedures in Q2, which was actually up sequentially from our Q1 procedure volume of approximately 2400 procedures. The modest sequential decline then in revenue, from Q1 to Q2 was a result of fewer initial stocking orders for new hospital customers in Q2. It goes without saying, during Q2, almost all hospitals were focused on preparing for and treating COVID patients rather than approving the acquisition of new devices.

We were pleased to see this increase in procedure volume. But even this does not tell the entire story. A closer look at procedure volume on a monthly basis shows an even more encouraging picture. Our recorded procedure volumes in January and February pre-COVID, showed expected growth.

In March, we began to see the impact of the pandemic on our procedure volumes. And we saw further erosion in April. However, we were pleased to see a steady recovery in May and further acceleration in June. In summary, based on a three week rolling average, our procedure volume declined by 40% from the pre COVID high to the trough in April.

And we saw recovery in June that was actually higher than our pre COVID peak. More recently in July, we continued to see sequential growth even beyond June. We believe there are several reasons for this recovery. First, both PE and DVT represent high acuity disease states, and patients cannot wait indefinitely for treatment.

Treatment of PE is perhaps considered more urgent than his treatment for DVT, but we were highly encouraged that the PE, DVT procedure mix has not changed during the pandemic compared with the pre-pandemic mix. We believe this suggests that DVT is often being treated urgently.

Second, the Inari procedures require limited hospital resources. Patients can be treated quickly with simple routine catheter based interventional procedures. Importantly, because the procedures are single session and do not require thrombolytic drugs, Inari procedures do not create the need for an ICU stay.

This is important always, but never more so than during this pandemic, as hospitals are doing their very best to preserve ICU beds for COVID patients. Third, the Inari economic story remains favorable for hospitals. We believe there has been and will continue to be some prioritization granted to financially viable procedures given the significant financial challenges the pandemic has created.

I'd like to make a few additional comments about COVID, our response to it and the implications as we look forward from here. This pandemic has been awful. For so many people with tremendous uncertainty, economic hardship, illness, and of course, a devastating loss of life.

Almost everyone has been impacted in some way. We have done our very best to protect our people. We attempted to ensure financial stability for our employees. We did not institute any furloughs, reduced hours, pay cuts or layoffs. We lowered quotas and guaranteed a base level of compensation for our field team.

Beyond financial support, we encourage all employees to work from home whenever possible. We hired consultants to utilize additional space and rearrange workflow throughout our headquarters to create a safer environment for those who cannot work from home, such as our engineers and our production team.

We installed temperature check stations at entrances and offer voluntary weekly COVID testing for all employees. All of this has been well received by our team and I believe our culture is stronger now than it's ever been.

While taking care of our people, we also developed and executed a plan for virtual training, education and engagement of our physicians and hospital customers. To date, more than 600 physicians and 200 nurses and techs have attended our weekly online educational series called the Clot Warrior Academy for example.

Similarly, we have developed an executed a plan for hiring, virtual training and on-boarding of new sales professionals. A key aspect to our commercial team -- sorry, a key aspect of our commercial system is the addition of new sales territories on a regular quarterly cadence. Historically, this cadence has been approximately 10 new sales territories per quarter.

The pandemic disrupted this pattern, and we paused our territory ads in Q2. Given the stabilization and recovery of our procedure volumes in the back half of Q2, in July, we restarted new sales territory ads. This last group, who came on board in early July included both planned additions for Q3 as well as additions to catch up from the Q2 hiatus.

Between now and the end of the year, we're planning a final group of new sales territory ads to come on board early in Q4. However, given the remaining uncertainties in the market, we will not be sharing guidance on the size of this last group at this time.

For our existing sales professionals, we took advantage of time spent at home to develop and deliver a robust training program. As a result, we believe our field team is more clinically knowledgeable, technically capable and better prepared than ever.

Finally, we've short up our supply chain. We've built a strong inventory position to protect against any potential future disruptions. Taken together, we believe we are stronger and more efficient company now than before the pandemic began.

Not only are we better prepared, we also believe our hospitals are better prepared to manage this pandemic during the new surge and perhaps another wave later this year, relative to last spring hospitals have more capacity, more equipment and expertise to

care for these patients in ways that reduce the impact on the rest of their operations.

We don't believe hospitals will shut down and mass to non COVID patients, as many did in the spring. Likewise, we also believe patients are currently more comfortable seeking care than they were during the early stages of the pandemic. One last point about the impact of COVID.

Clear evidence has emerged demonstrating high rates of VTE in COVID patients. While thus forth, I thought this has not translated into a meaningful number of COVID positive patients having been treated with our devices. We believe it has raised the overall awareness level of VTE among our physicians and hospital administration. We believe this will have positive impact on our patients and on our markets in the long haul.

As important as the pandemic context is, Inari's growth drivers are un-altered by the current circumstances and challenges. Our five growth drivers remain completely unchanged. First, we will continue to expand our organization to target new hospitals and physicians.

Given the size of our end markets and the vast unmet need when fully built out, we believe this organization will rival the size of the largest interventionally focused sales organizations in the market today. Increasingly, this expansion will provide opportunities split territories to focus on our second growth driver, which is building awareness and driving adoption via deeper penetration into existing and new hospital customers.

We continue to educate and to see interest from non interventional stakeholders such as ED physicians, pulmonologist and hospitals. The goal is to access the patient population conventionally treated with conservative medical management, which represents perhaps 90% of our PE TAM and about two thirds of our DVT TAM. We believe we are beginning to see some success on this front.

Recently, for example, several hospitals have proactively approached us to help install more systematic processes for identifying triaging treating and following up on PE and DVT patients, such programs are standard for heart attack and stroke treatment, but are virtually non existent in the treatment of DVT and PE.

Our third growth driver is to continue to build upon our base of clinical evidence. Like most companies, we saw a significant decrease in enrollment into our cloud and flash registries in Q2. But we have seen more recently an increase.

We expect to see presentation at the annual meeting of the American Heart Association in November, the first 200 patients enrolled into our flash registry. We made significant progress on our Flame protocol, a multicenter prospective two-arm trial for high risk PE patients.

We also saw significant progress on several investigator initiated trials, including our clot pathology pilot in which physicians are analyzing the content of DVT and PE clots extracted with our devices.

Finally, during Q2, we saw the publication of nine manuscripts covering power technology and peer reviewed journals. Taken together, our investment in clinical evidence will not only help support adoption, will also inform the design of eventual randomized controlled trials for both of our technologies.

Our fourth growth driver is to continue to expand our product portfolio. We anticipate introducing several additional product enhancements later this year. We do not believe that our timelines have been significantly impacted by the pandemic.

And finally, our fifth growth driver is working to expand into additional adjacencies in international markets. However, we do not expect significant revenue in 2020 from such expansion.

I think it's important to mention here that we believe the proceeds from our IPO provides significant capital to invest in these growth drivers over the coming quarters and years. We can't think our investors enough for joining us in this fight against VTE for the sake of our patients.

Last, I'd like to say we were pleased with and proud of the response from our team to these uncertain times. We have painstakingly built systems and processes in all parts of our business that we believe are repeatable, scalable, built for the long term and useful in both good times, and challenging times.

All of that said, we like many of you, and many of our peers have been humbled by the impact of this pandemic. Given the uncertainty of the current environment with COVID cases, continuing to surge. We do not feel comfortable providing guidance at this time. We do however, feel confident about our ability to continue to address the large unmet needs of our patients and to grow sustainably over the long haul.

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

[Mitch Hill, Chief Financial Officer]

Thank you, Bill. And good afternoon everyone. Inari's revenues for the second quarter of 2020 were $25.4 million, compared with $27 million in the prior quarter. And that $15.3 million or 152% from $10.1 million for the same period of the prior year.

This year-on-year increase was driven by the continued expansion of our sales force, both into existing as well as new U.S. territories and increased adoption of our products. Revenue is split between the two products as follows; 40% of our revenue is derived from the sale of ClotTriever products, and 60% was derived from the sale the FlowTriever during both the second quarters of 2020 and 2019.

Gross Margin was 86.3% for the second quarter of 2020, compared with 86.8% in the second quarter of 2019, and 90% for the first quarter of 2020. On a sequential basis, gross margin was negatively impacted by approximately 4% during the second quarter of 2020, due to idle production capacity costs incurred with the COVID disruptions.

Operating expenses were $22.5 million in the second quarter of 2020, compared with $9.4 million in the same period of the prior year. R&D expense was $3.6 million in the second quarter, compared with $1.6 million in the same period of 2019. The $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 $18.9 million in the second quarter of 2020, compared with $7.8 million in the same period last year. The increase was primarily due to personnel related expenses as a result of increased headcount of our sales organization and an increase in G&A costs associated with our recent public offering, as well as public company compliance costs.

Net loss for the second quarter of 2020 was $3.8 million compared with a net loss of $1 million for the same period of the prior year. The net loss per share for the second quarter was $0.16, and the weighted average basic and diluted share count was $24.2 million compared with a net loss per share of $0.17, and a weighted average basic and diluted share count of $5.8 million for the same period of the prior year.

The number of shares last year was significantly lower because of the conversion of the 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 balance at the end of the second quarter was $194.8, including $163 million of net proceeds from the IPO. During the first six months of 2020, our cash flows from operating and investing activities were negative $3.2 million compared to negative $4.7 million during the first six months of 2019.

As demonstrated by these figures, Inari continues to operate with a relatively neutral cash flow profile. We believe our cash on hand is sufficient to fund our current operating plans for the foreseeable future. This includes the investment initiatives as outlined during our recent public offering.

In closing, we'd like to acknowledge and thank all of the healthcare professionals who are working on the frontlines of the pandemic, to care for patients. Their courage, dedication, and professionalism are an inspiration to all of us.

And with that, I'd like to thank you for your attention. And I'll now turn the call over to our operator for your questions

[Operator]

Thank you. [Operator Instructions] Our first question comes from David Lewis of Morgan Stanley. You may proceed with your question.

[David Lewis, Morgan Stanley]

Hi. Can you hear me okay?

[Bill Hoffman, President & Chief Executive Officer]

Yes, we can hear you, David.

[David Lewis, Morgan Stanley]

Sorry about that. So just a couple quick questions for me to start off here. I guess, Bill, just to start off here. There's been a lot of discussion about new commercial entrance in the channel here in the last several weeks. Can you just sort of talked about -- you spent a lot of this call talking about TAM expansion. But just sort of talk about the early readings you can share from new commercial entrance into the market? Whether that should have an impact on share dynamics, your pricing strategy, or whether we should be more focused on sort of the broader TAM expansion? Then I had a quick follow up.

[Bill Hoffman, President & Chief Executive Officer]

Yes. Okay. So David, I'm surprised that question took so long for that to get out here as we start the conference call. So yes -- so look, I think the most important thing that I want to emphasize here is that the markets are really, really big, right? So 200,000 PE patients, 240,000 DVT patients. And we are treating fewer than 2%. But overall interventional procedures, anything other than simple anticoagulation represents less than 10% of the PE market and less than about a third of the DVT market.

So the idea is here, that more people worthy and high quality rivals communicating a story that honestly is about 80% the same as ours, right? The clot is bad. It ought not be there. We should take it out. Elimination of lytic is a good thing, no ICU time. All those things are very, very healthy for the expansion of a market with unmet needs that are desperately in need of addressing. So, I think in general, the addition of new entrants into the system here probably expands the market at a rate that's considerably faster than any share that might be lost. So that's one thing.

On the other hand, I know the question you're asking, you want to know the specifics and heads up the competition, that sort of thing. Look, our products are purpose built. They're designed for the specific needs in the environment of the venous, the venous environment and specific needs of these clots, and DVT for example. These clots are wall-adhered. They're very often chronic. They're old. And they're not amenable very often, at least not all the clot is amenable to aspiration. There's a reason we have two different products for two different disease states.

So we like our chances to compete heads up against current entrants. And I suspect given the sort of growth that we've seen, the big unmet need, gross margins, we'll see other entrants, but we feel good about our opportunity to compete heads up.

[David Lewis, Morgan Stanley]

Okay, very helpful. And just to kind of a second question here. Just thinking about the outpatient reimbursement that just came through here about a week ago. I think you're mixed today is -- saw the market mix is around 10% application for DVT. Just based on expanded reimbursement, I wonder if you just give us a sense of how your commercial strategy may shift in the outpatient and where you think that outpatient mix can be? And I'll ask my third question here really quickly, just timing on any updates on cloud and flash registries towards the latter half of this year? Thanks so much. I'll jump back in queue.

[Bill Hoffman, President & Chief Executive Officer]

Okay. So let's make sure to write these down. I have a little ADD. So I'll answer the first question first. So, with regards to outpatient -- increases in outpatient reimburse. We think that's really healthy. I think there is -- for the first time our products offer the potential for DVT to be treated on an outpatient basis, because they don't require our devices take out all the clot and almost all the clot in almost all the patients. The need to follow up, or to use TPA, the adjunctive use of TPA is almost nil, we just don't see it. Because there's no TPA, there's no ICU stay. So these procedures, they create the opportunity for these patients to be treated on an outpatient basis.

That said, I think your numbers are right, about 10% of all the patients that we've seen so far is our best estimate, are treated on an outpatient basis. I suspect we'll start to see more patients migrate to the outpatient setting, although it'll be slow at first. My understanding of these codes is that they apply to hospital based outpatient procedures. So I don't see this moving outside the hospital in the immediate term, although that is possible technically and clinically. And so we'll see how that plays out over time. But we do think this is a healthy development for the patients, for the hospitals and for these procedures more broadly. The other question was -- what was the other question.

[Mitch Hill, Chief Financial Officer]

And David, I could just jump in on the readouts for a flash. As Bill mentioned, we're expecting a 200 patient readout for flash in November with the AHA get together. We will have an additional readout for cloud as well, that has not yet been scheduled. And as Bill mentioned, the purpose of those two registries is really helped us design a randomized clinical trial, which will eventually be done for both products.

[David Lewis, Morgan Stanley]

Great, thank you. Congrats in a great quarter in a tough environment.

[Bill Hoffman, President & Chief Executive Officer]

Thanks, David.

[Mitch Hill, Chief Financial Officer]

Thanks, David.

[Operator]

Thank you. Our next question comes from Bob Hopkins with Bank of America. You may proceed with your question.

[Bob Hopkins, Bank of America Securities]

Hey, great and good afternoon. Can you hear me okay?

[Bill Hoffman, President & Chief Executive Officer]

Yes. We got you, Bob.

[Bob Hopkins, Bank of America Securities]

Great. Thanks, Bill and congrats on your first quarter out. I was wondering if you just wouldn't mind talking a little bit more about the trends that you're seeing in June and July. Because it almost seems from a top down perspective, like you're close to back to normal. So I guess, what I'd love to hear from you is just like how much regional disparity are you seeing across the United States in your centers? And do you think you benefited at all from COVID in terms of procedure volumes this quarter?

[Bill Hoffman, President & Chief Executive Officer]

So, yes -- so Bob, yes. There are clearly some continuing rolling hotspots is how we describe them in here in-house. And they're exactly as you might expect, right. Wherever COVID surges pickup, there's some challenges, patients feel a little bit marginally less safe, they maybe don't show up to hospitals. Hospitals, are reluctant to procedure certain patients if I can use that term as a verb. COVID positive patients of course end up requiring what's called a terminal clean that takes a -- it 0can take a cath lab down for several hours. It could take an interventional suite or the -- even the diagnostic room down for some time. And so there's a reluctance to procedure these patients. So those things occur at rolling hotspots.

I don't say, we do not think we have benefited directly at the moment from the COVID crisis. There's a very clear link now, and I think it's in the lay press, it's not just technical and peer reviewed journals, that sort of thing. That shows a very strong connection between COVID and the development of blood clots in the venous system, VTE. However, what we've seen so far is very few patients that are COVID positive having been treated with our devices. I suspect we treated more than we know, because the challenges of testing very often the test results maybe come back after we've treated a patient who is suspected, but we didn't know at the time.

So -- but we think the bigger -- there is a benefit longer term, because there's an awareness of VTE, we think that did not exist before the pandemic, right? It's almost a household term now, DVT and PE and blood clots that form as a result of COVID. So I think the awareness itself will pay dividends over time.

[Bob Hopkins, Bank of America Securities]

Okay. So that's helpful. So limited stocking in the quarter and no real COVID benefit in the quarter, kind of helpful for us to understand trend perspective. One other thing I want to ask about, I know it's early, but just maybe talk about international expansion for a second. Because that's not in any of the models. I just wanted to -- I know that COVID is probably all consuming for you right now. But what are the plans for some international launches as we look forward here over the next couple of quarters and years?

[Bill Hoffman, President & Chief Executive Officer]

So, we expect CE Mark kind of late this year, again, all COVID externalities, you could possibly change that. But we expect CE Mark little bit later on this year. We have a plan. We were beginning to develop a more concrete plan for launch into several countries in the EU later this year. There'll be very, very limited if any revenue. This year, I think we're not planning for any -- you shouldn't be modeling any meaningful revenue in 2021 either. So 2022 is the -- that's kind of the moment that we think about modeling revenue from OUS expansion.

[Bob Hopkins, Bank of America Securities]

Okay. That's helpful. Thank you. And I guess one last question just to back on the pricing front. Just you've seen Penumbra's Lightning 12 in the marketplace a little bit now. Just maybe big picture, talk about your comfort level with the pricing assumptions that you have for the company for this year and just going forward given that launch? Thank you.

[Bill Hoffman, President & Chief Executive Officer]

Yes. Thanks, Bob. We think our pricing is, well, first of all, we're not seeing any pricing pressure at the moment. We think the products are very much differentiated. Our procedures generate very favorable economic situation for the hospitals. So that's an important component in this. The products are differentiated. Your guess is as good as mine, if there'll be some sort of pricing pressure. Right now that the price looks very comparable. The pricing that we've seen from the new entrants looks very comparable to the pricing that we see for our two products.

But, again, I think in a competitive environment, the chance to expand the total number of patients being treated is going to outweigh any declining shares or marginal decrease in average selling prices, but for right now, there's no pricing pressure at all.

[Bob Hopkins, Bank of America Securities]

Okay. Yes. No, I appreciate the comment And I appreciate also that the rising tide here and big TAM is probably the right focus, but I appreciate your response. So thank you.

[Bill Hoffman, President & Chief Executive Officer]

Yes.

[Mitch Hill, Chief Financial Officer]

Thank you, Bob.

[Operator]

Thank you. Our next question comes from Larry Biegelsen with Wells Fargo. You may proceed with your question.

[Larry Biegelsen, Wells Fargo]

Hey. Good morning, guys. Can you hear me okay? I'm just having some audio issues here. Bill, can you hear me?

[Bill Hoffman, President & Chief Executive Officer]

Yes. We can hear you. It just fine.

[Larry Biegelsen, Wells Fargo]

Great. Excellent. So two questions for me. I wanted to ask about the adjacencies that you talked about in your prepared remarks. And then I had one on the pipeline. So Bill, how do you see Inari evolving over the next few years? You talked a minute ago about geographic expansion. Can you talk about new market opportunities? Do you plan to stay focused on the venous devices? Or do you see expanding beyond that? Then I had a follow up.

[Bill Hoffman, President & Chief Executive Officer]

So yes. So thanks, Larry. First and most important, we are less than 2% penetrated into a $3.6 billion TAMs. We are hyper-focused on the immediate opportunities that our current devices address and address it very, very nicely. The immediate -- the products that are coming down the pike in the immediate term here are all enhancements to our current offering in the existing TAM. That said, I know, what you're asking. The question you're asking is beyond the existing TAM. We think there are some immediate adjacencies for which our core competencies in engineering are overlap very, very nicely.

So for example, our TAM for DVT is for the iliofemoral regions, clot that forms roughly from the mid thigh area to the belly button. There's a lot of clot that forms in the vena cava. There's a lot of clot that forms in the upper extremities, the thoracic central veins in the -- obviously in the thoracic area. And we believe we're ideally suited to address those same call point. Again, core competencies in engineering. Beyond that, all things are possible. But we haven't vetted anything nearly well enough at this point to communicate in any meaningful way here on this conference call.

We believe our commercial system. We've had a lot of discussion about this in the past. We believe our commercial system is not just a commercial team parked that one call point, invaluable as that is. We believe it's repeatable. It's scalable. And it can be replicated in other parts -- in other areas, should we choose to do that? So a lot of possibilities, but nothing that we're anywhere close to being ready to communicate at the moment.

[Larry Biegelsen, Wells Fargo]

That's very helpful. For my follow up, Bill, you talked about some plan launches in the second half of this year. So I think at the time of the IPO, you had about four new product enhancements coming out in the second half. Did you kind of refresh our memory on those and highlight which ones you think could be the most impactful? Thanks for taking the questions. And congrats on the quarter.

[Bill Hoffman, President & Chief Executive Officer]

Yes. Thank you. I appreciate the good words. So I think the product that I am maybe most excited about, maybe what we have seen the most enthusiasm from the physicians with whom we've tested it in animals and communicating the story, is a product that we're calling, tentatively calling FlowTriever. And it's device that allows us to reintroduce blood after it's been extracted during PE Thrombectomy. We don't think we have a issue with blood loss during our procedures. But what the FlowTriever allows us to do is to be really aggressive.

We believe that it takes a limited amount of clot removed to make an immediate impact on the disease state, right? You can offload the right heart with a limited amount of clot extracted, but we believe the clot matters long term and the more passes, the more aggressive a physician can get, the more of that clot we can take out. And we believe physicians will be much more aggressive going after perhaps more distal clots just making more passes, if they know that they can reinject the blood. So we're really excited to see the impact that might have on our patient.

[Larry Biegelsen, Wells Fargo]

Thanks so much, Bill.

[Bill Hoffman, President & Chief Executive Officer]

Thanks, Larry.

[Operator]

Thank you. Our next question comes from Bill Plovanic with Canaccord. You may proceed with your question.

[Bill Plovanic, Canaccord]

Hey, great. Thanks. Good evening. Can you hear me okay?

[Bill Hoffman, President & Chief Executive Officer]

Yes. We got your Bill.

[Bill Plovanic, Canaccord]

Great. Thanks. Two questions. One, thanks for the color regarding the new versus the existing. And I was just -- as you move forward, I mean, that was unchanged year-over-year. But as you progressed through the quarter has that changed? And how would you expect that to evolve kind of as we move into the future?

[Bill Hoffman, President & Chief Executive Officer]

Do you mean new versus existing customers? Is that what you're referring to?

[Bill Plovanic, Canaccord]

Yes. Thank you.

[Bill Hoffman, President & Chief Executive Officer]

Yes. So thanks, Bill. Yes. So obviously new customer additions in Q2 were challenging because value analysis committees are -- they just weren't meaning. That was a low priority for most hospitals during the initial surge in the crisis period of COVID. So they're just fewer value-analysis committee meetings, and therefore, slower approval of new product acquisitions. Going forward here, I think we've already seen a little bit of a recovery on that these value-analysis committees are getting back to business.

That said, we model and we have seen a very small portion of the total amount of revenue, that we create coming from what we call initial stocking orders. It is procedure driven by design, right? That's our mission to treat patients. That's where the revenue should come from, that aligns all the goals with our mission. So, going forward, we see an increasing number of procedures in our existing customers, therefore, new customer revenue from initial stocking orders will represent an decreasing percentage of the total amount of revenue going forward. So it's already pretty modest and we see that declining over time. Again, revenue will be produced by doing procedures, and we're gearing up to do more procedures.

[Bill Plovanic, Canaccord]

Okay. And then, my follow up is, just as you look at, it's been a challenging quarter for a lot of people and getting through this. And it had an impact on the business. And I'm trying to understand -- we learn a lot of different things in these environments. What has changed in your strategy? Whether it would be from a commercial distribution standpoint, a clinical standpoint, what learnings are you applying as you move forward? And that's my questions. Thank you.

[Bill Hoffman, President & Chief Executive Officer]

Yes. Thanks, Bill. So first of all, the pandemic, it's amazing, the impact that it's had on so many people for so many different reasons. So we feel very fortunate to be talking about business rather other personal challenges here. But I would say, the pandemic has changed nearly everything that we do in our business, right? I would say everything that we thought was true about our business model, turned out to be altered or changed completely in some form or fashion.

Maybe most notably is the way that we interact with our customers. Just as the pandemic began to rage and people stopped flying, we were supposed to do in person training sessions, we call them advanced users forms. We were supposed to -- it was a weekend on which we were supposed to do our first two advanced users forms. We immediately had to change that. We couldn't get on airplanes or physicians didn't feel comfortable and so forth. And we change those to what has now migrated into the Clot Warrior Academy. And that turns out not to be a reasonable substitute. It's better. It's just flat out better in terms of the consistency, the interaction we have with our customers, the frequency with which we can interact with our customers in that way. And that has been incredibly valuable.

I would say the other thing that's emerged here is our sales professionals. Sales professionals, there's -- they distribute all around the country. They very rarely, maybe once a year, if we're lucky, get them all in one room. Very challenging to do that, of course. And so they hear each other's voices. They talk to each other on the phone, region by region. We have interacted. Our sales professionals interacting with each other far more consistently via Zoom. There's -- the proverbial Zoom happy hours. There's training, there's fun stuff. But I think the culture is stronger than it's ever been. This idea that we're all in this together, that's pervasive throughout the company, not just in our field team. So there's a lot of changes, but I like the way we responded. Go ahead, Mitch.

[Mitch Hill, Chief Financial Officer]

And one thing I would add on the Q2 learnings and changes. At beginning of the quarter, we had tried to do the IPO as you may remember back in early March. And if you'd asked us in early April, what was going to happen in Q2, we wouldn't have probably predicted that. But the opportunity we had to complete the IPO. And certainly bringing those resources, has really allowed us to change the way we think about the investment, basically, objectives for the business. And I would say, we used to think about things like clinical evidence projects or product development opportunities, more of a serial fashion. And due to the transformative resources of the IPO we're much more, I'd say parallel thinking about that. And ultimately, we hope that'll help us speed up the opportunities we have to grow our presence in the market and ultimately change the standard of care for VTE therapy.

[Bill Plovanic, Canaccord]

Great. That's helpful. Thank you.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.