Penumbra Inc

NYSE:PEN

Earnings Call Analysis

Penumbra's Revenue Growth and Margin Expansion Highlights Q3 2024 Performance

In Q3 2024, Penumbra reported $301 million in revenue, an 11.1% increase year-over-year, led by a 21.2% growth in its U.S. thrombectomy business. The launch of new products such as Lightning Flash 2.0 is driving this uptick. Gross margins improved to 66.5%, with expectations to exceed 70% within 18 to 24 months. Non-GAAP operating income rose to $40.3 million, reflecting efficient operations. Importantly, total revenue guidance for 2024 remains between $1.18 billion and $1.2 billion, while U.S. thrombectomy growth guidance is adjusted upwards to 24-25%. The company anticipates continued positive cash flow trends moving forward.

Strong Revenue Growth Amid Product Advances

In the third quarter of 2024, Penumbra achieved total revenue of $301 million, marking an impressive year-over-year increase of 11.1%. This growth is buoyed primarily by the U.S. thrombectomy sector, which alone surged by 21.2% to $162.1 million. The company’s innovative products, particularly in the CAVT (computer-assisted vascular thrombectomy) category, continue to see strong market adoption. Notably, the U.S. VTE (venous thromboembolism) franchise delivered substantial revenue growth of 32% year-over-year, indicating robust penetration in this critical therapeutic area.

Gross Margin Improvements Signal Operational Efficiency

Penumbra's gross margin for Q3 stands at 66.5%, which is a 90 basis point improvement compared to the same quarter last year. This increase is attributed to a favorable product mix and enhanced operational efficiencies. Looking ahead, the company aims to achieve gross margins exceeding 70% within the next 18 to 24 months, as they continue to optimize their operations and product offerings.

Strategic Focus on Innovation and Market Expansion

The company is executing a four-pronged strategy: continuous innovation, clinical and economic data generation, investment in commercial teams, and driving operational efficiencies. Actively pursuing FDA clearances for new products like Lightning Bolt 12 and Lightning Flash 2.0 demonstrates Penumbra's commitment to maintaining a competitive edge. The recent CE Marks for these products further signify Penumbra's intention to penetrate and expand in the European markets, which can bear fruit in the long term.

Operational Cash Flow and Shareholder Returns Strengthened

During the quarter, Penumbra generated $51.3 million in operating cash flow, underpinned by profitable operations and prudent working capital management. Despite a cash position of $291 million and no debt at quarter-end, the company returned significant capital to shareholders through a $100 million stock buyback, reinforcing confidence in future performance and financial health.

Guidance Points to Continued Optimism

Looking forward, Penumbra reaffirmed its revenue guidance for 2024, projecting total revenues in the range of $1.18 billion to $1.20 billion. The firm is also boosting its U.S. thrombectomy growth forecast to 24-25%, up from a previous range of 23-25%. This upward revision reflects the strong momentum in their thrombectomy business and supports expectations of sustained growth in subsequent quarters.

Challenges in International Markets

While the domestic market is thriving, Penumbra's international performance was somewhat mixed, particularly affected by a 1.9% decrease in revenues, largely due to a $13.6 million drop in China-related revenue. The company anticipates reduced headwinds in international markets moving into 2025, but ongoing assessment and adaptation will be crucial as they work to enhance their presence abroad.

Future Prospects Remain Promising

Overall, Penumbra demonstrates a solid trajectory bolstered by innovative product developments, a focus on operational efficiency, and a robust cash flow position. The outlined strategic initiatives are expected to pave the way for continued market growth and enhanced profitability. As the market adapts and evolves, the company's agility and commitment to innovation will be pivotal in capitalizing on emerging opportunities in the vascular intervention space.

Earnings Call Transcript 2024-Q3

[Operator]

Hello, good afternoon. My name is Jeremy, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's Third Quarter 2024 Conference Call. [Operator Instructions].

I would like to introduce Ms. Cecilia Furlong, Business Development and Investor Relations for Penumbra. Ms. Furlong, you may begin your conference.

[Cecilia Furlong, executive]

Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the third quarter of 2024. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com.

During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality, compliance and business trends. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2023, filed with the SEC.

As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stock. Penumbra disclaims any need to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise.

On this call, financial results for revenue and gross margin are presented on a GAAP basis, while operating expenses, operating income and adjusted EBITDA are presented on a non-GAAP basis. The corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release. Non-GAAP operating expenses and operating income exclude expenses related to the wind down of our Immersive Healthcare business in the third quarter of 2024 of $5 million, a onetime expense associated with the acquisition of IPR&D of $18.2 million in the third quarter of 2023 and amortization of acquired intangible assets of $2.4 million in the third quarter of 2023. Adjusted EBITDA of $56.7 million for the third quarter of 2024 excludes the wind down expenses, stock compensation expense, depreciation and amortization, provision for income taxes and interest income expenses.

Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the third quarter of 2024, and Jason Mills, our Executive Vice President of Strategy, will discuss our 2024 guidance.

With that, I would like to turn the call over to Adam Elsesser.

[Adam Elsesser, executive]

Thank you, Cecilia. Good afternoon. Thank you for joining Penumbra's Third Quarter 2024 Conference Call. In the third quarter, we generated total revenue of $301 million, representing a year-over-year increase of 11.1% on a reported basis and 10.9% on a constant currency basis. Our third quarter results reflect another strong performance by our U.S. thrombectomy business, driven by continued adoption and further market penetration of our current CAVT portfolio, Lightning Flash 2.0 and Lightning Bolt 7. U.S. thrombectomy grew 21.2% year-over-year to $162.1 million, with our U.S. VTE franchise delivering revenue growth of 32% year-over-year and 13% sequentially.

The balance of our U.S. thrombectomy franchise continued to perform very well in line with our expectations. In the quarter, we received FDA clearance for 2 new CAVT products, Lightning Bolt 6X and Lightning Bolt 12, which further enhance and build out an increasingly comprehensive CAVT portfolio. I will provide additional details on these products later in my prepared remarks.

In addition, we received CE Mark for Lightning Flash 2.0 and Lightning Bolt 7 in mid-September and are in the early phases of introducing our transformative technology to European markets. The trend of improving profitability continued in the third quarter, with gross margins expanding to 66.5%, up 90 basis points over the prior year period, and non-GAAP operating income of $40.3 million or 13.4% of revenue in the third quarter, up 110 basis points year-over-year. Behind positive product mix shift and operating efficiencies, we continue to see a path to a gross margin profile of over 70% within the next 18 to 24 months and expect non-GAAP operating margin expansion to outpace gross margin expansion for the foreseeable future.

Additionally, backed by strong revenue growth, expanding gross margins and disciplined operating spend this quarter, we generated $51.3 million in operating cash before you include the impact of our $100 million stock buyback. We are well positioned to continue to increase our profitability and operating cash flow into the future.

Within our U.S. peripheral business, the standout of the quarter, was Lightning Flash 2.0. Flash 2.0 consistently removes blood clots in VTE patients considerably faster than all older products. Given the speed of the procedure now with Flash 2.0, there is no significant blood loss. This Flash 2.0 technology compares very favorably to other companies' older technology that takes much longer to remove blood clots with enough blood loss to make physicians feel like they need to return blood to the patients. As a result, Flash 2.0's performance continues to command physician interest, and our third quarter results reflect strong adoption of our latest Flash technology in its first full quarter on the market, with September representing our highest month of VTE procedure volumes ever as we continue to gain VTE market share.

The speed of Flash 2.0 was extremely evident in a PE case this quarter where a firefighter, who was 39 weeks pregnant was treated for a very serious PE with a Flash 2.0. The speed of the procedure saved the patient and her baby. I had the privilege of watching a video of her and her baby being greeted by a line of firefighters when she was being discharged from the hospital.

In addition, we received FDA clearance for Lightning Bolt 12, expanding our portfolio of latest-generation CAVT products engineered to address VTE. Lightning Bolt 12 combines our proprietary modulated aspiration technology validated by Lightning Bolt 7 strong clinical outcomes with a catheter size designed to address smaller parts of the venous anatomy. The initial cases have gone very well. And this technology expands the number of VTE patients we can treat with our CAVT technology. While we expect modest initial contributions in the fourth quarter, looking to 2025 and beyond, we view CAVT's demonstrated value proposition and our increasingly comprehensive VTE focused CAVT catheter portfolio, helping accelerate conversion from other mechanical thrombectomy products, lytics and medical management.

Our U.S. arterial business, led by Lightning Bolt 7, continued to perform well in the third quarter. FDA clearance of Lightning Bolt 6X in September further expands the reach of our advanced CAV technology to smaller arteries, including below-the-knee arterial occlusions, where our legacy catheters are currently used to treat a portion of the patient population. The introduction of Bolt 6X will deliver CAVT's benefits, improved procedure efficiency and a reduction in procedure times to these patients.

Similar to Lightning Bolt 12, we expect modest contributions from 6X in the fourth quarter as we commence commercialization. That said, we see a meaningful opportunity for arterial focused CAVT portfolio, currently including Bolt 7 and Bolt 6X to accelerate physician conversion from open surgery or the use of lytics to a computer-assisted endovascular-first approach to treating arterial clot. Despite significant progress to date, we remain in the early stages of helping the over 800,000 patients annually in the U.S. who suffer from VTE and arterial clot, with our proprietary CAVT technology.

Turning to the Neurovascular business. Our team delivered another solid double-digit performance in stroke thrombectomy. As interest wanes in the super large-bore 088 catheters as aspiration catheters, most of the companies with those products have switched to positioning them as guide catheters. This positions us very well with our market-leading aspiration portfolio, led by RED 72 with our proprietary SENDit technology and RED 43 as we prepare to bring Thunderbolt and the benefits of our CAVT technology to the neurovascular field.

As we previously announced, our THUNDER trial recently completed enrollment with follow-up scheduled to be completed by the end of the year. We will provide additional future update as appropriate, but needless to say, we are excited about the prospect of bringing CAVT and its demonstrated clinical benefits and procedural advantages to the neurovascular field, further solidifying and enhancing our market-leading position in the field of stroke thrombectomy.

Shifting to our international business. In September, we received CE Mark for Lightning Flash 2.0 and Lightning Bolt 7, further expanding the global reach of our latest CAVT technology. Physician interest in the technology in European markets is high. And while we have commenced initial sales, we expect revenue contributions to scale in a measured fashion, given the current reimbursement landscape across the region. That said, over time, we see opportunity for CAVT in international markets, supported by the work we're currently doing in reimbursement and clinical evidence generation and backed by strong commercial execution.

As we look towards 2025 and beyond, we view a significant opportunity for CAVT to globally transform the way blood clots are addressed and treated. Over the near term, we are focusing on executing a 4-pronged strategy that we previously laid out. Number one, constant innovation to further enhance CAVT's comprehensive value proposition and further expand the patient population with clot burden able to be treated with CAVT therapy safely, effectively, swiftly and simply. Number two, clinical and health economic data generation via randomized clinical trials, real-world studies and our global -- and our market access initiatives to increase awareness, not only of CAVT's outcomes benefits but also of the economic benefit to hospital systems.

Number three, investment in our commercial and market access teams to fully realize CAVT's potential and support sustainable strong growth in the number of patients able to benefit annually from a computer-assisted interventional approach. And number four, executing our strategy with a disciplined focus on driving operating efficiencies and in improving profitability profile.

I'll now turn the call over to Maggie to go over our financial results for the third quarter.

[Maggie Yuen, executive]

Thank you, Adam. Good afternoon, everyone. Today, I discuss I will the financial results for the third quarter of 2024. Financial results on this call for revenue and gross margin are on a GAAP basis, while operating expenses and operating income on a non-GAAP basis. The corresponding GAAP measures and a reconciliation of GAAP to non-GAAP financial measures are provided in our posted press release.

For the third quarter ended September 30, 2024, our total revenues were $301 million, an increase of 11.1% reported and 10.9% in constant currency compared to the third quarter of 2023. Our geographic mix of sales for the third quarter 2024 was 75.2% U.S. and 24.8% international. Our U.S. region reported growth of 16.2%, driven by 21.2% growth in our thrombectomy franchise.

Our international regions decreased by 1.9% reported and 2.5% in constant currency, primarily due to a reduction in China revenue of $13.6 million, which was offset by an increase of $12.2 million in all other international regions. The sequential growth in our total revenues of 0.5% was primarily driven by an increase in our U.S. thrombectomy revenue of $8.3 million, relatively flat revenue in Europe and offset by a decline in China revenue of $9.4 million.

Moving to revenue by products. Revenue from global thrombectomy business grew to $204.1 million in the third quarter of 2024, an increase of 14% reported and 13.8% in constant currency compared to the same period last year. Our U.S. growth of 21.2% is driven primarily by continuous adoption of CAVT. Our international business declined by 7.1%, primarily driven by a decrease in China revenue, which was offset by an increase in all other international regions as compared to the same period last year.

Revenue from embolization and access business was $96.9 million in the third quarter of 2024, an increase of 5.5% reported and 5.2% in constant currency, which is in line with our expectations and primarily driven by an increase in the U.S. Gross margin for the third quarter of 2024 is 66.5% compared to 65.6% for the third quarter of 2023. We delivered 90 basis point improvements driven by favorable thrombectomy product mix across all regions and strong productivity improvements. Additionally, sequentially, we had a 100 basis point improvement in our gross margin, excluding the onetime $33 million Immersive Healthcare inventory write-off in the second quarter of 2024, which reflects higher thrombectomy product mix and favorable distributor mix. Our manufacturing team will focus on ramping up our volume, while driving our productivity and efficiency for our new product launches in the fourth quarter.

Now on to our non-GAAP operating expenses, non-GAAP operating income and margin and adjusted EBITDA. Total operating expense for the quarter was $160 million or 53.1% of revenue compared to $144.5 million or 53.3% of revenue for the same quarter last year. Research and development expenses for Q3 2024 were $22.6 million (sic) [ $25.2 million ] compared to $21 million for Q3 2023. SG&A expenses for Q3 2024 were $137.4 million (sic) [ $139.7 million ] or 45.6% of revenue compared to $123.5 million (sic) [ $125.9 million ] or 45.6% of revenue for the third quarter of 2023.

We recorded operating income of $40.3 million or 13.4% of revenue in the third quarter of 2024, compared to an operating income of $33.2 million or 12.3% of revenue for the same period last year. We wound down out the Immersive Healthcare business in the later half of the quarter, resulting in GAAP operating expense savings of approximately $6 million. We expect to create GAAP operating expense savings of approximately $40 million a year moving forward. With the full quarter of Immersive savings, we expect to continue our sequential margin expansion into Q4 2024. We posted adjusted EBITDA of $56.7 million or 18.8% of total revenue compared to $51.5 million or 19% in the third quarter last year.

Turning to cash flow and balance sheet. We ended the third quarter with cash, cash equivalents and marketable security balance of $291 million and no debt, which is a decrease of $48.7 million sequentially due to the stock repurchase of $100 million during Q3 2024. Excluding the stock repurchase, our operating cash increased by $51.3 million driven by operation profitability and improvement in working capital management. We continue to expect positive operating cash flow trends for the rest of 2024 and beyond.

And now I'd like to turn the call over to Jason to discuss our guidance.

[Jason Mills, executive]

Thank you, Maggie, and good afternoon, everyone. We reiterate our total revenue guidance range for 2024 of [ $1.18 billion to $1.2 billion ]. With 1 quarter remaining in the year, we are comfortable with expectations at the middle of this range, which is where they were coming into this call. Furthermore, we are raising the lower end of our 2024 guidance range for U.S. thrombectomy growth to 24% to 25% from 23% to 25% previously.

Moving down the income statement. We expect gross margin in the fourth quarter to be consistent with third quarter levels, and we expect non-GAAP operating margin to expand sequentially. Excluding the impact from the Immersive Healthcare impairments, these metrics would correlate with our full year guidance of 100 to 150 basis points improvement in gross margin and 100 to 200 basis points improvement in operating margin.

Operator, we can now open the call for your questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Richard Newitter from Truist Securities.

[Richard Newitter, analyst]

Maybe just to start off on the U.S. thrombectomy. It was a healthy 22%. I think you said that your U.S. Venous or VTE was 32%. Maybe -- can you just go over the U.S. neurothrombectomy piece. By my calculation, it might be wrong, but it would suggest a pretty big deceleration in the third quarter, is that right? And how should we think about the trend there and going forward?

[Adam Elsesser, executive]

Yes. Thanks for the question. I appreciate it. Our stroke business had a really good sort of high double-digit growth. So I don't think I would qualify that as a deceleration. If you remember the elements that go into U.S. thrombectomy, we have neuro, we have arterial, peripheral arterial, coronary as well as VTE. And obviously, coronary, which has been out there with our legacy product for many years is in the single digits. So I think that's the delta. But neuro did really well this quarter.

[Richard Newitter, analyst]

Okay. Sorry, that's my math. So I apologize there. Congrats, it's a very solid U.S. neuro growth rate. I guess, maybe just on the international piece and the China, what does this do to your view of recovery for those regions and as we look forward into '25, it seems like the international business continues to be somewhat unpredictable. So what's your visibility there? And how do we think about new product contribution in some of the areas that you're just launching in with the new product to offset that?

[Adam Elsesser, executive]

Yes. I think it's a great question. I think, look, we've talked about China last quarter and sort of the -- what's happening for us, particularly as we go from our licensing revenue model to the distribution model, that's part of our deal. We spent a lot of time last quarter walking through that. So really, nothing has changed. That's just now showing up. So we've sort of taken that into account. There's no new information there.

Obviously, as China recovers, that will be an upside in the future, whether that's in the back half of 2025 or 2026 or beyond. There's certainly significantly fewer headwinds in 2025 than there were in 2024 internationally. And there's some real bright spots with -- as we called out on this call the launch of Flash 2.0 as well as Lightning Bolt 7. Obviously, there's a lot of interest. There's a lot of conversations between physicians here in the states that are using it to their colleagues in European markets. And I think as we roll that out, we're going to see that part of the business do really, really well.

So there's not a lot of new news on our international markets. This is playing out how we had talked about it for a while.

[Operator]

Our next question comes from the line of Robbie Marcus from JPMorgan.

[Robert Marcus, analyst]

Congrats on a nice quarter here. Two for me. First, I wanted to ask on the margin expansion. It once again came in nice, saw some upside there, especially on EPS. How should we think about your ability to continue to drive this margin expansion? Is it one of these things that 100 to 200 basis points is a good range to use so long as thrombectomy continues to grow at the elevated levels? Or is there something onetime in '24?

[Adam Elsesser, executive]

Yes. If you're talking about gross margin, we -- that is a longer-term process that we've laid out for a while now, which is, it's a combination of efficiencies together with the product shift as we move toward a bigger chunk of that business coming from our CAVT platform. So that will continue.

If you're talking about operating margin, again, that also we think will outpace the gross margin. And I think this is a quarter that is like some of the few -- the past quarters that has shown that we have a really profitable business here. And we can do both things. We can obviously invest in this and we laid out again sort of clearly the 4-pronged strategy where we can invest in innovation, we'll invest in the clinical data in a variety of fashions, as well as in the growth of our commercial and market access teams, all of those investments focused on growth at the same time, doing that in a very, very profitable business.

So I think we were pretty clear in the prepared remarks about that, that hasn't changed from the past. It's just clearer than ever now. And I think this quarter puts a pretty fine point on that.

[Robert Marcus, analyst]

I was thinking operating margin. So you got both of them. I appreciate that. And then...

[Adam Elsesser, executive]

Just to be sure, I covered it all for you.

[Robert Marcus, analyst]

I appreciate it. And then just came back from TCT today, and we saw yesterday the PEERLESS data from your competitor. And I guess the question is, do you think that's going to be used by the clinical community as specific to your competitor? Or do you think that's going to be applied to thrombectomy in general and translate to your business as well?

[Adam Elsesser, executive]

Yes. Look, without being inappropriate, given the pretty muted reaction that we've seen and heard from most physicians, we certainly hope that it's not viewed for all products. Obviously, some of the details there were not surprising given the procedure -- the duration of the procedure with their older devices and really the bleeding rates that aren't true now with Flash 2.0. So I think Flash -- CAVT and 2.0 are commanding a lot of attention. And I think from everyone we've talked to there on the ground as well as who are reading that.

I think we're all looking past that particular type of study and to the more important comparison, which is against anti-coagulation like we're running in our STORM study. And I think that's where the real energy is put in the field, and that's where the interest is. So, I guess, given those issues, we weren't surprised with somewhat of the muted reaction, but I don't think it's a negative for us at all.

[Operator]

Our next question comes from the line of Larry Biegelsen from Wells Fargo.

[Lei Huang, analyst]

It's Lei calling in for Larry. Just starting with our THUNDER trial. Congratulations on completing the patient enrollment, we saw on ClinicalTrials.gov that the sample size -- the patient sample size has changed. It's a little bit less than what you started with. And the endpoint has changed. One of the safety endpoints has changed. Can you just comment on those and if the FDA agreed to those changes? And I have a follow-up.

[Adam Elsesser, executive]

Yes, the FDA did agree to those changes. That is accurate.

[Lei Huang, analyst]

For both of those changes?

[Adam Elsesser, executive]

Yes.

[Lei Huang, analyst]

Okay. Perfect. And then, Adam, you mentioned a few times before and again on this call that there are fewer headwinds in '25 versus '24. Can you just elaborate on which headwinds would go away in '25 versus '24? And what additional tailwinds that we can see in '25?

[Adam Elsesser, executive]

Yes. That's a good question. So some of the things we've talked about this year -- at the beginning of the year, we talked about getting sort of recalibrating, selling some of our embolization products and our access products in certain markets internationally where the reimbursement had gone down to the point where it wasn't a viable business. That's obviously one significant issue that will not be prevalent in 2025. We talked a bit about China over the last couple of calls and recalibrating that as we move to the next phase. And so -- and also, the delay, if you will, in getting CAVT in Europe. So those are sort of the big topics that we were dealing with internationally, and those really go away for the most part in 2025.

Some of the things that are looking positive, obviously, we've also talked about new product launches are coming. We have the sort of continued share gain with existing products like what we just saw pretty significant share shift just again in yet another quarter with Flash 2.0, so pretty consistent movement there. I think when you add those up, we're looking forward to 2025 as well.

[Operator]

Our next question comes from the line of Joanne Wuensch from Citi.

[Joanne Wuensch, analyst]

I actually have 2 quick questions [indiscernible] front. Can you walk us through your steps to get to your 88% gross margin goals over the next 18 months. How much of that is coming from real or the renamed label for that or something else?

And then my second question has to do with Thunderbolt. Congratulations on that -- on completion of the clinical trial and the filing. But I'm curious about the steps to commercialization and how you think about uptake?

[Adam Elsesser, executive]

Yes. Good questions. I maybe misheard you. I think you asked about gross margins. And I think you said getting them to 88% as opposed to what we had said out there, which was 70%. So I just want to make sure I heard it right. I might not have. But gross margins, we think, can get to above 70%. And the big issue there is continued efficiencies, but the primary driver is just as we go further and deeper into CAVT products, the margins are different and the product shift drives that. So that's the primary driver getting to the gross margin number that we talked about or above that.

On Thunderbolt, you talked about sort of the -- the question was related to commercialization. Let's -- before we get ahead of ourselves, let's do the follow-up for that. That's due -- we should complete that by the end of this year. And then obviously, we'll submit it and go through that. We certainly know how to launch products after 20 years, and we certainly are pretty excited about it. But let's wait until we can get the trial formally finished with the follow-up and move on, and then we'll give you more updated information at that point.

[Joanne Wuensch, analyst]

Sorry, if I set your goals too high.

[Adam Elsesser, executive]

Well, it's a good internal goal. No, I'm just joking.

[Operator]

Our next question comes from the line of Michael Sarcone from Jefferies.

[Michael Sarcone, analyst]

Just first one for me. Really nice growth in U.S. VTE. Could you maybe talk to us about where you think your share is shaking out across both PE and DVT these days?

[Adam Elsesser, executive]

I think it's probably premature. Maybe we'll sort of do it at the end of the year like we did last year to sort of do a recalibration. Obviously, quarter after quarter this year, we've seen a share shift toward us. But in terms of putting exact numbers on it, I think it's premature. We'll consider doing that again as we finish the year. The PE part of it has been pretty significant. We already were pretty successful in DVT sort of sharing that business 50-50, but we've seen a huge change in the PE shift and a lot of that really comes down to what I said.

The product Flash 2.0 is so fast. The time of the procedure, dramatically different, no significant blood loss at all. Therefore, you don't have the same anxiety, the same worry of having so much blood loss that you have to put the blood back in using other products and so on to do that. And that's just -- by definition, if you can get all the clot out much faster and don't have any issue of need to put anything back in, that's better for the patient. It's able to stabilize patients much faster. And frankly, I think it bodes really, really well for the future.

And again, it just goes to the need to constantly be innovating in these fields. Things change, products get better and better. And I hope all of us are excited about that and applaud that. That's sort of the point of innovation that we've been obviously known for, for the past 20 years.

[Michael Sarcone, analyst]

Got it. That's helpful, Adam. And just my follow-up, Bolt 6X and Bolt 12, just got FDA clearance. You have to go through [ VAC ] processes for each account to start selling those. Can you just talk about that process? And then maybe anything on pricing and what it does for economics on the P&L?

[Adam Elsesser, executive]

Yes. Well, a couple of things just first on price. Obviously, the CAVT products have a little bit different price point than the non-CAVT products do. So they're in comparison to legacy products, which are literally just the catheter and the original pump, there is obviously going to be a difference. In terms of the process, yes, I'm not aware of a blanket free pass and not having to go through the process with new products. These are obviously new products, we'll go through that process. And again, having launched multiple products every year for many, many years now, I think we know how to do it, and we'll keep going. But they do have to go through the VAC process.

[Operator]

Our next question comes from the line of Matthew O'Brien from Piper Sandler.

[Samantha Kurtz, analyst]

This is Samantha on for Matt today. We want to ask more about the 6X and the new Bolt 12 devices. And, I guess, specifically starting with the 6X. Can you talk just a little bit more about the difference between the below-the-knee catheter versus [ APR 1 ] just the size of the catheter it's different? And then maybe talk about some of the competitive dynamics going on in the arterial market, too.

[Adam Elsesser, executive]

Yes. There's not -- on the size of the catheter, it's obviously a little smaller. The numbers 7 French, 6 French are -- connote that the smaller it is, the further distal it can go. So not just below the knee, but into smaller arteries in other parts of the body as well, which I mentioned in the prepared remarks. And that's just the natural evolution of CAVT as we bring it to other places. The X part of the 6X is really a tool similar to what we call SENDit in the neuro space, where we help get the catheter and track it to more distal places. So it's really ease of tracking and so on. But overall, I think you've got the gist of the product. It just goes further into the vasculature, so we can remove that clot.

Your second question was what again, I apologize, was it around 12 or? What was the second part of that question.

[Samantha Kurtz, analyst]

Well, just the competitive dynamic in arterial.

[Adam Elsesser, executive]

In arterial. I'm sorry, I apologize. I think everyone knows there's not a lot of competition of VAC. There's a lot of companies with sort of gizmos and various things. I think we've seen this play out in stroke in the brain for years. This game sort of happened for many years in stroke. Aspiration works. Aspiration, the whole science behind aspiration is pretty clear, I think folks have understood that now in the neuro space.

And I think that's working and people are starting to pretty clearly understand that in the arterial space on the vascular side. So there's not a lot of companies that are focusing on that. And certainly none of them have the modulated aspiration that we bring with Lightning Bolt 7 and Lightning Bolt 6X which is really a whole total game changer, it sort of creates a new class, if you will, of technology.

So really, the fight for us, the competition, if you will, is open surgery and anti-coagulation and also lytic. All of that is where we put our energy, and that's where our focus has been, and that's what's really seen the continued growth of that business sort of quarter-over-quarter.

[Samantha Kurtz, analyst]

Great. And one more quick one. I know we touched on the THUNDER trial a couple of times in the call from a different point, when -- with follow-up ending at the end of the year, when could we expect to see data for that trial?

[Adam Elsesser, executive]

I'm not going to -- so I made a mistake a few years back, obviously, in putting out times for a trial to end in all. So I'm not going to do that with a specific time. Obviously, as soon as we know that answer in a very specific way, we will let everyone know. Obviously, we're pretty excited to get that out there. But the specific time frame, we'll update when we have that -- when we have more information to finish the trial.

[Operator]

Our next question comes from the line of Mathew Blackman from Stifel.

[Mathew Blackman, analyst]

I have a couple of stroke questions. Just curious, first of all, can you give us the high -- the current sort of U.S. stroke growth rate as sustainable until we get Thunderbolt. And then I'll just lob in the follow-up. Last week, Medtronic and Philips announced a partnership, I think targeting stroke awareness. Just your thoughts on what impact, if any, that could have on the market over time. And it doesn't seem like it, but are there any competitive implications of a device provider teaming up with an imaging provider? Just be interested in hearing your thoughts on that.

[Adam Elsesser, executive]

Yes. Well, let me answer that first, and then I'll go back to the sort of sustainability of our growth in stroke. I was thrilled to see that. The more folks are bringing awareness to the idea that we should be intervening on stroke patients. I mean this is something that 10-plus years ago now was shown definitively in many different randomized trials. So I think it's great. I don't think it has any device-specific impact.

I mean, I think we all know that the physicians are going to pick the product that works the best and get the clot out fastest. And I don't think there's anything we should say other than applaud everybody, whether it's imaging companies, device companies, hospital systems in the local community to bring all kinds of awareness. We've been involved in lots of programs, bringing awareness to this, working with -- some of the big societies get ahead of stroke, as you know, over the years. And I applaud it, and I'm glad to see it, and I think it helps pick many, many patients. So I'm all in.

As it relates to our growth in the stroke business. I think we're in a really, really good spot. As I mentioned, on the call, there are a lot of companies with sort of these super bore catheters that interest is clearly waning as people understand it and realize that maybe they are better focused as guide catheters, which is a very different thing than an aspiration catheter. And I think that's really laid the foundation for what I think will be a pretty good run on our business in stroke and a lot of excitement as we move toward bringing Thunderbolt to the neuro space as well.

[Operator]

Our next question comes from the line of Mike Kratky from Leerink.

[Michael Kratky, analyst]

On the arterial side, can you provide some more specifics on U.S. arterial thrombectomy growth during 3Q? And if the really strong momentum you've seen to date in that segment continued? And then just as a follow-up, was there anything specific to call out in 3Q in that segment that may have led to any deviation in the recent growth you've seen, if any?

[Adam Elsesser, executive]

No. The arterial business grew in the high teens off pretty challenging comps with -- from the prior year with the launch of Lightning Bolt 7. So we felt really, really good about the growth of the arterial business. That's the product works, guy, I mean, it's just that simple. Lightning Bolt 7 really works. Lightning Bolt 6X really works. And it's getting the clot out quickly easily. There's not a lot of issues there. So I think we're seeing that continue.

And again, we just are doing the work between launching 2.0, continuing to launch the brand new products, continue to penetrate with 7. The guys in the field have their hands full talking about some of the most innovative products this field has ever seen. But that business is really, really solid right now.

[Michael Kratky, analyst]

Then maybe just one quick one. In terms of the BTK side of the world, do you think about that as more of a market expansion story? Or is that something that you think is probably going to be more of an increased utilization?

[Adam Elsesser, executive]

It really is just a catheter size question. Right now, if you dial -- if you go backwards to before we had CAVT, we didn't really think about them as below the knee or not because the catheters, whatever size you could get to the clot is what you would use. But it became a little more like that when we had CAVT only on a catheter size that really doesn't go below the knee, which is the Bolt 7. Now that we have it on a catheter that can go further down and below the knee, we're bringing that CAVT. Our goal is to bring the CAV technology to every part of the body that has blood clot where CAVT can be helpful. And we're not fully done yet. And then continue innovating from there. So we're well underway on that plan.

Again, in the 4-pronged strategy that I laid out pretty clearly, innovation is number one. Innovation has always been #1 for Penumbra. And that's why we made sure it was crystal clear. We're going to continue to bring CAV technology to every part of the body that can benefit from getting the clot out so much faster and so much safer.

[Operator]

Our next question comes from the line of Pito Chickering from Deutsche Bank.

[Pito Chickering, analyst]

A quick one here on guidance. You're raising your U.S. thrombectomy guidance to add above [ the Street ] but maintaining your overall revenue guidance. Are there any other changes to the other segments of your guidance?

[Adam Elsesser, executive]

No, I don't think so.

[Jason Mills, executive]

No. So in the fourth quarter, I laid out, we said comfortable at the midpoint, that would be reflective obviously, of at least the midpoint of that new range of 24% to 25%. As you model out the international thrombectomy business, we've already talked about the headwinds that we're seeing internationally, especially in China, and so that's reflective of that. But at the midpoint of the guidance, obviously, the fourth quarter ends up being in and around 20% growth for U.S. thrombectomy is what is implied at the midpoint of guidance. And the rest of the business, I think, the Street is modeling somewhat appropriately.

[Pito Chickering, analyst]

One more on margins. So I understand gross margin is expanding as a positive mix offers those tailwinds. But if I look specifically at SG&A leverage, how should we be thinking about how you balance revenue growth with investments to afford that growth? How much leverage that you can drive over the next couple of years? It seems as though there can be a lot of SG&A leverage over the next 3 to 5 years. Is this like a 50-plus basis point margin expansion per year on SG&A over the next couple of years?

[Adam Elsesser, executive]

Yes, without giving you a specific number, I think we've been pretty clear that we can really kind of do both. We can invest pretty significantly in the things that matter. And again, those really go back to the 4-pronged strategy, which is continued innovation, the data that will be relevant to continue to grow the thrombectomy business as well as the commercial team and the market access team that will drive really market growth going forward, and do that by continuing to run a pretty significantly profitable business. And I think this quarter shows that, and we're going to continue to do that going forward.

[Operator]

Our next question comes from the line of Malgorzata Kaczor Andrew from William Blair.

[Macauley Kilbane, analyst]

It's Macauley on for Malgorzata. There's been a lot of discussion around changing the guidelines, obviously, following the data at TCT this week. And I understand it is product specific. But as we look towards the longer-term adoption of thrombectomy and CAVT in particular, I guess, how do you think about guideline-changing recommendations? And ultimately, how does that tie into the market access work that you've been continuing to work on in the background?

[Adam Elsesser, executive]

Yes. I think it really depends on the vascular bed you're talking about. You're focusing on PE. Obviously, we're talking about PE a lot, and I'll address that in a second, but there's also DVT, which is obviously, as I think you know, larger number of patients as well as arterial, which are also larger number of patients than PE. So the guideline issues are really most acute right now around PE. And I think legitimately, if you just think about the numbers, 85% of patients in the pool of PE patients still are getting anti-coagulation. 10% or so are getting mechanical thrombectomy and the balance, I think, 5%, if my numbers add up are getting catheter-directed lysis.

So you're not -- the guideline change around the 2%, 3%, 4%, 5% isn't really relevant and it would be somewhat not particularly relevant for how guidelines to change around a specific product, particularly given the reaction to the -- for most physicians to that data. I think really the field is looking to the trials that come out with anti-coagulation endpoints. And then I think guidelines will likely change.

I think it's unlikely that it will be product specific, even if we're the product, that really stops innovation, and no one wants to stop innovation. What you want to do is prove the concept and move on and continue to innovate and get better and better. And I think back to 10-plus years ago, when the stroke trials came out, there was no real desire to stop innovation. So it was interventional means what people are using today versus what they used 10 years ago in stroke are dramatically different but the point still holds. So I think that's how I would look at the field going forward.

[Macauley Kilbane, analyst]

That's great. And then just as a follow-up, I acknowledge the larger driver is the CAVT platform itself. But we've also heard quite a bit of positive receptivity of the Select Plus launch this week. So has that been able to drive any incremental growth similar to when SENDit first launched as kind of a comparator?

[Adam Elsesser, executive]

Well, yes, thank you for raising it. We don't typically talk about the inner catheters like Select Plus, they're sort of -- they're to just make the case faster and easier. People really like Select Plus, and it definitely has caught a lot of people's attention and made the cases even faster in terms of the access of the case. So it's really inside the umbrella of Flash 2.0. If you're just making Flash 2.0 from start to finish, that much faster, getting it there faster, getting a clot out now extremely fast. All of that adds up to an impression that this was really, really a great case. And I think that's going to continue to be what people gravitate to for quite a while.

[Operator]

Our next question comes from the line of Chris Pasquale from Nephron Research.

[Christopher Pasquale, analyst]

Adam, I wanted to follow up on the question about Bolt 12 and 6X. Can you give a rough sense what percentage of venous and arterial clots occur in vessels that are too small for Flash or Bolt 7 to reach? And are you guys involved in those cases today with non-CAVT products? Or do those patients need to get treated with something else or with surgery?

[Adam Elsesser, executive]

Yes, it's a good question. I don't have really good numbers. So I don't want to just sort of throw out sort of more guesstimates on the percentages within sort of -- if you take 12, the venous space. And some of it's preference as well. People would like a smaller catheter in a certain case and so on. But the answer to the -- I think the more significant question is, are we in those cases today? Most of the time, if they are using mechanical, we're in those cases. They're just using the non-CAVT to the extent that they need the smaller-sized cath -- product.

And so that gives us an opportunity to move and bring the CAVT products to those vascular beds. And most of the time, those physicians have already experienced them in -- with our larger systems, both on the arterial and venous side. So they're all excited about getting the benefit of CAVT in those smaller vascular beds. So I think it's a pretty straightforward understanding of it. And I think it will just again, make -- it will provide the benefit to those patients in the smaller vascular beds with CAVT.

[Christopher Pasquale, analyst]

That's helpful. And then you mentioned that reimbursement constraints in Europe could lead to a more measured uptake of Flash and Bolt. Do you see any opportunities to push for incremental reimbursement maybe through some additional in-country clinical studies or things of that nature?

[Adam Elsesser, executive]

Yes. So I want to just maybe clarify the word you used. We don't really have reimbursement concerns. We just want to make sure we get an appropriate reimbursement for these products. Obviously, they come with more cost. When you're adding a computer to every chip, it's not like a catheter or syringe or something, it's a much different type of product. So by definition, that requires sort of more work to get that reimbursement and to prove that.

And so yes, there are going to be opportunities to do that in different forms, including with data, for sure. And we sort of -- I sort of mentioned that again, if you go back to the 4-pronged strategy in addition to that innovation is the generation of data that will continue to drive the growth of this. So it sort of fits into that bucket.

[Operator]

Our final question comes from the line of Mike Matson from Needham.

[Michael Matson, analyst]

Just a couple on Thunderbolt. So on the THUNDER trial, do you think we'll see the data at some point maybe in the first half of next year before you submit it to the FDA? And then just pricing on Thunderbolt, I know you're not going to tell us what it is, but is it going to be at a similar sort of premium to what we've seen with what the venous side?

[Adam Elsesser, executive]

Yes, those are good questions. Well, we haven't even begun to sort of think about the exact timing of when the data would be published and presented. Usually, you do that around one of the significant neuro meetings. But we haven't -- let's get the trial done first, and then we can give you updates on the specific timing. And I hope you appreciate that. But again, I'm excited about getting through that and getting it done.

In terms of price, sort of within the confines of the reimbursement structure of neuro, we'll obviously price this to be a profitable procedure for the hospitals. But yes, there likely will be a premium. I can't tell you that it would be dollar-for-dollar matched to a particular other CAVT product, they're all a little different based on the reimbursement structure of those vascular beds.

[Operator]

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

[Cecilia Furlong, executive]

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

[Operator]

This concludes today's call. You may now disconnect.