Penumbra, Inc. (PEN) Q2 2019 Earnings Call Transcript

PEN earnings call for the period ending June 30, 2019.

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Penumbra, Inc. (NYSE:PEN)
Q2 2019 Earnings Call
Aug. 6, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Chantel, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's Second Quarter 2019 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press *1 on your telephone keypad. If you'd like to withdraw your question, press #. Thank you.

I would like to introduce Miss Qi Hanlin-Harris, Investor Relations, Penumbra. Miss Hanlin-Harris, you may begin your conference.

Qi Hanlin-Harris -- Investor Relations

Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the second quarter 2019. 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-Q for the quarter ended June 30, 2019, which will be filed with the SEC on August 6, 2019, as well as those described in our 10-K for the year ended December 31, 2018, which was filed with the SEC on February 26, 2019.

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-Q and 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 duty to update or revise our forward looking statements as a result of new information, future events, developments, or otherwise.

On this call, certain financial measures are presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted press release. We anticipate the prepared comments on today's call will run approximately 13 minutes. Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update, and then Sri Kosaraju, our CFO and Head of Strategy, will discuss our financial results for the quarter and an updated revenue guidance range.

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

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Thank you, Qi. Good afternoon and thank you for joining Penumbra's Second Quarter 2019 Conference Call. Our total revenues for the second quarter were $134.2 million, a year-over-year increase of 22.4% as reported and 23.8% in constant currency. We had operating income in the quarter of $12.8 million compared to $9.3 million for the same period last year. As we finish the first half of 2019, our business continues to have great momentum and growing opportunities to help more and more patients. Our overall revenue growth is being driven by the ischemic stroke market as well as our ability to develop new and significant opportunities within the vascular market. On today's call, I would like to focus on two important updates.

First, as you may remember on our last earnings call, we spent time discussing the number of patients that could be treated in the United States with peripheral thrombectomy. When we first launched our Indigo system four years ago, we estimated that 150,000 patients could benefit from our system. Now, four years later, with greater understanding of the variety of cases and with advancements in training and techniques, we believe the Indigo system has the potential address over 350,000 patients per year in the United States. This figure represents the number of patients with clot in their body who are currently being treated either surgically or interventionally. It will take us time to penetrate this patient opportunity, and future technology improvements will be important for us to do so. In addition, as the procedure improves and is made easier and easier, it is possible that the addressable patient opportunity could grow even higher.

To put this into context for Penumbra, our current addressable patient opportunity in peripheral thrombectomy is larger than our estimates of the addressable opportunity in ischemic stroke. Taken together, we see the ability for our company to positively impact well over a half a million patients each year in the United States alone. This gives our team a huge amount of motivation and the confidence and dedication to positively impact as many of these patients as possible.

[Audio cuts out] neuro franchise, last September, we launched Penumbra JET 7 and ENGINE in the United States, which marked the beginning of a new phase of innovation for Penumbra in ischemic stroke. The Penumbra JET 7 Aspiration catheter, when paired with the Penumbra ENGINE, provides the strongest thrombus removal force available, which we believe increases the ability to quickly remove the blood clot causing the stroke. Now, less than a year later, we're advancing the JET platform with an important and novel technology called Xtra Flex. This technology, developed through highly innovative engineering and design substantially improves navigation and trackability while maintaining the full lumen of the catheter and therefore delivering the strongest thrombus removal force in the market.

The introduction of the Xtra Flex technology is part of a new series of stroke technologies that we began discussing earlier this year. It was first showcased a few weeks ago at the Society of NeuroInterventional Surgery meeting and has received extremely positive feedback on its performance. We're excited by the early success of this new technology and even more excited about our subsequent innovations, which can ultimately transform the procedure and address the critical issues of fast and complete clot removal.

The importance of Aspiration as a front-line treatment for stroke patients is now clear. In addition to the strong clinical data, Aspiration has also been validated by our competitors. This validation has motivated us at Penumbra, as we take on the complicated engineering challenges in order to make the procedure faster and more effective for patients. We believe that we have the vision, experience, and multifaceted engineering discipline needed to solve these challenges. We are committed to lead the field forward as we move to newer and more advanced ideas.

While we were at the SNIS meeting, we also observed a few consistent themes through the meeting that support our broader view of their future of stroke treatment. Physicians and hospitals are focused on optimizing their stroke systems of care. There was a broad interest in exploring the expanded use of thrombectomy to treat tangential patient populations, and lastly, it is clear that advancements in technology can play an important role in improving stroke patient care in the future.

Along these lines, SNIS represented the first time that we publicly demonstrated the real system for neuro rehab. The consistently positive feedback at the meeting further validated the work we have done over the past few years with rehab specialists around the country. We expect to share more details of our commercial plan later this year.

Before I turn the call over to Sri, I would like to share an extraordinary patient story from a few months ago. We had previously shared many uplifting stories about stroke patients, but today's story is different. A young boy came home one day and interrupted a home invasion. At that moment, the unthinkable happened, and this young boy was shot from behind by the intruder in the neck and head. Fortunately, the boy was found and rushed to the hospital where Dr. Dwayne Anderson of Our Lady of the Lake Medical Center in Baton Rouge, Louisiana saw bleeding from the boy's carotid artery and the arteries feeding his nose. He opted to use Penumbra's very specialized POD 400 and PACK 400 neuro embolization coils, which are specifically designed to stop blood flow in the arteries, as opposed to the more traditional use in aneurysms.

Typically, Dr. Anderson would have used adjunct tools to help stop the flow of blood, but with the quick and successful placement of these coils, he was able to complete the procedure very quickly. Dr. Anderson's skill and the use of our specialized coil helped this young boy come out of this procedure with no neuro deficit at all-a truly remarkable result. These are the stories that motivate all of us. We are grateful to Dr. Anderson and his entire staff for their great work on this case and for the recovery of this young boy.

I'll now turn the call over to Sri to review the financials.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Thank you, Adam. For the second quarter ended June 30, 2019, our total revenues were $134.2 million, an increase of 22.4% reported and 23.8% in constant currency. Our geographic mix of sales in the quarter were 64% US and 36% international. Neuro and vascular represented 61% and 39% of sales respectively.

In the quarter, we saw great momentum across our business, which resulted in sequential growth over an exceptional first quarter. Revenue from our neuro business grew to $81.5 million in the second quarter of 2019, an increase of 9.9% reported and 11.5% in constant currency compared to the same period a year ago. Our neuro growth was primarily driven by sales of our Penumbra system for ischemic stroke. Through the first half of the year, we faced difficult year-over-year comparisons in neuro, particularly in neuro embolization. Additionally, as you may recall from our fourth quarter of last year, with the launch of our peripheral embolization products in Japan, we saw aa shifting of revenue from neuro to vascular. We have seen the stroke market growth and competitive dynamics both within our expectations. As we look ahead to the back half of the year, we're encouraged by our pipeline of innovation and the recent introduction of Penumbra JET 7 Xtra Flex.

Revenue from our vascular business grew to $52.7 million in the second quarter of 2019, an increase of 48.6% reported and 49.5% in constant currency. In the quarter, our vascular growth was driven by results from both our thrombectomy and embolization businesses. We are continuing to see accelerated growth from initiatives to reach new customers, to introduce new technologies, and to enter new geographies. As we head into the back half of the year, we expect to see our momentum continue, but with normalizing year-over-year growth rates.

Our gross margin in the quarter was 70% of revenues compared to 65.9% of revenues for the same quarter last year. Compared to last quarter, our gross margin increased due to favorable revenue mix and lower production variances. While we are encouraged by our gross margin performance in the quarter, which is the highest that it's been since going public in 2015, we do not yet expect this to be a new level. Given new product launches and further operational expansion initiatives through next year, we would expect our gross margins to remain within our historical levels.

Total operating expense for the quarter was $81.1 million, or 60.5% of revenue, compared to $63 million, or 57.4% of revenue, for the same quarter a year ago. As previously discussed, we are actively investing in our growing opportunities, which will result in growth in our R&D and SG&A spend. Our research and development expenses were $13.5 million in Q2 2019 compared to $8.2 million for Q2 2018. R&D expenses increased due to an increase in costs related to development programs within both existing and new areas. SG&A expenses were $67.7 million for Q2 2019 compared to $54.8 million for Q2 2018. Our spend increased primarily due to increases in headcount and related compensation expense.

We had operating income in the quarter of $12.8 million compared to operating income of $9.3 million for the same period last year. We continue to expect to invest in the growth of our current business and also in the development of potential new areas.

With the update of our second quarter results, we are formally increasing our 2019 revenue guidance to be in the range of $535 million to $540 million. This new range compares to our previous range of $525 million to $535 million. As it relates to the third quarter, we typically see summer seasonality and expect our revenues to be sequentially flat to our second quarter results.

And now, I'd like to turn the call back to Adam for closing remarks.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Thank you, Sri. As we move into the second half of 2019, we have laid the groundwork for a new chapter of the Penumbra story. We have confidence in our ability to develop, produce, and sell market-leading devices in our current areas of neuro and vascular diseases. We have also honed these skills and applied them in new areas, such as neuro rehab.

Just as important as the actual products, we are well under way in evolution and growth of the entire leadership team at Penumbra. This starts with the addition of our new board members who will be taking over leadership roles at key committees as well as the development and growth of our expansive and amazing management team. We have leaders -- in many cases, three to five layers deep -- in specific departments and functions that have developed the maturity and skills that allow us to have this strong conviction that we can continue to scale our growing business for many years to come. Our leaders are thriving as they take on new and additional challenges. With this capacity, we are excited to embark on the next chapter of the Penumbra story.

...

Thank you, and now we'll open the call to questions.


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Questions and Answers:

Operator

At this time, I would like to remind everyone in order to ask a question, press *1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Bob Hopkins with Bank of America. Your line is open.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Great, thanks, and good afternoon. Great results overall. A bit more weighted to vascular than we modeled, so I just wanted to ask you a couple questions on neurovascular to make sure I understand the moving pieces. The year-over-year of neurovascular growth decelerated a little bit relative to Q1. It was flat sequentially. Can you just talk about some of the dynamics in the second quarter of neurovascular results that caused a little bit of a de-cel in Q2?

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Sure. Hey, Bob, it's Sri. In the year-over-year context and growth rate that you mentioned, neuro, obviously, there's three components within that franchise: stroke, neuro embolization, and neuro access. As we mentioned in our prepared comments, most of that year-over-year comp-related issue resides in neuro embolization. If you look at the US, obviously, we're focused on stroke. And if you look outside the US, in Q4, we highlighted a pretty substantial shift of revenues related to our Japan peripheral embolization launch, so it's really a shifting of revenues. It doesn't affect the overall level of revenues but just where it resides, and some of that is settling down. So, really, the acute focus and the comp is really around neuro embolization. The other two franchises performed with good momentum.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

And then, just curious if you could talk a little bit about the feedback from SNIS on Xtra Flex Aspiration catheter. Maybe just mention that the early feedback you're getting on the launch, and should that lead to perhaps an uptick in neurovascular stroke growth as we look to the back half of the year?

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Bob, it's Adam. Thanks, and a good question. As I alluded to on the prepared remarks, the reaction from customers has really been pretty extraordinary. We have done a number of cases, enough to give us a fair amount of confidence that that reaction is pretty universal, and obviously, as you know, this field is not standing still. It's constantly changing and evolving, but at this moment in time with this particular product, we have a lot of confidence that in the back half of the year, we can continue to push this field forward with its performance.

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Great. I'll leave it at that. Thank you.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Thanks, Bob.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Thanks, Bob.

Operator

Your next question comes from Larry Biegelsen with Wells Fargo. Your line is open.

Larry Biegelsen -- Wells Fargo -- Senior Medical Device Equity Research Analyst

Hey, guys. Thanks for taking the question. So, one on peripheral, one on neuro. So, maybe, Adam, a little more color on what's driving the growth there. From a products standpoint, it sounds like it was pretty balanced with embolization and thrombectomy. Maybe you can talk about from an indication standpoint, from a physician specialty standpoint just a little bit more color on what's driving the pretty extraordinary growth in peripheral, and then I had a follow-up.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Sure. On the peripheral side, let's touch on the embolization part of the business. That continues to grow nicely. As we've said I think a few times, as that product, which it's a series of coils, gets broader and broader exposure, we're able to start to have physicians think about types of cases that they might not have used traditional coil technology to treat but other types of embolization tools, and so we think that it's potentially sustainable for a while as we grow that part of the business. On the thrombectomy side, it really comes down to just the simple math that we're incredibly underpenetrated still, and as we get broader exposure and more and more physicians are starting to think about clot in the body differently than they did traditionally and sort of embrace the idea of just taking it out, we think that we can grow that business for some time. As I said on the call, if the number is 350,000, and that's without adding potentially new areas or applications, I think we're in pretty good shape for growth there for a while.

Larry Biegelsen -- Wells Fargo -- Senior Medical Device Equity Research Analyst

Thanks, Adam. And then on ischemic stroke, could you give a little bit of color on US versus OUS ischemic stroke growth in the quarter? And I'll give you an opportunity -- there's obviously some public data from IQVIA showing your US Aspiration business is declining in recent months. It's a sample, obviously, but I thought it would be useful to hear your perspective on that data. Thanks for taking the questions.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Larry, it's Sri. Just to touch on stroke, so obviously, there's a lot of data sources that are out there. We obviously are aware of them all. They're all varied in where they come from, the type of information that they survey. We know our results. I think we have a pretty close touch, given our presence and share in the market. We've always contended that the growth of the market is the bigger factor in sensitivity to our results, and when we introduced our guidance early in February, we talked about the notion of looking at the last three years of patient growth in thinking about 6,000 to 7,000 patients more this year that could be treated as a market. So, that's high-teens growth. That's in the US, and we feel like through the first half of the year that that has been consistent with what our expectations and predictions have been. I think we feel as we go forward, that continues to be our prediction for the year.

As it relates to outside the US, there is a vast opportunity for us to treat stroke patients. The populations and incidents already speak for themselves. I think as we talked about in other calls, we expect some variability outside the US business, a lot of that entering new markets, a lot of that with distributors. If you look sort of going back to Q4, Q1, and certainly this quarter, I think we took the expectation that there would be some variability outside the US and stroke. But I would just wrap all that up by saying our overall stroke business is strong. It's got great momentum, and particularly, as we look forward to the back half of the year, we feel quite good.

Larry Biegelsen -- Wells Fargo -- Senior Medical Device Equity Research Analyst

Thanks for taking the questions, guys.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Thanks, Larry.

Operator

Your next question comes from Jason Mills with Canaccord Genuity. Your line is open.

Jason Mills -- Canaccord Genuity -- Managing Director

Hi, Adam and Sri. Can you hear me OK?

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Yeah. Hi, Jason.

Jason Mills -- Canaccord Genuity -- Managing Director

Good afternoon. I wanted, Adam and Sri, to talk about three topics. You covered a lot in stroke and thrombectomy, and I wanted to cover those areas in a little way, and then also gross margin. On stroke, the setup in the second half of the year is a bit different than the first half. Sri, you talked a little bit about that given the comp, and Adam talked about the Xtra Flex launch and the momentum early there, can you talk about your setup as a company in US stroke in the second half of the year relative to that high-teens procedure volume growth for the market sort of juxtaposed to the first half and what you faced without Xtra Flex in the first half?

And then, peripheral thrombectomy, I'm curious what sort of color you'd be willing to give, Adam, with respect to growth coming from uptake or utilization increases of existing accounts versus new accounts using thrombectomy that otherwise were doing drips heretofore. And then the last part, gross margins that you commented on, that's a phenomenal gross margin. Should we expect it to go back to the 65% level, or with volume increases, should we expect to see that improve over time? Thanks, guys.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Hey, Jason. It's Sri. I'll start with a couple responses to your questions and Adam can take a few of the other ones that you had asked. Related to stroke, I think you hit the nail on the head, and I think there's going to be, I think as you look at the neuro division number, a lot of questions to look into the details of it. As I mentioned, there are tougher comps in neuro in the front half of the year, and as you alluded to, the back half of the year changes quite a bit.

Neuro embolization, you can look at your own modeling of it. The comps change dramatically as we head to the back half. So, there is that sort of comp-related issue, but if we think about the thing that really matters, which is sort of where is the business today, the momentum we have in the business, and how it's growing sequentially, specifically in stroke. We are seeing that momentum, and with the market, which again, we continue to think is the bigger driver of our results and also with some of the new things that we talked about here, as I said, we obviously feel like we got great momentum heading into the back half.

Let me just comment on gross margins for a second, and I'll let Adam sort of catch more on the JET 7 Xtra Flex and peripheral questions. Gross margins, this is the highest gross margin that we've had as a public company, so we're obviously very enthused about it. The expectations we've set around gross margin is not to be driving that right now, so that truly is a very encouraging sign that we could achieve that in the current dynamic where we're growing quite rapidly, expanding operations, and launching new products, but we are in the midst of launching a new product in JET 7 Xtra Flex. We believe that we will have other new products to be launching, and we're in the midst of really growing our capacity, not just in Alameda but also in Roseville, California as well.

So, I think the right expectation that we would share is that mid-60% as we're going through this period, but I'll say I think we are extremely encouraged that we hit 70% this quarter. And maybe I'll let Adam touch on the remaining questions.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Thanks, Jason. Let me touch briefly on the Xtra Flex launch and how it sort of fits in, and then I'll try to answer the peripheral question. On the Xtra Flex launch, so the first half of the year, I am extremely proud of the whole Penumbra team. We, as you know, are constantly facing new catheters launched in this field and have for many years, and the team has done a great job of reminding and educating everyone sort of what matters in this field, and it's a number of things. You need to be able to get the clot out as fast as possible, and you wanna be able to track and navigate your product there, but you also then wanna be able to sort of ingest the clot as fast as possible. And so, with the original JET 7 and ENGINE, we really pushed the ball forward with the part of being able to have the largest catheter with the most thrombus removal force.

With this update to that product, being able to make it even more navigable is really gonna give the team a lot of momentum going into the back half of the year. And as we also said, that's not the end of the line. That's not the last product out there, and we feel that there's more to come that will continue to move that ball forward. So, we're in a really positive and exciting phase as it relates to our stroke franchise.

Now, on the peripheral side, a very specific question around where we're seeing the growth on the peripheral thrombectomy side, either adding new accounts or seeing existing accounts expand the number of patients or the types of patients that they're treating, and the answer is really both. We're seeing both happen. It really depends on when and how those accounts are sort of coming on board. Many times, they come on board specifically focused on one type of disease and expand beyond that, and so we're really the beneficiary of both further penetration by new accounts as well as deeper penetration into existing accounts.

Jason Mills -- Canaccord Genuity -- Managing Director

Thank you both.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Thanks.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Thanks, Jason.

Operator

Your next question comes from the line of Robbie Marcus with JP Morgan. Your line is open.

Robbie Marcus -- JP Morgan -- Senior Analyst

Great, thanks for the question. Two from me. First, Adam, at the end of your prepared remarks, you made the comment that you're moving into the next chapter of Penumbra, and I know you guys are always excited about the business and the products, but I don't think I've heard you guys talk about the next chapters for several years now. Maybe you could just give us a recap of why it's the next chapter, what to look forward to, and what you're most excited about?

Adam Elsesser -- Chairman, Chief Executive Officer, and President

That's a great question, and I'm delighted, Robbie, to be able to sort of attack it. So, we really have three areas that make up the next chapter. First, and I never want anyone to not believe that we care about this because we started out really treating stroke patients, and we are incredibly confident and excited about the products that we have now and coming in the future as it relates to our original franchise around stroke, and I think those products, both with Flex currently but with the other ones as well, provide a real catalyst for the future growth of that franchise for us.

As it relates to our vascular business, having the understanding that our addressable market is growing and can continue to grow, both with our existing products but with newer technology that will be coming in the future as well as the XTRACT trial that goes into new areas, that's two more catalysts in the upcoming year-plus that will allow us to be very, very confident about that part of our business.

And then, finally, when you look at new areas and the reaction broadly to what we're doing for neuro rehab and how the technology that we've developed is being viewed and reacted to by the professionals in the field, it's incredibly heartening. I mean, it's really exciting and motivating, and that performs or provides yet another catalyst in the future.

So, when you add it all up, we feel like we're in a really, really good spot, and I really particularly wanted to highlight not just the product side but just the extraordinary people that make up the Penumbra team because they're maturing and growing into, as I said, just amazing leaders and have the capacity to take this that far. So, it's a great time, and we feel particularly excited about it.

Robbie Marcus -- JP Morgan -- Senior Analyst

Thanks. And just a follow-up on Larry's question from before, Sri, I just wanna make sure everybody understands because this is a big sticking point for a lot of people in terms of the stroke growth. I think everyone understands the market is growing in the high teens. We saw it even better last year, but so far it looks like high teens. Just wanna make sure we understand what you're saying is that the patients growing are high teens. There's a shift from stent retrievers to more aspiration, offset by some degree of share loss, net net, you're coming out to that high-teens market growth. That's Part A of the question. Part B, can you give a sense of maybe where you stand in share in the US versus your international markets, if you're willing? Thanks.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Sure, Robbie. I'll answer this to the best that we can and know that you're looking for some additional color around this. What I'd say is I think a lot of the parameters that we've outlined before are unchanged, and I think that's an important statement to make. I think there's a lot of questions on are things changing in a way that's different than sort of what we've been discussing, expecting, or predicting. Let's talk about the market. As I mentioned, the market growth in the US, if we sort of focus on that for a moment, is moving along the expectation that we had around that 6,000 to 7,000 patients, and we see that through the first half, and then we continue to believe while the foundation is getting stronger, that that is sort of the growth that we're experiencing today.

We are of the feeling that there is a movement consistently toward aspiration as a mechanism. That, obviously, is a market phenomenon that it's hard to measure. From our experience, I think some of our other folks and peers in the space have confirmed and validated that point. And then, the third one, which is harder to measure, is competition. And people have a couple things to evaluate there -- what companies are themselves are saying, what various market data sources are saying. And as I mentioned, we're aware of the market sources out there. I'd say all of them are very different, and they all collect information in different methodologies. I think they're trying their best to be instructive, but we obviously know our information, our data, and try to triangulate on that.

It's been our expectation that as this market grows, we'll face more competitors, and as Adam mentioned, none of the tactics and strategies are different than what we've experienced in the last three years. There are periods where you hear about competitive launches from one particular competitor or another. Those are all things that we have, over the last three or four years, anticipated. And as we look forward, the biggest thing beyond the market is what do we do in our control, and we've outlined a strategy that isn't singular, but it's more comprehensive in how we approach the future. And today, you've heard of one of those components with the launch of JET 7 Xtra Flex.

Internationally, I think that's a very exciting topic for us. Stroke is a global disease, much more incidence outside the United States, much more opportunity. Many of those countries are just getting started, and they're well behind regions like the US and Europe are. We're excited. We're just getting started in some of those regions in Asia and South America, and it will be, just by nature of those markets and our distribution, a bit varied quarter by quarter, but we think there is a significant amount of growth there to be had, and we're on the right track to achieve it.

So, I guess what you're hearing, net net, is the momentum and the enthusiasm that we have in this business is consistent, and as we look forward, we're quite confident we have things in place to allow us to capitalize on.

Robbie Marcus -- JP Morgan -- Senior Analyst

Thanks for the color. That's it.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Thanks, Robbie.

Operator

Again, if you would like to ask a question, press *1 on your telephone keypad.

Your next question comes from Margaret Kaczor with William Blair. Your line is open.

Margaret Kaczor -- William Blair -- Partner, Medical Technology Analyst

Hey, good afternoon, guys. Thanks for taking the questions. Maybe the first couple for me, and I'll probably leave it there, is on vascular. And so, I think you guys said earlier on the call, you had talked about not having full geographic coverage. I'm not sure if you guys can give us any metrics in terms of some of that market development work, the coverage that you guys do have versus don't have, and then any sense of account development, targeting of accounts, or how sticky some of that new account business has been?

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Margaret, I'll touch on the international piece, and I'll let Adam touch on your second question on new accounts. Vascular for us is predominantly a domestic US business right now, and as we've outlined the opportunity, you can tell the 350,000 addressable patients was a US statistic that we introduced on this call. That is a pretty significant opportunity, and there's obviously a lot of growth opportunity for us in the United States. We equally think there is an opportunity outside the United States. That's gonna take some time to develop. The first geographic opportunity for us in vascular was in the fourth quarter with the launch of our peripheral coils in Japan I think that we mentioned a couple quarters ago, and that is just starting to get going. But we really are not really in many of those other countries yet, which remains a future opportunity for us, and you'll hear about that in the future.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

And Margaret, the question as it relates to sort of maybe the US business and how sticky it is, we have coverage throughout the US, but we're not fully penetrated in all the accounts, so we have that capacity. It just takes time, and education, and really training physicians and their staff to think about clots in patients differently than they've thought about, and that's been sort of the effort under way now for many years is we sort of take on that education process. The business typically is pretty darn sticky. I won't say it's 100% sticky in every situation. There are times where people may resort back to what they know and have more experience with, but the business, I think I answered it as it related to I think Jason's questions. The business is both sticky and there's opportunities to gain more and more at the same time in more and more areas and diseases or types of clot, but also, there's still a lot of room to go to penetrate.

Margaret Kaczor -- William Blair -- Partner, Medical Technology Analyst

And so, that then brings me to the next question, which was some of the TAM discussion you guys had at the front-end commentary. And so, that increase for domestic, I think you took it from 150,000 to 350,000, which is a really nice jump. So, maybe talk to us about those changes. I assume that's still within PAO DVT and PE, but are these patients that are already in the channel of receiving some sort of peripheral intervention, or is this more market development work and new tech development that needs to be done to kinda get to those addressable cases? Thanks.

Adam Elsesser -- Chairman, Chief Executive Officer, and President

I think that's a really important question, and we tried to answer that really, so let me be even clearer. That number represents the number of patients that are being treated today for some form of clot in their arteries or veins, either surgically or interventionally, and we understand that broader based on the work that physicians have done with our product. And so, we've added the patients that were surgically treated as well as some areas that we didn't really think we're sort of main line, but our product has done quite well. And so, for that reason, just with the experience that we've had with our product, we've been able to sort of add those patients to our goal of going after it. It doesn't include patients in which we don't have a specific indication for and areas where we think that number could grow even more, and those patients, we will certainly talk about in the future when it's appropriate.

Margaret Kaczor -- William Blair -- Partner, Medical Technology Analyst

Great. Thank you, guys.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Sure. Thanks.

Operator

Your next question comes from Joanne Wuensch with BMO Capital Markets. Your line is open.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Good afternoon, everybody. Two quick questions. Can you give us an update on how you're progressing with CAT RX and the coronary effort?

Adam Elsesser -- Chairman, Chief Executive Officer, and President

So, CAT RX is two things, not in those numbers that I just talked about. That is just the peripheral side of our business, so that's an additional group of patients. The product itself is performing quite well. It's a little different type of procedure than the vascular side directly in which many times, the clot's really an adjunct to something else, and the physician's using it in a much faster and more dynamic situation than where the clot itself is creating the issue. The product's performing incredibly well. We went into that area with no data and just the idea that using power aspiration in this form could be helpful, at least for the limited patients that have severe clot burden, and I think for those people who are trying it and seeing that, they're coming to the conclusion that the device has done really, really well for them.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Thank you. And as my second question, you alluded to more information on your stroke rehab effort "later in the year". Is there a forum that we will get that, and can you just sort of give us an idea of how to bring in the parameter of what that might mean for you? Thanks.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Joanne, we've mentioned previously that we expect to share more information on the product outline, the market, and our commercial plans or strategy. We haven't yet announced specifically the venue or date. We plan to do that, but that will be the agenda for that meeting.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

So, nothing to that.

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Thank you. Great. Thanks.

Operator

There are no further questions at this time. Miss Hanlin-Harris, I turn the call back over to you.

Qi Hanlin-Harris -- Investor Relations

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 third quarter call.

...

Operator

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

Duration: 48 minutes

Call participants:

Qi Hanlin-Harris -- Investor Relations

Adam Elsesser -- Chairman, Chief Executive Officer, and President

Sri Kosaraju -- Chief Financial Officer and Head of Strategy

Bob Hopkins -- Bank of America Merrill Lynch -- Managing Director

Larry Biegelsen -- Wells Fargo -- Senior Medical Device Equity Research Analyst

Jason Mills -- Canaccord Genuity -- Managing Director

Robbie Marcus -- JP Morgan -- Senior Analyst

Margaret Kaczor -- William Blair -- Partner, Medical Technology Analyst

Joanne Wuensch -- BMO Capital Markets -- Managing Director

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