ShockWave Medical Inc (SWAV) Q4 2020 Earnings Call Transcript

ShockWave Medical Inc (SWAV -0.12%)
Q4 2020 Earnings Call
Feb 17, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to ShockWave's fourth-quarter and year-end 2020 earnings conference call. [Operator instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Debbie Kaster, vice president of investor relations at Shockwave for a few introductory comments.

Debbie Kaster -- Vice President, Investor Relations

Thank you all for participating in today's call. Joining me today from Shockwave Medical are Doug Godshall, president and chief executive officer; Isaac Zacharias, chief commercial officer; and Dan Puckett, chief financial officer. Earlier today, Shockwave released financial results for the quarter and year ended December 31st, 2020. A copy of the press release is available on Shockwave's website.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitations, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations, and future product development approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of the COVID-19 pandemic that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place any undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our annual report on Form 10-K on file with the SEC and available on EDGAR and in our other reports filed periodically with the SEC. Shockwave disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 17th, 2021.

And with that, I'll turn the call over to Doug.

Doug Godshall -- President and Chief Executive Officer

Thanks, Debbie. Good afternoon, everyone, and thank you for taking the time to join us to review Shockwave's results for the fourth-quarter and full-year of 2020. The past year was full of many significant challenges for Shockwave and all of us, and despite the challenges put in front of us by the global pandemic. Obviously, the most significant recent achievement was the receipt of PMA approval for CT, our coronary device and we'll speak to that in more detail.

But before we do it is worthwhile recounting some of the team's recent accomplishments. We reported $22.7 million in revenue for the fourth quarter and $67.8 million for the full year of 2020, representing increases of 59% and 58%, respectively, from the same periods in 2019. Both the U.S. and international franchises grew at over 50% for the year, which reflects the global appeal of IVL.

In October, at TCT Connect, our CAD III U.S. coronary IDE study data were presented as a late-breaking trial and it confirmed that the safety and effectiveness endpoints of the trial were met. In November, the primary endpoint of our randomized PAD III study was also presented as a late-breaking trial this time in VIVA. The investigators demonstrated that intravascular lithotripsy is superior to angioplasty in severely calcified peripheral artery disease.

Earlier this month, data from our CAD IV pivotal study in Japan were published, confirming safety and efficacy in a complex patient population. In early December, CMS announced the accretion of four new codes that established specific payment for intravascular lithotripsy procedures performed in an outpatient setting in arteries below-the-knee, as well as, eight new codes for IVL performed in ambulatory surgery centers. We grew our overall team by nearly 60% over the course of 2020, with the most substantial growth occurring in our U.S. field organization, which now numbers over 125 individuals.

And we made meaningful progress on our R&D programs which led to an acceleration of patent filings and we ended the year with over 100 issued patents. Isaac is going to do a deeper dive into our commercial efforts. But before handing the call off, I want to provide a brief update on the COVID-19 situation as it relates to Shockwave and the trends we are witnessing which are largely consistent with what others have reported. U.S.

peripheral and international coronary procedures tapered off through the fourth quarter, as COVID restrictions were put in place and some patients elected to defer their treatment to avoid entering hospitals. Our business remained stable through the quarter and into January, despite the different procedures on a macro level which we found encouraging as it indicates that we captured a higher share of the cases that are still being done. Thankfully, most signs indicate that we are coming out of the worst phase of the current virus surge, so we anticipate that elective procedures will recover steadily over coming weeks as ICUs continue to free up capacity. That said, it remains extremely hard to predict the trajectory and impact of the virus given the additional variables of vaccines and new variants.

To provide some additional context on our commercial operations and C2, I'm happy to hand the call to Isaac.

Isaac Zacharias -- Chief Commercial Officer

Thanks, Doug. We have been preparing for the U.S. coronary launch for the better part of the year. The entire U.S.

sales organization is now out there, executing on our launch plan. As we've discussed before, our goal as a company is to foster independent use of IVL, whether that uses coronary or peripheral. What we mean by this is that customers can achieve great outcomes of IVL, even when a Shockwave rep is not in the room. This model is a win-win for customers and Shockwave.

We have been successful doing this in the countries in which we have launched IVL internationally and with our peripheral products in the U.S. Our coronary launch tactics in the U.S. are aligned with the same strategy. Now I'd like to share with you five key actions that have helped the team prepare for a successful launch.

First, we began training our sales force over six months ago. The training program developed by our marketing team is extremely comprehensive and includes modules on anatomy, calcified disease, advanced PCI tools and techniques, coronary IVL best practices, launch tactics, and pricing strategy. The content is delivered online, which has made it very accessible and easy for the team to circle back and refresh themselves periodically. Our training focus is on teaching the team not just when to use IVL, but also when not to use IVL.

We want to be responsible stewards in bringing this new technology to the market. We are fortunate to have many of the CAD III investigators and our international customers participate in the training program. These physicians teach the team how and when to use IVL appropriately from the perspective of an experienced IVL operator. The strong results from the distal CAD III study will be a tailwind as we launch this product, particularly, since it makes it clear to customers that IVL is safe and effective, even in the most challenging calcified cases.

Second, we have a data-driven approach that our territory managers are used to prioritize their account targets. We incorporate several factors, including PCI volume, atherectomy volume, IVL experience, IDN or GPO affiliation, and [Inaudible] process and timing. Each territory manager is now prepared to prioritize their activity at the target accounts in that area. While the normal hospital access pathways have been impacted to bearing degrees by COVID, we anticipate that most of our target accounts will be able to partner with us to get through the back approvals quickly and commit to the time needed to properly launch C2 in their hospital.

Third, we are fortunate to be able to leverage the experience from our three years of international sales to train our U.S. team in the most successful way to launch an account. In short, a successful launch requires a mutual commitment between Shockwave and the account to ensure that once launched, our customers can appropriately use IVL independently. Prior to introducing C2 at a center, our territory managers work with the account to identify patients who are good candidates for IVL.

We will provide digital training tools that physicians and staff can use to educate themselves prior to launch. During the one to two weeks that we are launching a new center, we will provide in person didactic trending to operators and their staff. With proper preparation, we expect to have multiple opportunities to treat appropriate patients during the in-service period. This will help ensure that we train as many physicians and cath lab staff as possible so they can successfully and independently continue using coronary IVL.

Especially in this COVID environment, we know that customers appreciate the ability to work independently from sales rep support. If we execute well on our account launches, I am confident that in the coming years, IVL will be broadly adopted and viewed as a necessary tool for achieving optimal PCI outcomes. Fourth, a few words about pricing. As we have done in international markets, we will sell C2 at a premium price relative to other calcium modification devices.

It is a novel differentiated product and safely improves PCI outcomes. It's easy to use and expands the population of patients that cardiologists can treat. Further, the device price is a component of the overall IVL PCI procedure costs, which CMS evaluates when determining both add-on and long-term payment levels. We have set the C2 price at a level that we believe will optimize the future reimbursement of IVL.

For near-term reimbursement, we have already submitted an application for a new tech add-on payment or NTAP to CMS. If awarded, this will provide incremental payment for IVL in the inpatient setting. Now that we have received our approval, we will soon apply -- soon be applying for the transitional pass-through or TPT pay. If awarded, this will provide incremental payment for what IVL is used in the hospital outpatient setting.

We hope to have both the NTAP and TPT payments in place within the year. Fifth and finally, for our C2 launch to be successful, our team must maintain and grow the peripheral business in 2021. Our sales reps have worked hard to ensure that our territories are appropriately sized and that we have enough field clinical specialists to support both coronary and peripheral accounts. The peripheral business tends to be more reprehensive in the coronary business, so we have coached our teams to manage their effort and time accordingly.

The field team spent the last 18 months helping customers become more independent with our peripheral IVL use. We are advantaged in that most peripheral accounts will be early targets for our coronary launch and many of our peripheral customers are interventional cardiologists who are already using IVL for peripheral and access. This account and customer synergy will help us maintain a strong peripheral business while we execute on a coronary launch. Switching gears now to our international business.

We're in the process of building a direct sales team in France and the U.K. We will transition the business in those countries from our distributors in the middle of 2021. We are very pleased with the results our distributors achieved in France and the U.K. In fact, it is those results that led us to conclude that we can drive further penetration at better margins with a focused Shockwave sales force.

We hired sales leadership for both countries in the fourth quarter and have begun onboarding territory managers in both countries this quarter. In Japan, we are in the process of building a local team that will be prepared to launch the coronary product in 2022. Our decision to build the Japan business with a leadership team -- with a local leadership team is justified by the size of the market and the myriad benefits of having a direct team in Japan, including communication, physician engagement, and focus. The strength of the recently published CAD IV data further encourages us about the potential for C2 in Japan.

It continues to be a busy and exciting time for our organization. I am very pleased by the effort, dedication, and accomplishments of our talented and growing commercial team. We are all pumped up to get on with the C2 launch here in the U.S. and continue expanding the Shockwave team in international markets.

The energy and passion of our employees is tangible and it's a pleasure to be a part of this team. With that, I'll turn the call back over to Doug.

Doug Godshall -- President and Chief Executive Officer

Thanks, Isaac. I will now touch on a few other operational updates. In addition to the early approval of C2 in the U.S., we continue to make good progress on international regulatory activities. We are on schedule with our Japan efforts with the first modules slated for submission to PMDA by the early second quarter.

We are also making good progress with our notified body to obtain device certifications under the new MDR regulations. We successfully passed our first quality system audit under MDR and were recommended for certification based on those results. Tracking to the new more rigorous standards is critical since they are stated to become mandatory this May. Our team and investigators have been quite prolific in the generation of clinical papers with almost 160 IVL publications on over 2,100 patients to date.

This number will continue to expand as we publish data from studies such as the recent CAD IV publication and the soon to be published PAD III randomized data. Let me next provide some additional detail regarding peripheral reimbursement since it is always a topic of interest. As a reminder, last July, we received four peripheral codes from CMS for hospital-based outpatient procedures. This was a great first step.

However, because above-the-knee and below-the-knee procedures were together into the same four codes, CMS would not have been able to track costs separately in those vessel beds. We worked with CMS last fall and we're pleased by their swift action in changing the outpatient rule in December with the addition of four new codes for IVL and below-the-knee lesions. These codes now pay for IVL in BTK lesions at a higher rate than ATK lesions which is consistent with the rest of the lower extremity basket. Ultimately, our hope is that the cost data that CMS is collecting will lead them to uplift both above the and below-the-knee payments levels for IVL.

The continued penetration we have seen in our in-hospital peripheral procedures, even in the face of broader procedural slowdowns to COVID, gives us confidence that CMS will be able to gather cost data on IVL quickly. The annual rule issued in December also included eight new codes for IVL in the ambulatory surgery center or ASC site of service which we're pleased to see. There are not a lot of pad interventions performed in ASCs presently, but the addition of these codes serves as validation that CMS is paying attention. Securing reimbursement, when you start from scratch takes time, but we and our customers are encouraged by the steady progress we've made over the past year.

Finally, there is the lower -- the broader lower extremity code set that covers both hospitals and OBLs, as well as, physician fees. The medical society has worked directly with AMA's CPT panel and we have no new information to report on the lower extremity basket. The agenda for the next CPT editorial panel will be posted on March 12th and we will all be able to see if a new proposal has been submitted for this lower extremity code set. As these many components of our business progress, we continue to strengthen our capabilities and capacity.

To that end, the R&D team has moved into a much larger lab in our new building and we expect the upgrade and expansion of our manufacturing facilities will be to -- will be completed within the next few months. The meaningful efficiency gains we experienced over the course of 2020 have put us in a comfortable inventory position for the launch of C2, and obviously, resulted in an encouraging step-up in gross margin over the second half of last year. These productivity improvements will continue to accrue to our benefit as we move into our new clean room, although there will certainly be some ebbs and flows as we bring in a bolus of new equipment and a surge of additional operators in coming months. I will now turn the call to Dan.

Dan Puckett -- Chief Financial Officer

Thank you, Doug. Good afternoon, everyone. Shockwave Medical's revenue for the fourth quarter ended December 31st, 2020, was $22.7 million, a 59% increase from $14.3 million in the same period of 2019. U.S.

revenue was $12.7 million in the fourth quarter of 2020, growing 66% from $7.6 million in the same period of 2019. The increase was driven by continued sales force expansion into new territories and increased adoption of our products. International revenue was $10 million in the fourth quarter of 2020, representing a 51% increase from $6.7 million in the prior-year period. The growth in international revenue is primarily driven by increased adoption in the existing geographies.

We're now commercially selling IVL in 55 countries outside the U.S. Looking at product lines, our peripheral products, M5 and S4, accounted for $14.1 million of the total revenue in the fourth quarter of 2020, compared to $8.7 million in the same period of 2019, a 62% increase. Our coronary product, C2, accounted for $8.2 million of the total revenue in the fourth quarter of 2020, compared to $5.3 million in the same period of 2019, representing a 54% increase. All of our C2 revenue is currently international.

In addition, the sales of generators, most of which were international, contributed $466,000 in revenue in the fourth quarter of 2020, compared to $317,000 in the same period of 2019. Gross profit for the fourth quarter of 2020 was $16.2 million, compared to $8.8 million for the fourth quarter of 2019. Gross margin for the fourth quarter of 2020 was 72%, as compared to 61% in the fourth quarter of 2019. Contributors to gross margin expansion included continued improvement in manufacturing productivity and process efficiencies.

Total operating expenses for the fourth quarter of 2020 were $32.1 million, a 33% increase from $24.1 million in the fourth quarter of 2019. Sales and marketing expenses for the fourth quarter 2020 were $16.4 million, compared to $9.6 million in the fourth quarter of 2019. The increase was primarily driven by sales force expansion in the U.S. R&D expenses for the fourth quarter of 2020 were $9 million, compared to $10.1 million in the fourth quarter of 2019.

The decrease was driven by lower clinical expenses as most of our major studies have completed enrollment in the first half of 2020. The general and administrative expenses for the fourth quarter of 2020 were $6.6 million, compared to $4.5 million in the fourth quarter of 2019. The increase was primarily driven by higher headcount to support the growth of the business. Net loss for the fourth-quarter 2020 was $15.9 million, compared to a net loss of $14.7 million in the same period of 2019.

Net loss per share for the period was $0.46. We ended 2020 with $202.4 million in cash, cash equivalents, and short-term investments. Finally, I'd like to briefly recap our full-year 2020 top-line results. Total Shockwave revenue for the full-year 2020 was $67.8 million, an increase of 58%, compared to full-year 2019 revenue of $42.9 million.

Revenue for the U.S. for the full-year 2020 was $37.1 million, representing a 64% increase over 2019 revenue of $22.7 million. International revenue was $30.7 million for the full-year 2020, compared to $20.2 million in 2019, representing a 52% increase. With the continued uncertainties of COVID and the vaccine rollout globally and their combined impact on both COVID spread and procedure trends, we're not able to provide meaningful financial guidance at this time.

We continue to monitor both the broad global trends, as well as, those of our business and look forward to providing you with guidance at the appropriate time. At this point, I'd like to turn the call back to Doug for closing comments.

Doug Godshall -- President and Chief Executive Officer

Thanks, Dan. And first, I'd like to express our support and concern for our friends, colleagues, and customers, and their patients who are struggling with out heat and electricity in various parts of the country. We wish you well. And hopefully, things return to the pre-cold snap normal, to the extent that in itself was normal since we all know that 2020, and into 2021 has been a 12 months that none of us will ever forget.

And yet, it's hard to describe how fortunate I feel to have such a talented team surrounding me that never wants lost sight of what drives us and creates value, which is serving our customers and their patients. Two thousand twenty one is going to be a predictably unpredictable for a period of time, but I'm certain that the Shockwave team will do all we can to deliver best-in-class service and technology for the treatment of patients with cardiovascular calcification. And with that, now I would like to open the call for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question is from the line of David Lewis of Morgan Stanley. Your line is open.

David Lewis -- Morgan Stanley -- Analyst

Well, thank you for the question. Good afternoon. Congrats on the quarter and the C2 approval team, very, very impressive. Just maybe one here on broader C2 and then a quick follow-up.

But I guess, either for Doug or Isaac. I just wonder if you could comment on some assumptions that the detail around the C2 launch was excellent. So one, we're kind of assuming kind of USD 5,000 price point. I wonder if you could kind of update us on that and consensus numbers for '21, sort of have $20 million, $25 million of U.S.

coronary. I wonder if you could react to that? And then, Isaac, for you, just thinking about the target lesion population just said you kind of think about your marketing plans heading into the U.S. here. What's the right patient cohort percent of PCI lesions that you think is the appropriate cohort for C2? And then just a quick follow-up.

Doug Godshall -- President and Chief Executive Officer

Yeah. So in terms of the specific price, I think for modeling, it'd probably be appropriate to use something around $4,700 selling price. That's around the range of what we've been quoting to customers here over the past 28 hours or whatever it's been and so I think for the model that would work. It's also a number that works well, both in terms of reflecting the value of the technology and by happenstance also helps both near-term reimbursement and long-term land in the right APC.

So it -- that's the number we've coalesced around. And I'll let Isaac pick up the launch specific questions.

Isaac Zacharias -- Chief Commercial Officer

Sure. So, hi, David. How are you doing? I think the way we are going to approach customers in the U.S. is remarkably similar, I'd say to what we've done in international markets, and that is have our reps kind of articulate the value proposition of coronary IVL.

And really, as you start -- as we start to enter the market, I think there are really -- we'll work with customers on identifying patients and lesions that are not well treated by existing technologies. And I think, you know, existing technologies do a lot of things well and what we try to focus on as we come into each account is, where do they have problems even with the existing technologies and how can we help satisfy those unmet needs. And that's really the training that we bring to this. It's how we talk about how we talk about the product with VAC committees and getting into kind of where we think penetration might end up in the U.S.

It's I'd say, it's -- I can put it a guess right now, but it would certainly be wrong. I think, you know, what we're focused on is, it's like I said, really landing the technology appropriately, so customers understand how to use it. And then work on getting payment from CMS that can help support the continued use.

David Lewis -- Morgan Stanley -- Analyst

Very helpful.

Doug Godshall -- President and Chief Executive Officer

And you also asked about the year, which obviously, there are so many uncertainties around procedure trajectory. We -- we're off to believe that sort of second, third, fourth week of January is were the bottom of the trough. In terms of impact on ICUs and the like, and hopefully, we were right and that we'll have a steady recovery of procedures. And obviously, the most recent downdraft was not as severe as last March and April when there was such fear and a complete shutdown of electives, we obviously aren't seeing that.

But it does make it a little bit challenging to say, OK, we have -- we have extremely high level of confidence that by June, it's going to be 100 times percent of of what would be deemed as normal. So that doesn't make guiding difficult which also makes answering your question a bit challenging. Here's what we anticipate. We do anticipate based on the initial feedback that we will be able to launch C2 and that there will be sites that will be able to work through the VAC process and bring us on forward.

And so we aren't seeing anything at this juncture in the early, early response that would say our launch expectations are going to be materially adversely affected by COVID, that does not appear to be the case. And so we're -- our goal is obviously to be very thorough and effective in how we launched, as Isaac described, and not allow chasing cases or chasing revenue in the third week of February or fourth week of February to derail us from what we think is a much more effective long-term strategy of converting it in selling accounts in a very planful and effective manner. And so if all that comes to pass, what we aren't seeing is anything that says to us, at least on the coronary side and our expectation on procedure recovery side, that would have us be particularly uncomfortable with the expectations around coronary right now.

David Lewis -- Morgan Stanley -- Analyst

OK. That's super helpful given the environment. I'll just ask one more quick one here. Just on BTK, I know not the focus of this call, but how are you feeling about the traction in BTK kind of exiting 2020 heading into '21? Thanks so much and congrats again.

Doug Godshall -- President and Chief Executive Officer

And Isaac, obviously, feel free to chime in. The -- I mean, we -- we are -- we continue to be encouraged by the balanced growth of our peripheral business. Our S4 business is growing, our M5 business is growing, the unique ability of IVL to address legions, whether it's an iliac or common femoral or tibial lesion, where there's heavy calcification and other things, either fail or the operator knows they won't work to begin with, has enabled us to cobble together a -- obviously, an encouraging business and clinical business approach. And so we're never satisfied by any means, but we continue to be encouraged by the steady growth and traction, both above-the-knee and below-the-knee.

Next question?

Operator

Thank you. Your next question comes from the line of Bob Hopkins from Bank of America. Your line is open.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Great. Thank you and good afternoon. First question, I'll ask this kind of a market question and then ask a Shockwave question. So for Doug or for Isaac or both, it's just a general market question.

With the decline in you know, obviously, COVID-related hospitalizations that we've seen over the last couple of weeks. When you're thinking about just what you're seeing out there in terms of procedure volumes, are you starting to see a pickup in the last couple of weeks in case volumes generally? In other words, if we kind of hit the bottom and are starting to climb back up? Or are we still sort of wallowing at the lows? Just I want to get your perspective on broader trends and procedures first?

Doug Godshall -- President and Chief Executive Officer

Yeah. I think Isaac and I just talked about this earlier today. You know, we're moderately encouraged here in February which is the first glimmer of encouragement, I'd say, that we felt in several weeks. It doesn't feel like a head fake.

It does feel like things are starting to return. The challenge is, obviously, we don't have a macro. Seeing all procedures, we see the ones that we participate in and at least in the U.S., cautiously encouraged, I guess. And, Isaac, maybe you want to chime in on international since we have such a strong international business as well.

Isaac Zacharias -- Chief Commercial Officer

Yeah. Sure. I think the way it's -- unlike in Q2, when the virus first emerged, what's -- what appeared to happen throughout Q4 and into early this year is, kind of almost a Whac-A-Mole where some areas or regions would be back moving and then you'd see a flare-up and things would tighten up or electors would close down for -- in an area in a couple of hospitals, and that was just happening throughout the last, I think, four or five months. And I think what we're seeing now seems better, but it's pretty early, Bob.

It's hard to tell. I'm not -- I'm bad at predicting what this virus is going to do and how people are going to react. It's just -- so I think it's early, but you know, I -- I'm more encouraged than I was a month ago, I'd say, and I think it just continue to do the best we can with the procedures we got and what is nice is, it doesn't seem like we're getting wholesale shutdowns of electives across big parts of our region.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

OK. That's helpful. You know, it was really a question on just like, the here and now, predicting, I realize, is difficult, but it feels like from a lot of data points that it would make logical sense that procedure volumes broadly are starting to get a little bit better, especially in the United States, but I just wanted to confirm it.

Isaac Zacharias -- Chief Commercial Officer

Yeah. Yeah.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

OK. And then the other question, it's going to be kind of an interesting year in terms of data points on reimbursement. So just for the record, I was wondering if you can give us a sense for specifics on timing for when you expect on TPT, a new tech add-on payment? And just maybe set expectations for what we might see on March 12th.

Doug Godshall -- President and Chief Executive Officer

So, there -- March 12th, we have no idea, whether the lower extremity basket will be resubmitted for the May meeting or if they will hold and submit for the October meeting. It's -- I mean, for the medical societies, the current state is attractive and the future state is uncertain. And so, not that they're stalling, but it's not like, oh, they're rushing to change the current codes as fast as they possibly can. So, whether it's going to be on the agenda for the next meeting or the meeting after that, it's not known to us, and we probably will find out what everybody else finds out because I think the societies have -- they've solicited all the feedback that they need from different companies.

And I think they're now hunkered down and negotiating among themselves since it's for different societies that all have to join hands and jump together. So that's the longer-term level 1 CPT code process. Near-term, on the peripheral side, it's -- we do not expect to see a change of APC level for our peripheral codes, now that we have eight of them. Before the annual rule-making in October, that's sort of the more comfortable time for CMS to make changes.

There's certainly no -- there is no certainty, certainly no certainty that we will get uplifted. I think, the CMS objective reviews the data that they'll receive, I think it will be pretty obvious that we should be in a higher-paying APC, both for above- and below-the-knee. So we'll see it as soon as that could happen would be October. October is also when we would anticipate that the new tech add-on payment for inpatient coronary procedures would be -- would go into effect.

Given our breakthrough designation, it's not a guarantee, but it's -- we think it's more likely than not that we would satisfy the criteria for an NTAP for coronary. And then the last piece is the transitional pass-through which we've obviously been prepping to apply for and had to wait until we got approved, which thankfully, we now are. We'll be filing that in the not-too-distant future. There's a, I'd say, not remote, but slim chance that that gets approved in the first cycle which would be July.

That also seems a more sort of more likely that they would bundle that into an October time frame. So, if we were fortunate on the coronary side, we would get both inpatient and outpatient, additional payments for NTAP for inpatient, and TPT for outpatient at the October time frame.

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Great. Very helpful. Thanks, guys.

Doug Godshall -- President and Chief Executive Officer

Yup.

Operator

Your next question comes from the line of Larry Biegelsen of Wells Fargo. your line is open.

Larry Biegelsen -- Wells Fargo -- Analyst

Good afternoon. Thanks for taking the question and congratulations on the quarter and the approval.

Doug Godshall -- President and Chief Executive Officer

Thanks, Larry.

Larry Biegelsen -- Wells Fargo -- Analyst

Doug, two on coronary. Doug, two on coronary. Just first, I'm interested in the account overlap between peripheral accounts and your targeted coronary accounts. Any additional color, quantification you can provide and how that can help the coronary launch? And I had one follow-up.

Doug Godshall -- President and Chief Executive Officer

Do you want to take that, Isaac? Or you want me to take that?

Isaac Zacharias -- Chief Commercial Officer

Sure, OK. Hi, Larry. We, uh -- there's quite a bit of overlap in -- where we put together just a list of target accounts in each territory and then look at those accounts from a coronary perspective and looked at those accounts on who's doing peripheral business with us. So I think the better part of this year, we will -- a lot of our early new launch accounts will be accounts where there is established peripheral business, interventional cardiologists who are doing some of that peripheral business, and they have -- they are higher volume complex PCI operators as well.

Larry Biegelsen -- Wells Fargo -- Analyst

Thank you. And Doug, I know there's a lot of enthusiasm for the coronary procedure for Shockwave in the U.S. But I'm curious how much of a barrier. Yo know, the one pushback that we've seen and heard about is pricing.

So how much of a barrier do you think that'll be before and after you get the new tech add-on? And hopefully get the new tech add-on and transitional pass-through payment. I'm sure you saw the TCTMD article yesterday which talked about doctors using IVL mainly in large vessels and bifurcations. What's your reaction? Thanks for taking the questions.

Doug Godshall -- President and Chief Executive Officer

Yeah. Yeah and I'll tag-team with Isaac with this one as well. The -- and when we launched internationally, like we -- I don't think I can find any customer that was thrilled that we were selling at a premium to atherectomy. And yet our launch, both internationally and in the U.S., is to provide an important new tool for patient populations that -- where other devices aren't able to do a good enough job and adequately address the disease and we'll take the same approach here.

We're not trying to take share from the sort of smallish atherectomy pool. We think there's a much larger population that isn't getting adequate calcium modification. And once our international customers had the initial reaction to our price, I'm sure they all wish we would lower price, but it really has -- other than in some select countries, it has not really provided -- proved to be a significant barrier to adoption and we don't expect it will, here, either. The added advantage we have here is -- there's a, not only is the price appropriate for the technology, but there's a very clear, comprehensible reason why this price actually will accrue to the benefit of the hospitals, and ultimately, the patients.

And that it enables us to qualify for the add-on payments, and ultimately, should help qualify for a level 1 CPT code as we go to work toward the longer-term objective. And so while there is likely to be some initial friction, I think the -- my perception is the level of enthusiasm for the system and the appreciation and the conversations we've been having. The appreciation that they've seen this work before when the atherectomy code came into being, there was also some sort of friction on the price of atherectomy and yet it worked. It enabled CMS to come up with a code that rewarded the use of that device and created a good economic support system for atherectomy use and when we're looking to go down a similar road.

And many of the customers we've spoken to, sort of, are very familiar with that story and understand what we're doing. And right now, the -- we're not seeing a lot of evidence that it's going to be a major barrier to utilization, maybe some decrease used early, but in the long run, it will pay off.

Isaac Zacharias -- Chief Commercial Officer

And I'll just add to that, Larry. The key for us on this is, first, having a rationale that -- about why we're pricing the way we are and we shared that with you. Next is having our reps understand that rationale, and we've got a lot of work on that front. And then third step in to them being able to talk to their customers about it and administrators about it.

And I think, you know, if we do that well and couple that with what I think is patients which is warranted given the environment, given the price, and the lack of payment as we roll out. That customers will come along with us and we'll remain patient and over time, build the business.

Larry Biegelsen -- Wells Fargo -- Analyst

Thanks, guys for taking the questions and congrats again.

Isaac Zacharias -- Chief Commercial Officer

Thanks.

Operator

Your next question comes from the line of Adam Maeder of Piper Sandler. Your line is open.

Adam Maeder -- Piper Sandler -- Analyst

Hey, guys. Good afternoon and congrats on the nice finish to the year. The first question is probably for Doug or Isaac. You know, this came up a bit in the prepared remarks and the Q&A, but can you give us just a little bit more insight around the different vessel beds, ATK, BTK, coronary, and how those fare during the quarter? And what the trajectory of those segments look like throughout Q4? Just any color there would be appreciated and then I had a follow-up.

Doug Godshall -- President and Chief Executive Officer

Yeah. So, our -- both our peripheral segment, as I mentioned earlier, our peripheral products are both growing and contributing nicely to growth that at comparable growth rates. Now our above-the-knee business is the larger business, so it's contributing more dollar growth than the below-the-knee segment. And yet, we made very good strides with some of the key below-the-knee, critical limb ischemia operators.

Those who do below-the-knee work tend to concentrate a lot of their activity on below-the-knee work and those who don't do much of below-the-knee work or our more generalists in peripheral space. While they're below-the-knee business, not that it matters to us, that's not where the procedure volume was concentrated. So we've had a real concerted effort over the past quarter or so to make greater inroads into the CLI community and that seems to be bearing fruit as they evaluate and start to incorporate test for -- into their treatment algorithms. So they're -- we're -- our above-the-knee business is stronger because of the existence of our below-the-knee business and best person.

They seem very complementary. Just like we anticipate that the integration of C2 is actually going to have a halo effect for our overall peripheral business and we've already seen it in some of our conversations as we talk. Coronary with folks who aren't using aren't using M5 for TAVR PREP, it opens the door for us to have a conversation, like why are you doing an alternative access, when you could be using Shockwave to open up the iliacs. So our express intention is to take advantage of the fact that we have a single sales force who can leverage the relationship with cardiologists who do some peripheral or might do structural heart or the like.

There's so much synergistic crossover with coronary in our peripheral business that we think it's going to be a real advantage given the use case of our system that C2 will complement S4 and M5, as opposed to cannibalize the selling time for those products.

Adam Maeder -- Piper Sandler -- Analyst

No. That's helpful. Thanks,Doug. And then I'll just -- I'll ask one on the pipeline.

You know, it's been a little while since we've gotten an update on the TAVR program for aeortic stenosis. I know it's very early there, but it's a sizable opportunity for the company. If the right technology can be developed, so just any update on that program that you can share at this point in time? And then separately, you started to talk a little bit about just exploration of new indications for IVL. Just wondering if there's anything you can share there as well.

Thanks so much.

Doug Godshall -- President and Chief Executive Officer

Sure. Yeah. So we're -- we remain optimistic about our prospects to develop a therapy for treating aortic stenosis. We continue to make strides with what we hope will be the next device that goes into the clinic, but it is such a different environments use Shockwave and when you've got sort of flat leaflets with calcium built on -- within them versus putting a -- our IVL inside of an artery, and so we've learned a lot over the years.

And as we described it last year, TAVR was sort of in -- it had been heavily in research mode. And I'd say, we made good progress on researching what it is we need to do, perhaps, a bit differently to make it more intuitive, more predictable when treating aortic stenosis. And our plan is, later this year or early next year, to have a broader pipeline discussion, not just advances in the peripheral and coronary device activity, but also areas such as TAVR. And so our -- I'd say, stay tuned, either later this year or early next year, we look to have a pipeline, a broader, a more detailed pipeline conversation.

Adam Maeder -- Piper Sandler -- Analyst

Sounds good. Thank you.

Operator

Your next question comes from the line of Bill Plovanic of Canaccord. Your line is open.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thanks. Good evening. Congratulations on the approval.

And the first question is for Doug and Isaac is relative to the launch. As you launched C2, I'm just curious, the learnings you gained internationally and kind of what are those key learnings? And how has that influenced the launch of C2? And then my second question will be just some of the transition international and the impact on the finances.

Doug Godshall -- President and Chief Executive Officer

Since, uh, Isaac basically flew back and forth to Europe every other week, launching C2. I'll let him take it.

Isaac Zacharias -- Chief Commercial Officer

Yeah. The, um -- similar to what I laid out, we've really tried to learn from what went well in our international experience and what didn't go well, and incorporate that into the U.S. training and U.S. launch.

And a lot of that learning, frankly, was delivered -- that training was delivered to the sales force by customers who have, since the beginning of our launch of the coronary product in Europe, worked with us and help us learn together kind of where is it IVL appropriate? Where can it work where other things cannot? When is it not appropriate? And so, we really know a lot more about how the technology works and where it works than we did -- when we launched in Europe, and that's really kind of what's driven the foundation of a lot of the training that we have in the U.S. But essentially, it's going to be launched the same way and that is talking to customers about the unmet needs they have with their current technology. There are specific areas of those unmet needs. Most customers who treat complex PCI have patients that are -- that fit in those specific categories and that's where we start.

And that really, you know, in our experience, helps. It helps the customer understand where IVL can help them in their practice and help their patients, and then they -- and the community starts to grow from there. But that's always our starting point when we go into accounts.

Bill Plovanic -- Canaccord Genuity -- Analyst

And then on the VAC process, I mean and I don't know as you go through how many of the accounts actually need to go through VAC for coronary? And then given that you already have peripheral in most of the initial accounts, like, is this -- what's the timing of that process? Is that a week? Is it a month? Is it -- how should we think about -- I understand the commentary of it's about two weeks to onboard an account, but how does it take to get through that first gate, which is the VAC?

Doug Godshall -- President and Chief Executive Officer

It's really highly variable and so I think what we'll see is, as our territory managers go in and start working with accounts, there's going to be some of their target accounts that can move through the process quickly. Some that are more like two to four weeks, some that might take a longer, and we'll just start stacking up into their launch planning. When those accounts are coming in, so they can start scheduling their in-service one- to two-week launch week with the account. So it's -- in a way, the variability helps because if everyone got to a back in a week, we'd be inundated with people wanting to launch, but it will naturally kind of space itself out.

Bill Plovanic -- Canaccord Genuity -- Analyst

OK. And then thank you for that. And then my other question is, you mentioned on international, in a couple of markets that you were going direct. And you know, how should we think about the impact in Q1 as you make that transition on the business? Is this material? Is it, you know, you've already worked those inventory down so we haven't seen it in the numbers? How should we think about that?

Doug Godshall -- President and Chief Executive Officer

Yeah. So in the first quarter, you won't see an impact because the transition will be midyear and we've gotten to a point where it should be a fairly smooth transition. And at least in Japan, it will have no effect because we're going direct when we launch next year. In the U.K., we see the benefit primarily being revenue growth and penetration.

What we think is a real market for peripheral in the U.K. and yet less of an ASP lift because the model we have in the U.K. is a sales agent model versus a distributor model. And then in France, we have a smaller business in the U.K., which is one of the reasons we're building direct is our distributor did a good -- did a very good job of validating that the market is real, both coronary, primarily coronary, but also peripheral.

And yet they had a full -- a bag that was too full to really put in the effort that we think the market warrants, and therefore, we have both unit volume increase, meaningful potential in France, as well as, ASP because we don't have the transfer price in France. So it's sort of a mixture of benefits in the countries where we're going direct. And at the end of the day, and the commonality is, we think the markets are in those countries, and we'll be assessing other countries as well, is more substantial than maybe a distributor is able to realize given that they're less focused by definition than a direct presence we'll have.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great.

Isaac Zacharias -- Chief Commercial Officer

And if I may, what --

Doug Godshall -- President and Chief Executive Officer

Sure. Go ahead.

Isaac Zacharias -- Chief Commercial Officer

Sorry, just one clarifying question or a comment on the inventory as we transition in midyear. We have, you know, the team in Europe is working closely already with the distribution partners to plan a smooth transition so that there was not excess inventory that people can't sell that has been purchased, etc. So we expect it to be a very kind of smooth, seamless transition that shouldn't impact balance sheet or inventory.

Bill Plovanic -- Canaccord Genuity -- Analyst

OK. Thank you. And then in guidance, I know it's really difficult given COVID and kind of the ebb and flows of this, but if I could ask the question differently. as you look at the first week pre-coronary in the peripheral business, if that annualized out and I understand there's a lot of variables here.

I mean, in terms of comparison to fourth quarter, are you up, down? You know, I'm just trying to directionally kind of get a feel for where Q1 may be going with that trough and bounce because we don't know how deep the trough is and how big the bounce is. But if we get some sort of normalcy to maybe a point in time, it's helpful.

Doug Godshall -- President and Chief Executive Officer

Yeah. I mean, so in terms of our understanding of procedure volume month to month, the underlying base of procedures felt, seemed, I don't know what the right way to say this, seemed lower in January than it did in November, December. But as I described, our sort of daily drum beat of sales was not dissimilar month to month. There's obviously -- the numbers aren't identical, but they're not dissimilar, which is what made us -- which gave us the impression that if the procedures are down, but your daily cadence is similar, that would suggest you're getting a high percentage of the cases that are getting done.

In terms of the bounce back, I certainly -- it's not a -- it's what were all in the different letters. It's -- I wouldn't give it a V-shape recovery, but nor was the trough as low as it was back in the second quarter. So we're -- we are -- as you can tell from both Isaac and I, we are ultra careful not to get ahead of the curveball that the buyers keeps throwing at our customers, and then by extension, their procedure volumes. So we're -- we feel like it's going to be a climb out, but it's going to be a slow ascent from the trough of January -- mid-January.

Bill Plovanic -- Canaccord Genuity -- Analyst

Thanks for taking my questions.

Operator

There are no further questions at this time. I'd like to turn the call back over to your speaker, Doug Godshall, for any closing remarks.

Doug Godshall -- President and Chief Executive Officer

OK. Thank you, operator, and thank you, everybody, for your time and attention. And hopefully, 2021 is going to be a superior year to 2020 in terms of the average daily living will, we all do. And hopefully, the vaccines all take hold and we are all in the same place together again in the not-too-distant future.

So with that, thank you very much, and have a good rest of your quarter.

Operator

[Operator signoff]

Duration: 59 minutes

Call participants:

Debbie Kaster -- Vice President, Investor Relations

Doug Godshall -- President and Chief Executive Officer

Isaac Zacharias -- Chief Commercial Officer

Dan Puckett -- Chief Financial Officer

David Lewis -- Morgan Stanley -- Analyst

Bob Hopkins -- Bank of America Merrill Lynch -- Analyst

Larry Biegelsen -- Wells Fargo -- Analyst

Adam Maeder -- Piper Sandler -- Analyst

Bill Plovanic -- Canaccord Genuity -- Analyst

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