ShockWave Medical Inc (SWAV) Q1 2021 Earnings Call Transcript

ShockWave Medical Inc (SWAV -0.12%)
Q1 2021 Earnings Call
May 10, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. And welcome to Shockwave's first-quarter 2021 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 of 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 ended March 31, 2021. 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 limitation, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations and future product development and 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 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, May 10, 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 first quarter of 2021. We are pleased to be able to share our preliminary expectations for the quarter a few weeks ago, and we look forward to discussing our final results as well and some more detail about our accomplishments during the quarter.

I'll start with a brief recap. We reported $31.9 million in revenue for the first quarter of 2021, representing an increase of 110% from the same period in 2020. We received premarket approval for use of IVL in coronary artery disease from the U.S. Food and Drug Administration and subsequently sold $6.6 million of Shockwave C2 devices in the U.S.

During the quarter, which outpaced our internal projections. We announced that we had formed a joint venture with Genesis MedTech Group, an established Chinese entity whose management team has a solid track record of commercializing medical devices in Mainland China. In late March, we submitted our shown-in application to PMDA for commercial approval in Japan. And more recently, we were pleased to see that CMS has proposed new technology add-on payment codes or NTAP, for inpatient coronary procedures where IVL is used.

On a macro level, we are confident that the solid early performance of C2 will continue and will enhance the growth of our peripheral business in the U.S. Our international customers are still navigating the COVID challenges, and we expect that the elective procedures outside the U.S. will remain dampened this quarter, potentially through the third quarter. While it is still early in this very dynamic launch, we believe the traction we are witnessing with C2 is sustainable and as a result, our expectation is that we will generate between $195 million and $205 million in revenue for the full year of 2021.

This represents growth of 188% to 202% from our revenue for the full year of 2020. I'm going to hand the call to Isaac now to provide some additional color on our commercial progress, and then Dan and I will provide more detail on the broader business and financial results. Isaac?

Isaac Zacharias -- Chief Commercial Officer

Thanks, Doug. Picking up from our most recent commentary, we continue to see encouraging adoption of our Shockwave C2 product in the U.S. while we are still in the very early innings, the pace at which accounts are embracing and using the product has exceeded our expectations. Our focus will continue to be on maintaining disciplined execution, consistent with the strategy we presented on prior calls.

I will dig in a bit now with some launch metrics that we think are important to help frame how things are going. We will continue to assess, which metrics are most relevant to help develop an understanding of our business, we will likely modify what we share as the launch matures. From a cadence perspective, we intend to maintain the limit on how many accounts a territory can launch at two per month for the second quarter and will likely continue to do so for the remainder of 2021. We believe this is the best way to ensure that each account receives thorough training on the appropriate use of IVL, and our customers are able to use the system independently.

In practice, we are averaging approximately 1.6 accounts per territory per month, inclusive of April. We will also maintain the current limit on initial order quantity for each new account. The minimum initial order is four units, which is one for each size; and the maximum initial order is eight units, which is two for each size. We think this is adequate to get accounts started, and we want to avoid overstocking customers or inviting a backlash from administrators if folder sizes are too big.

In practice, we are averaging just over five units per account for the initial order through April. A key focus for us is to ensure that our customers and their staff are comfortable using IVL independently. The first week of the launch is critical from this standpoint, as this is when the Shockwave team is going deep with the accounts to train them and do IVL cases. If we do this well, the customer should continue doing cases after that first week when the Shockwave team is not always present in the lab.

I am pleased with the early results in this regard. In April, approximately 35% of the C2 revenue was generated by accounts within their first week of C2 use. This includes the revenue from the initial order and any additional units that were ordered within a week of the initial order. This means then that 65% of the C2 revenue in April was from accounts that have moved past the first week of launch, which is when we expect to start seeing independent use of coronary IVL.

Overall, we are pleased with what we have seen for reorders after the launch is completed, and customers seem to be maintaining appropriate power levels to support their volumes, meaning they are carrying enough product to treat their patients, but not so much as to result in excess inventory of the accounts that completed launch activities in Q1, 88% reordered product in April. The organizational strategy for our sales team is predicated on creating an efficient model, both in economics and headcount that serves our customers' needs. Specifically, we service our customers with one sales team, whether that customer is a surgeon, a radiologist or a cardiologist. Our goal is to have a team that is comprised of more field clinical specialists and territory managers.

We believe that the ease of use, safety profile and IVL's unique position in the market will enable this nontraditional sales model to work well for Shockwave and our customers. We expect that having our teams sell both coronary and peripheral products will help them maximize the opportunity within each account. For instance, there are accounts where we are launching the coronary product that have not been -- but have not been able to get peripheral products adopted for lower extremity treatment or large bore access. We already have multiple instances where the interventional cardiologist is so impressed with coronary IVL that they introduce our team to their structural heart or vascular surgeon colleague and advocate on our behalf.

We have also observed that in many accounts where we have peripheral adoption. It has helped us gain support for launching coronary IVL because the peripheral interventionalists are strong advocates of IVL and its utility. We were pleased with the growth of our peripheral business in the U.S. during the first quarter.

While the ongoing pandemic impacted some regions of the country, especially early in the quarter, our team was able to drive significant quarter-on-quarter growth of our peripheral business. We continue to see a diverse mix of cases for the M5 catheter, including symptomatic iliac disease, common femoral lesions that are not amenable to surgery, facilitation of large bore access and superficial femoral artery treatment. All areas of this mix are experiencing solid growth and while the SFA application continues to be the plurality of M5 use, it is followed closely by symptomatic iliac and then large bore access. Our team also continues to make inroads in the adoption of the S4 catheter for below-the-knee lesions.

While this business is smaller than our above-the-knee business, it is growing nicely, and we see significant opportunity for future growth. As we look at the product adoption across indications within our accounts, the synergy between peripheral and coronary appears to be working. Through April, 26% of our U.S. accounts have purchased both coronary and peripheral products.

2% have purchased only coronary products and 73% have purchased only peripheral products. Our goal is to have every account purchasing both coronary and peripheral products. Finally, a few words about our team. Last week, Doug and I had the privilege of meeting with our U.S.

sales management team. Many of us had not met face-to-face given the overlap between when we hired people and the limitations caused by COVID-19. We both left the meeting impressed with the quality of our leadership team. It is a group of seasoned sales management professionals, who will help us continue to improve patient care with IVL.

Our goal is to create an environment that unlocks the tremendous potential of this management team. And with that, I'll turn the call back over to you, Doug.

Doug Godshall -- President and Chief Executive Officer

Thanks, Isaac. I'm really impressed by the results the collective organization accomplished thus far, and I want to reiterate how crucial our team's planning and preparedness has been to the success of our Shockwave C2 launch in the U.S. It proved invaluable to be able to learn from our international coronary launch and to then translate these learnings to inform what is proving to be a very effective launch strategy. We had hoped that our international experience would translate to the U.S.

and so far, so good. And while Shockwave C2 in the U.S. has certainly stolen the line later over the past few months, there have been other important accomplishments that are worth sharing. Internationally, we've also made some great progress to set the table for future growth.

We've been building out our team on the ground in Japan and as mentioned previously, we filed our shown-in application in the last week of March, which keeps us on track for a possible approval in the late first quarter or early second quarter of 2022. We'll then begin the process of securing reimbursement, which should take an additional six to nine months. Prior to receiving reimbursement, we expect sales to be fairly limited so the real impact of the significant opportunity in Japan will begin in -- begin to be felt in 2023. The data from our CAD IV trial in Japan were published in February in Circulation Journal, and the results were also presented at the annual Japanese Circulation Society meeting, or JCS, in March.

The stellar results give us a high degree of confidence in both the likelihood of approval and future commercial acceptance. Remaining in Asia. During the first quarter, we also announced our joint venture with Genesis MedTech. We're very pleased with the team at Genesis and their proven ability to execute.

Under the terms of the agreement, the JV through a wholly owned subsidiary in China will market and distribute Shockwave manufactured product, and the JV will also develop, secure approval for and subsequently sell a version of our IVL system which will be manufactured in Mainland China and for which Shockwave will receive a royalty payment. There are over 1.25 million PCIs in China each year, the largest number of any single country, and the numbers are growing north of 10% per year. Our hope is that the JV will be selling Shockwave manufactured products in China within the next two to three years and a locally designed version within the next four to five years. In Europe, the move to go direct in France and the U.K.

is making good progress, and we continue building out the teams. And we anticipate that the first products will be sold directly by Shockwave in these geographies during the third quarter. As you all know, many countries around the world continue to have severe COVID challenges. I'm proud of our team in Europe and our distribution partners for all of their effort during what was a very difficult quarter for them, their families and their customers.

As challenging and long-lasting as COVID has been here in the U.S., our international team has had to endure a much longer overhang in their lives and businesses. Touching quickly on clinical. Next week is a busy conference week, starting with ACC, or the American College of Cardiology, where Dr. Robert Riley's presentation of the CAD pooled analysis will be shared on Sunday, May 16.

You may have seen the publication, which was already posted on the jack website. This meta analysis is the largest patient-level study of IVL published to date with 628 patients at 72 sites in 12 countries. Ease of use, safety and efficacy were confirmed across multiple operators and sites with varying experience. We will also be hosting a Shockwave sponsored symposium at ACC and then right after ACC as EuroPCR, where we are excited to be holding two symposia, one on real-world data and cases with IVL; and a second, that discusses both the mechanism of action and the aforementioned pooled CAD analysis.

The exposure at this widely attending conference will allow us to further enhance Shockwave's presence internationally and to continue to differentiate IVL from other calcium modification tools. And finally, in late April, the centers for Medicare and Medicaid services, CMS, published the fiscal-year 2022 hospital inpatient prospective payment system, or IPPS, proposed rule, which recommended that coronary IVL cases be eligible for incremental payment via a new technology add-on payment, or NTAP. In the proposed rule, CMS specified that the maximum amount of NTAP for a procedure involving coronary IVL is an additional $3,666 to the hospital's DRG. This was encouraging news and it was impressive to see this proposal in less than three months after C2 was approved by the FDA.

While the actual reimbursement amount paid for IVL will vary from hospital to hospital and case to case, the important takeaway for our customers is that the use of IVL will likely result in additional payment for inpatient procedures, which should meaningfully reduce any anxiety about our price. This is a positive development, not just for Shockwave, but for patients, physicians and hospitals as well. The proposed rule is now open for public comment and is expected to be finalized and in effect by October 1, 2021. Obviously, to support our accelerating growth, we have had to ramp up our investment in people, facilities and processes.

We had 487 employees at the end of the first quarter, which is up 40% from 349 employees at the end of the first quarter of 2020. Much of the employee growth last year was in our field sales team, but we have also witnessed a meaningful increase in our R&D, regulatory, marketing and administrative support teams over the past six months. While growth in these groups will likely slow down a bit now, the next surge will be in our production area. We officially moved into our new clean room today and more than doubling our manufacturing floor space, which will create room for additional commercial production capacity, as well as room to grow for new product development.

We have five assembly lines in the new lab already, and the plan is at seven by the end of the year. Excellent progress completing all this work despite the significant logistical challenges posed by COVID and really perfect timing. I will now turn the call over to Dan.

Dan Puckett -- Chief Financial Officer

Thank you, Doug. Good afternoon, everyone. Shockwave Medical's revenue for the first quarter ended March 31, 2021, was $31.9 million, 110% increase from $15.2 million in the same period of 2020. U.S.

revenue was $21 million in the first quarter of 2021, growing 171% from $7.8 million in the same period of 2020. The increase included $6.6 million from the coronary product, Shockwave C2, which was launched in the U.S. in February. The growth in the U.S.

was also driven by continued sales force expansion and increased adoption of our products. International revenue was $10.9 million in the first quarter of 2021, representing a 46% increase from $7.4 million in the prior-year period. The growth in international revenue over the prior year was primarily driven by increased adoption in existing geographies. We're now commercially selling IVL in 56 countries outside the U.S.

Looking at product lines, our peripheral products, Shockwave M5 and Shockwave S4 accounted for $16.1 million of the total revenue in the first quarter of 2021, compared to $9.1 million in the same period of 2020, a 78% increase. Our coronary product, Shockwave C2 accounted for $15.3 million of the total revenue in the first quarter of 2021, compared to $5.8 million in the same period in 2020, representing 165% increase. In addition, the sales of generators, most of which were international, contributed $451,000 in revenue in the first quarter of 2021, compared to $349,000 in the same period of 2020. Gross profit for the first quarter of 2021 was $24 million, compared to $9.5 million for the first quarter of 2020.

Gross margin for the first quarter of 2021 was 75% as compared to 63% in the first quarter of 2020. Improvement in gross margin was partly driven by the launch of Shockwave C2 in the U.S., which has the highest selling price of all our products. In addition, we have seen continued improvement in manufacturing productivity and process efficiencies, which also contributed to the gross margin expansion. Total operating expenses for the first quarter of 2021 were $41.5 million, a 45% increase from $28.5 million in the first quarter of 2020.

Sales and marketing expenses for the first quarter of 2021 were $24 million, compared to $10.4 million in the first quarter of 2020. The increase was primarily driven by sales force expansion in the U.S. R&D expenses for the first quarter of 2021 were $10.3 million, compared to $11.9 million in the first quarter of 2020. The decrease was primarily driven by the timing of clinical study expenses as most of our major studies completed enrollment in the first half of 2020.

General and administrative expenses for the first quarter of 2021 were $7.2 million, compared to $6.2 million in the first period of 2020. The increase was primarily driven by higher headcount to support the growth of the business. Net loss for the first quarter of 2021 was $23.6 million, compared to a net loss of $18.8 million in the same period of 2020 included within the net loss was $5.5 million for the company's proportionate share of the underlying loss in the joint venture in China. Net loss per share for the period was $0.68.

We ended the first-quarter 2021 with $177.4 million in cash, cash equivalents and short-term investments. 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 thanks, everyone, for joining us for our call today. The past 12 months have been more challenging than any of us could have possibly imagined. I've been humbled by the selfless -- selflessness and bravery of healthcare workers, including our customers, and I've been impressed by how the Shockwave team pulled together, fought through adversities and consistently delivered.

I look forward with excitement to the coming years as we continue our effort to deliver a compelling, safe solution for patients with calcified arterial disease. Stay safe and healthy, and thank you again for your time today. With that, I would like to open the call for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Larry Biegelsen with Wells Fargo. Your line is open.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Good afternoon. Thanks for taking the question, and congrats on a really strong start to the year, Doug. And look, I'll have to start with the guidance, which, obviously, came in well above, I think, street estimates. So Doug, let me ask about the guidance, how should we think about the cadence of sales through the year? Are you assuming a major step-up in Q4 due to enhanced coronary reimbursement and the components of the guidance? Can you share kind of the U.S.

OUS split that's implied and coronary peripheral split implied? Any color on how you're thinking about the guidance or how the guidance was built would be helpful. Thank you.

Doug Godshall -- President and Chief Executive Officer

Thanks, Larry. As you can probably imagine, we spent a reasonable amount of time trying to forecast a ramp like the one we're experiencing right now. So it is -- there's certainly a challenge to it. We do anticipate a continued steady growth on sort of, as Isaac articulated, new accounts, new site starts over the course of the year.

Obviously, the primary driver above the sort of street consensus is the coronary number. We're anticipating the normal seasonality and maybe even a pronounced seasonality on the peripheral front as folks are finally sort of unlocked from COVID. We expect both the U.S. and international peripheral slowdown in the third quarter, not that we think it will go backwards, but it'll just grow less robustly as it has in the past few quarters.

And then, a bit of a stronger step-up in the fourth quarter because of the addition of NTAP. And so we are looking at steady uplift Q1 to Q2. Obviously, Q2 to Q3 with the caveat that that peripheral will contribute less and then a stronger step into the fourth quarter. We were -- we can obviously, chat later about the split between peripherals and coronaries, but that's -- we don't want to get into sort of granular guidance on those two -- on sort of our two franchises.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

That's helpful. And one for Dan on the P&L. Dan, how should we think about the opex spending going forward and gross margin, which was really strong at 75%, where do you think that can go over time? And how are you thinking about at what point you -- how much revenue you need to kind of breakeven on an operating margin or EBITDA basis? Thanks for taking the questions, guys.

Dan Puckett -- Chief Financial Officer

Sure, Larry. We're still investing actively in the business. We're expecting to continue to grow sales and marketing sales, not at the clip. We've been growing, but we are still gonna invest, and we've got some investments in marketing -- various marketing programs.

Research and development, you're going to continue to see an uptick as we invest in our pipeline development, and we've got some clinical programs that will be coming on in the near to mid-term. So to expect some increases there and G&A should be pretty consistent. We'll add a few heads as we grow the business and support the business domestically and internationally. So you'll see some growth in opex as we go forward, we're going to hopefully see more growth in the top line than the opex.

As far as margin, we're very pleased with our results. We are bringing on more capacity in Q2, so we'll have to absorb some of that additional space, and we've got some training as we hire some new people, and we're adding some equipment. So we'll have a little bit of a headwind in Q2, but we'll work through that. And like we've said, before, we're expecting upper 70s to be able to achieve just through scale.

So I think we've got a clear path to that as we continue to scale. And obviously, we are benefiting from the mix, as well as U.S. coronary kind of grows. It helps for sure.

So we've got a favorable sales mix, and we've got production improvement. So we're very pleased with what we've been able to do with margin, and we've got, I think, more left going forward. As far as profitability, we've always planned to be profitable in '22. We're, obviously, continuing to invest in the business as well.

So we are still sticking with post coronary into '22, we should turn the corner on profitability. So hopefully the outcome of that would be great.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Thanks. very much. Thanks for taking the questions. Thank you.

Operator

Our next question comes from Bill Plovanic with Canaccord. Your line is open.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thanks for taking my questions. Just on the operational. You talked about the methodical launch and kind of keeping it at the cadence of a couple per months per rep.

I was just wondering, any granularity on what you're seeing in terms of those back approvals as you get deeper into the account base kind of past that early adopter phase. If any, it looked like by the metrics you provided us maybe your reps are becoming more productive and your -- but you're selling maybe four units, a little less than you -- a starter kit. But just any color around, I think, that and your thoughts on that one rep to service, any just additional input you've picked up. Thanks.

Doug Godshall -- President and Chief Executive Officer

Yeah, I'll take team with Isaac on this. On a macro level, I think, our team is executing really effectively but you're not wrong to identify that there's gonna be variability and how quickly you can get through back approval processes. We were fortunate to have early adopters who were able to get things done in a couple of days after approval or a couple of weeks after approval. And as you start to wander into the land of the IDNs, and like it's -- it will not be as quick, but we've also had more time to now put the work into it.

And our reps now are also sort of learning the skills of how to sell this product and effectively launch and then service it. And I'll let Isaac walk through the sort of particulars on how we're continuing to manage this closely.

Isaac Zacharias -- Chief Commercial Officer

Sure. So I think getting at the question of is the strategy of having one rep service, kind of all three products and in all three customer bases that use these products. That's a -- I think, we're very encouraged, frankly, by how that's going within the U.S. and the early coronary launch.

As we talked about, leading up to the launch, we've seen that work well also in our international geographies. So it's certainly something that we feel strongly about that it should be something we can do with this product, and we think our team has been -- we are very fortunate to have a lot of strong sales professionals join us. And I think they're very capable at doing this. And it's just such a -- the alternative is so unappealing where you have a rep standing in a cath lab, talking to the interventional cardiologists, and that person says, "Hey, let's talk about hard bore access procedure, I got one coming up tomorrow, "and the rep would say, "Well, let me go get my colleague to talk to about that", or the interventional cardiologist says, "I'm gonna do a -- blow the knee procedure".

And that repo would then say, "Well, let me go get my colleague to talk to you about the S4 product". And the -- so I just think it's -- from a customer standpoint, that's not an appealing way to deal with the company. From a rep standpoint, very encouraged by the strength of our team, their ability to be trained on all of these applications and stay trained up on them and really service the customer in a way that, I think, customers appreciate.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thank you. And if I could have one follow-up for Dan. It's just can you help us understand the share in the net loss, the equity method investment and kind of how we should think about that through the next couple of quarters and through the year?

Dan Puckett -- Chief Financial Officer

Sure. So we've got a couple of things going on. We set up the joint venture, follow the equity method. So we've got an equity investment of $12.3 million.

We couldn't take the revenue for the licensing. So they contributed cash. We contributed our license and the know-how to build the product. They put in $15 million.

So we valued our share at $12.3 million because we're 45% of the joint venture. So we booked that on our books. So we've got a charge to the equity investment. If we would have delivered on the IP and they can make the product, we would have taken the revenue, which is license revenue, but we're still working through that process.

So we've deferred that revenue, and that will come in at some point in the future when we've transferred all the IP and know-how to do that. At the same time, on the joint venture side, the accounting was they had to -- they had to expense the license that they shared with us. So we took our share through the equity method, about $5.5 million of that $12.3 million, if that makes sense. It's complicated, but it's pretty straightforward.

The 10-Q will be out here pretty soon and can walk you through that. But bottom line, it was -- it's a noncash charge. It's a nonoperating loss. So in the future through the equity method, we'll pick up our 45% of our share of the expenses as it goes forward.

But we are still in early days. There's a lot of work to do. So the impact should be pretty minimal for the near term. And then, as we get more information, we'll share that and provide some more insight guidance.

But it's set up now, it's noncash. And going forward, it should be pretty straightforward and pretty clean, and the 10-Q should answer a lot of the questions.

Bill Plovanic -- Canaccord Genuity -- Analyst

Great. Thanks for taking my questions.

Operator

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

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

Oh, great. Thanks for taking the question. Can you hear me OK?

Doug Godshall -- President and Chief Executive Officer

Absolutely.

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

OK, great. So congrats on the guidance, it's pretty strong numbers, and you guys are generally pretty conservative. So it speaks very loudly. I assume this guidance of $200 million for the year probably assumes your fourth quarter is a little over $60 million.

Just wondering if that's directionally correct. And I'm also trying to understand if you think that the stocking dynamic this year will be similar to next year, just given the hyper growth period in terms of opening accounts. I was just curious if you can comment on those two things.

Doug Godshall -- President and Chief Executive Officer

Yeah, so we -- as Isaac articulated, we often don't let accounts buy as many as they think they should buy at the original launch because we really, really don't want to have a large upfront stocking order, as we've discussed previously. So averaging five-ish units per start enables us to get in, do cases, augment their initial purchase with trunk stock as they work through their first week. And some are satisfied with having just four, six, eight units on the shelf. And given that we really don't want overutilization of the device, we talk -- actively convince people, try something else first, make sure it fails because we realize if somebody starts doing 20, 30 Shockwave cases a month, they're going to hear from administration, and we're going to hear from administration and things will go backwards.

And so our management of the evaluation, our management of the account rolling post launch and our upfront purchase is all geared toward sustainability and greater utilization, frankly, as time goes on versus early aggressive utilization. And what we would anticipate is that your -- so if we're averaging, call it, one and a half starts per month per salesperson, we envision a modest increase in the number of territories as we're seeing some geographies that would benefit, we believe, from additional territories by the end of the year. You'll see that number of one and a half per month start to decline somewhat just because you'll have we don't think we'll have saturated the total number of accounts, but there are just fewer to pursue. So maybe you're exiting the year closer to one and a quarter or something like that.

And then, by the end of next year, maybe it's one. But there are -- just about every cath lab wants us on the shelf, we are not gonna spend a lot of time on the cath labs to 250 cases a year but in all likelihood, they're going to still want to buy the product and put it on their shelf. You'll just get less pull-through because, by definition, they just have less volume. In terms of your question on the fourth quarter, we are certainly fully expecting NTAP to be instituted in October given that the proposed rule almost always translates into a final rule.

And while we've been pleasantly surprised by the utilization rate at our initial centers, it's -- we're certainly aware that there is some level of discomfort and anxiety around this new device and price and the fact that there is an incremental reimbursement. So we think that, plus the growing number of sites that will have the device installed would imply that you're probably not wrong to think that the fourth quarter would be north of 60%. That certain growth, that's what we're expecting.

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

That's really helpful. And then, one follow-up. I'm just curious, now that a couple more weeks have passed, just how you see the device being used. I mean, what's the -- what's -- on the coronary side in the United States, what's the typical case look like? In the percentage of time, maybe that it's being used alone versus being used with some other technology to help with access before the PCI extending case is done in earnest?

Isaac Zacharias -- Chief Commercial Officer

Yeah, I'll take that. Good question. I think it is early, and we don't have perfect data on that. I think the -- my general view in talking to customers and looking at the data we do have that are collected from our reps is generally, it's being used after -- oftentimes after a pre-deal where the pre-deal fails, i.e., the balloon doesn't open.

And then, commonly Shockwave will be used as the next tool. And then, the last tool, in that case, before the stent. We're getting probably a disproportionate amount of use in the left main give -- as left main PCI as a percent of left main PCI, I think, the percent of our mix in left main is higher. We get -- and the LAD is the next use case.

We get a lot of osteo lesions, Bob, right osteo, left main, osteosarcs and from a standpoint in conjunction with atherectomy, atherectomy is the tool you need if you can't get a balloon across a lesion. And I think it's early to say kind of in the U.S., but again, going back to, I think, the European experience, where there's a lot of rotablation use. It is a strong minority of those rotablation cases have shock wave afterwards. It might be in the order of 10% to 20% in the centers, you do a lot of rotablation.

And I honestly, I don't expect it to be much different in the U.S., but we'll see.

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

OK, great. That's all my questions. Thanks very much guys.

Operator

Our next question comes from Adam Maeder with Piper Sandler. Your line is open.

Adam Maeder -- Piper Sandler -- Analyst

Hey, guys, good afternoon. Thanks for taking the questions, and congrats on the start to the year. Two quick ones for me on coronary and then one on peripheral. So on the coronary side, you guys shared a lot of metrics that were helpful.

But would you be able to just level set us on the number of U.S. peripheral accounts that you're in -- you've been in historically, I think, you mentioned that 26% of the account base is -- now use both peripheral and coronary? So that's question one. And then, question two on coronary is, obviously, things are off to a fast start, and you talked about a new clean room in opening that. So just level of confidence that you'll be able to adequately supply the market.

It sounds like you have confidence there, but just wanted to double check that. And then, I had one follow-up. Thanks.

Doug Godshall -- President and Chief Executive Officer

Yeah. So we -- and I'm not going to -- let me explain how we look at accounts because it's not as simple as how many people have ever ordered peripheral. We -- if somebody has not reordered a device -- a peripheral device in, say, six months, we would say they're no longer a customer, and we've got to go back in and resell them. So there are -- luckily, that's not a large number, but the total number of accounts that have ordered peripheral is not the total number of accounts that we would call customers.

Our peripheral customers are a subset of the total who have ever ordered peripheral device. And so they sort of disappear and we instructed our team to go back and resell them if we've noticed there's not been utilization in a period of time. So we're north of 500 peripheral accounts. We've always said the universe is about 800 that we really care about that universe has actually expanded somewhat because of our large bore access where they may not be huge peripheral accounts, but they do a nice amount of TAVR.

So that universe is probably pushing more like 900 peripheral accounts, and we still have a decent percentage of those that we are not yet in. Coronary, a challenge with coronary is you have lots of labs. Particularly, in some geographies like Chicago, there are way too many PCI sites per capita versus more concentrated areas like New York, but there are more like 1,200 to 1,400 coronary sites depending on where you sort of snap the line in terms of what qualifies as PCI. If it's less than 50 PCIs, maybe you don't even want to call it an account, but the universe could be up to about 1,400 PCI centers.

And so triangulating your -- we are not close to the 800 peripheral accounts that we would call accounts at this juncture, more than 500, so somewhere in the middle there. And the great thing is almost all of those, not all, but almost all of those peripheral accounts are also generally the bigger PCI sites. So there's not -- back to Isaac's commentary about efficiency, 60-plus percent of our -- the physicians who use our device clinically on the peripheral side, are cardiologists, almost all of them also do PCI. So there's an extraordinary overlap, a really -- a very valuable overlap and efficiency potential and the main reason why we have been vigilant in our belief that we have to have a single sales force because it is very customer unfriendly to make them have multiple reps when they can just roll from one procedure to another.

And selfishly, from our side, I mean, Isaac and I both have been in the field a lot. He more than I, but I've probably done five rides with our sales team and the access that we get because of our coronary device has been tremendous for our peripheral program. It was pretty good with COVID, where some geographies like LA really restrict utilization, our rep can just walk in now and park for a week and catch up with all the peripheral folks that they weren't getting access to before. So it's better for the customer, and there's strong evidence that it's materially better for our business to have a single sales channel.

Adam Maeder -- Piper Sandler -- Analyst

Great. And sorry, Doug, just anything on -- from a supply standpoint? And then, I had one follow-up.

Doug Godshall -- President and Chief Executive Officer

Yeah. Luckily, our Vice President of Operations Mike Maszy thought that our sales and marketing team was way too low on their forecast. So he was just crushing it on capacity and refused to believe our own internal forecast and now that we're meaningfully ahead of our own internal forecast, I'm glad Mike was paranoid. We're in good shape.

Adam Maeder -- Piper Sandler -- Analyst

Good to hear. And then, just for the follow-up, I don't think I heard an update on peripheral reimbursement. So just was wondering if there's anything new from that side, whether it's rerating the existing CMS codes higher or any news on the pursuit of the permanent CPT code in the AMA process. Thanks so much for taking the questions.

Doug Godshall -- President and Chief Executive Officer

Yeah. No news on AMA, and I'm -- if you have news, please share it. But we anticipate we'll probably hear rumors when other people start hearing rumors because they've really sort of hunkered down, the societies have. We -- the next CPT panel meeting is coming up soon.

We know that the peripheral codes are not on the panel agenda. So the next panel after that is the first week in October, we would not be surprised if it is on that agenda. It's a little hard to forecast whether we should say it is likely or not since no one is checking with us to say, "Hey, do you want us to put on the agenda or not". We know the societies are happy with the reimbursement that they have today.

And so, they're perfectly OK if they sort of drag their feet a little bit, but they've been dragging their feet for a couple of years now. So we expect it will be the next meeting or the meeting thereafter that it will end up on the agenda. Since we know they're under some pressure from AMA and CMS to get it done. In terms of our eight codes, the four below-the-knee and the four above-the-knee, we've certainly continued a fairly active running dialogue with CMS, but it's sort of up to them, whether they're gonna rerate or not.

Certainly, we've -- we believe when they -- as they are tracking the data and particularly for the four above-the-knee codes that they've had longer, more time to track the data on then they have for the below-the-knee-codes they created. I think when they see the costs, it will be pretty evident that they should rerate and raise the levels by one APC level for the Shockwave codes. But just because they should, it doesn't mean they will. But we think the data will support it.

Adam Maeder -- Piper Sandler -- Analyst

Got it. Thanks.

Operator

[Operator instructions] Our next question comes from the line of Cecilia Furlong with Morgan Stanley. Your line is open.

Cecilia Furlong -- Morgan Stanley -- Analyst

Great. Thanks for taking our questions. Doug, I wanted to start with just how you're balancing BTK and really the targeting of CLI-focused positions versus pushing coronary today?

Doug Godshall -- President and Chief Executive Officer

Yeah. So we are -- we've made sure that we created a commission structure such that if you -- if Dan and I both sell the same amount, dollar-wise. And I only sell coronary, but I slip on my S4 number or miss my M5 number. If -- Dan, if he hits his S4 number and his M5 number and his C2 number, even though we sell the same dollar amount, Dan is going to get paid more because he hit his quota on each of those buckets.

So as Isaac explained to them, like, you got to fill all three buckets if you want to get paid. Now I'm not going to go broke, but Dan is gonna do better financially because we've structured it such that people -- reps know, they've got to hit their number across the board. And so, arguably, maybe you could sell a little more coronary right now, but we think that that's harmful to the business long term if we become a coronary-only business because we think there's tremendous upside on our peripheral franchise. You pointed out as four huge untapped potential below-the-knee.

And we had this sort of stilted launch because we launched and then COVID, and we are now -- ironically, we're really refining our sales strategies on S4, concurrent with launching C2 and having that access into the labs is actually helpful time to be able to refine that. And we envision maintaining that sort of fill-all-three-buckets commission strategy indefinitely because it seems to be working. And Isaac, I don't know if you want to add more to that.

Isaac Zacharias -- Chief Commercial Officer

I think that's well said, Doug. I also think that a big focus, as we launch coronary, is to really land the coronary launch, which is why we are restricting the number of accounts that a territory can launch per month. But that also gives them time. Intentionally, it gives them time to call them a vascular surgeon in the hospital and talk about the lower extremity and the iliac disease or below-the-knee disease.

And we need to make sure that they have enough time and enough focus to work with vascular surgeons as well. So in addition to the comp plan, it's really trying to make sure that their time is -- they have time to allocate beyond just coronary and beyond just the interventional cardiologist.

Cecilia Furlong -- Morgan Stanley -- Analyst

Great. Thank you. And if I could follow up just on your OUS performance, really what you're seeing to date just on a geographic basis in terms of recovery, really what you contemplated from a recovery standpoint, as well as go-direct presence in France and U.K. in your guidance?

Doug Godshall -- President and Chief Executive Officer

Yeah. And we'll tag team on this one again. We had a good to very good start in the first quarter in India. And unless you're in a cave somewhere, you know that India is a mess, which doesn't mean the rest of the world is a mess, it's just more representative of the -- one of the beauties of our business in non-COVID world is a variety of geographies we're in now with 56 countries, but when Germany is great middle of last year and then Germany suffers, it's really hard when you have this sort of rolling suffering that hits certain geographies, particularly profoundly even if the other -- like if the U.K.

is recovering, well, Germany is holding it down or India is holding it down, etc. But it also has -- the diversity has also prevented it from going backwards. It has just been pretty flat really for the -- from September through March, but luckily, because of the diversity, it has not gone backwards. And Isaac, maybe you want to speak to the go-forward.

Isaac Zacharias -- Chief Commercial Officer

Sure. Yeah, I think so. Frankly, I think, Q1 was -- did not recover as much as we had hoped as we were kind of exiting 2020. And you've seen the news, they're slower on the vaccine uptake.

I think looking at it after -- through April and currently, I think, especially in the continent, the team is starting to feel better about getting folks vaccinated and more of a return -- closer return to normal than they have been. My guess is they're about a quarter behind the U.S. in terms of the shape of the recovery. The U.K.

is doing pretty well. And then, if we look at going direct, where we flipped the U.K. and France, that'll be -- that'll occur kind of throughout the third quarter because there's a transition period, two different distributors, two different dates. So yes, we'd expect that to go throughout the third quarter.

And as we look at forecasting the rest of the year, I think, Q2 should be better than Q1 from a COVID perspective. Q3, seasonal, but should be better than Q1 from a COVID perspective. Q4, hopefully, it looks as much like normal as we've seen in Europe in the last two years. And then, we should start stacking in deeper penetration within the U.K.

but not a price uplift because we had a sales agent model there. And then, in France, both deeper penetration and a price uplift as we exit Q3 and that will start ramping through Q4. But from a materiality standpoint, it probably doesn't move the needle too much this year.

Cecilia Furlong -- Morgan Stanley -- Analyst

Thank you.

Operator

And I'm currently showing no further questions at this time. I'd like to turn the call back over to Doug Godshall for closing remarks.

Doug Godshall -- President and Chief Executive Officer

OK, thanks, operator. And thank you, everyone, for your time and attention and support over the years. We're looking forward to continued reports back from our customers regarding their -- the benefits they're seeing with C2, M5 and S4. And we'll be speaking with many of you at upcoming conferences.

So have a great rest of your evening.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Debbie Kaster -- Vice President of Investor Relations

Doug Godshall -- President and Chief Executive Officer

Isaac Zacharias -- Chief Commercial Officer

Dan Puckett -- Chief Financial Officer

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Bill Plovanic -- Canaccord Genuity -- Analyst

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

Adam Maeder -- Piper Sandler -- Analyst

Cecilia Furlong -- Morgan Stanley -- Analyst

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