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Penumbra, Inc (NYSE:PEN)
Q3 2021 Earnings Call
Nov 3, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Suzanne, and I will be your conference operator today. At this time, I would like to welcome everyone to Penumbra's Third Quarter 2021 Conference Call. [Operator Instructions].

I would now like to introduce Ms. Jee Hamlyn-Harris, Investor Relations for Penumbra. Ms. Hamlyn-Harris, you may begin your conference.

Jee Hamlyn-Harris -- Investor Relation Officer

Thank you, operator, and thank you all for joining us on today's call to discuss Penumbra's earnings release for the third quarter of 2021. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, can be viewed under the Investors tab on our company website at www.penumbrainc.com. During the course of this conference call, the company will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial performance, commercialization, clinical trials, regulatory status, quality compliance and business trends.

Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those referenced in our 10-K for the year ended December 31, 2020, filed with the SEC. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our periodic filings with the SEC, including the 10-K previously mentioned, for a more complete discussion of these factors and other risks that may affect our future results or the market price of our stocks, including, but not limited to the impact of the COVID-19 pandemic on our business, results of operations and financial conditions.

Penumbra disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. On this call, certain financial measures are presented on a non-GAAP basis. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted press release. We anticipate the prepared comments on today's call will run approximately 18 minutes. Adam Elsesser, Penumbra's Chairman and CEO, will provide a business update. Maggie Yuen, our Chief Financial Officer, will then discuss our financial results for the third quarter. And Jason Mills, our Executive Vice President of Strategy, will discuss our updated 2021 guidance.

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

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thank you, Jee. Good afternoon, everybody. Thank you for joining Penumbra's Third Quarter 2021 Conference Call. Our total revenues for the second quarter were $190.1 million, a year-over-year increase of 25.8% as reported and 25.6% in constant currency and a 3.2% sequential increase from the prior quarter. For the third quarter of 2021, we recorded operating income of $8.8 million or 4.6% of revenue compared to an operating loss of $20.2 million or 13.3% of revenue during the same period last year.

Against the backdrop of the spreading Delta variant, particularly in the first part of the quarter, our team executed very well. Our Vascular business achieved record results and our Neuro business nearly matched a record quarter as well. Our business was exceptionally strong in the United States, where our latest products in both vascular and neurothrombectomy are experiencing strong adoption. Overall, our business accelerated throughout the quarter, driven by the RED series of stroke catheters and continued strength in vascular thrombectomy.

While our embolization business also performed well, especially as the fall season progressed. I also want to acknowledge our physician, customers and hospital staff who against challenging circumstances, especially with COVID, worked particularly hard to take care of their patients. As a company, we think we are in the best position we've ever been to help more patients than ever before.

As we look forward and the world emerges from this pandemic, the three key dynamics that have defined Penumbra: constant innovation, hiring the best people and execution, once again, defined our work in the third quarter and give us a lot of confidence that we can deliver strong, durable growth for years to come. As it relates to hiring the best people, we are adding remarkable people to the Penumbra team. In addition to the new engineers, other professionals and best-in-class salespeople that we added.

I would like to call your attention to new senior additions. Fred Hubbard and Joan Kristensen recently joined us with decades of senior medical device experience. Fred will lead International Commercial efforts as Senior Vice President, focused on areas outside of Europe and North America.

Joan will lead our efforts in Europe and the Middle East as Vice President and Head of Europe. Also, Riley Russell, former senior executive at Sony Interactive Entertainment, working on Sony PlayStation and third-party developers, has joined us as Executive Vice President of third-party partnerships for Immersive Healthcare. And Amir Rubin, the former CEO of Sixense, is leading our research efforts for Immersive Healthcare as Executive Vice President of Research for Immersive Healthcare.

Also, we will continue to promote as well as add additional senior members of the team in the quarters ahead. Now let's focus on our products. Starting with our Vascular business. We reported growth of 40.3% year-over-year to $105.5 million in the third quarter. Vascular thrombectomy revenue increased 10% sequentially in the United States, with strong performances across venous, PE, arterial and coronary. We continue to see accelerating growth in new physician customers adopting our thrombectomy products in the third quarter, which we think is a testament to both excellent patient outcomes and the value proposition, our proprietary computer-aided Lightning thrombectomy system brings to the healthcare system.

We are focused on the opportunity to expand the paradigm of single-session therapy to many more patients going forward. As evidenced by strong results in the third quarter, our computer-aided Lightning technology is resonating with an increasing number of physicians and is becoming an integral part of the treatment algorithms in PE, venous and arterial procedures.

Indeed, both Lightning 12 and Lightning seven produced strong growth in the quarter, growing double digits sequentially in the U.S. Like other unique and transformational products we have developed, our Lightning platform is the product of our focus on constant innovation dedicated to what's truly important to successful and safe outcomes for patients and the most talented team of engineers and product development professionals in the industry. Moreover, we continue to invest in innovation, clinical studies and market development initiatives to reach the 90% of patients that can still benefit from this technology each year.

In sum, we are just getting started, and our team's work continues. Moving to coronary, we continued seeing an accelerating number of physicians utilize CAT RX to treat their patients in the quarter. We have a tremendous opportunity ahead of us with CAT RX. Having reached only about 10% of the coronary patients, we believe we can help the most, those with high thrombus burden. Also, we look forward to the presentation of results of the CHEETAH study, which will be highlighted during the featured clinical research session at the upcoming TCT Conference in Orlando, Florida, in two days, on Friday, November five.

I will be in attendance, and I hope to see many of you there. Within our vascular embolization business, we matched our record second quarter results, notwithstanding Q2 benefited from some catch-up in deferred procedure, while this quarter faced a modest COVID headwind. The uniqueness and breadth of our vascular embolization portfolio continues to resonate with physicians who are finding more reasons to use our products in both chronic and acute settings, including continued strong adoption of Ruby LP, which had another record quarter.

Let me now turn to our Neuro business. in which we recorded growth of 11.5% year-over-year to $84.7 million in the third quarter. The Neuro team has done incredible work alongside our physician, customers throughout this pandemic. The initial launch during the quarter of RED 72 and RED 68 in the United States went extraordinarily well. Paired with RED 62, the RED series expands upon our U.S. stroke portfolio, which recorded robust 17% sequential growth this quarter. Physicians in the United States have responded very positively to the RED series.

The extraordinary tractability and clot removal capabilities of the RED series, driven by our new RED-glide coating technology and proprietary catheter architecture are unrivaled in the field. And the breadth of the RED series allows physicians to choose the catheter that best matches the patient's vessel size. In sum, the RED series is designed to give physicians the technology they need to use aspiration as frontline treatment and maximize the ability to achieve first pass success. One of the hallmarks of our Neuro business is portfolio breadth with our stroke access and embolization franchises, complementing each other extraordinarily well.

Our neuro access business produced another record quarter, led by continued adoption of BMX96 and strong international growth. Our neuro embolization business nearly matched our record Q2 results, notwithstanding the COVID-related headwinds to these type of procedures in the third quarter. In sum, we expect momentum to continue in our Neuro business as we continue to invest in our team, our innovation engine and important initiatives to expand access to our neuro products to more patients going forward. Let me now turn to our Immersive Healthcare business.

We hosted an Investor Day in late September that marked a monumental moment for Penumbra. In addition to announcing the acquisition of Sixense, a leader in virtual reality technology and our longtime partner, we outlined plans to build a platform to provide Immersive therapy to tens of millions of patients across a broad range of healthcare settings. The combination of our proprietary hardware, tracking technology, software and unique content sourced from our own studio, second-party partners as well as a robust group of third-party developers define the REAL platform and the ecosystem we plan to build as we try to help over 50 million patients in the U.S. alone.

The feedback we have received since this event from the healthcare community has been extremely positive. We are dedicated to the important work ahead. Turning to our international markets. China continues to be a strong contributor to our business, and we see significant opportunities for additional growth well into the future. In addition, we continue to see good momentum in our Japanese business where we look forward to introducing our latest stroke in neuro products, our entire vascular product portfolio and eventually our Immersive Healthcare platform in the future.

Our EMEA, Latin America and Asia Pacific businesses all showed solid growth year-over-year, and we think there are many opportunities to expand our presence in each one of these geographies going forward. Overall, notwithstanding the challenges all companies are facing, we are confident that we are set up to help more and more patients with our existing and future products across all of our product categories and geographies.

I would now like to turn the call over to Maggie to go over our financial results for the quarter.

Maggie Yuen -- Chief Financial Officer

Thank you, Adam. Today, I will discuss the financial results for the third quarter 2021. Additional details will be contained within our quarterly reports on Form 10-Q. For the third quarter ended September 30, 2021, our total revenues were $190.1 million, an increase of 25.8% reported and 25.6% in constant currency compared to the third quarter of 2020, and sequential growth of 3.2% over the second quarter of 2021. Our geographic mix of sales in the quarter were 70.9% U.S. and 29.1% international. U.S. and international reported growth of 23% and 33.5%, respectively, compared to the same period in 2020. Moving to revenue by franchise.

Revenue from our Vascular business grew to $105.5 million in the third quarter of 2021, an increase of 40.3% reported in constant currency compared to the same period last year. Compared to the prior quarter, revenue from our Vascular business grew by 4.7%, driven by strong performance in peripheral thrombectomy volume in the U.S. Revenue from our Neuro business was $84.7 million in the third quarter of 2021, an increase of 11.5% reported and 11.1% in constant currency compared to the same period a year ago, with growth across neuro access, embolization and thrombectomy franchises.

Gross margin in the third quarter was 63.1% compared to 60.2% in the same quarter last year due to benefits from additional volume and stable product mix. We are pleased with our ability to increase our manufacturing capacity and expand our supply chain and manufacturing footprint in 2021 to support rapidly growing demand for our new product launches.

In the coming months, we will continue to accelerate our investment in our Roseville manufacturing site, including hiring and training product builders, transferring multiple key manufacturing processes and improving efficiency and productivity. This may continue to have short-term margin impact as it did in the third quarter, but will set us up for strong margin expansion opportunities in coming years. Total operating expense for the quarter was $111.1 million or 59% of revenue compared to $111.1 million or 74% of revenue for the same quarter last year.

Our research and development expenses for Q3 2021 were $16.7 million compared to $34.9 million for Q3 2020. SG&A expenses for Q3 2021 were $94.4 million compared to $76.2 million for Q3 2020. In the fourth quarter of 2021, we anticipate payments related to research and development milestones and onetime expenses associated with the Sixense acquisition. We estimate these additional expenses in Q4 2021 in the range of $35 million to $45 million, the majority of which is noncash.

For the third quarter of 2021, we recorded operating income of $8.8 million or 4.6% of revenue compared to an operating loss of $20.2 million or 13.3% of revenue for the same period last year. We ended the third quarter with cash, cash equivalents and marketable security balance of $267 million, an increase of $28 million in operating cash.

And now I'd like to turn the call over to Jason to discuss our 2021 guidance.

Jason Mills -- Executive Vice President of Strategy

Thank you, Maggie. With the update of our third quarter results, we are formally increasing our 2021 revenue guidance range to $735 million to $740 million, which would represent 31% to 32% growth over 2020 revenue of $560.4 million. This updated guidance compares to our previous 2021 guidance range of $720 million to $730 million, given on our second quarter call in August. We see multiple drivers of growth going forward, both near and long term.

In the fourth quarter, we expect sequential growth compared to our record third quarter results, driven predominantly by vascular thrombectomy across venous, PE arterial and coronary, further expansion of our peripheral embolization business and increasing contribution from our new RED series of catheters for stroke intervention. Overall, consistent with our approach to setting guidance in the past, our updated 2021 revenue guidance represents our current views on our markets, timing of new product launches and other relevant inputs.

I will now turn the call back to Adam for closing remarks.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thank you, Jason, Maggie and Jee. As we report the third quarter and we move through the fourth quarter, Penumbra is well positioned to help more and more people in the months and years ahead. We are making investments to constantly innovate, both in Neuro and Vascular as well as the newer area of Immersive Healthcare. We are hiring the best people in all parts of our business and we continue to execute in our day-to-day work. These three elements have defined our success for many years.

Finally, I want to acknowledge and thank everyone at Penumbra for doing so much and working so well together to design, manufacture and make available all of our products to physicians and patients even in these challenging times. Thank you for your attention on the call today, and we'd like to open the call to questions.

Operator, please go ahead.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from the line of Larry Biegelsen from Wells Fargo.

Larry Biegelsen -- Wells Fargo -- Analyst

Good afternoon. Thank you for taking the question. Just let me start off on the guidance. You reported, obviously, a very nice quarter here compared to your historical seasonality. But the Q4 guidance at the midpoint implies lower sequential growth than we typically see from you guys, and it's only about 12% year-over-year growth. So what are you seeing that's leading to that conservatism? And how do we put that into context for 2022? The Street is assuming about 17% year-over-year growth. And I just want to confirm you're still confident in the $1 billion in 2023, and I had a follow-up.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Larry, it's a great question. Let me start with the last question, and then I'll let Jason take over with some of the specifics. The answer is we are definitely confident about our 2023 comment about $1 billion. And I think if you look at how we've done this quarter and the guidance going forward, it gets you there pretty quickly. So we have a lot of confidence. I think our commentary today shows that. I'll let Jason talk about the specific guidance. But no question, we feel very confident about the future.

Jason Mills -- Executive Vice President of Strategy

Yes. And just before we leave the $1 billion comment, I'll just add a little bit to what Adam said. As you might recall, Larry, at the time we said that we actually said $1 billion plus. And just to remind you that the plus refer specifically to our Immersive Healthcare business. That continues to be the way we look at that comment at this point in time as well. So -- and I appreciate your question about the guidance.

Obviously, the sequential increase in our business in the third quarter was quite strong. It was a strong performance, as we talked about across both Neuro and Vascular businesses. Obviously, stronger sequentially than a lot of folks and obviously representative of the strength of our products in our business. And so we're cognizant of that strong record growth, and we're also cognizant of the world and what others are saying about COVID. As we talked about in our remarks, we saw pretty good growth throughout the quarter, and we expect that to continue into the fourth quarter, which is why we expect sequential growth to continue.

Larry Biegelsen -- Wells Fargo -- Analyst

Well, thanks for that. All right. And just for my follow-up. So Adam, on the CHEETAH data, what do you think physicians will be focused on? How do you plan to leverage the data? And just, Adam, we didn't hear anything about Lightning. Is that still on track? Thanks for taking the questions.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. Well, first of all, I think we -- I said a lot about Lightning. I think you meant Thunderbolt.

Larry Biegelsen -- Wells Fargo -- Analyst

Yes, Thunderbolt. Sorry, sorry. You're right.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

If I'm not mistaken, I know the names are close. --

Larry Biegelsen -- Wells Fargo -- Analyst

You are.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Let's talk first about CHEETAH. It's two days away. As you know, being -- I want to be very respectful to the physicians who are presenting the data and the appropriate rules around that. I obviously -- I'm going to be there and look forward to talking about it with anyone after the presentation, and we can address that in a couple of days. But needless to say, there's a lot of data to go through, and we look forward to doing that.

As it relates to Thunderbolt, I think you guys know me well enough to know last time I mentioned the name sort of publicly. We like to let our actions and the products speak for themselves. So it seemed appropriate this quarter not to continue to have that conversation, but there is nothing, and I mean nothing about that you should take as anything on the negative side by the fact that I didn't mention the name. And I think you guys can interpret the fact that I didn't mention it in the public comments the way I meant it to be.

Larry Biegelsen -- Wells Fargo -- Analyst

Thanks, Adam.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thank you, Larry.

Operator

Our next question comes from the line of Bill Plovanic from Canaccord Genuity Fund.

John -- Canaccord Genuity Fund -- Analyst

Hi. It's John on for Bill tonight. Thanks for taking my questions. Adam, if you can go back to CHEETAH quickly, can you just talk about the overall opportunity in coronary? And then how are you going to balance that with your work in arterial DVT and PE? And then perhaps can you just talk about the call point overlap? Any possible synergies there?

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Sure. So the way we've talked about that market, and I mentioned it on the prepared remarks of this call is really going after the patients that have really high clot burden or thrombus burden, the patients that really need it the most. And that was what the CHEETAH's trial was designed to study. That's what we'll report out. And that's really been the opportunity. That's a significant opportunity. We're only about 10% penetrated. And as we've said in the past, that opportunity is roughly the same size as the U.S. stroke opportunity for the U.S. patients in coronary. So it's not insignificant at all.

And as I think you all know that big technology change is the idea of using continuous power aspiration as opposed to some of the older technology. And when you look at some of the older studies, they really highlighted the need in those studies for innovation in technology to deal with those high thrombus patients. So that's the framework in which you can see and digest the data on Friday morning in Orlando.

As it relates to the call point, obviously, that call point is interventional cardiology. I think all of interventional cardiologists do a significant number. Sometimes people estimate up to around 25% of the peripheral work. And so there's just an obvious synergy between those two products and really not -- one doesn't take away from the other. In fact, they worked very, very synergistically and the teams have been focused on that for a while.

John -- Canaccord Genuity Fund -- Analyst

Thanks. We look forward to the data. And then just as a follow-up, too, on neuro. As you reach out COVID wall, how do you think about appetite engagement with legislators again and first responders against stroke patients into the right care setting?

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. So I'm really glad you asked that question. This is for the first time in a couple of years, given the pandemic, I'm feeling and seeing, I guess, some early signs that things are starting to reengage. I spent a decent amount of time talking to our physicians out there. They're starting in the earliest phases to have the bandwidth and the time and the ability to go out into their local communities and start to work on the kind of local work that they had been doing in the past.

But we also saw this quarter another state enact, the state legislation that you were referring to, North Carolina did that. And so I'm feeling pretty optimistic that as we move into this next phase of the pandemic, we're starting to see a little more momentum. And as you heard in my prepared remarks, our Neuro team is really engaged. There's so much energy and momentum. You saw that in the sequential growth in the U.S. and it's a really, really exciting time to push the technology forward. At the same time, we're coming out of a really difficult couple of years.

John -- Canaccord Genuity Fund -- Analyst

Thanks, taking our questions.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thank you.

Jason Mills -- Executive Vice President of Strategy

Yup.

Operator

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

Robbie Marcus -- JPMorgan -- Analyst

Great. Thanks for taking the questions and congrats on a great quarter.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thanks, Robbie.

Jason Mills -- Executive Vice President of Strategy

Thanks, Robbie.

Robbie Marcus -- JPMorgan -- Analyst

Maybe to start, Adam, you spoke about a lot of different new product launches, Lightning seven, some of the RED products. You talked about China and some of the adoption there. How do we think about the impact it had to sales in the quarter and what you're expecting, let's say, over the next six to 12 months? Also, throw in coronary. You don't break out products or the different sub-line items for those businesses. So how do we think about where we're seeing the biggest incremental dollar growth?

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. No, it's a great question. Well, we do obviously break out Neuro versus Vascular. So you'll see the benefit of the RED series in future products, I hope, over the next six months to a year, pretty clearly, in our Neuro business. As it relates to the Vascular business, it's -- and I said this in my prepared remarks, it's all working. We saw really successful growth, both on PE and venous and arterial as well as coronary. So we're lucky. We have the ability to really positively impact patients on all four of those categories.

I think it would be -- it's unnecessary to sort of break out which is more because they're all working and successful right now. And that's, I think, one of the really huge opportunities as the field starts to really digest and accept the idea of single-session treatment. It's no longer just a thing that people sort of thought about philosophically. It's now becoming a lot more rooted in the viewpoint of physicians because -- in some part because of the pandemic and the need to free up ICU beds, they're finding success, particularly with the Lightning series in PE, venous and arterial and then being exposed to CAT RX in their daily practice.

And with CHEETAH, I think, we'll see, but I think that can continue pretty dramatically. So it's hard to break it down in a way to say which is contributing more because all of the team is focused on all of them, and all of it matters. And all of it is contributing and that gives us, I think, the confidence that you hear in our voice that we have a lot of growth to come.

Jason Mills -- Executive Vice President of Strategy

And Robbie, just to follow up a little bit on that, going back to some of our prepared remarks. Obviously, when folks look at our Lightning seven and Lightning 12 products, those are speaking to arterial and venous to a large extent in transfer. And we did talk about double-digit growth sequentially in both of those. Obviously, we -- this quarter, anniversarying a year ago quarter, which was pretty nearly a full quarter of the initial launch of Lightning 12. Just a couple of other things to just point out and remind, we talked about the U.S. stroke business was up 17% sequentially. That's obviously because of the receptivity of the RED series of catheters, and overall, in the United States, peripheral thrombectomy being up 10% cuts across all four of those areas we talked about, arterial, PE, venous and coronary.

Robbie Marcus -- JPMorgan -- Analyst

Great. Thanks for that. And maybe a quick follow-up. It's been a while since we got some -- you used to give out details on how many procedures you thought were happening in the U.S. and outside the U.S., neurothrombectomy markets. Do have any sense of maybe where the U.S. and Europe is on track for procedures this year? And if there's any way to gauge how -- just the business performance in those markets have been since the recall last year would be really helpful. Thanks a lot.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. I don't think it's fair to give out specific numbers because they're a little harder to track during this phase. We'll certainly try to do that going forward as best we can. But to throw out numbers sort of without having the sort of confidence is a little bit harder. As you know, there are lots more players in the field and everything that makes it a touch more difficult. I will reiterate what I said, I do think the last -- almost two years, not quite 1.5 years, has been relatively -- first obviously went down dramatically at the very beginning of pandemic and sort of recovered.

I do see -- and again, just purely anecdotal at this point, so I wouldn't want to be more aggressive than that. But I do see and hear an optimism around growing the number of patients, and that's really started a month or two ago. And then I think North Carolina is just a good example of sort of the energy that's still out there in order to sort of do this work and drive those patients. So it's a good question. We'll try to do more to give you as much specifics. But I don't want to just throw out numbers. We want to be as accurate as possible.

Robbie Marcus -- JPMorgan -- Analyst

All right. And if I could squeeze in one quick one. China, I know that used to be all a -- or predominantly a Medtronic market. Any sense of the impact you're making there? Is it still real early days? Or how do we think about the impact you're seeing? Thanks.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. I mean, look, China is a large market and to quantify the impact to their business is hard because it's hard to know that from here. I will tell you from the conversations I've had, there's an awful lot of interest in moving that market to aspiration-based technology. The physicians, they have known about it for a while. They're excited to get the products that can do that work.

ACE68 is the product that was more recently launched, and we're seeing some real success in those cases. So I think, again, very early days, significant opportunity. And as we've said in the past, we're using technology there that's a touch older than the technology we have here. So when you look at that between now and the future where we can continue to bring the most current stuff, I have a lot of confidence that we're going to continue to do quite well in the China market going forward.

Robbie Marcus -- JPMorgan -- Analyst

Great. Thanks a lot.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. Thanks, Robbie.

Operator

Next question comes from the line of Bob Hopkins from Bank of America.

Bob Hopkins -- Bank of America -- Analyst

Thanks and good afternoon.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Hi.

Jason Mills -- Executive Vice President of Strategy

Hey.

Bob Hopkins -- Bank of America -- Analyst

Hey, guys. Maggie, I was wondering if we could dissect Q3 just a little bit more. You -- maybe I'll ask two things about the third quarter. You said that growth accelerated over the course of the quarter. I was just wondering if you could put a little more color around that in terms of how pronounced that was.

And then secondly, about the third quarter. I was wondering if you could talk about just the impact of COVID because in some regards, it's an obvious -- I mean, obviously, it's a negative because of disruption to hospitals. But then the nature of COVID is that it's prothrombotic. And so there's also a positive aspect potentially to your business and one of your competitors calls that out on a quarterly basis. So just wondering if you could provide a little more color on Q3 around those two topics, the acceleration over the course of the quarter and then how COVID impacted your numbers in terms of that headwind and tailwind perspectives.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. really, really good question. Let me take a shot at doing it as best we can without just sort of guessing. So our -- the first part about the quarter, the quarter looked surprisingly normal in the trajectory of the quarter for a third quarter, and that's what we were trying to say. Most quarters do accelerate as the quarter goes, particularly in the third quarter where you start out in July. And this looked relatively normal. And that's what we wanted to point out.

We knew COVID was there. We saw spikes particularly in parts of a little later in the quarter, but it didn't have an impact in for us. Now why is that the case? Was that patients that would not otherwise have had thrombus, but had it because they got COVID? We've done a little bit of sort of anecdotal conversation with people on that. And we don't think that was the majority of -- or even a significant part of the growth. We think that we're really past that. Most of those patients are being treated earlier.

And so they're not showing up with the kind of thrombus that needs to be removed in a mechanical setting. And a lot of it is really just new physicians being exposed to the technology over time going it's time to switch either from another tool that they're using or from tPA and they're learning the benefit of the Lightning both, again, in the arterial side and in PE and particularly in venous as well. So I think it was really just sort of the normal growth of really, really about important product that does really, really good work for patients. And that's what gives us a lot of confidence that we'll see this continue for a while.

Bob Hopkins -- Bank of America -- Analyst

Okay. That's great. And then just one quick follow-up on -- you mentioned 10% sequential growth in vascular thrombectomy. And I know all of the components of that seem to be doing quite well between PE and venous and arterial and coronary. But what is the range around that 10% sequential? I mean are there some of the -- one of those four are growing 20% or 30% in some low single digit? Or is it more bunched up around 10%? Just wanted to get a sense for the range of performance within the four franchises.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. Well, there are really three because it's hard to really know with any kind of specificity within Lightning 12 cases, whether Lightning is being used in PE or in venous, albeit we have a feel that we're doing well in both of them. But I can't give you with any kind of certainty the difference there because it's the same product. But I can tell you that all of them are doing well. I think we called out Lightning specifically, it's newer. There's more work to be done. So between that and CAT RX, Lightning did particularly well. Again, we'll pick this conversation up after Friday, going forward. But again, it's a good spot to be in where all of it is contributing to our growth right now.

Bob Hopkins -- Bank of America -- Analyst

Thank you.

Jason Mills -- Executive Vice President of Strategy

Yes. Bob, just to reiterate what I said a bit earlier, we did say that the 10% growth was a U.S. growth number sequentially. So just making sure you heard that. And then we did also call it double-digit growth for both Lightning seven and 12 franchises, respectively, and obviously, consistent with what Adam said, it's hard to tell the DVT versus PE on that front.

And then just as a quick addition to your first question, you talked about the paradigm of whether it's prothrombotic or not. I think it's -- we would just point you to a different paradigm, which is the paradigm of single-session therapy is certainly resonating more and more. And obviously, what goes along with that is the -- in single-session therapy, you're obviously not using up the resources from an intensive care unit perspective that you might otherwise. And that is a paradigm that we're seeing and probably continues.

Bob Hopkins -- Bank of America -- Analyst

Okay. Great. Thank you very much.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thank you, Bob.

Operator

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

Brandon -- William Blair -- Analyst

Hi, everyone. This is Brandon on for Margaret. I first wanted to just kind of focus within Neuro still is a really nice quarter, especially within the U.S. for stroke. And I appreciate maybe you don't have specific numbers for market share. But is it a fair characterization to say, 17% sequential growth is maybe above the market? And I guess what I'm trying to get at is, after a somewhat period of maybe disruptions and a little bit of recall, do you kind of feel like with the RED series of catheters here, you're on the offensive now and you're taking share as you're heading into next year?

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes, absolutely.

Brandon -- William Blair -- Analyst

Okay. Simple enough.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

I can tell you more. Yes, absolutely, and we're very excited about it. There's no question we're in a great spot right now. The RED series is just doing amazingly well, and there's just not enough time in the day to get it out there as fast as we want. But this is not even a full, full quarter, and we're seeing a lot of success. So yes, it is a really, really -- it's heartening. It's exciting. Morale is high and physicians are really reacting positively to it.

Brandon -- William Blair -- Analyst

Got it.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

The market did not likely grow 17%, that is right.

Brandon -- William Blair -- Analyst

Right. And Adam, maybe just in a broader sense, you had hinted at increased investments or just maybe a focus on market development efforts. Maybe within Vascular, that's especially important given how large the market is and there's maybe more for you to go after. Just curious if you could talk about what kind of market development efforts you're all investing in, getting from 10% to 20% penetration and beyond maybe require some of that. So what are the things that you're investing in? And how important are they to maybe the next like 12 months of growth?

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes, it's a great question. So there's -- again, similar to stroke, where we spend time with communities and the hospital systems doing outreach to make sure patients were getting to the right place. Here, the outreach is a little different. But with folks and physicians who believe in single session and want to continue that, there's local outreach to make sure that the referral patterns are in place and that the patients are getting to see the physicians who are already sort of committed to treating them in a single session. So there's definitely work to be done in what we are engaging and doing to do that.

The other area, of course, is in clinical work. We're running some studies right now. But really importantly is the studies that we're starting to really think about and frame up that particularly in certain areas like PE. You can think about really going after all of the other patients that aren't even getting tPA, but are just getting medical management and how one would attach those. We've talked about that in the past, but we've always wanted to be sure and learn a lot more. And I think as we continue here, we're starting to understand more and more the benefits of the product and technology and starting those conversations. So again, lots ahead, pretty exciting time to bring this technology to more and more people.

Brandon -- William Blair -- Analyst

Got it. And then if I could just ask one last one. The new hires internationally were interesting, clearly, an area that you're investing in. Is there anything that this may be signals to new strategies? Is there -- have you reached the level where you kind of need to tweak how you're approaching those markets? And what could that mean for 2022 growth in the international markets? Thanks.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. Look, we're -- we've always, as a company, looked to continue to hire the best people that we can possibly hire that know things we don't, bring huge expertise in areas that we can continue to learn from. And the two international hires, Fred and Joan are just that, two really extraordinary people who can just bring a ton of experience and bolster with their experience things we don't know as well. So yes, I do expect that we can continue to see growth in international in the years ahead, and it's exciting to have them. They're great additions to the team.

Jason Mills -- Executive Vice President of Strategy

Thanks, Brandon.

Operator

Our next question comes from the line of David Rescott from Truist Securities.

David Rescott -- Truist Securities -- Analyst

Hey, guys. Thanks for taking my question. First, I guess --

Jason Mills -- Executive Vice President of Strategy

Hi, David.

David Rescott -- Truist Securities -- Analyst

-- a follow-up on back to Venous segment. Hi, Jason. There's been some, I guess, M&A in the space that we've seen with some kind of larger diversified medtech companies over the past couple of months or so. And I guess how do you think about the competitive landscape shaping up here? I mean do you see a competitive advantage for some of these thrombectomy products to be within a portfolio alongside some other complementary products that address the vascular space? Would just like to get some sense on how you're thinking about the positioning for increased competition going forward.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. Look, I've been really, really happy to see, particularly some of the big companies acknowledge that removing clot in the body in a mechanical thrombectomy tool without tPA and other stuff is the way to go. That is a huge sort of statement to the whole field that, that we're on the right track, and I think people are starting to really pay attention to this as the future. So I think it is all incredibly important and not unexpected that, that would happen. And that happening now, I think, is perfect.

As it relates to technology itself, we have a lot of confidence in our sort of computer-aided Lightning thrombectomy system. It works really, really well. We know the other technologies pretty well. And just as we are, we're in really good shape. But we also, as you know, don't ever stay still. And when you add in the innovation coming in this field, that we are working on, we have a lot of confidence that as the market continues to switch from tPA drip to thrombectomy, we're going to be right where we want to be to capture a lot of those patients and do really, really well for those patients.

David Rescott -- Truist Securities -- Analyst

Okay. That's helpful. I guess just following up on kind of some of the commentary that you talked about on market development within the peripheral thrombectomy segment, I mean, it seems like there's been some competitors, specifically within pulmonary embolism that have announced some head-to-head RCT trials.

So I guess what -- and I know in the past that you've kind of commented on or expressed at least some interest in doing some kind of head-to-head studies within the Venous segment. So I guess what's the strategy here or at least the overall thought behind potentially either having or not having some kind of head-to-head data? And if you don't have it or if you don't necessarily kind of invest in that segment, I mean, how do you think about kind of the dynamics between growing the market as opposed to kind of gaining market share within that segment?

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. No, it's a really, really good question, and I'm glad you asked it. So I alluded to it just in my last answer, but maybe I'll be more clear. So PE, which is really what you're talking about is today the smallest segment of patients in the U.S., if we're talking U.S. numbers, that are actually treated with some form of intervention, the majority being tPA, dripping tPA over a period of time. And it's only about 20,000. It's significant, but it's a relatively small group compared to the number of patients on the venous sort of DVT and arterial side that are intervened done.

The real opportunity is to go after the much larger group of patients that aren't intervening and that are just given medical management, but could likely they have submassive or massive PEs and could potentially benefit earlier rather than waiting until those become quite acute. So that's the study that would open up the field, that would grow the field. The studies that are going on now, no judgment on them, but they're really market sort of share-type studies. And that's less interesting for us given the sort of size of the growth that we're experiencing and the opportunity we think our product is going to have. So we're really focused on really kind of study. We haven't announced it, but we're -- as I alluded to, we're starting to understand enough to have those dialogues with some of the physician leaders as to what would really open up the market in a more significant way. The randomized studies that are currently going really are focused on the same relatively small pool of patients.

David Rescott -- Truist Securities -- Analyst

Okay. That is helpful. Thanks for taking the question.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yup. My pleasure. Thank you.

Operator

[Operator Instructions] Next question comes from the line of Joanne Wuensch from Citi Research.

Joanne Wuensch -- Citi Research -- Analyst

Good afternoon. Hi.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Hi.

Joanne Wuensch -- Citi Research -- Analyst

And thanks for taking the question.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Of course.

Joanne Wuensch -- Citi Research -- Analyst

So it looks like -- two questions. One is on gross margins. It looks like the new manufacturing site that you have is beginning to weigh on that. How do we think about that, not just for the fourth quarter but into next year?

Maggie Yuen -- Chief Financial Officer

Yes, Joanne, thanks for the question. So as to our investment in our Roseville site impact to our margin, I mean, I want to, in my remarks, say that it is -- they're all intentional investment. I mean we accelerate the investment quite a bit, all because of our projection of our long-term volume growth. So as with any investment in setting up manufacturing site, the impact to the short-term margin impact will be a little bit choppy, but it will continue to support margin expansion activities throughout the year. And I just want to also add that, at this point, we have not seen material impact to our margin because of macro supply chain and inflation area, but we are -- we believe that all these productivity investment is going to help us to offset some of the macro impact in the long term.

Joanne Wuensch -- Citi Research -- Analyst

Okay. My second question has to do with REAL revenue, revenue from the REAL system, said another way.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yup.

Joanne Wuensch -- Citi Research -- Analyst

How do we -- people have this already in their models from what I can tell. I mean based on what I can piece together, for next year ranges anywhere from $3 million to $26 million, which could be the difference between you meeting or beating consensus. Can you just sort of help us get our head around that so that we're set up right? Thanks.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Yes. So I don't -- we're not -- let me try to address it as best I can without going into guidance or numbers for 2022 because we're just not doing that on this call, and I want to be clear about that. The opportunities in Immersive Healthcare, we think, are -- as you know from our Investor Day, really huge, significant. It will take us time to do the work that we laid out in the Investor Day. The work is a number of things. We have to continue to work on the platform itself and doing the work to build that capacity so that we can host and have developers working with us in terms of content.

We also have to do the work to provide a viable business by getting a pretty significant installed base. All of that is in the earliest stages of doing the work. So whether or not the revenue is significant, we'll give you a decent amount of guidance when we start talking about our 2022 guidance. But the goal is to sort of lay that out, do that work, not chase the sort of short-term revenue next year or as we sort of do this. That is important. That being said, we have a lot of excitement because after Investor Day where there's been sort of a lot of public and we can start to talk about it, we've had a lot of conversations with healthcare community who would be, in effect, participating is buying this, utilizing this with their patients, with their residents and so on.

And I got to tell you that as I said in my prepared remarks, the interest, the excitement, the need to have one company, a trusted company in healthcare provide this where it's all clear, it's all contained, the data is secured, it's sort of a proper use of this great technology, that level of interest, frankly, is -- I won't say it's surprising me, I knew it was there, but it's really heartening to see that it's coming after those -- that sort of public discussion. So stay tuned. We'll do our best to give you specific numbers as best we can in the future. But I think we are well on our way here. Thank you.

Joanne Wuensch -- Citi Research -- Analyst

Thank you.

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Thank you.

Jason Mills -- Executive Vice President of Strategy

Thanks, Joanne.

Operator

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

Jee Hamlyn-Harris -- Investor Relation Officer

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

Operator

[Operator Closing Remarks].

Duration: 60 minutes

Call participants:

Jee Hamlyn-Harris -- Investor Relation Officer

Adam Elsesser -- Co-Founder, Chairman, President & Chief Executive Officer

Maggie Yuen -- Chief Financial Officer

Jason Mills -- Executive Vice President of Strategy

Larry Biegelsen -- Wells Fargo -- Analyst

John -- Canaccord Genuity Fund -- Analyst

Robbie Marcus -- JPMorgan -- Analyst

Bob Hopkins -- Bank of America -- Analyst

Brandon -- William Blair -- Analyst

David Rescott -- Truist Securities -- Analyst

Joanne Wuensch -- Citi Research -- Analyst

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